Gross margin was 35.3 percent for the quarter and 35.1 percent year-to-date, compared to prior year margins of 35.2 percent for the quarter and year-to-date. We continue to benefit from our ongoing Continuous Improvement initiatives as well as improved absorption of fixed costs compared to last year’s third quarter. These were partially offset by a slightly less favorable sales mix.
Operating expenses for the quarter were $129.8 million, up 3.2 percent from $125.8 million last year primarily due to the increased sales volume. As a percent of sales, operating expenses were 20.1 percent in the third quarter compared to last year’s 21.2 percent. Operating expenses year-to-date were $380.4 million, or 20.7 percent of sales, compared to $361.5 million, or 21.7 percent of sales, last year.
The effective tax rate for the quarter was 29.0 percent, compared to a prior year rate of 24.5 percent. The current year quarter included $1.8 million of tax benefits primarily from a statute of limitation expiration, while last year’s quarter included $3.5 million of tax benefits from the expiration of some statutes of limitations and the favorable conclusion of two international tax audits. The year-to-date effective tax rate was 28.0 percent compared to a prior year rate of 28.1 percent.
As part of our ongoing share repurchase program we repurchased 261,000 shares, or 0.2 percent of our diluted outstanding shares, for $9.0 million during the quarter. Year-to-date we have repurchased 3,012,000 shares, or 2.0 percent of our diluted outstanding shares, for $82.6 million.FY12 Outlook We expect to achieve full year sales, operating margin, and EPS records.
- We forecast our FY12 sales to be approximately $2.5 billion, or up about 9 percent from the prior year. Our current forecast is based on the Euro at US$1.28 and 80 Yen to the US$. With the recent depreciation of the Euro against the US$, we do see foreign currency translation to be a headwind for the balance of our fiscal year.
- Our full year operating margin is forecast to be 14.2 to 14.8 percent.
- Our full year FY12 tax rate is anticipated to be between 28 and 29 percent.
- Cash generated by operating activities is projected to be between $260 and $280 million. Capital spending is now estimated to be between $75 and $80 million.
- We anticipate sales to both our Off-Road and On-Road OEM Customers will remain strong through the remainder of FY12. We will continue to benefit from increased market share on our Customers’ new Tier IV equipment platforms.
- Sales of our Aftermarket Products are expected to increase moderately based on current utilization rates for both off-road equipment and on-road heavy trucks. We should also benefit from our continued expansion into the emerging economies and from the increasing number of systems installed in the field with our proprietary filtration systems, such as our PowerCore® products.
- We forecast Aerospace and Defense Products’ sales to be level with the prior year as the continued slowdown in military spending is anticipated to be offset by increased commercial aerospace sales.
- Our Industrial Filtration Solutions’ sales are projected to increase 7 to 10 percent and assume a continuing improvement in general manufacturing activity in the U.S., slowly improving conditions in Asia, and forecasted strong fourth quarter project shipments in Europe.
- We anticipate our Gas Turbine Products’ sales to be up 17 to 20 percent due to the recent improvement in the large turbine power generation market and ongoing strength in the oil and gas market segment. We have a very strong schedule for fourth quarter project shipments to our Customers.
- Special Applications Products’ sales are forecast to be level with the prior year as growth in our membrane and venting product sales should offset the reduction in our disk drive filter sales related to the Thai floods last fall.
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