Press Release Details

 

 

"We are very pleased to start our new fiscal year with another record performance," said Bill Cook, Chairman, President and CEO. "Continued strength in our aerospace and defense, industrial filtration, and gas turbine businesses helped to offset weakness in our other end markets. Our sales grew 14 percent in Asia, 11 percent in the Americas, and 4 percent in Europe."

"Our operating margin performance was very good at 12.2 percent, equal to the same period last year and well above our minimum target of 11 percent. We did experience higher raw material costs early in our first quarter, which we have worked to offset through a combination of pricing actions with our Customers and our internal cost reduction efforts. These efforts continue."

"While we had a solid start to our new fiscal year, we also foresee a challenging global economic environment in front of us. As a result, we have been proactively managing our business and working aggressively to reduce our expense levels. Our progress to date is evident as our operating expenses decreased to 20.4 percent of sales this quarter compared to 22.0 percent in the fourth quarter of FY08. We expect that the combination of our continued focus on operating expense controls, product and process cost reductions, and the strength of our diversified portfolio of filtration businesses will allow us to achieve our 20^th consecutive year of record earnings."

"We recognize that it is critical that we successfully manage through the current difficult economic climate. However, it is important to note that we also remain focused on our longer-term strategic objectives. Our recent acquisition of Western Filter was part of these plans."

The impact of foreign currency translation increased reported sales by $3.6 million, or 0.7 percent, and had minimal impact on net earnings in the quarter.

Gross margin of 32.6 percent compares to a prior year margin of 32.9 percent. We experienced a delay from several major Customers in the recovery of our material cost increases, which was partially offset by higher sales in our Industrial businesses (which had a higher gross margin) and our cost reduction efforts.

Operating expenses were 20.4 percent of sales, down from 20.8 percent in the first quarter of last year.  The decrease was driven by our focus on cost containment efforts, including a global hiring freeze, a reduction of contract and temporary workers in the U.S., targeted restructuring within some of our businesses, and other discretionary spending cuts.

The effective tax rate of 30.0 percent for the quarter compares to a prior year rate of 27.1 percent.  The higher rate this quarter was due to a $2.1 million decrease in tax benefits recognized this quarter compared to $3.9 million of tax benefits recognized in last year's first quarter. The current year tax rate includes a benefit of $1.8 million primarily from the reinstatement of the R&D Tax Credit and a positive development regarding a foreign tax contingency.

As part of our ongoing share repurchase program, during the quarter we repurchased 802,000 shares for $32.8 million.

For the past several years we have enjoyed a positive impact from foreign exchange – most specifically the weaker U.S. Dollar versus the Euro. However, during the past weeks, that has changed dramatically with a resurgence in the strength of the U.S. Dollar. At current exchange rate levels, we now anticipate that this will decrease our FY09 full year sales by approximately $133 million, or 6 percent, from FY08.  Including this foreign currency translation assumption, we expect full year sales in both the Engine and Industrial Products' segments to be flat or slightly down. In local currency, we expect low single-digit sales growth in both segments and for the total company.

Engine Products:  

 Industrial Products: