Question-and-Answer Session
Operator
(Operator Instructions)
Our first question comes from the line of Mike Sison.
Mike Sison – Keybanc Capital Markets
Hey, guys. Congrats on another great quarter. In terms of organic volume growth, or sales growth minus foreign currency, it was a little bit slower than I thought. Was there any timing in terms of the new product launches that maybe got pushed out into the quarter?
Richard F. Hobbs
No, actually, Mike, we’re looking at the year as being up on an organic basis in the mid-single digits. We continue to see that and what we had in the quarter regarding the currency impact was a very favorable mix and as a result of that we saw our gross margins go up by 90 basis points and we’ve seen our margins in general come up with a strong showing in the U.S. and, as Rob mentioned, in the European Flavors. If you look at the pre-tax income, which is up 24.4%, the portion that’s foreign exchange is a little bit over a third of that, so 15.2% is the increase in the pre-tax earnings prior to any impact of foreign exchange. So, we performed very strongly, we had excellent quality of earnings; what you saw in the top line did not drop to the bottom line. And we expect that organic mid-single digit top-line growth for the remainder of this year.
Mike Sison - Keybanc Capital Markets
If you think about the 10% sales growth, ex-foreign currency, generating, let’s say, sort of 15% earnings growth, if you will, if your organic sales growth less foreign currency ramps up to, let’s say, mid-single digits, should the operating leverage be even stronger?
Richard F. Hobbs
We certainly, when we look at the year and we look at the currency markets—and of course no one can predict where they’re going to go, but based on where they’re at right now—we certainly could see a little bit of a lift to the organic numbers from the currency.
Kenneth P. Manning
Mike, we’re looking for a strong year and we would rather sell a lot of the high-priced items than the stuff like Red 40, Yellow 5, Yellow 6, which is more of a commodity product. So we continue our effort to push towards a more value-added product mix.
Mike Sison - Keybanc Capital Markets
When you think about the organic growth for the rest of the year, the bulk of that—or how much of that growth comes from sort of wins that you have in the bag, if you will, versus a reliance on market demand, which seems to be okay, from what I’m hearing from you guys?
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