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Short-term financial performance continues to improve and even as we make increased investments for long time organic growth. As we'd anticipated consolidated sales were lower due to factors affecting our Marine segments and to a lesser extent our Recreational segment.Preliminary U.S. retail boat industry demand was up in the quarter with improvements continuing in aluminum and fiberglass outboard product categories, although at a lesser rate increase in the first quarter. This is being partially offset by continuing weak demand in fiberglass sterndrive inboard categories, especially in boats larger than 30 feet for demand continues to decline. We experienced lower sales in Europe in all four of our segments. For the total company, excluding Sealine, revenues declined about $41 million or 23% in this region. Revenues generated from our U.S. and the rest of world customers increased about 3%. Ending boat pipeline inventories remained at healthy levels and our weeks on hand as measured on a trailing 12-month retail basis declined. Our gross margin of 26% represents an increase of 90 basis points from the prior year. Lower warranty, depreciation and pension expenses combined with successful cost reduction activities contributed to the higher gross margin. Contrary to the first quarter, SG&A and R&D expenses in the aggregate increased by 3% as lower variable compensation expense was only partially offset by company-wide investments in growth initiatives. Finally, our lower income tax provision contributed the higher net earnings during the quarter. For those of you, who may have printed out the slides and are flipping through those, I'll call out page numbers. We're now on Slide 5. Sales decreased by 3% in the second quarter. Sales generated by our ongoing European businesses declined by approximately $41 million. Additionally, revenues from our Sealine boat brand, which we divested in Q3 of 2011, were approximately $20 million in the second quarter of 2011. I will comment in a few moments about some of the other major factors that affected our topline during the quarter.
In the first half of the year, our sales decreased by 2%. Sales from our ongoing European businesses declined by about $61 million during the first six months. Sealine sales during the first half of 2011 were approximately $32 million.Operating earnings, excluding restructuring, exit, and impairment charges were $116 million for the quarter, an 8% increase compared to 2011. Operating margins, ex-charges increased by 110 basis points to 10.9%. The increased in operating earnings reflect gross margin improvements as well as the reductions in operating expenses that I previously mentioned. Operating earnings, excluding restructuring, exit, and impairment charges were $184 million for the first half, an increase of 2% compared to 2011. Operating margins, ex-charges increased by about 40 basis points to 9%. Net earnings for the quarter were $0.90 per share, including a $0.01 charge for restructuring, $0.05 of losses on debt retirements and a $0.03 benefit from special tax items. Excluding these items, our diluted earnings per share would have been $0.93 per share. This compares to net earnings of $0.75 per share in the prior quarter, which included a $0.01 of losses on debt retirements and the $0.02 benefit from special tax items. Again, excluding these items 2011's earnings per share would have been $0.74. In summary our adjusted EPS increased by $0.19 or 26%. I'm now going to Page 10. Net earnings for the first half were $1.34 per share, including $0.01 of restructuring charged, $0.05 of losses on debt retirement and a $0.02 benefit from special tax items. Excluding these items, our diluted earnings per share would have been $1.38 per share. This compares to net earnings of $1.05 per share in prior year, which included $0.05 of restructuring charges and $0.05 of losses on debt retirements, and a $0.02 benefit from special tax items. Excluding these items 2011's earnings per share would have been $1.13. As adjusted, our first half EPS increased by $0.25 or 22%. Read the rest of this transcript for free on seekingalpha.com