Exhibit 99.1

 

FOR IMMEDIATE RELEASE: Monday, August 29, 2011

FOR FURTHER INFORMATION: Rich Sheffer   (952) 887-3753

 

 

DONALDSON REPORTS RECORD FOURTH QUARTER AND FULL-YEAR RESULTS

 

 

MINNEAPOLIS (August 29, 2011) — 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):

 

		Three Months Ended July 31												Twelve Months Ended 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 4^th 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.

 

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Donaldson Company, Inc.

August 29, 2011

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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.

 

 

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Donaldson Company, Inc.

August 29, 2011

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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.

 

 

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Donaldson Company, Inc.

August 29, 2011

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CONDENSED STATEMENTS OF CONSOLIDATED EARNINGS

DONALDSON COMPANY, INC. AND SUBSIDIARIES

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

(Unaudited)

 

		Three Months Ended July 31								Twelve Months Ended 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

  

 

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Donaldson Company, Inc.

August 29, 2011

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DONALDSON COMPANY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Thousands of dollars)

(Unaudited)

 

		July 31 2011				July 31 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

 

 

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August 29, 2011

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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

 

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August 29, 2011

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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 July 31								Twelve Months Ended 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

 

 

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August 29, 2011

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RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(Thousands of dollars, except per share amounts)

(Unaudited)

 

		Three Months Ended July 31								Twelve Months Ended 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
Net sales		$	625,450			$	515,243			$	2,294,029			$	1,877,064
Net earnings, excluding foreign currency translation		$	61,813			$	51,419			$	219,236			$	162,612
Foreign currency translation			3,954				(249	)			6,055				3,551
Net earnings		$	65,767			$	51,170			$	225,291			$	166,163

 

 

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August 29, 2011

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RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (CONTINUED)

(Thousands of dollars, except per share amounts)

(Unaudited)

 

		Three Months Ended July 31								Twelve Months Ended July 31
		2011				2010				2011				2010
Net earnings, excluding special items		$	65,767			$	51,233			$	225,857			$	173,350
Restructuring and asset impairment charges, net of tax			—				(63	)			(566	)			(7,187	)
Net earnings		$	65,767			$	51,170			$	225,291			$	166,163
Net earnings per share assuming dilution, excluding special items		$	0.84			$	0.65			$	2.88			$	2.19
Restructuring and asset impairment charges per  share, net of tax			—				—				(0.01	)			(0.09	)
Net earnings per share assuming dilution		$	0.84			$	0.65			$	2.87			$	2.10

 

 

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.

 

 

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