Donaldson Company, Inc. (NYSE: DCI) announced its financial
results for its fiscal 2012 second quarter. Summarized financial
results are as follows (dollars in millions, except per share
data):
Three Months Ended Six Months Ended
January 31 January 31
2012
2011 Change
2012 2011
Change Net sales $ 581 $ 537 8 % $ 1,189 $ 1,074 11 %
Operating income 75 67 11 % 165 142 16 % Net earnings 54 45 21 %
122 98 25 % Diluted EPS $ 0.70 $ 0.56 25 % $ 1.60 $ 1.24 29
%
“We are very pleased to reach the midpoint of our year with
another strong performance as we established second quarter records
in sales, operating margin, and EPS,” said Bill Cook,
Chairman, President and CEO. “Sales in our Engine Products segment
increased 12 percent as new equipment build rates at our global
Off-Road and On-Road OEM Customers remained healthy. Within our
Industrial Products segment, sales of our Torit® dust collectors
were strong this quarter.”
“Our operating margin performance was very good at 12.9 percent.
Our ongoing Continuous Improvement initiatives helped us again. We
also continue to leverage our fixed cost base as our sales grow.
The combination of our solid revenue growth, our strong margin
performance, and a lower tax rate drove second quarter net income
and EPS up 21 percent and 25 percent, respectively.”
“We now forecast our full year sales to grow between 7 and 12
percent over last year. Forecasted business conditions in our end
markets vary: strong in the Americas, stable in Europe, and
improving in China. Currency translation is now projected to be
unfavorable during the second half of our year due to the
strengthening of the U.S. dollar, with an estimated reduction of
our full year EPS estimate of $0.05 from our previous forecast. As
a result, we now forecast our FY12 EPS to be between $3.25 and
$3.45, which would be another new record, and would be up 13
percent to 20 percent over last year.”
Financial Statement
Discussion
The impact of foreign currency translation decreased sales by
$4.2 million, or 0.8 percent, during the second quarter and
increased sales by $9.2 million, or 0.9 percent, year-to-date,
compared to the same periods last year. The impact of foreign
currency translation decreased reported net earnings by $0.6
million, or 1.3 percent, during the second quarter and increased
reported net earnings by $0.7 million, or 0.8 percent, for the
year.
Gross margin was 34.6 percent for the quarter and 35.0 percent
year-to-date, compared to prior year margins of 35.3 percent and
35.2 percent, respectively. The decrease in the quarter was due to
lower absorption of fixed costs resulting from the Thai floods and
from fewer shipping days compared to last year’s second quarter.
These were partially offset by cost reductions from our ongoing
Continuous Improvement initiatives.
Operating expenses for the quarter were $126.0 million, up 3.2
percent from $122.1 million last year primarily due to the
increased sales volume. As a percent of sales, operating expenses
were 21.7 percent compared to last year’s 22.7 percent for the
second quarter. Operating expenses year-to-date were $250.7
million, or 21.1 percent of sales, compared to $235.7 million, or
21.9 percent of sales, last year.
The effective tax rate for the quarter was 29.6 percent,
compared to a prior year rate of 34.4 percent. The prior
year’s quarter included a $4.0 million tax charge related to the
reorganization of our subsidiary holdings to improve our global
business and legal entity structure, partially offset by $0.9
million in tax benefits primarily from the retroactive
reinstatement of the Research and Experimentation Credit in the
U.S. The year-to-date effective tax rate was 27.3 percent compared
to a prior year rate of 30.2 percent.
We did not repurchase any shares during the second quarter, and
year-to-date we have repurchased 1,376,000 shares, or 1.8 percent
of our diluted outstanding shares, for $73.6 million.
FY12 Outlook
We forecast our FY12 sales to be between $2.45 and $2.55
billion, or up about 7 to 12 percent from the prior year. Our
current forecast is based on the Euro at US$1.32 and 76 Yen to the
US$, which, in aggregate, is less favorable than our previous
currency guidance issued in November.
- Our full year operating margin is
forecast to be 13.7 to 14.5 percent.
- Our full year FY12 tax rate is
anticipated to be between 27 and 30 percent.
- Cash generated by operating activities
is projected to be between $250 and $280 million. Capital spending
is now estimated to be approximately $85 million.
Engine Products: We
expect full year sales to increase 8 to 12 percent, including the
impact of foreign currency translation.
- We anticipate sales to both our
Off-Road and On-Road OEM Customers will remain strong in the second
half of FY12. We will continue to benefit from increased market
share on our Customers’ new Tier IV equipment platforms.
- Sales of our Aftermarket Products are
expected to increase moderately 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 our
PowerCore® products.
- 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 11 percent, including
the impact of foreign currency translation.
- Our Industrial Filtration Solutions’
sales are projected to increase 7 to 11 percent and assume a
continuing improvement in general manufacturing activity in the
U.S., stable conditions in Europe, and improving conditions in
Asia.
- We anticipate our Gas Turbine Products’
sales to be up 18 to 22 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 be level with the prior year as growth in our
membrane and venting product sales should offset the reduction in
our disk drive filter sales related to the Thai floods last
fall.
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 nearly
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 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
Six Months Ended
January 31 January 31 2012 2011 2012
2011 Net sales $ 580,883 $ 537,105 $ 1,189,178 $ 1,074,014
Cost of sales 380,066 347,562
773,427 696,381 Gross margin
200,817 189,543 415,751 377,633 Operating expenses
126,049 122,102 250,656
235,689 Operating income 74,768 67,441 165,095
141,944 Other income, net (4,550 ) (3,502 ) (9,410 ) (4,609
) Interest expense 2,899 2,936
6,069 6,589 Earnings before
income taxes 76,419 68,007 168,436 139,964 Income taxes
22,598 23,428 46,062
42,251 Net earnings $ 53,821 $ 44,579
$ 122,374 $ 97,713 Weighted average
shares outstanding* 75,052,805 77,580,064 75,154,873 77,375,086
Diluted shares outstanding* 76,412,785 78,977,509 76,480,673
78,766,895 Net earnings per share* $ 0.72 $ 0.57 $ 1.63 $
1.26 Net earnings per share assuming dilution* $ 0.70 $ 0.56
$ 1.60 $ 1.24 Dividends paid per share* $
0.150 $ 0.130 $ 0.300
$ 0.255
* Earnings and dividends declared per share and weighted average
shares outstanding are presented before the effect of a 100 percent
stock dividend declared on January 27, 2012, to be distributed on
March 23, 2012 to shareholders of record on March 2, 2012.
DONALDSON COMPANY, INC. AND SUBSIDIARIES CONDENSED
CONSOLIDATED BALANCE SHEETS (Thousands of dollars) (Unaudited)
January 31 July 31 2012 2011
ASSETS Cash, cash equivalents and short-term investments $
272,315 $ 273,494 Accounts receivable – net 408,462 445,700
Inventories – net 270,212 271,476 Prepaids and other current assets
78,697 75,912 Total current assets 1,029,686
1,066,582 Other assets and deferred taxes 268,746 268,009
Property, plant and equipment – net 382,957 391,502
Total assets $ 1,681,389 $ 1,726,093 LIABILITIES AND
SHAREHOLDERS’ EQUITY Trade accounts payable $ 190,076 $
215,918 Employee compensation and other liabilities 176,030 219,326
Short-term borrowings 92,728 13,129 Current maturity long-term debt
2,356 47,871 Total current liabilities 461,190
496,244 Long-term debt 205,217 205,748 Other long-term
liabilities 99,569 89,390 Total liabilities
765,976 791,382 Equity 915,413 934,711
Total liabilities and equity $ 1,681,389 $ 1,726,093
DONALDSON COMPANY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS (Thousands of dollars) (Unaudited)
Six Months Ended January 31 2012 2011
OPERATING ACTIVITIES Net earnings $ 122,374 $ 97,713
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 30,896 30,478 Changes in operating
assets and liabilities (43,485 ) (19,947 ) Tax benefit of equity
plans (7,576 ) (7,445 ) Stock compensation plan expense 6,440 6,089
Other, net
(6,451 ) (13,828 ) Net cash provided by operating
activities 102,198 93,060 INVESTING ACTIVITIES Net
expenditures on property and equipment (36,349 ) (24,051 )
Purchases of short-term investments (93,455 ) (66,494 )
Acquisitions and divestitures, net - 3,613
Net cash used in investing activities (129,804 ) (86,932 )
FINANCING ACTIVITIES Purchase of treasury stock
(73,558 ) (6,491 ) Net change in debt and short-term borrowings
33,452 (21,254 ) Dividends paid (22,342 ) (19,542 ) Tax benefit of
equity plans 7,576 7,445 Exercise of stock options 9,791
12,113 Net cash used in financing activities
(45,081 ) (27,729 )
Effect of exchange rate changes on
cash
(19,877
)
9,236
Decrease in cash and cash equivalents
(92,564
)
(12,365
)
Cash and cash equivalents – beginning of
year
273,494
232,000
Cash and cash equivalents – end of
period
$
180,930
$
219,635
SEGMENT DETAIL (Thousands of dollars)
(Unaudited) Engine Industrial
Corporate &
Total
Products Products Unallocated
Company
3 Months Ended January 31, 2012: Net sales $ 370,834 $ 210,049 ---
$ 580,883 Earnings before income taxes 48,418 30,597 (2,596 )
76,419 3 Months Ended January 31, 2011: Net sales $ 331,122
$ 205,983 --- $ 537,105 Earnings before income taxes 44,203 29,127
(5,323 ) 68,007 6 Months Ended January 31, 2012: Net
sales $ 764,559 $ 424,619 --- $ 1,189,178 Earnings before income
taxes 108,296 64,896 (4,756 ) 168,436 6 Months Ended January
31, 2011: Net sales $ 664,891 $ 409,123 --- $ 1,074,014 Earnings
before income taxes 92,654 59,162 (11,852 ) 139,964
NET SALES BY PRODUCT (Thousands of dollars) (Unaudited)
Three Months Ended Six Months Ended
January 31 January 31 2012 2011 2012
2011 Engine Products segment: Off-Road Products $ 87,035 $ 73,852 $
181,143 $ 146,498 On-Road Products 39,376 28,747 82,001 57,802
Aftermarket Products 214,070 199,891 440,967 401,758 Retrofit
Emissions Products 4,651 4,908 9,288 8,255 Aerospace and Defense
Products 25,702 23,724 51,160 50,578
Total Engine Products segment $ 370,834 $ 331,122 $ 764,559 $
664,891 Industrial Products segment: Industrial Filtration
Solutions Products $ 132,041 $ 123,430 $ 265,440 $ 242,783 Gas
Turbine Products 37,011 34,871 72,592 70,376 Special Applications
Products 40,997 47,682 86,587 95,964
Total Industrial Products segment $ 210,049 $ 205,983 $ 424,619 $
409,123 Total Company $ 580,883 $ 537,105 $ 1,189,178 $
1,074,014
RECONCILIATION OF NON-GAAP FINANCIAL
MEASURES
(Thousands of dollars, except per share amounts) (Unaudited)
Three Months Ended Six Months Ended
January 31 January 31 2012 2011 2012
2011 Free cash flow $ 26,654 $ 16,294 $ 65,849 $ 69,009 Net
capital expenditures 17,858 14,003
36,349 24,051 Net cash provided by
operating activities $ 44,512 $ 30,297 $ 102,198
$ 93,060 EBITDA $ 93,530 $ 85,911 $ 203,492 $
175,919 Income taxes (22,598 ) (23,428 ) (46,062 ) (42,251 )
Interest expense (net) (1,789 ) (2,344 ) (4,160 ) (5,477 )
Depreciation and amortization (15,322 ) (15,560 )
(30,896 ) (30,478 ) Net earnings $ 53,821
$ 44,579 $ 122,374 $ 97,713 Net
sales, excluding foreign currency translation $ 585,085 $ 540,594 $
1,179,960 $ 1,081,230 Foreign currency translation (4,202 )
(3,489 ) 9,218 (7,216 ) Net
sales $ 580,883 $ 537,105 $ 1,189,178 $
1,074,014 Net earnings, excluding foreign currency
translation $ 54,408 $ 44,417 $ 121,630 $ 97,432 Foreign currency
translation (587 ) 162 744
281 Net earnings $ 53,821 $ 44,579
$ 122,374 $ 97,713
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (CONTINUED)
(Thousands of dollars, except per share amounts) (Unaudited)
Three Months Ended Six Months Ended January 31
January 31 2012 2011 2012 2011
Net earnings, excluding special items
$ 53,821 $ 44,579 $ 122,374 $ 98,279
Restructuring charges, net of tax
-
-
-
(566 ) Net earnings $ 53,821 $ 44,579 $ 122,374 $
97,713
Net earnings per share assuming dilution,
excluding special items
$ 0.70 $ 0.56 $ 1.60 $ 1.25
Restructuring charges per share, net of
tax
-
-
-
(0.01 )
Net earnings per share assuming
dilution
$ 0.70 $ 0.56 $ 1.60 $ 1.24
Although free cash flow, EBITDA, net sales excluding foreign
currency translation, net earnings excluding foreign currency
translation, net earnings excluding restructuring charges and net
earnings per share assuming dilution excluding restructuring
charges 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. Both net earnings excluding
restructuring charges and earnings per share excluding
restructuring charges provide a comparable measure for
understanding the results of the Company as compared to prior
periods. 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.
Donaldson (NYSE:DCI)
Historical Stock Chart
From May 2024 to Jun 2024
Donaldson (NYSE:DCI)
Historical Stock Chart
From Jun 2023 to Jun 2024