During the course of our presentation, we will make reference to certain non-GAAP financial measures, and unless specified otherwise, metrics referred to in today's discussion will be adjusted for the unusual items. Reconciliations to the most comparable GAAP measures can be found in our earnings release, in the slide presentation and on our website.This teleconference will contain forward-looking statements based on current expectations regarding important risk factors, which are identified in the earnings release and in our slide presentation. Actual results may differ materially from these statements, so we ask that you please note our Safe Harbor language. We'll take questions after concluding our prepared remarks, and we plan to end the teleconference by 11 a.m. Eastern Time. Now I'll turn the call over to Peter to begin our review. Peter McCausland Thanks, Jay. Good morning. Please start by turning to Slide 2. Our 14,000 associates have once again delivered a record quarter. Adjusted earnings per share were $1.03, a 24% increase over last year on sales growth of 12%. But at volumes, they are still below prerecession levels. We continue to see strengths in the manufacturing-intensive regions of the U.S. as evidenced by the strong performances of our Great Lakes, North Central and Mid-America regions. In addition to Manufacturing customers, Petrochemical and Energy segments are also performing very well. Second quarter sales were $1.2 billion, marked by a strong same-store sales increase of 10%, gas and rent same-store sales increased 7% and hardgoods increased 14%. Acquisitions contributed 2% of sales. The relative out-performance in our hardgoods business on the strength of sales to large manufacturing customers and the mix shift within hardgoods to welding and automation equipment had a dilutive effect on our gross margin and account for the majority of the gross margin compression we experienced this quarter. However, both dynamics are generally indicative of sustained activity levels in the manufacturing economy and future demand for industrial gases and welding consumables.
Later in the quarter, we found ourselves slightly behind the curve on rising hardgoods product cost which also had a dilutive effect on our hardgoods gross margin for the quarter. In addition, we had to overcome supply-chain disruptions in a few gases, including helium, acetylene and argon.We will be initiating a pricing action in both gas and hardgoods in the coming days in order to get back in front of the cost curve. While strong hardgoods sales and a favorable pricing outlook are both called for optimism, given the global or economic uncertainty that unfolded during that quarter, we are playing -- we are paying close attention to our business trends. As we have proven in the past, we can quickly adjust our cost structure if warranted. Adjusted operating margin for the quarter improved 20 basis points from the prior year to 12.2%, an impressive result considering it includes a 70 basis point impact from SAP implementation cost and depreciation expense incurred during the quarter, as well as a very difficult comps on our other operations segment. Even with the burden of SAP implementation cost, the strength of our business in a period of modest economic growth is evident. Our return on capital increased by 140 basis points over last year to 12.3% as we continue to leverage our national footprint and industry-leading platform on rising sales volumes. Since the beginning of our fiscal year in April. In April we have acquired 5 businesses with nearly $70 million in aggregate annual revenues. Among them were Pain Enterprises, our carbon dioxide and dry ice producer and distributor with 20 locations and more than 140 employees in the midwestern U.S. and ABCO an industrial gas and welding distributor with 12 locations and more than 100 employees in New England. While our acquisition pipeline is far more active than it was last year, some potential sellers are delaying decisions in the wake of market volatility. Our appetite for acquisitions remained strong, and we're still targeting a goal of $150 million in acquired annual sales for this fiscal year. On the strength of our second quarter results and outlook for sustained volumes in the coming quarter, we have raised our earnings guidance from -- for fiscal '12 to a range of $397 million to $407 million, representing 19% to 22% growth over fiscal '11. Read the rest of this transcript for free on seekingalpha.com