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Donaldson Reports Record First Quarter Results

Dépèche transmise le 17 novembre 2011 par Business Wire

Donaldson Reports Record First Quarter Results

Donaldson Reports Record First Quarter Results

MINNEAPOLIS--(BUSINESS WIRE)--Donaldson Company, Inc. (NYSE: DCI) announced its financial results for its fiscal 2012 first quarter. Summarized financial results are as follows (dollars in millions, except per share data):

“We are very pleased to start our new fiscal year with another record performance”

   
Three Months Ended
October 31
2011     2010     Change
Net sales $ 608 $ 537 13 %
Operating income 90 75 21 %
Net earnings 69 53 29 %
 
Diluted EPS $ 0.90 $ 0.68 32 %
 

“We are very pleased to start our new fiscal year with another record performance,” said Bill Cook, Chairman, President and CEO. “Sales in our Engine Products segment increased 18 percent as new equipment build rates at our Off-Road and On-Road OEM Customers remained robust, while continued high equipment utilization rates kept our Aftermarket Products’ sales at record levels. Within our Industrial Products’ segment, demand for our Torit® dust collectors remained strong.”

“Our operating margin performance was very good at 14.8 percent, another record. Our ongoing Continuous Improvement initiatives are helping us offset higher raw material costs compared to a year ago. In addition, we continue to leverage our fixed cost base as our sales grow.”

“While we had a strong start to our new fiscal year, recent public forecasts for global economic growth rates have been reduced. Fortunately, our order trends remain healthy so we are retaining our original sales guidance of 7 to 15 percent growth in FY12. Of course, we will monitor business conditions at our Customers and will proactively adjust our plans if necessary. We continue to execute the Strategic Growth Plan we launched a year ago and are pleased to re-confirm our forecast of another sales record in FY12. Based on our strong 1st quarter performance and current outlook, we have increased our FY12 EPS projection to be between $3.25 and $3.50, which would be a new record.”

Financial Statement Discussion

The impact of foreign currency translation increased sales by $13.4 million, or 2.5 percent, during the first quarter compared to the same period last year. The impact of foreign currency translation increased reported net earnings by $1.3 million, or 2.5 percent, during the first quarter compared to the prior year.

Gross margin was 35.3 percent, compared to 35.0 percent in last year’s first quarter. The increase came from our ongoing Continuous Improvement initiatives and selective price increases, which were partially offset by increases in our purchased raw material costs and a less favorable sales mix.

Operating expenses for the quarter were $124.6 million, or 20.5 percent of sales, versus $113.6 million, or 21.2 percent of sales, last year.

The effective tax rate for the quarter was 25.5 percent, compared to a prior year rate of 26.2 percent. Both the current and prior year’s quarter included tax benefits primarily due to favorable settlements of tax audits of $4.3 million and $2.7 million, respectively.

As part of our ongoing share repurchase program we repurchased 1,376,000 shares, or 1.8 percent of our diluted outstanding shares, for $73.6 million during the quarter.

FY12 Outlook

We are re-confirming our FY12 sales forecast of 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$1.39 and 78 Yen to the US$, which, in aggregate, is slightly less favorable than our original guidance issued in August.

  • Our full year operating margin is forecast to be 13.7 to 14.5 percent. Our annual stock option expense is estimated to be between $7.0 and $9.0 million with approximately 50 percent of that incurred in our second quarter.
  • Our full year FY12 tax rate is anticipated to be between 27 and 30 percent.
  • Our full year FY12 EPS projection has been increased to be between $3.25 and $3.50.
  • Cash generated by operating activities is projected to be between $260 and $290 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 both our On-Road and Off-Road OEM Customers will grow at a moderate rate in FY12. We will also continue to benefit from increased market share on our Customers’ new Tier IV equipment platforms.
  • 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 from our continued expansion into the emerging economies and from the increasing number of systems installed in the field with our proprietary filtration systems such as PowerCore®.
  • We forecast Aerospace and Defense Products sales to be level with the prior year 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 and assume a continuing improvement in general manufacturing activity.
  • We anticipate our Gas Turbine Products’ sales to be up 18 to 25 percent due to the recent strengthening in the large turbine power generation market and ongoing strength in the oil and gas market segment.
  • Special Applications Products’ sales are forecast to decrease 1 to 7 percent as the recent flood in Thailand is expected to temporarily reduce demand for our disk drive filters.

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 12,900 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, 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
2011 2010
Net sales $ 608,295 $ 536,909
 
Cost of sales   393,361     348,819  
 
Gross margin 214,934 188,090
 
Operating expenses   124,607     113,587  
 
Operating income 90,327 74,503
 
Other income, net (4,860 ) (1,107 )
 
Interest expense   3,170     3,653  
 
Earnings before income taxes 92,017 71,957
 
Income taxes   23,464     18,823  
 
Net earnings $ 68,553   $ 53,134  
 
Weighted average shares
outstanding 75,256,946 77,169,260
 
Diluted shares outstanding 76,523,599 78,484,455
 
Net earnings per share $ 0.91 $ 0.69
 
Net earnings per share
assuming dilution $ 0.90 $ 0.68
 
Dividends paid per share $ 0.150 $ 0.125
 
 
DONALDSON COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Thousands of dollars)
(Unaudited)
 
    October 31     July 31
2011 2011
ASSETS
 
Cash and cash equivalents $ 302,213 $ 273,494
Accounts receivable – net 439,571 445,700
Inventories – net 274,172 271,476
Prepaids and other current assets   74,795   75,912
 
Total current assets 1,090,751 1,066,582
 
Other assets and deferred taxes 271,314 268,009
Property, plant and equipment – net   384,106   391,502
 
Total assets $ 1,746,171 $ 1,726,093
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
Trade accounts payable $ 203,445 $ 215,918
Employee compensation and other liabilities 200,921 219,326
Notes payable 92,132 13,129
Current maturity long-term debt   47,536   47,871
 
Total current liabilities 544,034 496,244
 
Long-term debt 204,881 205,748
Other long-term liabilities   109,061   89,390
 
Total liabilities 857,976 791,382
 
Equity   888,195   934,711
 
Total liabilities and equity $ 1,746,171 $ 1,726,093
 
 
DONALDSON COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of dollars)
(Unaudited)
 
    Three Months Ended
October 31
2011     2010
OPERATING ACTIVITIES
 
Net earnings $ 68,553 $ 53,134
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 15,574 14,918
Changes in operating assets and liabilities (21,932 ) 1,220
Tax benefit of equity plans (2,171 ) (2,933 )
Stock compensation plan expense 1,690 1,461
Other, net   (4,028 )   (5,037 )
Net cash provided by operating activities 57,686 62,763
 
INVESTING ACTIVITIES
 
Net expenditures on property and equipment   (18,491 )   (10,048 )
Net cash used in investing activities (18,491 ) (10,048 )
 
FINANCING ACTIVITIES
 
Purchase of treasury stock (73,558 ) (6,491 )
Net change in debt 78,763 (17,191 )
Dividends paid (11,193 ) (9,553 )
Tax benefit of equity plans 2,171 2,933
Exercise of stock options   2,961     3,950  
Net cash used in financing activities (856 ) (26,352 )
 

Effect of exchange rate changes on cash

 

(9,620

)

 

9,238

 
 

Increase in cash and cash equivalents

28,719

35,601

 

Cash and cash equivalents – beginning of year

 

273,494

   

232,000

 
 

Cash and cash equivalents – end of period

$

302,213

 

$

267,601

 
 
 
SEGMENT DETAIL
(Thousands of dollars)
(Unaudited)
               
Engine Industrial Corporate & Total
Products Products Unallocated Company
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
 
3 Months Ended October 31, 2010:
Net sales $ 333,769 $ 203,140 --- $ 536,909
Earnings before income taxes 48,451 30,035 (6,529 ) 71,957
 
 
NET SALES BY PRODUCT
(Thousands of dollars)
(Unaudited)
 
Three Months Ended
October 31
2011 2010
Engine Products segment:
Off-Road Products $ 94,108 $ 72,646
Aerospace and Defense Products 25,458 26,854
On-Road Products 42,625 29,055
Aftermarket Products 226,897 201,867
Retrofit Emissions Products   4,637     3,347
Total Engine Products segment $ 393,725   $ 333,769
 
Industrial Products segment:
Industrial Filtration Solutions Products $ 133,399 $ 119,353
Gas Turbine Products 35,581 35,505
Special Applications Products   45,590     48,282
Total Industrial Products segment $ 214,570   $ 203,140
 
Total Company $ 608,295   $ 536,909
 
 

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(Thousands of do

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