Gross margin was 35.0 percent for both the quarter and the year, compared to prior year margins of 36.3 percent for the quarter and 35.5 percent for the year. The year-over-year decrease is primarily attributable to the combination of the planned ramp-up of our newest plant in Aguascalientes, Mexico, lower fixed cost absorption in Asia, and increased purchased commodity costs internationally due to the stronger U.S. dollar. These were partially offset by the benefits from our ongoing Continuous Improvement initiatives.
Operating expenses for the quarter were $130.3 million, down 4.9 percent from $137.0 million last year, but equal with last year in local currency. As a percent of sales, operating expenses were 19.8 percent in the quarter compared to last year’s 21.9 percent. Reduced distribution and warranty costs and our ongoing cost controls provided improved operating leverage. Operating expenses for the year were $510.7 million, or 20.5 percent of sales, compared to $498.5 million, or 21.7 percent of sales, last year.
The effective tax rate for the quarter was 30.7 percent, compared to a prior year rate of 27.3 percent. Last year’s fourth quarter included $2.6 million of tax benefits primarily from the expiration of some statutes of limitations and the favorable impact of foreign subsidiary dividends. For the year, the effective tax rate was 28.7 percent compared to the prior year’s rate of 27.9 percent.
As part of our ongoing share repurchase program we repurchased 1,491,000 shares, or 1.0 percent of our diluted outstanding shares, for $47.7 million during the quarter. For the year, we repurchased 4,504,000 shares, or 2.9 percent of our diluted outstanding shares, for $130.2 million.Our global headcount is now approximately 13,600 and is up 500 from this time a year ago. FY13 Outlook We forecast delivering record sales and earnings in FY13 as we manage through uncertain economic conditions while continuing to invest in our business for growth.
- We project our sales to be between $2.62 and $2.72 billion, or up 5 to 9 percent. Our current forecast is based on the Euro at US$1.24 and 78 Yen to the US$. We expect foreign currency translation to have a negative impact on sales for most of our fiscal year.
- Our full year operating margin is forecast to be 14.6 to 15.4 percent. Included in this forecast is $6 million for an increase in pension expense and $6 million for our Global Enterprise Resource Planning (ERP) project that is beginning this year.
- Our full year FY13 tax rate is anticipated to be between 28 and 31 percent.
- We forecast our full year FY13 EPS to be between $1.82 and $1.96.
- Cash generated by operating activities is projected to be between $280 and $310 million. Capital spending is estimated to be approximately $125 million.
- Our OEM Customers’ build rates of new on-road and off-road equipment have moderated in most developed economies so we anticipate sales growth will slow from FY12’s double-digit increases. We will continue to benefit from new program wins and increased filter content 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, from the increasing number of systems installed in the field with our proprietary filtration systems, and from our increasing sales of liquid filtration products.
- We forecast our 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 Products’ sales are projected to increase 1 to 7 percent and assume U.S. manufacturing activity remaining strong, gradually improving conditions in Asia, and moderating activity levels in Europe.
- We anticipate our Gas Turbine Products’ sales to be up 17 to 23 percent due to the continuing strength in the large turbine power generation and in the oil and gas markets.
- Special Applications Products’ sales are forecast to increase 8 to 14 percent with solid growth expected in all product groups – disk drive filtration, membranes, and venting products.
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