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Donaldson Reports Record Fourth Quarter and Full-Year Results

Dépèche transmise le 29 août 2011 par Business Wire

Donaldson Reports Record Fourth Quarter and Full-Year Results

Donaldson Reports Record Fourth Quarter and Full-Year Results

MINNEAPOLIS--(BUSINESS WIRE)--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):

“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”

     
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  

Business Wire

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