Third Quarter Results
Net sales for the quarter ended September 30, 2012 totaled $921.3 million, down one percent from $933.9 million a year ago. Sales growth increased six percent from price, offset by a decline of five percent in volume and a two percent reduction from foreign exchange. Earnings before interest and income taxes (EBIT) for the third quarter totaled $183.2 million, down from $201.7 million a year earlier. This decrease was primarily from foreign exchange balance sheet re-measurement losses in 2012 as compared to re-measurement gains in the prior year. In addition, lower costs associated with the establishment of our standalone IT infrastructure were largely offset by higher demand-generation investments.
Gross margin was 61.2 percent, down from 61.6 percent in the third quarter of 2011. The 40 basis point decline was attributed to higher commodity costs and unfavorable manufacturing variances from lower production volume in our North America/Europe segment, partially offset by higher prices and productivity gains.
Operating expense increased from higher advertising and promotion investments to support new product launches. In addition, foreign currency balance sheet re-measurement impacts, reported in Other Expense/Income, were unfavorable with current quarter losses compared against significant gains reported in the prior year. General and Administrative expenses were lower due to the implementation of SAP across our global system, which was completed in 2011, and lower performance-based compensation expense.The effective tax rate for the quarter was 16.3 percent compared to 22.6 percent a year ago. The lower effective tax rate was primarily attributable to changes in management’s assertion that certain current and prior years’ foreign earnings and profits are permanently invested abroad, favorable return-to-provision adjustments associated with the recent filing of our 2011 U.S. income tax return and changes in the geographic earnings mix. Net earnings attributable to shareholders totaled $140.3 million, or $0.69 per diluted share, compared with $144.7 million, or $0.70 per diluted share, for the third quarter a year ago.