Full-year sales now expected to increase 1% to 2% in constant
currencies
Donaldson Company, Inc. (NYSE: DCI) today updated its guidance for
fiscal 2015.
"The second half of our fiscal year has been disappointing, driven by an
unforeseen slowdown in our Engine Aftermarket distribution channels,
further weakening in industrial conditions in China, continued softening
in our Engine OEM Off-Road equipment end markets, and incremental
pressure associated with the strong U.S. dollar, which we experienced
throughout the third quarter," said Tod Carpenter, President and CEO of
Donaldson.
"Consistent with the commitment made during our second quarter earnings
call, we executed productivity and restructuring actions during our
third quarter that are expected to generate annual savings of $20
million. These savings are incremental to the future benefits we expect
to realize through the previously announced decision to close our
facility in Grinnell, Iowa. During our upcoming third quarter earnings
call on May 21, we will provide details on additional actions that we
are taking to further adjust our business to changing market conditions.
"In local currency, we continue to see organic growth in our On-Road,
Industrial Filtration Solutions, and Gas Turbine businesses. Despite
uncertainty in the global industrial environment, we are strengthening
our foundation for future growth as we continue to win new propriety
first-fit programs in our Engine and Industrial segments. We have the
right strategy, and I am confident that our business model, combined
with our relentless focus on our Customers, will ensure our Company's
future growth."
Updated Fiscal 2015 Outlook
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Full-year sales are now expected to be in the range of $2.3 billion to
$2.4 billion, or 4 percent to 5 percent below last year. In local
currency, our sales are expected to increase 1 percent to 2 percent.
-
The forecast for the second half of fiscal 2015 is based on the
Euro at US$1.07 and 120 Yen to the US$. Compared to our prior
guidance, the estimated negative year-over-year impact from
currency translation has grown to $152 million from $136 million.
-
Our adjusted operating margin1 for the full year is
expected to be in the range of 12.7 percent to 13.1 percent, which
compares to prior guidance of 13.6 percent to 14.4 percent.
-
We continue to expect the full-year tax rate will be between 27
percent and 29 percent.
-
Adjusted diluted earnings per share (EPS)1 are now expected
to be $1.51 to $1.61, which compares with our prior guidance of $1.65
to $1.85 per share.
-
Excluding the impact from any additional restructuring actions, our
GAAP diluted EPS are expected to be approximately 7 cents lower than
adjusted EPS, driven by:
-
Restructuring charges of approximately $10 million, or 5 cents per
share, including approximately $6 million of charges related to
the restructuring actions taken in our third quarter, and
-
A charge in our second quarter of $3.9 million, or 2 cents per
share, resulting from a U.S. pension settlement.
-
As part of our ongoing share repurchase program, we are targeting a
reduction of our outstanding shares of at least 4 percent in fiscal
2015.
1 Beginning with its fiscal 2015 second quarter, we provide
adjusted operating margin and adjusted diluted earnings per share
("adjusted EPS") measures, which are non-GAAP financial measures that
exclude the impact of certain matters not related to the Company's
ongoing operations, including restructuring charges and expenses related
to pension settlements.
Engine Products: We now
forecast full-year 2015 sales in U.S. dollars to decline 5 percent to 7
percent. In local currency, our sales are expected to be flat to down 2
percent.
-
We see lower growth rates for our Engine Aftermarket business in both
OEM and independent distribution channels.
-
Demand from our Off-Road OEM first-fit Customers remains mixed by end
market and geography, and overall new equipment build rates have
weakened.
-
Consistent with our prior guidance, our Engine On-Road OEM Customers
expect increased production of heavy- and medium-duty trucks in fiscal
2015, and our Aerospace and Defense sales are expected to experience a
mid-single-digit increase in fiscal 2015.
Industrial Products: We now
forecast full-year 2015 sales in U.S. dollars to decline 1 percent to 3
percent. In local currency, sales are expected to increase 4 percent to
6 percent.
-
We now project Industrial Filtration Solutions' sales to decline 3
percent to 7 percent, reflecting the impact of currency translation
headwinds and softer first-fit equipment demand, partially offset by
continued strong sales of replacement filters.
-
We now anticipate Gas Turbine sales will increase 15 percent to 20
percent, which primarily reflects Customers delaying delivery of some
projects into our fiscal 2016.
-
Consistent with prior guidance, Special Applications' sales are
expected to be slightly down as lower membrane sales and currency
headwinds offset improved demand for semiconductor and venting
products.
Fiscal Third and Fourth Quarter Outlook for the
Company
-
Our third quarter sales are expected to decrease approximately 9
percent from the prior year, including the impact of foreign currency
translation. We expect an adjusted operating margin in a range between
11.9 percent and 12.5 percent, and adjusted EPS to be 34 cents to 36
cents.
-
Our third quarter GAAP EPS will be lower than adjusted EPS by
approximately 4 cents, driven by our restructuring actions.
-
Our fourth quarter sales are expected to decrease between 10 percent
and 12 percent from the prior year, including the impact of foreign
currency translation. We expect an adjusted operating margin in a
range between 13.7 percent and 14.3 percent, and adjusted EPS to be 36
cents to 46 cents.
-
Excluding the impact from any additional restructuring actions,
fourth quarter GAAP EPS will be lower than adjusted EPS by
approximately 1 cent, driven by restructuring actions.
Miscellaneous
We will discuss our revised fiscal 2015 outlook at 9:00 a.m. CDT on
Monday, May 4, during a live webcast. To participate, go to IR.Donaldson.com
and click on the webcast icon.
We will release our third quarter earnings on May 21. Details about the
release will be available at IR.Donaldson.com
(click on "Calendar of Events").
About Donaldson Company
Founded 100 years ago, Donaldson (NYSE: DCI) is a global leader in the
filtration industry. The Company's innovative filtration technologies
improve people's lives, enhance Customers' equipment performance and
protect the environment. More than 12,500 employees support Customers at
140 sales, manufacturing, and distribution locations. For more
information, visit www.Donaldson.com.
Forward-Looking Statements
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, without limitation, forecasts, plans, trends, and projections
relating to our business and financial performance and global economic
conditions, which involve uncertainties that could materially impact
results. All statements other than statements of historical fact are
forward-looking statements. These statements do not guarantee future
performance.
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, the reduced demand for
hard disk drive products with the increased use of flash memory,
currency fluctuations, commodity prices, political factors, the
Company's international operations, highly competitive markets,
governmental laws and regulations, including the impact of the various
economic stimulus and financial reform measures, the implementation of
our new information technology systems, information security and data
breaches, potential global events resulting in market instability
including financial bailouts and defaults of sovereign nations, military
and terrorist activities, including political unrest in the Middle East
and Ukraine, health outbreaks, natural disasters, and all of the other
risk factors included in our Annual Report on Form 10-K and Quarterly
Reports on Form 10-Q. We undertake no obligation to publicly update or
revise any forward-looking statements.
Donaldson Company Inc.
Brad Pogalz, 952-887-3753
or
Jim
Shaw, 952-887-3816
May 01, 2015