Second Quarter Results
Net sales for the second quarter totaled $1,012.3 million, up 9 percent from $932.0 million a year ago. Sales benefited 8 percent from price, 3 percent from volume, reduced by 2 percent from foreign exchange. Earnings before interest and income taxes (EBIT) for the second quarter totaled $248.3 million, up 22 percent from $203.7 million a year earlier. The EBIT increase was driven by sales growth, lower IT and other separation expenses following the 2011 SAP implementation, favorable balance sheet re-measurement gains from foreign exchange and lower performance-based compensation accruals. These factors were partially offset by lower gross margins, higher demand-generation investments and the earlier recognition of pension settlement expense compared to the prior year.
Gross margin was down 150 basis points versus the second quarter of 2011. The decrease was from higher commodity costs and unfavorable manufacturing variances, largely attributed to lower production volume in our North America/Europe segment, partially offset by higher pricing and productivity gains. Investment spending for advertising and promotion, sales force expansion in growth markets and research and development increased compared to the prior year. Foreign currency balance sheet re-measurement gains, mainly at our European manufacturing entity, were largely offset by pension settlement expense recognized in the second quarter of 2012 compared to the fourth quarter of 2011. The effective tax rate for the quarter was 25.9 percent versus 29.6 percent a year ago. The decrease in the effective tax rate was attributable to a change in geographic earnings mix and to higher manufacturing incentives.
Net earnings attributable to shareholders for the second quarter of 2012 totaled $165.8 million, or $0.81 per diluted share, compared with $132.1 million, or $0.64 per diluted share, a 27 percent increase from the prior-year quarter. In addition to EBIT increases, the second quarter of 2012 benefited from a lower effective tax rate.
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