Mr. Nagel continued, “Our gross profit margin increased 30 basis points year-over-year to 39.7 percent. Through previously implemented pricing initiatives we were able to recapture approximately $11 million of higher material costs, although the impact of these items negatively impacted our gross profit margin by 90 basis points. Our operations in Spain reported for the quarter an adjusted operating loss, excluding any special charges, of $1.3 million, or $0.03 per diluted share, on a 50 percent, or $2.6 million, year-over-year decline in net sales, reflecting the difficult economic conditions in Spain. While we are taking significant steps to properly size our Spanish operations given the challenging prospects of the local economy, we expect to report a modest operating loss for Spain in our third quarter.”
The effective tax rate for the second quarter of fiscal 2012 was 35.4 percent compared with 31.4 percent for the prior-year period. The increase in the effective tax rate was due primarily to the research and development tax credit which was extended during the second quarter of fiscal 2011 but was not extended in the current year. The change in the tax rate negatively impacted adjusted net income and adjusted diluted EPS by $1.3 million and $0.03, respectively, compared with the year-ago period. The effective tax rate for fiscal 2012 is forecasted to approximate 34 percent.
In the second quarter of fiscal 2012, the Company recorded a pre-tax special charge related to streamlining activities of $6.6 million, or $0.11 per diluted share. The special charge was comprised of approximately $1.2 million associated with a reduction in workforce, primarily at its operations in Spain, and $5.4 million related to the planned closing of the Company’s Cochran, Georgia production facility. The closure of the facility is expected to be principally completed by the end of the current fiscal year. The Company expects to incur additional costs of approximately $10 million associated with the closure of the facility, which are forecasted to be recognized primarily during the second half of fiscal 2012. The total estimated pre-tax special charge of $15 million associated with the facility closing consists primarily of severance and employee-related costs of $9 million, production transfer expenses of $3 million, and non-cash asset impairments of $3 million. Annualized pre-tax savings related to the reduction in workforce in Spain are estimated to be $1.2 million and are expected to begin to be realized by the end of the third quarter of the current fiscal year. Annualized pre-tax savings associated with the closure of the Cochran production facility are forecasted to be approximately $8 million and are expected to be realized beginning in the first quarter of fiscal 2013 following the completion of the transfer of production and closure of the facility.
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