The effective income tax rate for the second quarter of 2005 was 34.8 percent compared to 31.5 percent in the comparable prior year period. The rate for the 2005 period is lower than the Company's estimated annual effective rate of approximately 36.1 percent (subject to quarterly adjustments) primarily due to the year-to-date impact of state investment tax credits associated with the construction of the distribution center in Indiana and the impact on certain taxes of an internal corporate restructuring. As discussed above, the tax rate in the 2004 period was favorably impacted by adjustments to reduce certain contingent income tax-related liabilities.
Year-to-date net sales increased 12.8 percent, including a same-store sales increase of 4.4 percent. As a percentage to sales, gross margin for the year-to-date period was 28.6 percent in 2005 compared to 29.3 percent in 2004. The decrease in gross margin is primarily attributable to a decrease, as a percentage of total sales, of sales in higher margin categories, an unfavorable impact resulting from the RIM expansion (17 basis points), and increased transportation costs, primarily resulting from higher fuel costs.
Accordingly, the Company expects EPS for its third quarter ending October 28, 2005 to be in the range of $0.19-$0.21. Included in this estimate is a negative impact of approximately $0.02-$0.03 per share resulting from the RIM expansion. Additionally, management expects transportation costs, primarily fuel-related, to have a significant negative impact on gross profit in the third quarter as the Company has its heaviest number of shipments in preparation for the holiday season.
marketing@alchempro.com
