Click here to close now.


Microsoft Cloud Authors: Jordan Sanders, Carmen Gonzalez, Pat Romanski, Keith Mayer, Jayaram Krishnaswamy

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






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


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.

(Thousands of dollars, except share and per share amounts)
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.

(Thousands of dollars)
    October 31     July 31
2012 2012
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
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
(Thousands of dollars)
    Three Months Ended
October 31
2012     2011
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
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)
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




Increase/(Decrease) in cash and cash equivalents




Cash and cash equivalents – beginning of year




Cash and cash equivalents – end of period





(Thousands of dollars)
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
(Thousands of dollars)
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


(Thousands of dollars, except per share amounts)
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
Cloud computing delivers on-demand resources that provide businesses with flexibility and cost-savings. The challenge in moving workloads to the cloud has been the cost and complexity of ensuring the initial and ongoing security and regulatory (PCI, HIPAA, FFIEC) compliance across private and public clouds. Manual security compliance is slow, prone to human error, and represents over 50% of the cost of managing cloud applications. Determining how to automate cloud security compliance is critical to maintaining positive ROI. Raxak Protect is an automated security compliance SaaS platform and ma...
We all know that data growth is exploding and storage budgets are shrinking. Instead of showing you charts on about how much data there is, in his General Session at 17th Cloud Expo, Scott Cleland, Senior Director of Product Marketing at HGST, showed how to capture all of your data in one place. After you have your data under control, you can then analyze it in one place, saving time and resources.
Today air travel is a minefield of delays, hassles and customer disappointment. Airlines struggle to revitalize the experience. GE and M2Mi will demonstrate practical examples of how IoT solutions are helping airlines bring back personalization, reduce trip time and improve reliability. In their session at @ThingsExpo, Shyam Varan Nath, Principal Architect with GE, and Dr. Sarah Cooper, M2Mi’s VP Business Development and Engineering, explored the IoT cloud-based platform technologies driving this change including privacy controls, data transparency and integration of real time context with p...
The Internet of Things (IoT) is growing rapidly by extending current technologies, products and networks. By 2020, Cisco estimates there will be 50 billion connected devices. Gartner has forecast revenues of over $300 billion, just to IoT suppliers. Now is the time to figure out how you’ll make money – not just create innovative products. With hundreds of new products and companies jumping into the IoT fray every month, there’s no shortage of innovation. Despite this, McKinsey/VisionMobile data shows "less than 10 percent of IoT developers are making enough to support a reasonably sized team....
Internet of @ThingsExpo, taking place June 7-9, 2016 at Javits Center, New York City and Nov 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA, is co-located with the 18th International @CloudExpo and will feature technical sessions from a rock star conference faculty and the leading industry players in the world and ThingsExpo New York Call for Papers is now open.
With major technology companies and startups seriously embracing IoT strategies, now is the perfect time to attend @ThingsExpo 2016 in New York and Silicon Valley. Learn what is going on, contribute to the discussions, and ensure that your enterprise is as "IoT-Ready" as it can be! Internet of @ThingsExpo, taking place Nov 3-5, 2015, at the Santa Clara Convention Center in Santa Clara, CA, is co-located with 17th Cloud Expo and will feature technical sessions from a rock star conference faculty and the leading industry players in the world. The Internet of Things (IoT) is the most profound cha...
Just over a week ago I received a long and loud sustained applause for a presentation I delivered at this year’s Cloud Expo in Santa Clara. I was extremely pleased with the turnout and had some very good conversations with many of the attendees. Over the next few days I had many more meaningful conversations and was not only happy with the results but also learned a few new things. Here is everything I learned in those three days distilled into three short points.
As organizations realize the scope of the Internet of Things, gaining key insights from Big Data, through the use of advanced analytics, becomes crucial. However, IoT also creates the need for petabyte scale storage of data from millions of devices. A new type of Storage is required which seamlessly integrates robust data analytics with massive scale. These storage systems will act as “smart systems” provide in-place analytics that speed discovery and enable businesses to quickly derive meaningful and actionable insights. In his session at @ThingsExpo, Paul Turner, Chief Marketing Officer at...
DevOps is about increasing efficiency, but nothing is more inefficient than building the same application twice. However, this is a routine occurrence with enterprise applications that need both a rich desktop web interface and strong mobile support. With recent technological advances from Isomorphic Software and others, rich desktop and tuned mobile experiences can now be created with a single codebase – without compromising functionality, performance or usability. In his session at DevOps Summit, Charles Kendrick, CTO and Chief Architect at Isomorphic Software, demonstrated examples of com...
In his keynote at @ThingsExpo, Chris Matthieu, Director of IoT Engineering at Citrix and co-founder and CTO of Octoblu, focused on building an IoT platform and company. He provided a behind-the-scenes look at Octoblu’s platform, business, and pivots along the way (including the Citrix acquisition of Octoblu).
In his General Session at 17th Cloud Expo, Bruce Swann, Senior Product Marketing Manager for Adobe Campaign, explored the key ingredients of cross-channel marketing in a digital world. Learn how the Adobe Marketing Cloud can help marketers embrace opportunities for personalized, relevant and real-time customer engagement across offline (direct mail, point of sale, call center) and digital (email, website, SMS, mobile apps, social networks, connected objects).
The Internet of Everything is re-shaping technology trends–moving away from “request/response” architecture to an “always-on” Streaming Web where data is in constant motion and secure, reliable communication is an absolute necessity. As more and more THINGS go online, the challenges that developers will need to address will only increase exponentially. In his session at @ThingsExpo, Todd Greene, Founder & CEO of PubNub, exploreed the current state of IoT connectivity and review key trends and technology requirements that will drive the Internet of Things from hype to reality.
Two weeks ago (November 3-5), I attended the Cloud Expo Silicon Valley as a speaker, where I presented on the security and privacy due diligence requirements for cloud solutions. Cloud security is a topical issue for every CIO, CISO, and technology buyer. Decision-makers are always looking for insights on how to mitigate the security risks of implementing and using cloud solutions. Based on the presentation topics covered at the conference, as well as the general discussions heard between sessions, I wanted to share some of my observations on emerging trends. As cyber security serves as a fou...
Continuous processes around the development and deployment of applications are both impacted by -- and a benefit to -- the Internet of Things trend. To help better understand the relationship between DevOps and a plethora of new end-devices and data please welcome Gary Gruver, consultant, author and a former IT executive who has led many large-scale IT transformation projects, and John Jeremiah, Technology Evangelist at Hewlett Packard Enterprise (HPE), on Twitter at @j_jeremiah. The discussion is moderated by me, Dana Gardner, Principal Analyst at Interarbor Solutions.
Too often with compelling new technologies market participants become overly enamored with that attractiveness of the technology and neglect underlying business drivers. This tendency, what some call the “newest shiny object syndrome” is understandable given that virtually all of us are heavily engaged in technology. But it is also mistaken. Without concrete business cases driving its deployment, IoT, like many other technologies before it, will fade into obscurity.
With all the incredible momentum behind the Internet of Things (IoT) industry, it is easy to forget that not a single CEO wakes up and wonders if “my IoT is broken.” What they wonder is if they are making the right decisions to do all they can to increase revenue, decrease costs, and improve customer experience – effectively the same challenges they have always had in growing their business. The exciting thing about the IoT industry is now these decisions can be better, faster, and smarter. Now all corporate assets – people, objects, and spaces – can share information about themselves and thei...
The Internet of Things is clearly many things: data collection and analytics, wearables, Smart Grids and Smart Cities, the Industrial Internet, and more. Cool platforms like Arduino, Raspberry Pi, Intel's Galileo and Edison, and a diverse world of sensors are making the IoT a great toy box for developers in all these areas. In this Power Panel at @ThingsExpo, moderated by Conference Chair Roger Strukhoff, panelists discussed what things are the most important, which will have the most profound effect on the world, and what should we expect to see over the next couple of years.
Discussions of cloud computing have evolved in recent years from a focus on specific types of cloud, to a world of hybrid cloud, and to a world dominated by the APIs that make today's multi-cloud environments and hybrid clouds possible. In this Power Panel at 17th Cloud Expo, moderated by Conference Chair Roger Strukhoff, panelists addressed the importance of customers being able to use the specific technologies they need, through environments and ecosystems that expose their APIs to make true change and transformation possible.
Microservices are a very exciting architectural approach that many organizations are looking to as a way to accelerate innovation. Microservices promise to allow teams to move away from monolithic "ball of mud" systems, but the reality is that, in the vast majority of organizations, different projects and technologies will continue to be developed at different speeds. How to handle the dependencies between these disparate systems with different iteration cycles? Consider the "canoncial problem" in this scenario: microservice A (releases daily) depends on a couple of additions to backend B (re...
Growth hacking is common for startups to make unheard-of progress in building their business. Career Hacks can help Geek Girls and those who support them (yes, that's you too, Dad!) to excel in this typically male-dominated world. Get ready to learn the facts: Is there a bias against women in the tech / developer communities? Why are women 50% of the workforce, but hold only 24% of the STEM or IT positions? Some beginnings of what to do about it! In her Day 2 Keynote at 17th Cloud Expo, Sandy Carter, IBM General Manager Cloud Ecosystem and Developers, and a Social Business Evangelist, wil...