Welcome!

Microsoft Cloud Authors: Elizabeth White, Mihai Corbuleac, Pat Romanski, David Bermingham, Steven Mandel

News Feed Item

Donaldson Reports First Quarter Results

Donaldson Company, Inc. (NYSE: DCI) announced its financial results for its fiscal 2013 first quarter. Summarized financial results are as follows (dollars in millions, except per share data):

   
Three Months Ended
October 31

2012

   

2011

   

Change

Net sales $589 $608 (3 )%
Operating income 74 90 (19 )%
Net earnings 54 69 (21 )%
Diluted EPS (*) $0.36 $0.45 (20 )%
 

(*) The prior year EPS amounts reflect the impact of last year’s two-for-one stock split.

“Our first quarter sales and EPS were consistent with the updated outlook we announced in late October,” said Bill Cook, Chairman, President and CEO. “While we finished FY12 very strong, we saw conditions at many of our Customers decelerate in September and October. Incoming orders from our Engine OEM and Disk Drive Customers decreased as they lowered their production schedules to deal with declining end market demand and to also reduce their inventory levels. Utilization of on-road and off-road equipment also weakened during this period, resulting in lower order rates for our replacement filters. Fortunately, our Gas Turbine Products business helped offset these weaker conditions with a 33 percent year-over-year sales increase. We expect our Gas Turbine project shipments to continue increasing in our second and third quarters. Finally, foreign currency translation decreased our sales by almost 3 percent due to the stronger US dollar versus last year. Excluding the foreign exchange impact, sales decreased less than 1 percent in the quarter.”

“Our operating margin was 12.5 percent due to lower fixed cost absorption and a mix shift to large Gas Turbine project shipments. We were able to partially offset these with our Continuous Improvement initiatives. Looking forward, we have initiated actions which will better align our manufacturing and operating expenses with our expected Customer demand.”

“We see the current downturn as short-term primarily due to high levels of global uncertainty. We expect to return to year-over-year growth in our second quarter. A continuing benefit of our diversified portfolio of filtration businesses around the world is that regions including Latin America, South Africa, and Australia, and product groups like Gas Turbine and Integrated Venting Solutions, are all projecting strong growth. As a result, we are forecasting our Company’s full-year sales to increase 0 to 4 percent, and our FY13 EPS forecast is between $1.68 and $1.88 per share.”

Financial Statement Discussion

The impact of foreign currency translation decreased sales by $16.9 million, or 2.8 percent, during the first quarter compared to the same period last year. The impact of foreign currency translation decreased reported net earnings by $1.3 million, or 1.9 percent, compared to the prior year.

Gross margin was 33.7 percent, compared to 35.3 percent in last year’s first quarter. The year-over-year decrease is primarily attributable to lower fixed cost absorption due to the decrease in our production volumes and the mix impact due to large Gas Turbine project shipments. These were partially offset by the benefits from our ongoing Continuous Improvement initiatives.

Operating expenses for the quarter were $124.8 million, approximately even with last year’s $124.6 million. As a percent of sales, operating expenses were 21.2 percent compared to last year’s 20.5 percent. Our cost containment actions helped offset higher pension expense and incremental expenses related to our strategic business systems projects.

Our effective tax rate for the quarter was 29.4 percent, compared to a prior year rate of 25.5 percent. The prior year’s quarter included tax benefits primarily due to favorable settlements of tax audits of $4.3 million.

As part of our ongoing share repurchase program we repurchased 1,500,000 shares, or 1.0 percent of our diluted outstanding shares, for $50.7 million during the quarter.

FY13 Outlook

We continue to forecast full-year sales growth as strong Gas Turbine project shipments in the next two quarters and improving demand for replacement filters are anticipated to offset weaker demand from our Engine OEM and Disk Drive Customers.

  • We are projecting our full-year sales to be between $2.5 and $2.6 billion, or up 0 to 4 percent over last year’s record. Our forecast is based on the Euro at US$1.27. We expect foreign currency translation to have a negative impact on our sales for most of our fiscal year.
  • Our full-year operating margin forecast is 14.2 to 15.0 percent.
  • Our FY13 tax rate is anticipated to be between 28 and 31 percent.
  • We forecast our FY13 EPS to be between $1.68 and $1.88.
  • Cash generated by operating activities is projected to be between $235 and $265 million. Our capital spending is estimated to be approximately $100 million.

Engine Products: We forecast FY13 sales to be equal to FY12, including the negative impact of foreign currency.

  • Our on-road OEM Customers are planning to build fewer heavy- and medium-duty trucks. Demand from our off-road OEM Customers is anticipated to be mixed: build rates of agriculture equipment are forecasted to remain good, build rates of construction equipment are expected to slowly improve in North America, but remain weak in Europe and China, and build rates of mining equipment are expected to decrease globally.
  • We are anticipating low single-digit sales growth of our Aftermarket Products. Current utilization rates for off-road equipment and on-road heavy trucks have softened. We should offset much of this through our continued expansion into emerging economies, from the increasing number of systems installed in the field with our proprietary filters, and from our increasing sales of liquid filtration products.
  • We forecast our Aerospace and Defense Products’ sales to be equal to the prior year as the continued slowdown in military spending is anticipated to be offset by increased commercial aerospace sales.

Industrial Products: We forecast sales to increase 4 to 10 percent over FY12, including the negative impact of foreign currency.

  • Our Industrial Filtration Solutions Products’ sales are projected to increase 0 to 5 percent. We assume manufacturing activity will remain strong in the Americas, slowly improve in Asia, and continue to be weak in Europe.
  • We anticipate our Gas Turbine Products’ sales to be up 21 to 27 percent due to continued strength in both the large turbine power generation and the oil and gas markets.
  • Special Applications Products’ sales are forecast to increase 1 to 7 percent, with growth expected from membranes products and integrated venting 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 approximately 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, the 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 the 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 and defaults of sovereign nations, military and terrorist activities, health outbreaks, natural disasters, 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
October 31
2012 2011
Net sales $588,947 $608,295
 
Cost of sales 390,654 393,361
 
Gross margin 198,293 214,934
 
Operating expenses 124,756 124,607
 
Operating income 73,537 90,327
 
Other income, net (5,812) (4,860)
 
Interest expense 2,671 3,170
 
Earnings before income taxes 76,678 92,017
 
Income taxes 22,565 23,464
 
Net earnings $54,113 $68,553
 
Weighted average shares
Outstanding (*) 149,149,429 150,513,892
 
Diluted shares outstanding (*) 151,524,125 153,047,198
 
Net earnings per share (*) $0.36 $0.46
 
Net earnings per share
assuming dilution (*) $0.36 $0.45
 
Dividends paid per share (*) $0.090 $0.075
 

(*) Prior year shares and per share amounts reflect the impact of the Company’s two-for-one stock split that occurred during the third quarter of Fiscal 2012.

 
DONALDSON COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Thousands of dollars)
(Unaudited)
 
    October 31     July 31
2012 2012
ASSETS
 
Cash, cash equivalents and short-term investments $289,010 $318,151
Accounts receivable – net 415,059 438,796
Inventories – net 272,396 256,116
Prepaids and other current assets 71,948 72,599
 
Total current assets 1,048,413 1,085,662
 
Other assets and deferred taxes 265,187 259,511
Property, plant and equipment – net 398,898 384,909
 
Total assets $1,712,498 $1,730,082
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
Trade accounts payable $185,721 $199,182
Employee compensation and other liabilities 189,341 201,848
Short-term borrowings 67,506 95,147
Current maturity long-term debt 2,361 2,346
 
Total current liabilities 444,929 498,523
 
Long-term debt 202,473 203,483
Other long-term liabilities 109,914 118,062
 
Total liabilities 757,316 820,068
 
Equity 955,182 910,014
 
Total liabilities and equity $1,712,498 $1,730,082
 
 
DONALDSON COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of dollars)
(Unaudited)
 
    Three Months Ended
October 31
2012     2011
OPERATING ACTIVITIES
 
Net earnings $54,113 $68,553

Adjustments to reconcile net earnings to net cash provided by operating activities:

Depreciation and amortization 16,026 15,574
Changes in operating assets and liabilities 1,910 (21,932)
Tax benefit of equity plans (5,527) (2,171)
Stock compensation plan expense 1,476 1,690
Other, net (3,935) (4,028)
Net cash provided by operating activities 64,063 57,686
 
INVESTING ACTIVITIES
 
Net expenditures on property and equipment (21,404) (18,491)
Net change in short-term investments 12,868 -
Net cash used in investing activities (8,536) (18,491)
 
FINANCING ACTIVITIES
 
Purchase of treasury stock (50,731) (73,558)
Net change in debt and short-term borrowings (28,703) 78,763
Dividends paid (13,292) (11,193)
Tax benefit of equity plans 5,527 2,171
Exercise of stock options 5,576 2,961
Net cash used in financing activities (81,623) (856)
 

Effect of exchange rate changes on cash

5,077

(9,620)

 

Increase/(Decrease) in cash and cash equivalents

(21,019)

28,719

 

Cash and cash equivalents – beginning of year

225,789

273,494

 

Cash and cash equivalents – end of period

$204,770

$302,213

 
 

SEGMENT DETAIL

(Thousands of dollars)
(Unaudited)
             
Engine Industrial Corporate & Total
Products Products Unallocated Company
3 Months Ended October 31, 2012:
Net sales $370,660 $218,287 --- $588,947
Earnings before income taxes 47,424 32,562 (3,308) 76,678
 
3 Months Ended October 31, 2011:
Net sales $393,725 $214,570 --- $608,295
Earnings before income taxes 59,878 34,299 (2,160) 92,017
 
 
NET SALES BY PRODUCT
(Thousands of dollars)
(Unaudited)
 
Three Months Ended
October 31
2012 2011
Engine Products segment:
Off-Road Products $90,997 $94,108
On-Road Products 34,756 42,625
Aftermarket Products 218,396 226,897
Retrofit Emissions Products 2,897 4,637
Aerospace and Defense Products 23,614 25,458
Total Engine Products segment $370,660 $393,725
 
Industrial Products segment:
Industrial Filtration Solutions Products $128,576 $133,399
Gas Turbine Products 47,243 35,581
Special Applications Products 42,468 45,590
Total Industrial Products segment $218,287 $214,570
 
Total Company $588,947 $608,295
 
 

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(Thousands of dollars, except per share amounts)
(Unaudited)
   
Three Months Ended
October 31
2012     2011
 
Net cash provided by $64,063 $57,686
operating activities
Net capital expenditures (21,404) (18,491)
Free cash flow $42,659 $39,195
 
Net earnings $54,113 $68,553
Income taxes 22,565 23,464
Interest expense (net) 1,754 2,371
Depreciation and amortization 16,026 15,574
EBITDA $94,458 $109,962
 
Prior year net sales $608,295 $536,909
Change in net sales, excluding foreign currency translation (2,489) 57,966
Foreign currency translation (16,859) 13,420
Current year net sales $588,947 $608,295
 
Prior year net earnings $68,553 $53,134
Change in net earnings, excluding foreign currency translation (13,119) 14,088
Foreign currency translation (1,321) 1,331
Current year net earnings $54,113 $68,553
 

Although free cash flow, EBITDA, net sales excluding foreign currency translation, and net earnings excluding foreign currency translation 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. 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.

More Stories By Business Wire

Copyright © 2009 Business Wire. All rights reserved. Republication or redistribution of Business Wire content is expressly prohibited without the prior written consent of Business Wire. Business Wire shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.

@ThingsExpo Stories
So, you bought into the current machine learning craze and went on to collect millions/billions of records from this promising new data source. Now, what do you do with them? Too often, the abundance of data quickly turns into an abundance of problems. How do you extract that "magic essence" from your data without falling into the common pitfalls? In her session at @ThingsExpo, Natalia Ponomareva, Software Engineer at Google, will provide tips on how to be successful in large scale machine lear...
The IoT has the potential to create a renaissance of manufacturing in the US and elsewhere. In his session at 18th Cloud Expo, Florent Solt, CTO and chief architect of Netvibes, will discuss how the expected exponential increase in the amount of data that will be processed, transported, stored, and accessed means there will be a huge demand for smart technologies to deliver it. Florent Solt is the CTO and chief architect of Netvibes. Prior to joining Netvibes in 2007, he co-founded Rift Technol...
The increasing popularity of the Internet of Things necessitates that our physical and cognitive relationship with wearable technology will change rapidly in the near future. This advent means logging has become a thing of the past. Before, it was on us to track our own data, but now that data is automatically available. What does this mean for mHealth and the "connected" body? In her session at @ThingsExpo, Lisa Calkins, CEO and co-founder of Amadeus Consulting, will discuss the impact of wea...
SYS-CON Events announced today that Peak 10, Inc., a national IT infrastructure and cloud services provider, will exhibit at SYS-CON's 18th International Cloud Expo®, which will take place on June 7-9, 2016, at the Javits Center in New York City, NY. Peak 10 provides reliable, tailored data center and network services, cloud and managed services. Its solutions are designed to scale and adapt to customers’ changing business needs, enabling them to lower costs, improve performance and focus inter...
We’ve worked with dozens of early adopters across numerous industries and will debunk common misperceptions, which starts with understanding that many of the connected products we’ll use over the next 5 years are already products, they’re just not yet connected. With an IoT product, time-in-market provides much more essential feedback than ever before. Innovation comes from what you do with the data that the connected product provides in order to enhance the customer experience and optimize busi...
In his session at @ThingsExpo, Chris Klein, CEO and Co-founder of Rachio, will discuss next generation communities that are using IoT to create more sustainable, intelligent communities. One example is Sterling Ranch, a 10,000 home development that – with the help of Siemens – will integrate IoT technology into the community to provide residents with energy and water savings as well as intelligent security. Everything from stop lights to sprinkler systems to building infrastructures will run ef...
Digital payments using wearable devices such as smart watches, fitness trackers, and payment wristbands are an increasing area of focus for industry participants, and consumer acceptance from early trials and deployments has encouraged some of the biggest names in technology and banking to continue their push to drive growth in this nascent market. Wearable payment systems may utilize near field communication (NFC), radio frequency identification (RFID), or quick response (QR) codes and barcodes...
SYS-CON Events announced today that Stratoscale, the software company developing the next generation data center operating system, will exhibit at SYS-CON's 18th International Cloud Expo®, which will take place on June 7-9, 2016, at the Javits Center in New York City, NY. Stratoscale is revolutionizing the data center with a zero-to-cloud-in-minutes solution. With Stratoscale’s hardware-agnostic, Software Defined Data Center (SDDC) solution to store everything, run anything and scale everywhere...
Angular 2 is a complete re-write of the popular framework AngularJS. Programming in Angular 2 is greatly simplified – now it's a component-based well-performing framework. This immersive one-day workshop at 18th Cloud Expo, led by Yakov Fain, a Java Champion and a co-founder of the IT consultancy Farata Systems and the product company SuranceBay, will provide you with everything you wanted to know about Angular 2.
You think you know what’s in your data. But do you? Most organizations are now aware of the business intelligence represented by their data. Data science stands to take this to a level you never thought of – literally. The techniques of data science, when used with the capabilities of Big Data technologies, can make connections you had not yet imagined, helping you discover new insights and ask new questions of your data. In his session at @ThingsExpo, Sarbjit Sarkaria, data science team lead ...
SYS-CON Events announced today that Men & Mice, the leading global provider of DNS, DHCP and IP address management overlay solutions, will exhibit at SYS-CON's 18th International Cloud Expo®, which will take place on June 7-9, 2016, at the Javits Center in New York City, NY. The Men & Mice Suite overlay solution is already known for its powerful application in heterogeneous operating environments, enabling enterprises to scale without fuss. Building on a solid range of diverse platform support,...
You deployed your app with the Bluemix PaaS and it's gaining some serious traction, so it's time to make some tweaks. Did you design your application in a way that it can scale in the cloud? Were you even thinking about the cloud when you built the app? If not, chances are your app is going to break. Check out this webcast to learn various techniques for designing applications that will scale successfully in Bluemix, for the confidence you need to take your apps to the next level and beyond.
Whether your IoT service is connecting cars, homes, appliances, wearable, cameras or other devices, one question hangs in the balance – how do you actually make money from this service? The ability to turn your IoT service into profit requires the ability to create a monetization strategy that is flexible, scalable and working for you in real-time. It must be a transparent, smoothly implemented strategy that all stakeholders – from customers to the board – will be able to understand and comprehe...
Artificial Intelligence has the potential to massively disrupt IoT. In his session at 18th Cloud Expo, AJ Abdallat, CEO of Beyond AI, will discuss what the five main drivers are in Artificial Intelligence that could shape the future of the Internet of Things. AJ Abdallat is CEO of Beyond AI. He has over 20 years of management experience in the fields of artificial intelligence, sensors, instruments, devices and software for telecommunications, life sciences, environmental monitoring, process...
Increasing IoT connectivity is forcing enterprises to find elegant solutions to organize and visualize all incoming data from these connected devices with re-configurable dashboard widgets to effectively allow rapid decision-making for everything from immediate actions in tactical situations to strategic analysis and reporting. In his session at 18th Cloud Expo, Shikhir Singh, Senior Developer Relations Manager at Sencha, will discuss how to create HTML5 dashboards that interact with IoT devic...
SYS-CON Events announced today that Ericsson has been named “Gold Sponsor” of SYS-CON's @ThingsExpo, which will take place on June 7-9, 2016, at the Javits Center in New York, New York. Ericsson is a world leader in the rapidly changing environment of communications technology – providing equipment, software and services to enable transformation through mobility. Some 40 percent of global mobile traffic runs through networks we have supplied. More than 1 billion subscribers around the world re...
There is an ever-growing explosion of new devices that are connected to the Internet using “cloud” solutions. This rapid growth is creating a massive new demand for efficient access to data. And it’s not just about connecting to that data anymore. This new demand is bringing new issues and challenges and it is important for companies to scale for the coming growth. And with that scaling comes the need for greater security, gathering and data analysis, storage, connectivity and, of course, the...
SYS-CON Events announced today that DatacenterDynamics has been named “Media Sponsor” of SYS-CON's 18th International Cloud Expo, which will take place on June 7–9, 2016, at the Javits Center in New York City, NY. DatacenterDynamics is a brand of DCD Group, a global B2B media and publishing company that develops products to help senior professionals in the world's most ICT dependent organizations make risk-based infrastructure and capacity decisions.
Machine Learning helps make complex systems more efficient. By applying advanced Machine Learning techniques such as Cognitive Fingerprinting, wind project operators can utilize these tools to learn from collected data, detect regular patterns, and optimize their own operations. In his session at 18th Cloud Expo, Stuart Gillen, Director of Business Development at SparkCognition, will discuss how research has demonstrated the value of Machine Learning in delivering next generation analytics to im...
This is not a small hotel event. It is also not a big vendor party where politicians and entertainers are more important than real content. This is Cloud Expo, the world's longest-running conference and exhibition focused on Cloud Computing and all that it entails. If you want serious presentations and valuable insight about Cloud Computing for three straight days, then register now for Cloud Expo.