Donaldson Company, Inc. (NYSE: DCI) announced its financial results for
its fiscal 2011 fourth quarter. Summarized financial results are as
follows (dollars in millions, except per share data):
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Twelve Months Ended
|
|
|
July 31
|
|
|
July 31
|
|
| 2011 |
| 2010 |
| Change |
|
| 2011 |
| 2010 |
| Change |
Net sales
|
|
$625
|
|
$515
|
|
21
|
%
|
|
|
$2,294
|
|
$1,877
|
|
22
|
%
|
Operating income
|
|
90
|
|
75
|
|
21
|
%
|
|
|
315
|
|
238
|
|
32
|
%
|
Net earnings
|
|
66
|
|
51
|
|
29
|
%
|
|
|
225
|
|
166
|
|
36
|
%
|
Diluted EPS
|
|
$0.84
|
|
$0.65
|
|
29
|
%
|
|
|
$2.87
|
|
$2.10
|
|
37
|
%
|
"We are very pleased to report that we had a very good 4th
quarter with all-time quarterly sales and EPS records. We also delivered
full year records on key operating metrics including sales, operating
margins, and net earnings," said Bill Cook, Chairman, President and CEO.
"We saw strength in both of our reporting segments as Engine and
Industrial Products sales increased 26 percent and 15 percent over the
prior year, respectively. Our operating margin was 14.4 percent in the
fourth quarter and a record 13.7 percent for the year. We are executing
very well in our manufacturing plants and distribution centers and
continue to make both capital and operating investments which, along
with our Continuous Improvement initiatives, position us to
profitably support our Customers' global growth plans."
"Over the past four weeks, there have been many reports of a slowdown in
global growth rates and the increased possibility of another recession.
However, our current order trends remain healthy and, consequently, we
continue to forecast that our sales will grow 7 to 15 percent in FY12.
However, we will remain very vigilant and will quickly modify our plans
if conditions change. Through our continued execution of our Strategic
Growth Plans and by focusing on those things we can control, we forecast
delivering another sales record and record EPS performance of between
$3.15 and $3.45 per share in FY12."
Financial Statement Discussion
The impact of foreign currency translation increased sales by $40.3
million, or 7.8 percent, during the fourth quarter and $49.8 million, or
2.7 percent, for the year. The impact of foreign currency translation
increased reported net earnings by $4.0 million, or 7.7 percent, during
the fourth quarter and $6.1 million, or 3.6 percent, for the year.
Gross margin was 36.3 percent for the quarter, equal to last year's
fourth quarter, and 35.5 percent for the year, 40 basis points better
than last year's 35.1 percent. Increases in purchased raw material and
freight costs were offset by better fixed cost absorption and our Continuous
Improvement initiatives.
Operating expenses for the quarter were $137.0 million, or 21.9 percent
of sales, versus $112.4 million, or 21.8 percent of sales, last year.
Operating expenses for the year were $498.5 million, or 21.7 percent of
sales, compared to $420.5 million, or 22.4 percent of sales, last year.
The effective tax rate for the quarter was 27.3 percent, compared to a
prior year rate of 29.5 percent. The current quarter included $2.6
million of tax benefits primarily from the expiration of some statutes
of limitation and the favorable impact of dividends from some foreign
subsidiaries. For the year, the effective tax rate was 27.9 percent
compared to a prior year rate of 27.8 percent.
As part of our ongoing share repurchase program we repurchased 1,157,000
shares for $65.8 million during the quarter. For the year, we
repurchased 1,957,000 shares, or 2.5 percent of our diluted outstanding
shares, for $108.9 million.
FY12 Outlook
We expect continued expansion in many of our end markets, with higher
growth in emerging economies. We are planning our FY12 sales to be
between $2.45 and $2.60 billion, or up about 7 to 15 percent from the
prior year. Our current forecast is based on the Euro at US$1.42 and 81
Yen to the US$.
-
Our full year operating margin is forecasted to be 13.7 to 14.5
percent.
-
Our full year FY12 tax rate is anticipated to be between 28 and 30
percent.
-
We forecast our full year FY12 EPS to be between $3.15 and $3.45.
-
Cash generated by operating activities is projected to be between $275
and $305 million in FY12. Capital spending is estimated to be
approximately $100 million.
Engine Products: We expect
full year sales to increase 8 to 15 percent, including the impact of
foreign currency translation.
-
We anticipate sales to our agricultural, mining, and construction
equipment OEM Customers to grow at a more moderate pace in FY12
compared to FY11's growth rate of 47 percent. We will also continue to
benefit from increased market share on our Customers' new Tier IV
equipment platforms.
-
In our On-Road Products' business, we believe that build rates for
heavy- and medium-duty trucks at our OEM Customers will be higher than
FY11 levels but grow at a more normal rate than last year's 55 percent
growth rate.
-
Sales of our Aftermarket Products are expected to remain strong based
on current utilization rates for both off-road equipment and on-road
heavy trucks. We should also benefit as our distribution networks
continue to expand in the emerging economies and from the increasing
number of systems installed in the field with our proprietary
filtration systems.
-
We forecast modest sales gains in Aerospace and Defense Products for
FY12 as the continued slowdown in military spending is anticipated to
be offset by increased commercial aerospace sales.
Industrial Products: We
forecast full year sales to increase 7 to 15 percent, including the
impact of foreign currency translation.
-
Our Industrial Filtration Solutions' sales are projected to increase 7
to 14 percent assuming demand for new filtration equipment and
replacement filters both continue to improve with increased global
general industrial capital activity and spending.
-
We anticipate our Gas Turbine Products' sales to be up 14 to 22
percent due to an improvement in the power generation market and
ongoing strength in the oil and gas market segment.
-
Special Applications Products' sales are forecast to increase 2 to 9
percent primarily due to growing sales of our membranes products.
About Donaldson Company
Donaldson is a leading worldwide provider of filtration systems that
improve people's lives, enhance our Customers' equipment performance,
and protect our environment. We are a technology-driven Company
committed to satisfying our Customers' needs for filtration solutions
through innovative research and development, application expertise, and
global presence. Our over 13,000 employees contribute to the Company's
success by supporting our Customers at our more than 100 sales,
manufacturing, and distribution locations around the world.
Donaldson is a member of the S&P MidCap 400 and Russell 1000 indices,
and our shares trade on the NYSE under the symbol DCI. Additional
information is available at www.donaldson.com.
SAFE HARBOR STATEMENT UNDER THE SECURITIES REFORM ACT OF 1995
The Company desires to take advantage of the "safe harbor" provisions of
the Private Securities Litigation Reform Act of 1995 (the "Act") and is
making this cautionary statement in connection with such safe harbor
legislation. This announcement contains forward-looking statements,
including forecasts, plans, and projections relating to our business and
financial performance and global economic conditions, which involve
uncertainties that could materially impact results.
The Company wishes to caution investors that any forward-looking
statements are subject to uncertainties and other risk factors that
could cause actual results to differ materially from such statements,
including but not limited to risks associated with: world economic
factors and the ongoing economic uncertainty, reduced demand for hard
disk drive products with the increased use of flash memory, the
potential for some Customers to increase their reliance on their own
filtration capabilities, currency fluctuations, commodity prices,
political factors, the Company's international operations, highly
competitive markets, governmental laws and regulations including the
impact of various economic stimulus and financial reform measures, the
implementation of our new information technology systems, potential
global events resulting in market instability including financial
bailouts of sovereign nations, political changes, military and terrorist
activities, health outbreaks, and other factors included in our Annual
and Quarterly Reports. We undertake no obligation to publicly update or
revise any forward-looking statements.
|
CONDENSED STATEMENTS OF CONSOLIDATED EARNINGS
|
DONALDSON COMPANY, INC. AND SUBSIDIARIES
|
(Thousands of dollars, except share and per share amounts)
|
(Unaudited)
|
|
|
|
Three Months Ended
|
|
|
Twelve Months Ended
|
|
|
July 31
|
|
|
July 31
|
|
|
2011
|
|
2010
|
|
|
2011
|
|
2010
|
Net sales
|
|
$625,450
|
|
|
$515,243
|
|
|
|
$2,294,029
|
|
|
$1,877,064
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
398,445
|
|
|
328,213
|
|
|
|
1,480,233
|
|
|
1,218,316
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin
|
|
227,005
|
|
|
187,030
|
|
|
|
813,796
|
|
|
658,748
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
136,998
|
|
|
112,364
|
|
|
|
498,513
|
|
|
420,504
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
90,007
|
|
|
74,666
|
|
|
|
315,283
|
|
|
238,244
|
|
|
|
|
|
|
|
|
|
|
|
Other income, net
|
|
(3,515
|
)
|
|
(1,164
|
)
|
|
|
(9,505
|
)
|
|
(3,907
|
)
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
3,039
|
|
|
3,274
|
|
|
|
12,525
|
|
|
11,975
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes
|
|
90,483
|
|
|
72,556
|
|
|
|
312,263
|
|
|
230,176
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes
|
|
24,716
|
|
|
21,386
|
|
|
|
86,972
|
|
|
64,013
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$65,767
|
|
|
$51,170
|
|
|
|
$225,291
|
|
|
$166,163
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares
|
|
|
|
|
|
|
|
|
|
outstanding
|
|
76,774,299
|
|
|
77,389,950
|
|
|
|
77,196,370
|
|
|
77,848,528
|
|
|
|
|
|
|
|
|
|
|
|
Diluted shares outstanding
|
|
78,126,167
|
|
|
78,697,443
|
|
|
|
78,598,459
|
|
|
79,177,772
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings per share
|
|
$0.86
|
|
|
$0.66
|
|
|
|
$2.92
|
|
|
$2.13
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings per share
|
|
|
|
|
|
|
|
|
|
assuming dilution
|
|
$0.84
|
|
|
$0.65
|
|
|
|
$2.87
|
|
|
$2.10
|
|
|
|
|
|
|
|
|
|
|
|
Dividends paid per share
|
|
$0.150
|
|
|
$0.120
|
|
|
|
$0.535
|
|
|
$0.470
|
|
|
DONALDSON COMPANY, INC. AND SUBSIDIARIES
|
CONDENSED CONSOLIDATED BALANCE SHEETS
|
(Thousands of dollars)
|
(Unaudited)
|
|
|
|
July 31
|
|
July 31
|
|
|
2011
|
|
2010
|
ASSETS
|
|
|
|
|
|
|
|
|
Cash, cash equivalents and short-term investments
|
|
$273,494
|
$232,000
|
Accounts receivable – net
|
|
445,700
|
358,917
|
Inventories – net
|
|
271,476
|
203,631
|
Prepaids and other current assets
|
|
75,912
|
65,667
|
|
|
|
|
Total current assets
|
|
1,066,582
|
860,215
|
|
|
|
|
Other assets and deferred taxes
|
|
268,009
|
273,399
|
Property, plant and equipment – net
|
|
391,502
|
|
365,892
|
|
|
|
|
Total assets
|
|
$1,726,093
|
|
$1,499,506
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
Trade accounts payable
|
|
$215,918
|
|
$165,907
|
Employee compensation and other liabilities
|
|
219,326
|
167,813
|
Notes payable
|
|
13,129
|
50,000
|
Current maturity long-term debt
|
|
47,871
|
5,536
|
|
|
|
|
Total current liabilities
|
|
496,244
|
389,256
|
|
|
|
|
Long-term debt
|
|
205,748
|
256,192
|
Other long-term liabilities
|
|
89,390
|
107,425
|
|
|
|
|
Total liabilities
|
|
791,382
|
752,873
|
|
|
|
|
|
Equity
|
|
934,711
|
|
746,633
|
|
|
|
|
|
Total liabilities and equity
|
|
$1,726,093
|
|
$1,499,506
|
|
DONALDSON COMPANY, INC. AND SUBSIDIARIES
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(Thousands of dollars)
|
(Unaudited)
|
|
|
|
Twelve Months Ended
|
|
|
July 31
|
|
|
2011
|
|
2010
|
OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
Net earnings
|
|
$225,291
|
|
$166,163
|
|
Adjustments to reconcile net earnings to net cash provided by
operating activities:
|
|
|
|
Depreciation and amortization
|
|
60,491
|
|
59,232
|
|
Changes in operating assets and liabilities
|
|
(26,469
|
)
|
(23,116
|
)
|
Tax benefit of equity plans
|
|
(9,873
|
)
|
(4,625
|
)
|
Stock compensation plan expense
|
|
9,234
|
|
8,253
|
|
Other, net
|
|
(12,619
|
)
|
(2,902
|
)
|
Net cash provided by operating activities
|
|
246,055
|
|
203,005
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
Net expenditures on property and equipment
|
|
(59,851
|
)
|
(42,659
|
)
|
Acquisitions and divestitures, net
|
|
3,493
|
|
(250
|
)
|
Net cash used in investing activities
|
|
(56,358
|
)
|
(42,909
|
)
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Purchase of treasury stock
|
|
(108,929
|
)
|
(66,696
|
)
|
Net change in debt
|
|
(43,182
|
)
|
15,736
|
|
Dividends paid
|
|
(41,013
|
)
|
(36,242
|
)
|
Tax benefit of equity plans
|
|
9,873
|
|
4,625
|
|
Exercise of stock options
|
|
15,899
|
|
|
13,053
|
|
Net cash used in financing activities
|
|
(167,352
|
)
|
|
(69,524
|
)
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash
|
|
19,149
|
|
|
(2,259
|
)
|
|
|
|
|
|
|
|
Increase in cash and cash equivalents
|
|
41,494
|
|
|
88,313
|
|
|
|
|
|
|
|
|
Cash and cash equivalents – beginning of year
|
|
232,000
|
|
|
143,687
|
|
|
|
|
|
|
|
|
Cash and cash equivalents – end of period
|
|
$273,494
|
|
|
$232,000
|
|
|
SEGMENT DETAIL
|
(Thousands of dollars)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Engine Products
|
|
Industrial Products
|
|
Corporate & Unallocated
|
|
Total Company
|
3 Months Ended July 31, 2011:
|
|
|
|
|
|
|
|
|
Net sales
|
|
$397,995
|
|
$227,455
|
|
---
|
|
|
$625,450
|
Earnings before income taxes
|
|
62,132
|
|
31,635
|
|
(3,284
|
)
|
|
90,483
|
|
|
|
|
|
|
|
|
|
3 Months Ended July 31, 2010:
|
|
|
|
|
|
|
|
|
Net sales
|
|
$316,946
|
|
$198,297
|
|
---
|
|
|
$515,243
|
Earnings before income taxes
|
|
48,000
|
|
29,766
|
|
(5,210
|
)
|
|
72,556
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12 Months Ended July 31, 2011:
|
|
|
|
|
|
|
|
|
Net sales
|
|
$1,440,495
|
|
$853,534
|
|
---
|
|
|
$2,294,029
|
Earnings before income taxes
|
|
211,255
|
|
123,871
|
|
(22,863
|
)
|
|
312,263
|
|
|
|
|
|
|
|
|
|
12 Months Ended July 31, 2010:
|
|
|
|
|
|
|
|
|
Net sales
|
|
$1,126,007
|
|
$751,057
|
|
---
|
|
|
$1,877,064
|
Earnings before income taxes
|
|
155,833
|
|
91,084
|
|
(16,741
|
)
|
|
230,176
|
|
NET SALES BY PRODUCT
|
(Thousands of dollars)
|
(Unaudited)
|
|
|
|
Three Months Ended
|
|
Twelve Months Ended
|
|
|
July 31
|
|
July 31
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
Engine Products segment:
|
|
|
|
|
|
|
|
|
Off-Road Products
|
|
$90,885
|
|
$65,096
|
|
$327,557
|
|
$222,329
|
Aerospace and Defense Products
|
|
27,111
|
|
27,170
|
|
104,883
|
|
111,977
|
On-Road Products
|
|
38,381
|
|
24,146
|
|
127,107
|
|
81,874
|
Aftermarket Products
|
|
236,351
|
|
196,984
|
|
861,393
|
|
691,899
|
Retrofit Emissions Products
|
|
5,267
|
|
3,550
|
|
19,555
|
|
17,928
|
Total Engine Products segment
|
|
$397,995
|
|
$316,946
|
|
$1,440,495
|
|
$1,126,007
|
|
|
|
|
|
|
|
|
|
Industrial Products segment:
|
|
|
|
|
|
|
|
|
Industrial Filtration Solutions Products
|
|
$138,637
|
|
$112,691
|
|
$507,646
|
|
$423,050
|
Gas Turbine Products
|
|
40,119
|
|
41,458
|
|
154,726
|
|
150,131
|
Special Applications Products
|
|
48,699
|
|
44,148
|
|
191,162
|
|
177,876
|
Total Industrial Products segment
|
|
$227,455
|
|
$198,297
|
|
$853,534
|
|
$751,057
|
|
|
|
|
|
|
|
|
|
Total Company
|
|
$625,450
|
|
$515,243
|
|
$2,294,029
|
|
$1,877,064
|
|
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
|
(Thousands of dollars, except per share amounts)
|
(Unaudited)
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Twelve Months Ended
|
|
|
July 31
|
|
July 31
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
|
|
|
|
|
|
|
|
Free cash flow
|
|
$60,061
|
|
|
$38,809
|
|
|
$186,204
|
|
|
$160,346
|
|
Net capital expenditures
|
|
17,451
|
|
|
15,429
|
|
|
59,851
|
|
|
42,659
|
|
Net cash provided by operating activities
|
|
$77,512
|
|
|
$54,238
|
|
|
$246,055
|
|
|
$203,005
|
|
|
|
|
|
|
|
|
|
|
EBITDA
|
|
$107,409
|
|
|
$89,482
|
|
|
$381,995
|
|
|
$300,067
|
|
Income taxes
|
|
(24,716
|
)
|
|
(21,386
|
)
|
|
(86,972
|
)
|
|
(64,013
|
)
|
Interest expense (net)
|
|
(1,711
|
)
|
|
(2,852
|
)
|
|
(9,241
|
)
|
|
(10,659
|
)
|
Depreciation and amortization
|
|
(15,215
|
)
|
|
(14,074
|
)
|
|
(60,491
|
)
|
|
(59,232
|
)
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$65,767
|
|
|
$51,170
|
|
|
$225,291
|
|
|
$166,163
|
|
|
|
|
|
|
|
|
|
|
Net sales, excluding foreign currency translation
|
|
$585,110
|
|
|
$523,471
|
|
|
$2,244,198
|
|
|
$1,833,863
|
|
Foreign currency translation
|
|
40,340
|
|
|
(8,228
|
)
|
|
49,831
|
|
|
43,201
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$625,450
|
|
|
$515,243
|
|
|
$2,294,029
|
|
|
$1,877,064
|
|
|
|
|
|
|
|
|
|
|
Net earnings, excluding foreign currency translation
|
|
$61,813
|
|
|
$51,419
|
|
|
$219,236
|
|
|
$162,612
|
|
Foreign currency translation
|
|
3,954
|
|
|
(249
|
)
|
|
6,055
|
|
|
3,551
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$65,767
|
|
|
$51,170
|
|
|
$225,291
|
|
|
$166,163
|
|
|
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (CONTINUED)
|
(Thousands of dollars, except per share amounts)
|
(Unaudited)
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Twelve Months Ended
|
|
|
July 31
|
|
July 31
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
Net earnings, excluding special items
|
|
$65,767
|
|
$51,233
|
|
|
$225,857
|
|
|
$173,350
|
|
Restructuring and asset impairment charges, net of tax
|
|
-
|
|
(63
|
)
|
|
(566
|
)
|
|
(7,187
|
)
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$65,767
|
|
$51,170
|
|
|
$225,291
|
|
|
$166,163
|
|
|
Net earnings per share assuming dilution, excluding
special items
|
|
$0.84
|
|
$0.65
|
|
|
$2.88
|
|
|
$2.19
|
|
Restructuring and asset impairment charges per share,
net of tax
|
|
-
|
|
-
|
|
|
(0.01
|
)
|
|
(0.09
|
)
|
|
|
|
|
|
|
|
|
|
Net earnings per share assuming dilution
|
|
$0.84
|
|
$0.65
|
|
|
$2.87
|
|
|
$2.10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Although free cash flow, EBITDA, net sales excluding foreign currency
translation, net earnings excluding foreign currency translation, net
earnings excluding restructuring charges and net earnings per share
assuming dilution excluding restructuring charges are not measures of
financial performance under GAAP, the Company believes they are useful
in understanding its financial results. Free cash flow is a commonly
used measure of a company's ability to generate cash in excess of its
operating needs. EBITDA is a commonly used measure of operating earnings
less non-cash expenses. Both net sales and net earnings excluding
foreign currency translation provide a comparable measure for
understanding the operating results of the company's foreign entities
excluding the impact of foreign exchange. Both net earnings excluding
restructuring charges and earnings per share excluding restructuring
charges provide a comparable measure for understanding the results of
the Company as compared to prior periods. A shortcoming of these
financial measures is that they do not reflect the company's actual
results under GAAP. Management does not intend these items to be
considered in isolation or as a substitute for the related GAAP measures.
Donaldson Company, Inc.
Rich Sheffer, 952-887-3753
Aug 29, 2011