GAAP EPS of 28 cents; Adjusted EPS of 29 cents
MINNEAPOLIS--(BUSINESS WIRE)--
Donaldson Company, Inc. (NYSE: DCI) today reported second quarter 2016
net earnings of $38.0 million, or 28 cents per share1. The
impact from foreign currency translation reduced net income by $4.9
million, or 10.2 percent. Second quarter 2016 adjusted EPS2
was 29 cents, compared with 36 cents last year3. The tables
attached to this press release provide a reconciliation of non-GAAP to
GAAP measures.
“While market conditions remained stagnant last quarter, we further
intensified our focus on operational efficiency and expense management,”
said Tod Carpenter, president and chief executive officer of Donaldson.
“Beyond our unwavering commitment to support our Customers during this
period of uncertainty, we are actively working to protect our
bottom-line results.
“Our efforts led to expense performance in the quarter that partially
offset the pressure created by softer-than-expected sales, particularly
in our Gas Turbine Systems business, and additional pressure from
currency translation. We expect these pressures to continue into the
second half of this fiscal year, so we have revised our full-year sales
and profit guidance. However, we are able to maintain the midpoint of
our prior operating margin guidance due to benefits from our expense
reduction efforts and Continuous Improvement initiatives.”
|
|
|
1 All earnings per share figures refer to diluted EPS.
|
|
2 Adjusted earnings per share, a non-GAAP financial
measure, exclude the impact of certain matters not related to the
Company’s ongoing operations. See the “Accounting Considerations”
section of this release for more information.
|
|
3 Previously issued interim financial statements for
fiscal 2015 were revised in the Company’s Annual Report on Form
10-K for the period ended July 31, 2015. Note O of this 10-K
filing includes additional detail related to the impact of the
revision.
|
|
|
Sales Results
Second quarter 2016 sales declined 12.1 percent to $517.2 million from
$588.5 million in 2015, which includes a negative impact from foreign
currency translation of 4.5 percent, or $26.3 million.
Excluding the impact of currency translation, second quarter 2016 sales
decreased 7.6 percent from last year, driven by year-over-year sales
declines in both the Engine and Industrial segments of 5.7 percent and
10.6 percent, respectively. The table below illustrates year-over-year
sales performance with and without the impact of foreign currency
translation.
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
January 31, 2016
|
|
January 31, 2016
|
|
|
|
|
Constant
|
|
|
|
Constant
|
|
|
Reported
|
|
Currency
|
|
Reported
|
|
Currency
|
|
|
% Change
|
|
% Change
|
|
% Change
|
|
% Change
|
|
Engine Products segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Off-Road
|
|
(17.4
|
)
|
%
|
|
(12.9
|
)
|
%
|
|
(21.7
|
)
|
%
|
|
(16.9
|
)
|
%
|
|
On-Road
|
|
2.4
|
|
|
|
5.9
|
|
|
|
(0.3
|
)
|
|
|
4.0
|
|
|
|
Aftermarket
|
|
(9.3
|
)
|
|
|
(4.6
|
)
|
|
|
(9.4
|
)
|
|
|
(3.8
|
)
|
|
|
Aerospace and Defense
|
|
(15.3
|
)
|
|
|
(12.4
|
)
|
|
|
(8.1
|
)
|
|
|
(4.5
|
)
|
|
|
Total Engine Products
|
|
(10.1
|
)
|
%
|
|
(5.7
|
)
|
%
|
|
(10.7
|
)
|
%
|
|
(5.6
|
)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industrial Products segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industrial Filtration Solutions
|
|
(7.5
|
)
|
%
|
|
(2.2
|
)
|
%
|
|
(5.3
|
)
|
%
|
|
0.9
|
|
%
|
|
Gas Turbine Systems
|
|
(40.8
|
)
|
|
|
(39.3
|
)
|
|
|
(34.1
|
)
|
|
|
(31.1
|
)
|
|
|
Special Applications
|
|
(5.7
|
)
|
|
|
0.4
|
|
|
|
(6.8
|
)
|
|
|
--
|
|
|
|
Total Industrial Products
|
|
(15.1
|
)
|
%
|
|
(10.6
|
)
|
%
|
|
(11.3
|
)
|
%
|
|
(5.6
|
)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Company
|
|
(12.1
|
)
|
%
|
|
(7.6
|
)
|
%
|
|
(11.0
|
)
|
%
|
|
(5.6
|
)
|
%
|
Operating Profit Results
Second quarter 2016 operating margin was 10.4 percent, compared with
11.2 percent last year. Excluding restructuring charges and other
one-time items in both current- and prior-year periods, second quarter
adjusted operating margin declined approximately 1.3 percentage points
to 10.7 percent in 2016 from 12.0 percent last year.
Second quarter 2016 gross margin rate was 33.0 percent, compared with
34.5 percent in 2015. The current- and prior-year rates include
restructuring charges, which reduced these rates by approximately 0.2
percentage points and 0.1 percentage points, respectively. Excluding
this impact from each period, second quarter 2016 gross margin was
approximately 1.4 percentage points below last year, driven primarily by
the impact of lower sales and a transactional impact from foreign
currency exchange rates, partially offset by Continuous Improvement
initiatives.
Operating expense rate was 22.6 percent in second quarter 2016, compared
with 23.3 percent last year. Second quarter 2016 expense rate included a
restructuring impact of approximately 0.1 percentage points, while the
second quarter 2015 expense rate was approximately 0.6 percentage points
higher due to a lump-sum pension settlement. Excluding these impacts,
second quarter 2016 expense rate was lower than last year by
approximately 0.2 percentage points, reflecting the benefit from
restructuring actions, lower variable compensation expenses and other
expense controls. These benefits were partially offset by increased
expense related to the Company’s ERP implementation and a loss of
leverage on lower sales volume than last year.
Interest expense increased to $5.5 million in second quarter from $3.7
million last year, reflecting a higher level of debt.
The Company’s second quarter 2016 effective income tax rate was 23.0
percent, compared with 26.7 percent in 2015. The decrease from last year
of 3.7 percentage points was driven by a favorable mix of earnings
between tax jurisdictions, the retroactive aspects of the Protecting
Americans from Tax Hikes Act of 2015 and other discrete items.
Capital Returned to Shareholders
Donaldson paid dividends of $22.5 million in second quarter and $45.2
million year to date. The Company did not repurchase any shares of its
common stock in second quarter. Year to date, Donaldson has invested
$68.0 million to repurchase 1.5 percent of its outstanding shares at an
average price of $32.85 per share.
Fiscal 2016 Outlook4
Donaldson now expects fiscal 2016 adjusted EPS between $1.51 and $1.61,
compared with prior adjusted EPS guidance of $1.49 to $1.69. GAAP EPS is
expected to be approximately 6 cents lower than adjusted EPS in fiscal
2016, reflecting the year-to-date impact from restructuring charges and
investigation-related costs.
Donaldson’s full-year 2016 guidance reflects:
-
Sales between $2.20 billion and $2.25 billion, or 5 percent to 7
percent below last year, compared with prior guidance of 3 percent to
7 percent below last year.
-
Excluding the negative impact from currency translation of $90
million to $100 million, sales in local currencies are expected to
decline between 1 percent and 3 percent. The midpoint of this
range is consistent with that of the prior guidance range.
-
Adjusted operating margin in a range between 13.0 percent and 13.6
percent. The midpoint of this range is consistent with that of the
prior guidance range.
-
An effective income tax rate between 25.5 percent and 27.5 percent,
compared with prior guidance of 26.0 percent to 28.0 percent.
-
Repurchasing up to 2 percent of its outstanding shares.
Engine Products: Full-year
2016 Engine sales are now expected to decline between 5 percent and 7
percent compared with 2015. In local currency, sales are expected to
decline between 1 percent and 3 percent, with the midpoint of this range
consistent with prior guidance, reflecting:
-
Continued weakness in the global agriculture and mining equipment
markets, a slowdown in the construction market and moderating build
rates for on-road heavy-duty transportation in the second half of
fiscal 2016.
-
Stable utilization rates of on-road heavy-duty trucks offset by a
decline in utilization of off-road equipment, resulting in a decline
in sales of replacement filters.
-
A continued slowdown in U.S. defense spending, partially offset by
growing sales of commercial aerospace products.
|
|
|
4 This outlook excludes the impact from the pending
acquisition of Industrias Partmo, which is expected to close by
the end of fiscal 2016.
|
|
|
Industrial Products:
Full-year 2016 Industrial sales are now expected to decline between
6 percent and 8 percent compared with 2015. In local currency, sales are
now expected to decline between 1 percent and 3 percent compared with
fiscal 2015.
-
Industrial Filtration Solutions’ sales are expected to decline in the
low-single-digit range compared with last year.
-
Gas Turbine Systems’ sales are now expected to decline between 20
percent and 25 percent from 2015, reflecting project deferrals and
volatility in global demand.
-
Special Applications’ sales are expected to decline in the
low-single-digit range compared with last year, driven by declines in
the membrane, disk drive and semiconductor businesses, partially
offset by growth in venting products.
Accounting Considerations
In first quarter 2016, Donaldson initiated actions to further align its
operating and manufacturing cost structure with current and projected
Customer and end-market demand. Additionally, in second quarter 2016,
the Company completed the closure of its production facility in
Grinnell, Iowa. These actions resulted in second quarter and
year-to-date pre-tax charges of $1.0 million and $8.5 million,
respectively.
During first quarter 2016, the Audit Committee of Donaldson’s Board of
Directors engaged independent external counsel and independent forensic
accountants to investigate revenue recognition issues in Donaldson’s
European Gas Turbine Systems business. The investigation was completed
in second quarter 2016 and resulted in second quarter and year-to-date
pre-tax charges of $0.5 million and $3.1 million, respectively.
Additional detail related to the investigation is included in the
Company’s Form 10-K for the fiscal year ended July 31, 2015.
In second quarter 2015, Donaldson recorded pre-tax charges of $3.9
million related to a lump-sum pension settlement, and $0.7 million of
restructuring charges related to the closure of its production facility
in Grinnell, Iowa. These charges reduced second quarter 2015 GAAP EPS by
approximately 2 cents.
Miscellaneous
The Company will webcast its second quarter 2016 earnings conference
call at 9:00 a.m. CT today. To listen to the live webcast of the call,
visit the Events & Presentations section of Donaldson’s Investor
Relations website (IR.Donaldson.com),
and click on the “listen to webcast” option. The webcast replay will be
available within the Events & Presentations section of the Company’s
Investor Relations website beginning at 12:00 p.m. CT today.
Statements in this release regarding future events and expectations,
such as forecasts, plans, trends and projections relating to the
Company’s business and financial performance, are forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995, and are identified by words or phrases such as
“estimate,” “project,” “believe,” “expect,” “anticipate,” “forecast,”
and similar expressions. These forward-looking statements speak only as
of the date such statements are made and are subject to risks and
uncertainties that could cause the Company’s results to differ
materially from these statements. These factors include, but are not
limited to, world economic factors and the ongoing economic uncertainty,
currency fluctuations, commodity prices, political factors, the
Company’s international operations, highly competitive markets and
governmental laws and regulations. These risks and uncertainties are
described in the Company’s Annual Report on Form 10-K and interim
financial reports on Form 10-Q. Donaldson undertakes no obligation to
publicly update or revise any forward-looking statements. The results
presented herein are preliminary, unaudited and subject to revision
until the Company files its results with the United States Securities
and Exchange Commission on Form 10-Q.
About Donaldson Company
Founded in 1915 and based in Bloomington, MN, Donaldson (NYSE: DCI) is a
global leader in the filtration industry with approximately 140 sales,
manufacturing and distribution locations in 44 countries. Donaldson’s
innovative filtration technologies improve people’s lives, enhance
Customers’ equipment performance and protect the environment. For more
information, visit www.Donaldson.com.
|
CONDENSED STATEMENTS OF CONSOLIDATED EARNINGS
|
|
|
(In millions, except per share amounts)
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
|
January 31,
|
|
January 31,
|
|
|
|
2016
|
|
2015
|
|
Change
|
|
2016
|
|
2015
|
|
Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$517.2
|
|
|
$588.5
|
|
|
(12.1
|
)
|
%
|
$1,055.2
|
|
|
$1,185.0
|
|
|
(11.0
|
)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
346.4
|
|
|
385.4
|
|
|
(10.1
|
)
|
|
706.3
|
|
|
772.8
|
|
|
(8.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
170.8
|
|
|
203.1
|
|
|
(15.9
|
)
|
|
348.9
|
|
|
412.2
|
|
|
(15.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
117.1
|
|
|
137.3
|
|
|
(14.6
|
)
|
|
239.7
|
|
|
269.4
|
|
|
(11.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
53.7
|
|
|
65.8
|
|
|
(18.5
|
)
|
|
109.2
|
|
|
142.8
|
|
|
(23.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income, net
|
|
(1.2
|
)
|
|
(3.3
|
)
|
|
(63.3
|
)
|
|
(4.1
|
)
|
|
(7.1
|
)
|
|
(41.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
5.5
|
|
|
3.7
|
|
|
48.0
|
|
|
10.5
|
|
|
7.2
|
|
|
45.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes
|
|
49.4
|
|
|
65.4
|
|
|
(24.6
|
)
|
|
102.8
|
|
|
142.7
|
|
|
(28.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes
|
|
11.4
|
|
|
17.4
|
|
|
(34.9
|
)
|
|
26.3
|
|
|
38.8
|
|
|
(32.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$38.0
|
|
|
$48.0
|
|
|
(20.8
|
)
|
%
|
$76.5
|
|
|
$103.9
|
|
|
(26.4
|
)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding
|
|
133.7
|
|
|
138.0
|
|
|
(3.1
|
)
|
%
|
133.8
|
|
|
138.8
|
|
|
(3.6
|
)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted shares outstanding
|
|
134.4
|
|
|
139.7
|
|
|
(3.7
|
)
|
%
|
134.7
|
|
|
140.6
|
|
|
(4.2
|
)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings per share
|
|
$0.28
|
|
|
$0.35
|
|
|
(20.0
|
)
|
%
|
$0.57
|
|
|
$0.75
|
|
|
(24.0
|
)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings per share assuming dilution
|
|
$0.28
|
|
|
$0.34
|
|
|
(17.6
|
)
|
%
|
$0.57
|
|
|
$0.74
|
|
|
(23.0
|
)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends paid per share
|
|
$0.170
|
|
|
$0.165
|
|
|
|
|
$0.340
|
|
|
$0.330
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: All figures independently rounded.
|
CONDENSED CONSOLIDATED BALANCE SHEETS
|
|
(Millions of dollars)
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
January 31,
|
|
July 31,
|
|
|
|
2016
|
|
2015
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$222.1
|
|
$189.9
|
|
Short-term investments
|
|
9.8
|
|
27.5
|
|
Accounts receivable, net
|
|
402.7
|
|
460.0
|
|
Inventories, net
|
|
274.8
|
|
265.0
|
|
Prepaids and other current assets
|
|
97.3
|
|
88.3
|
|
|
|
|
|
|
|
Total current assets
|
|
1,006.7
|
|
1,030.7
|
|
|
|
|
|
|
|
Other assets and deferred taxes
|
|
310.4
|
|
308.2
|
|
Property, plant, and equipment, net
|
|
471.8
|
|
470.6
|
|
|
|
|
|
|
|
Total assets
|
|
$1,788.9
|
|
$1,809.5
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
Trade accounts payable
|
|
$150.1
|
|
$179.2
|
|
Employee compensation and other liabilities
|
|
174.8
|
|
192.3
|
|
Short-term borrowings
|
|
261.4
|
|
187.3
|
|
Current maturity of long-term debt
|
|
1.2
|
|
1.8
|
|
|
|
|
|
|
|
Total current liabilities
|
|
587.5
|
|
560.6
|
|
|
|
|
|
|
|
Long-term debt
|
|
389.0
|
|
389.2
|
|
Other long-term liabilities
|
|
106.6
|
|
81.0
|
|
|
|
|
|
|
|
Total liabilities
|
|
1,083.1
|
|
1,030.8
|
|
|
|
|
|
|
|
Equity
|
|
705.8
|
|
778.7
|
|
|
|
|
|
|
|
Total liabilities & equity
|
|
$1,788.9
|
|
$1,809.5
|
Note: All figures independently rounded.
|
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
|
|
(Millions of dollars)
|
|
(Unaudited)
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
January 31,
|
|
|
2016
|
|
2015
|
|
OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$76.5
|
|
|
$103.9
|
|
|
Adjustments to reconcile net earnings to net cash provided by
operating activities:
|
|
|
|
|
|
Depreciation and amortization
|
|
36.6
|
|
|
37.4
|
|
|
Changes in operating assets and liabilities
|
|
(16.1
|
)
|
|
(69.4
|
)
|
|
Tax benefit of equity plans
|
|
(1.8
|
)
|
|
(5.4
|
)
|
|
Stock compensation plan expense
|
|
5.3
|
|
|
7.7
|
|
|
Other, net
|
|
8.8
|
|
|
11.2
|
|
|
Net cash provided by operating activities
|
|
109.3
|
|
|
85.4
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
Net expenditures on property and equipment
|
|
(42.8
|
)
|
|
(51.0
|
)
|
|
Net change in short-term investments
|
|
18.0
|
|
|
87.5
|
|
|
Acquisitions, net of cash acquired
|
|
(12.9
|
)
|
|
(96.6
|
)
|
|
Net cash used in investing activities
|
|
(37.7
|
)
|
|
(60.1
|
)
|
|
|
|
|
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
Purchase of treasury stock
|
|
(68.0
|
)
|
|
(174.2
|
)
|
|
Net change in debt and short-term borrowings
|
|
72.4
|
|
|
135.9
|
|
|
Dividends paid
|
|
(45.2
|
)
|
|
(45.7
|
)
|
|
Tax benefit of equity plans
|
|
1.8
|
|
|
5.4
|
|
|
Exercise of stock options
|
|
5.0
|
|
|
8.1
|
|
|
Net cash used in financing activities
|
|
(34.0
|
)
|
|
(70.5
|
)
|
|
|
|
|
|
|
Effect of exchange rate changes on cash
|
|
(5.4
|
)
|
|
(22.2
|
)
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents
|
|
32.2
|
|
|
(67.4
|
)
|
|
|
|
|
|
|
Cash and cash equivalents, beginning of year
|
|
189.9
|
|
|
296.4
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of year
|
|
$222.1
|
|
|
$229.0
|
|
|
|
|
|
|
Note: All figures independently rounded.
|
CONSOLIDATED RATE ANALYSIS
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
January 31,
|
|
January 31,
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin
|
|
33.0
|
%
|
|
34.5
|
%
|
|
33.1
|
%
|
|
34.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses rate
|
|
22.6
|
|
|
23.3
|
|
|
22.7
|
|
|
22.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income rate
|
|
10.4
|
|
|
11.2
|
|
|
10.3
|
|
|
12.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earning before income taxes margin
|
|
9.6
|
|
|
11.1
|
|
|
9.7
|
|
|
12.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
January 31,
|
|
January 31,
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
ADJUSTED RATES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin
|
|
33.2
|
%
|
|
34.6
|
%
|
|
33.4
|
%
|
|
34.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses rate
|
|
22.5
|
|
|
22.7
|
|
|
22.0
|
|
|
22.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income rate
|
|
10.7
|
|
|
12.0
|
|
|
11.4
|
|
|
12.4
|
|
|
|
Note: Rate analysis metrics are computed by dividing the applicable
amount by net sales.
Note: All figures independently rounded.
|
SEGMENT DETAIL
|
|
(Millions of dollars)
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
January 31,
|
|
January 31,
|
|
|
2016
|
|
2015
|
|
Change
|
|
2016
|
|
2015
|
|
Change
|
|
NET SALES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Engine Products segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Off-Road
|
|
$52.6
|
|
$63.8
|
|
(17.4)
|
%
|
|
$107.4
|
|
$137.3
|
|
(21.7)
|
%
|
|
On-Road
|
|
32.5
|
|
31.6
|
|
2.4
|
|
|
68.3
|
|
68.4
|
|
(0.3)
|
|
|
Aftermarket
|
|
213.7
|
|
235.6
|
|
(9.3)
|
|
|
445.9
|
|
492.1
|
|
(9.4)
|
|
|
Aerospace and Defense
|
|
22.1
|
|
26.1
|
|
(15.3)
|
|
|
45.9
|
|
50.0
|
|
(8.1)
|
|
|
Total Engine Products segment
|
|
$320.9
|
|
$357.1
|
|
(10.1)
|
|
|
$667.5
|
|
$747.8
|
|
(10.7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industrial Products segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industrial Filtration Solutions
|
|
$120.4
|
|
$130.2
|
|
(7.5)
|
|
|
$246.9
|
|
$260.7
|
|
(5.3)
|
|
|
Gas Turbine Systems
|
|
32.8
|
|
55.4
|
|
(40.8)
|
|
|
57.0
|
|
86.5
|
|
(34.1)
|
|
|
Special Applications
|
|
43.1
|
|
45.8
|
|
(5.7)
|
|
|
83.8
|
|
90.0
|
|
(6.8)
|
|
|
Total Industrial Products segment
|
|
$196.3
|
|
$231.4
|
|
(15.1)
|
|
|
$387.7
|
|
$437.2
|
|
(11.3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Company
|
|
$517.2
|
|
$588.5
|
|
(12.1)
|
%
|
|
$1,055.2
|
|
$1,185.0
|
|
(11.0)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EARNINGS BEFORE INCOME TAXES (EBIT)
|
|
Engine segment
|
|
$27.4
|
|
$41.5
|
|
(34.0)
|
%
|
|
$63.4
|
|
$94.6
|
|
(33.0)
|
%
|
|
Industrial segment
|
|
27.7
|
|
35.1
|
|
(21.1)
|
|
|
51.7
|
|
62.7
|
|
(17.6)
|
|
|
Corp/Unallocated
|
|
(5.7)
|
|
(11.2)
|
|
-
|
|
|
(12.3)
|
|
(14.6)
|
|
-
|
|
|
Total
|
|
$49.4
|
|
$65.4
|
|
(24.5)
|
|
|
$102.8
|
|
$142.7
|
|
(28.0)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBIT %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Engine Products segment
|
|
8.5
|
%
|
11.6
|
%
|
(3.1)
|
%
|
|
9.5
|
%
|
12.7
|
%
|
(3.2)
|
%
|
|
Industrial Products segment
|
|
14.1
|
|
15.2
|
|
(1.1)
|
|
|
13.3
|
|
14.3
|
|
(1.0)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: EBIT% is calculated by dividing EBIT $ by sales
|
|
|
|
|
|
|
|
|
|
|
|
Note: All figures independently rounded.
|
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
|
|
(In millions, except per share amounts)
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
January 31,
|
|
January 31,
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
$51.3
|
|
|
$36.1
|
|
|
$109.3
|
|
|
$85.4
|
|
|
Net capital expenditures
|
|
(21.3
|
)
|
|
(24.0
|
)
|
|
(42.8
|
)
|
|
(51.0
|
)
|
|
Free cash flow
|
|
$30.0
|
|
|
$12.1
|
|
|
$66.5
|
|
|
$34.4
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$38.0
|
|
|
$48.0
|
|
|
$76.5
|
|
|
$103.9
|
|
|
Income taxes
|
|
11.4
|
|
|
17.4
|
|
|
26.3
|
|
|
38.8
|
|
|
Interest expense
|
|
5.5
|
|
|
3.7
|
|
|
10.5
|
|
|
7.2
|
|
|
Depreciation and amortization
|
|
18.1
|
|
|
19.3
|
|
|
36.6
|
|
|
37.4
|
|
|
EBITDA
|
|
$73.0
|
|
|
$88.4
|
|
|
$149.9
|
|
|
$187.3
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
$53.7
|
|
|
$65.8
|
|
|
$109.2
|
|
|
$142.8
|
|
|
Restructuring charges
|
|
1.0
|
|
(a)
|
0.7
|
|
|
8.5
|
|
(a)
|
0.7
|
|
|
Pension lump sum settlement charge
|
|
---
|
|
|
3.9
|
|
|
---
|
|
|
3.9
|
|
|
Investigation costs
|
|
0.5
|
|
(b)
|
---
|
|
|
3.1
|
|
(b)
|
---
|
|
|
Adjusted Operating Income
|
|
$55.2
|
|
|
$70.4
|
|
|
$120.8
|
|
|
$147.4
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$38.0
|
|
|
$48.0
|
|
|
$76.5
|
|
|
$103.9
|
|
|
Restructuring charges, net of tax
|
|
0.7
|
|
(a)
|
0.4
|
|
|
5.9
|
|
(a)
|
0.4
|
|
|
Pension lump sum settlement charge, net of tax
|
|
---
|
|
|
2.4
|
|
|
---
|
|
|
2.4
|
|
|
Investigation costs, net of tax
|
|
0.3
|
|
(b)
|
---
|
|
|
2.0
|
|
(b)
|
---
|
|
|
Adjusted Net Earnings
|
|
$39.0
|
|
|
$50.8
|
|
|
$84.4
|
|
|
$106.7
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS
|
|
$0.28
|
|
|
$0.34
|
|
|
$0.57
|
|
|
$0.74
|
|
|
Restructuring charges per share
|
|
0.01
|
|
(a)
|
---
|
|
|
0.04
|
|
(a)
|
---
|
|
|
Pension lump sum settlement charge, net of tax
|
|
---
|
|
|
0.02
|
|
|
|
|
0.02
|
|
|
Investigation costs per share
|
|
---
|
|
(b)
|
---
|
|
|
0.02
|
|
(b)
|
---
|
|
|
Adjusted Diluted EPS
|
|
$0.29
|
|
|
$0.36
|
|
|
$0.63
|
|
|
$0.76
|
|
|
|
Note: All figures independently rounded.
(a) Current year restructuring charges include (1) actions related to
rebalancing and reducing the current workforce (2) accrued severance,
project management fees, warehousing costs, moving expenses, and
supplies and equipment associated with the closing of the Company's
Grinnell, Iowa, facility.
(b) Investigation costs relate to professional services incurred in
connection with the independent investigation into the Company's Gas
Turbine Systems Products revenue recognition.
Although free cash flow, EBITDA, adjusted operating income, adjusted net
earnings, and adjusted diluted EPS 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. The Company evaluates its results of operations
both on an as reported and a constant currency basis. The constant
currency presentation, which is a non-GAAP measure, excludes the impact
of fluctuations in foreign currency exchange rates. The Company believes
providing constant currency information provides valuable supplemental
information regarding its results of operations, consistent with how the
Company evaluates its performance. The Company calculates constant
currency percentages by converting its current period local currency
financial results using the prior period exchanges rates and compared
these adjusted amounts to its prior period reported results. 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.
Note: All figures independently rounded.
View source version on businesswire.com: http://www.businesswire.com/news/home/20160301005431/en/
Source: Donaldson Company, Inc.