Cover Page
Cover Page - shares | 9 Months Ended | |
Apr. 30, 2020 | May 29, 2020 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Apr. 30, 2020 | |
Document Transition Report | false | |
Entity File Number | 1-7891 | |
Entity Registrant Name | DONALDSON COMPANY, INC. | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 41-0222640 | |
Entity Address, Address Line One | 1400 West 94th Street | |
Entity Address, City or Town | Minneapolis | |
Entity Address, State or Province | MN | |
Entity Address, Postal Zip Code | 55431 | |
City Area Code | 952 | |
Local Phone Number | 887-3131 | |
Title of 12(b) Security | Common Stock, $5.00 par value | |
Trading Symbol | DCI | |
Security Exchange Name | NYSE | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Emerging Growth Company | false | |
Entity Small Business | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 126,129,111 | |
Entity Central Index Key | 0000029644 | |
Current Fiscal Year End Date | --07-31 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS - USD ($) shares in Millions, $ in Millions | 3 Months Ended | 9 Months Ended | ||
Apr. 30, 2020 | Apr. 30, 2019 | Apr. 30, 2020 | Apr. 30, 2019 | |
Income Statement [Abstract] | ||||
Net sales | $ 629.7 | $ 712.8 | $ 1,964.4 | $ 2,117.9 |
Cost of sales | 420.5 | 472.1 | 1,300.7 | 1,413.4 |
Gross profit | 209.2 | 240.7 | 663.7 | 704.5 |
Operating expenses | 124.7 | 140.7 | 406.1 | 420.7 |
Operating income | 84.5 | 100 | 257.6 | 283.8 |
Interest expense | 4.4 | 5.2 | 13.5 | 14.7 |
Other income, net | (4.3) | (4.7) | (9.8) | (7.3) |
Earnings before income taxes | 84.4 | 99.5 | 253.9 | 276.4 |
Income taxes | 21 | 24.3 | 61 | 67.3 |
Net earnings | $ 63.4 | $ 75.2 | $ 192.9 | $ 209.1 |
Weighted average shares - basic (in shares) | 126.9 | 128.2 | 127 | 128.5 |
Weighted average shares - diluted (in shares) | 127.7 | 130 | 128.5 | 130.4 |
Net earnings per share - basic (in usd per share) | $ 0.50 | $ 0.59 | $ 1.52 | $ 1.63 |
Net earnings per share - diluted (in usd per share) | $ 0.50 | $ 0.58 | $ 1.50 | $ 1.60 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Apr. 30, 2020 | Apr. 30, 2019 | Apr. 30, 2020 | Apr. 30, 2019 | |
Statement of Comprehensive Income [Abstract] | ||||
Net earnings | $ 63.4 | $ 75.2 | $ 192.9 | $ 209.1 |
Other comprehensive income (loss): | ||||
Foreign currency translation loss | (35.3) | (11.9) | (24.8) | (12.4) |
Pension liability adjustment, net of deferred taxes of $0.7, $(0.5), $0.4, and $(1.1), respectively | (2) | 1.2 | 0 | 3.3 |
Gain (loss) on hedging derivatives, net of deferred taxes of $(0.9), $0.0, $(0.2) and $(0.3), respectively | 1.4 | (0.2) | 2.2 | 0.3 |
Reclassifications of losses on hedging derivatives to net earnings, net of taxes of $(1.2), $0.1, $(1.9), and $0.2, respectively | 2.1 | 0 | 3.4 | 0 |
Total derivatives | 3.5 | (0.2) | 5.6 | 0.3 |
Net other comprehensive loss | (33.8) | (10.9) | (19.2) | (8.8) |
Comprehensive income | $ 29.6 | $ 64.3 | $ 173.7 | $ 200.3 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Parenthetical) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Apr. 30, 2020 | Apr. 30, 2019 | Apr. 30, 2020 | Apr. 30, 2019 | |
Statement of Comprehensive Income [Abstract] | ||||
Deferred taxes on pension liability | $ 0.7 | $ (0.5) | $ 0.4 | $ (1.1) |
Deferred taxes on hedging derivatives | (0.9) | 0 | (0.2) | (0.3) |
Taxes on reclassifications of derivatives to net income | $ (1.2) | $ 0.1 | $ (1.9) | $ 0.2 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Millions | Apr. 30, 2020 | Jul. 31, 2019 |
Current assets: | ||
Cash and cash equivalents | $ 326.5 | $ 177.8 |
Accounts receivable, less allowance of $5.3 and $4.8, respectively | 460.5 | 529.5 |
Inventories, net | 346.5 | 332.8 |
Prepaid expenses and other current assets | 87 | 82.5 |
Total current assets | 1,220.5 | 1,122.6 |
Property, plant and equipment, net | 614.3 | 588.9 |
Right-of-use lease assets | 71.4 | 0 |
Goodwill | 303.8 | 303.1 |
Intangible assets, net | 65.3 | 70.9 |
Deferred income taxes | 15.4 | 14.2 |
Other Assets, Noncurrent | 47.8 | 42.9 |
Total assets | 2,338.5 | 2,142.6 |
Current liabilities: | ||
Short-term borrowings | 8.1 | 2.1 |
Current maturities of long-term debt | 50 | 50.2 |
Trade accounts payable | 202.7 | 237.5 |
Current lease liabilities | 24 | 0 |
Other current liabilities | 148 | 193.1 |
Total current liabilities | 432.8 | 482.9 |
Long-term debt | 735.1 | 584.4 |
Non-current income taxes payable | 104 | 110.9 |
Deferred income taxes | 18.6 | 13.2 |
Long-term lease liabilities | 47.4 | 0 |
Other long-term liabilities | 45.8 | 48.5 |
Total liabilities | 1,383.7 | 1,239.9 |
Commitments and contingencies (Note 15) | ||
Redeemable non-controlling interest | 10.3 | 10 |
Shareholders’ equity: | ||
Preferred stock, $1.00 par value, 1,000,000 shares authorized, none issued | 0 | 0 |
Common stock, $5.00 par value, 240,000,000 shares authorized, 151,643,194 shares issued | 758.2 | 758.2 |
Retained earnings | 1,418.8 | 1,281.5 |
Non-controlling interest | 5.7 | 5.4 |
Stock-compensation plans | 14 | 21.7 |
Accumulated other comprehensive loss | (212.1) | (192.9) |
Treasury stock, 25,480,083 and 24,324,483 shares, respectively, at cost | (1,040.1) | (981.2) |
Total shareholders’ equity | 944.5 | 892.7 |
Total liabilities and shareholders’ equity | $ 2,338.5 | $ 2,142.6 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Millions | Apr. 30, 2020 | Jul. 31, 2019 |
Statement of Financial Position [Abstract] | ||
Accounts receivable, allowance | $ 5.3 | $ 4.8 |
Preferred stock, par value (in usd per share) | $ 1 | $ 1 |
Preferred stock, shares authorized (in shares) | 1,000,000 | 1,000,000 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Common stock, par value (in usd per share) | $ 5 | $ 5 |
Common stock, shares authorized (in shares) | 240,000,000 | 240,000,000 |
Common stock, shares issued (in shares) | 151,643,194 | 151,643,194 |
Treasury stock, shares (in shares) | 25,480,083 | 24,324,483 |
CONDENSED CONSOLIDATED STATEM_4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Millions | 9 Months Ended | |
Apr. 30, 2020 | Apr. 30, 2019 | |
Operating Activities | ||
Net earnings | $ 192.9 | $ 209.1 |
Adjustments to reconcile net earnings to net cash provided by operating activities: | ||
Depreciation and amortization | 64.6 | 59.8 |
Deferred income taxes | 2.4 | 8.8 |
Stock-based compensation expense | 11.6 | 13.8 |
Other, net | 19.2 | (8.5) |
Changes in operating assets and liabilities, excluding effect of acquired business | (25.5) | (59.8) |
Net cash provided by operating activities | 265.2 | 223.2 |
Investing Activities | ||
Net expenditures on property, plant and equipment | (106.2) | (112.4) |
Acquisitions, net of cash acquired | 0 | (96) |
Net cash used in investing activities | (106.2) | (208.4) |
Financing Activities | ||
Proceeds from long-term debt | 262.7 | 145 |
Repayments of long-term debt | (111.1) | (24.8) |
Change in short-term borrowings | 5.7 | 22.9 |
Purchase of treasury stock | (94.3) | (104.4) |
Dividends paid | (79.8) | (72.9) |
Tax withholding payments for stock compensation transactions | (6.3) | (4.1) |
Exercise of stock options | 19.4 | 24.6 |
Net cash used in financing activities | (3.7) | (13.7) |
Effect of exchange rate changes on cash | (6.6) | (2) |
Increase (decrease) in cash and cash equivalents | 148.7 | (0.9) |
Cash and cash equivalents, beginning of period | 177.8 | 204.7 |
Cash and cash equivalents, end of period | 326.5 | 203.8 |
Supplemental Cash Flow Information [Abstract] | ||
Income taxes | 59.5 | 73.1 |
Interest | 14.2 | 14.2 |
Accrued property, plant and equipment additions | $ 9.9 | $ 16.1 |
CONDENSED CONSOLIDATED STATEM_5
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY - USD ($) $ in Millions | Total | Common Stock | Additional Paid-in Capital | Retained Earnings | Non- Controlling Interest | Stock Compensation Plans | Accumulated Other Comprehensive Loss | Treasury Stock |
Beginning Balance at Jul. 31, 2018 | $ 857.8 | $ 758.2 | $ 0 | $ 1,122.1 | $ 4.8 | $ 21.3 | $ (149.8) | $ (898.8) |
Increase (Decrease) in Stockholders' Equity | ||||||||
Net earnings | 209.1 | 209.1 | ||||||
Other comprehensive income (loss) | (8.8) | (8.8) | ||||||
Treasury stock acquired | (104.4) | (104.4) | ||||||
Dividends declared | (48.3) | (48.3) | ||||||
Stock compensation and other activity | 39.5 | (6.9) | 0.4 | 1 | 45 | |||
Ending Balance at Apr. 30, 2019 | 944.9 | 758.2 | 0 | 1,276 | 5.2 | 22.3 | (158.6) | (958.2) |
Beginning Balance at Jan. 31, 2019 | 872.6 | 758.2 | 0 | 1,202.7 | 5.2 | 21.1 | (147.7) | (966.9) |
Increase (Decrease) in Stockholders' Equity | ||||||||
Net earnings | 75.2 | 75.2 | ||||||
Other comprehensive income (loss) | (10.9) | (10.9) | ||||||
Treasury stock acquired | (2.4) | (2.4) | ||||||
Dividends declared | 0.1 | 0.1 | ||||||
Stock compensation and other activity | 10.3 | (2) | 1.2 | 11.1 | ||||
Ending Balance at Apr. 30, 2019 | 944.9 | 758.2 | 0 | 1,276 | 5.2 | 22.3 | (158.6) | (958.2) |
Beginning Balance at Jul. 31, 2019 | 892.7 | 758.2 | 0 | 1,281.5 | 5.4 | 21.7 | (192.9) | (981.2) |
Increase (Decrease) in Stockholders' Equity | ||||||||
Net earnings | 192.9 | 192.9 | ||||||
Other comprehensive income (loss) | (19.2) | (19.2) | ||||||
Treasury stock acquired | (94.3) | (94.3) | ||||||
Dividends declared | (53) | (53) | ||||||
Stock compensation and other activity | 25.4 | (2.6) | 0.3 | (7.7) | 35.4 | |||
Ending Balance at Apr. 30, 2020 | 944.5 | 758.2 | 0 | 1,418.8 | 5.7 | 14 | (212.1) | (1,040.1) |
Beginning Balance at Jan. 31, 2020 | 940.4 | 758.2 | 0 | 1,354.1 | 5.6 | 14.5 | (178.3) | (1,013.7) |
Increase (Decrease) in Stockholders' Equity | ||||||||
Net earnings | 63.4 | 63.4 | ||||||
Other comprehensive income (loss) | (33.8) | (33.8) | ||||||
Treasury stock acquired | (29.3) | (29.3) | ||||||
Dividends declared | 0.1 | 0.1 | ||||||
Stock compensation and other activity | 3.7 | 1.2 | 0.1 | (0.5) | 2.9 | |||
Ending Balance at Apr. 30, 2020 | $ 944.5 | $ 758.2 | $ 0 | $ 1,418.8 | $ 5.7 | $ 14 | $ (212.1) | $ (1,040.1) |
CONDENSED CONSOLIDATED STATEM_6
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Parenthetical) - $ / shares | 9 Months Ended | |
Apr. 30, 2020 | Apr. 30, 2019 | |
Statement of Stockholders' Equity [Abstract] | ||
Dividends, per share (in dollars per share) | $ 0.42 | $ 0.38 |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Apr. 30, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Basis of Presentation The accompanying unaudited Condensed Consolidated Financial Statements of Donaldson Company, Inc. and its subsidiaries (the Company) have been prepared in accordance with generally accepted accounting prin ciples in the United States (GAAP) and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and notes required for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair statement of earnings, comprehensive income, financial position, cash flows and shareholders’ equity have been included and are of a normal recurring nature. Operating results for the three and nine month periods ended April 30, 2020 are not necessarily indicative of the results that may be expected for future periods. The year-end Condensed Consolidated Balance Sheet information was derived from the Company’s audited Consolidated Financial Statements but does not include all disclosures required by GAAP. For further information, refer to the Audited Consolidated Financial Statements and Notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended July 31, 2019. The preparation of the Company’s financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amount of assets and liabilities and the disclosures regarding contingent assets and liabilities at period end and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. With the recent outbreak of coronavirus, or COVID-19, which has been declared by the World Health Organization to be a pandemic, management has evaluated the Company’s accounting estimates that require consideration of forecasted financial information, including its allowances for doubtful accounts and inventory obsolescence, the carrying value of goodwill, intangible assets and other long-lived assets. This assessment was conducted with current information, as well as consideration of future potential impacts of COVID-19 on the business as of April 30, 2020. Management determined that due to a majority of the Company’s business being deemed “essential” under applicable governmental orders otherwise restricting business activities, the limited downtime of certain operations and its ability to adapt and to continue to operate in the current environment, no triggering event for impairment existed at April 30, 2020. In addition, management completed its annual impairment assessment for goodwill and concluded there was no impairment. However, because of uncertainties at this time with respect to the severity and duration of the COVID-19 outbreak, the duration and terms of related governmental orders restricting activities, and the timing and pace of any economic recovery as COVID-19 impacts ultimately abate, management cannot predict with specificity the extent and duration of any future impact on the business and financial results from COVID-19. In addition, although most operations have continued, it is possible that they may not continue under future government orders, or may be subject to site-specific health and safety concerns which could require certain operations to be halted for some period. Accordingly, such impact could potentially result in impairments of assets and increases in allowances in future periods. New Accounting Standards Recently Adopted In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-02, Leases (Topic 842) (ASU 2016-02), which requires lessees to recognize right-of-use assets and lease liabilities for substantially all leases. This accounting guidance was effective for the Company in the beginning of the first quarter of fiscal 2020 and the Company adopted the guidance on a modified retrospective basis. In December 2018, the FASB issued ASU 2018-20, Leases (Topic 842) Narrow-Scope Improvements for Lessors (ASU 2018-20), which amends ASU 2016-02, to provide additional guidance on accounting for certain expenses such as property taxes and insurance paid on behalf of the lessor by the lessee. The Company adopted ASU 2016-02 in the first quarter of fiscal 2020, and increased assets and liabilities by $71.5 million, as of August 1, 2019. Refer to Note 17 for further discussion. In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (ASU 2018-02). The guidance allows a company to elect to reclassify from accumulated other comprehensive income (AOCI) to retained earnings the stranded tax effects from the adoption of the new federal corporate tax rate that became effective January 1, 2018 as a result of the U.S. Tax Cuts and Jobs Act (TCJA). The amount of the reclassification is calculated as the difference between the amount initially charged to other comprehensive income at the previously enacted tax rate that remains in AOCI and the amount that would have been charged using the newly enacted tax rate, excluding any valuation allowance prior to tax reform. The Company adopted ASU 2018-02 in the first quarter of fiscal 2020 and elected to not reclassify tax effects stranded in accumulated other comprehensive loss. As such, there is no impact on the Company’s Condensed Consolidated Financial Statements. New Accounting Standards Not Yet Adopted In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments (ASU 2016-13). In November 2018, the FASB issued an update, ASU 2018-19, that clarifies the scope of the standard in the amendments in ASU 2016-13. This guidance introduces a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses. Financial instruments impacted include accounts receivable, trade receivables, other financial assets measured at amortized cost and other off-balance sheet credit exposures. The guidance is effective for the Company beginning in the first quarter of fiscal 2021, with early adoption permitted. The Company is evaluating the impact of the adoption of ASU 2016-13 on its Consolidated Financial Statements. In April 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815 Derivatives and Hedging and Topic 825, Financial Instruments (ASU 2019-04). This guidance clarifies the standards on credit losses (Topic 326), derivatives and hedging (Topic 815), and recognition and measurement of financial instruments (Topic 825). The guidance is effective for the Company beginning in the first quarter of fiscal 2021, with early adoption permitted. The Company is evaluating the impact of the adoption of ASU 2019-04 on its Consolidated Financial Statements. |
Acquisitions and Divestitures
Acquisitions and Divestitures | 9 Months Ended |
Apr. 30, 2020 | |
Business Combinations [Abstract] | |
Acquisitions and Divestitures | Acquisitions and Divestitures In the first quarter of fiscal 2019, the Company acquired 88% of the shares of BOFA International LTD (BOFA), headquartered in the United Kingdom, for cash consideration of $98.2 million less cash acquired of $2.2 million. In the fourth quarter of fiscal 2019, the Company acquired an additional 3% of the shares, increasing its ownership to 91%. BOFA designs, develops and manufactures fume extraction systems across a wide range of industrial air filtration applications. The acquisition allowed the Company to accelerate its long-term global growth in the fume collection business and add additional filtration technology to the Company’s existing product lines. On February 21, 2020, the Company received a binding offer from Nelson Global Products for the purchase of the Company’s Exhaust and Emissions business. |
Supplemental Balance Sheet Info
Supplemental Balance Sheet Information | 9 Months Ended |
Apr. 30, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Supplemental Balance Sheet Information | Supplemental Balance Sheet Information The components of net inventories are as follows (in millions): April 30, July 31, Raw materials $ 114.8 $ 114.7 Work in process 35.6 33.0 Finished products 196.1 185.1 Inventories, net $ 346.5 $ 332.8 The components of net property, plant and equipment are as follows (in millions): April 30, July 31, Land $ 23.7 $ 24.2 Buildings 346.3 325.3 Machinery and equipment 834.9 813.5 Computer software 143.9 142.8 Construction in progress 137.5 114.3 Less: accumulated depreciation (872.0) (831.2) Property, plant and equipment, net $ 614.3 $ 588.9 |
Earnings Per Share
Earnings Per Share | 9 Months Ended |
Apr. 30, 2020 | |
Earnings Per Share [Abstract] | |
Earnings Per Share | Earnings Per Share The Company’s basic net earnings per share is computed by dividing net earnings by the weighted average number of outstanding common shares. The Company’s diluted net earnings per share is computed by dividing net earnings by the weighted average number of outstanding common shares and common share equivalents relating to stock options and stock incentive plans. Certain outstanding options were excluded from the diluted net earnings per share calculations because their exercise prices are greater than the average market price of the Company’s common stock during those periods. Options excluded from the diluted net earnings per share calculations were 2.5 million and 1.7 million for the three and nine months ended April 30, 2020, respectively, and were 0.8 million for the three and nine months ended April 30, 2019. The following table presents the information necessary to calculate basic and diluted net earnings per share (in millions, except per share amounts): Three Months Ended Nine Months Ended 2020 2019 2020 2019 Net earnings for basic and diluted earnings per share computation $ 63.4 $ 75.2 $ 192.9 $ 209.1 Weighted average common shares outstanding: Weighted average common shares – basic 126.9 128.2 127.0 128.5 Dilutive impact of share-based awards 0.8 1.8 1.5 1.9 Weighted average common shares – diluted 127.7 130.0 128.5 130.4 Net earnings per share – basic $ 0.50 $ 0.59 $ 1.52 $ 1.63 Net earnings per share – diluted $ 0.50 $ 0.58 $ 1.50 $ 1.60 |
Goodwill and Intangible Assets
Goodwill and Intangible Assets | 9 Months Ended |
Apr. 30, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill and Intangible Assets | Goodwill and Intangible Assets Goodwill is assessed for impairment annually, during the third quarter of the fiscal year, or more frequently if events or changes in circumstances indicate that the asset may be impaired. The Company performed its annual impairment assessment during the third quarter of fiscal 2020 and did not record any impairment as a result of this assessment. The following is a reconciliation of goodwill by reportable segment for the nine months ended April 30, 2020 (in millions): Engine Industrial Total Balance as of July 31, 2019 $ 84.5 $ 218.6 $ 303.1 Goodwill acquired — — — Currency translation (0.4) 1.1 0.7 Balance as of April 30, 2020 $ 84.1 $ 219.7 $ 303.8 The following table summarizes the net intangible asset classes as of April 30, 2020 (in millions): Gross Carrying Amount Accumulated Amortization Total Customer relationships $ 101.8 $ (47.9) $ 53.9 Patents, trademarks and technology 22.4 (11.0) 11.4 Total intangible assets, net $ 124.2 $ (58.9) $ 65.3 The following table summarizes the net intangible asset classes as of July 31, 2019 (in millions): Gross Carrying Amount Accumulated Amortization Total Customer relationships $ 101.5 $ (43.3) $ 58.2 Patents, trademarks and technology 22.3 (9.6) 12.7 Total intangible assets, net $ 123.8 $ (52.9) $ 70.9 Amortization expense was $2.1 million and $6.4 million for the three and nine months ended April 30, 2020, respectively, and was $2.1 million and $5.6 million for the three and nine months ended April 30, 2019, respectively. |
Revenue
Revenue | 9 Months Ended |
Apr. 30, 2020 | |
Revenue from Contract with Customer [Abstract] | |
Revenue | Revenue The Company recognizes revenue on a wide range of filtration solutions sold to customers in many industries around the world. Most of the Company’s performance obligations within customer sales contracts are for manufactured filtration systems and replacement parts. The Company also performs limited services and installation. Customer contracts may include multiple performance obligations and the transaction price is allocated to each distinct performance obligation based on its relative standalone selling price. Revenue Disaggregation Net sales disaggregated by geography based on the location where the customer’s order was placed are as follows (in millions): Three Months Ended Nine Months Ended 2020 2019 2020 2019 United States $ 265.2 $ 301.5 $ 819.6 $ 896.0 Europe, Middle East and Africa 182.1 208.0 570.9 611.7 Asia Pacific 134.9 146.8 412.8 443.4 Latin America 47.5 56.5 161.1 166.8 Total net sales $ 629.7 $ 712.8 $ 1,964.4 $ 2,117.9 See Note 16 for net sales disaggregated by segment. Contract Assets and Liabilities The satisfaction of performance obligations and the resulting recognition of revenue typically correspond with billing the customer. In limited circumstances, the customer may be billed at a time later than when revenue is recognized, resulting in contract assets, which are reported in prepaid expenses and other current assets on the Condensed Consolidated Balance Sheets. Contract assets were $14.8 million and $12.4 million as of April 30, 2020 and July 31, 2019, respectively. In other limited circumstances, the Company will require a down payment from the customer prior to the satisfaction of performance obligations. The circumstances result in contract liabilities, or deferred revenue, which is reported in other current liabilities or other long-term liabilities on the Condensed Consolidated Balance Sheets, depending on when revenue is expected to be recognized. Contract liabilities were $13.3 million and $10.4 million as of April 30, 2020 and July 31, 2019, respectively. The Company will recognize revenue in future periods related to remaining performance obligations for certain open contracts. Generally, these contracts have terms of one year or less. The amount of revenue related to unsatisfied performance obligations in which the original duration of the contract is greater than one year is not significant. |
Warranty
Warranty | 9 Months Ended |
Apr. 30, 2020 | |
Standard Product Warranty Disclosure [Abstract] | |
Warranty | Warranty The Company estimates warranty expense on certain products at the time of sale. The following is a reconciliation of warranty reserves for the nine months ended April 30, 2020 and 2019 (in millions): Nine Months Ended 2020 2019 Balance at beginning of period $ 11.2 $ 18.9 Accruals for warranties issued during the reporting period 2.0 1.6 Accruals related to pre-existing warranties (including changes in estimates) (0.9) (2.0) Less: settlements made during the period (2.5) (6.9) Balance at end of period $ 9.8 $ 11.6 There were no individually material specific warranty matters accrued for or significant settlements made in the nine months ended April 30, 2020 or 2019. |
Stock-Based Compensation
Stock-Based Compensation | 9 Months Ended |
Apr. 30, 2020 | |
Share-based Payment Arrangement, Noncash Expense [Abstract] | |
Stock-Based Compensation | Stock-Based Compensation On November 22, 2019, at the Company’s 2019 Annual Meeting of Stockholders, the Company’s stockholders approved the adoption of the 2019 Master Stock Incentive Plan (2019 Plan). As of November 22, 2019, the 2019 Plan replaced the 2010 Master Stock Incentive Plan (2010 Plan). Consistent with the 2010 Plan, the 2019 Plan allows for granting of nonqualified stock options, incentive stock options, restricted stock awards, restricted stock units, stock appreciation rights, dividend equivalents, and other stock-based awards. Stock Options When options are granted the option exercise price is equivalent to the market price of the Company’s common stock at the date of grant. Options are generally exercisable for up to 10 years from the date of grant and vest in equal increments over three years. The following table summarizes expenses associated with stock options during the three and nine months ended April 30, 2020 and 2019 (in millions): Three Months Ended Nine Months Ended 2020 2019 2020 2019 Pretax compensation expense associated with stock options $ 1.3 $ 1.4 $ 9.0 $ 8.3 Tax benefits associated with stock options $ 0.3 $ 0.3 $ 1.4 $ 1.7 Stock-based employee compensation expense is recognized using the fair-value method. The Company determines the fair value of stock option awards using the Black-Scholes option pricing model. The following table summarizes stock option activity during the nine months ended April 30, 2020: Options Weighted Outstanding as of July 31, 2019 6,531,250 $ 39.66 Granted 929,941 51.96 Exercised (667,564) 29.79 Canceled (79,279) 52.37 Outstanding as of April 30, 2020 6,714,348 $ 42.19 The total intrinsic value of options exercised during the nine months ended April 30, 2020 was $15.3 million. The weighted average fair value for options granted during the nine months ended April 30, 2020 and 2019 was $10.94 and $12.27 per share, respectively. As of April 30, 2020, the aggregate intrinsic value of options both outstanding and exercisable was $31.8 million. As of April 30, 2020, there was $8.6 million of total unrecognized compensation expense related to non-vested stock options and is expected to be recognized over the remaining vesting period. Performance-based awards Consistent with the 2010 Plan, the 2019 Plan allows for the granting of performance-based awards to a limited number of executives. Administered by the Human Resources Committee of the Company’s Board of Directors, these performance-based awards are payable in common stock and are based on a formula that measures Company performance over a three The following table summarizes expenses associated with performance-based awards during the three and nine months ended April 30, 2020 and 2019 (in millions): Three Months Ended Nine Months Ended 2020 2019 2020 2019 Pretax compensation expense associated with performance-based awards $ (0.3) $ 1.5 $ 1.5 $ 4.5 The following table summarizes performance-based award activity during the nine months ended April 30, 2020: Performance Shares Weighted Non-vested at July 31, 2019 174,100 $ 52.87 Granted 100,500 51.61 Vested — — Canceled/forfeited (2,500) 58.35 Non-vested at April 30, 2020 272,100 $ 52.35 The weighted average fair value for performance-based awards granted during the nine months ended April 30, 2020 was $5.2 million. As of April 30, 2020, there was $3.5 million of total unrecognized compensation expense related to non-vested performance-based awards. This expense is expected to be recognized over the remaining vesting period. |
Employee Benefit Plans
Employee Benefit Plans | 9 Months Ended |
Apr. 30, 2020 | |
Retirement Benefits, Description [Abstract] | |
Employee Benefit Plans | Employee Benefit Plans The Company and certain of its international subsidiaries have defined benefit pension plans for many of their hourly and salaried employees. There are two types of U.S. plans. The first type of U.S. plan (Hourly Pension Plan) is a traditional defined benefit pension plan primarily for union production employees. The second plan (Salaried Pension Plan) is for some salaried and non-union production employees, and provides defined benefits pursuant to a cash balance feature whereby a participant accumulates a benefit comprised of a percentage of current salary that varies with years of service, interest credits and transition credits. The Company no longer allows entrants into the U.S. Salaried Pension Plan and the participating employees no longer accrue Company contribution credits under the plan. Instead, eligible employees receive a 3% annual retirement contribution to their 401(k) in addition to the Company’s normal 401(k) match. The non-U.S. plans generally provide pension benefits based on years of service and compensation level. Components of net periodic benefit cost other than the service cost component are included in other income, net in the Condensed Consolidated Statements of Earnings. Net periodic benefit costs for the Company’s pension plans include the following components (in millions): Three Months Ended Nine Months Ended 2020 2019 2020 2019 Net periodic benefit costs: Service cost $ 1.5 $ 1.5 $ 4.7 $ 4.5 Interest cost 3.3 4.1 10.1 12.3 Expected return on assets (6.5) (6.6) (19.5) (19.9) Prior service cost amortization 0.2 0.1 0.5 0.4 Actuarial loss amortization 1.6 1.1 4.8 3.3 Settlement charge 2.3 — 2.3 — Net periodic benefit costs $ 2.4 $ 0.2 $ 2.9 $ 0.6 A settlement charge is required when the amount of all lump-sum distributions during the year is greater than the sum of the service and interest cost components of the annual net periodic pension cost. In the third quarter, the Company recorded a pension settlement charge of $2.3 million. As a result of the related remeasurement, the Company’s pension obligations increased with a corresponding adjustment to other comprehensive loss of $7.9 million (see Note 13). The Company’s general funding policy is to make at least the minimum required contributions as required by applicable regulations, plus any additional amounts that it determines to be appropriate. The estimated minimum funding requirement for the Company’s qualified U.S. plans for the plan year ending July 31, 2020 is $4.4 million. For the nine months ended April 30, 2020, the Company made required contributions of $3.5 million to its qualified U.S. pension plans and $1.4 million to its non-qualified U.S. pension plans. In May 2020, the Company contributed an additional $0.5 million to the qualified U.S. pension plans. For the nine months ended April 30, 2020, the Company made required contributions of $1.0 million to its non-U.S. pension plans. The Company estimates it will contribute an additional $0.1 million to its non-U.S. pension plans during the remainder of fiscal 2020 based upon the local government prescribed funding requirements. Future estimates of the Company’s required pension plan contributions may change significantly depending on the actual rate of return on plan assets, discount rates and regulatory requirements. |
Income Taxes
Income Taxes | 9 Months Ended |
Apr. 30, 2020 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The Company files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. With few exceptions, the Company is no longer subject to state and foreign income tax examinations by tax authorities for years before 2010. The United States Internal Revenue Service has completed examinations of the Company’s U.S. federal income tax returns through 2016. As of April 30, 2020, gross unrecognized tax benefits were $16.9 million and accrued interest and penalties on these unrecognized tax benefits were $2.2 million. The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense within the Condensed Consolidated Statement of Earnings. With an average statute of limitations of approximately five years, up to $6.3 million of the unrecognized tax benefits could potentially expire in the next 12 months, unless extended by an audit. The Company believes it is remote that any adjustment necessary to the reserve for income taxes over the next 12 months will be material. However, it is possible the ultimate resolution of audits or disputes may result in a material change to the Company’s reserve for income taxes, although the quantification of such potential adjustments cannot be made at this time. |
Fair Value Measurements
Fair Value Measurements | 9 Months Ended |
Apr. 30, 2020 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | Fair Value Measurements Fair value measurements of financial instruments are reported in one of three levels based on the lowest level of significant input used as follows: Level 1 Inputs to the fair value measurement are quoted prices in active markets for identical assets or liabilities. Level 2 Inputs to the fair value measurement include quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active and inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. Level 3 Inputs to the fair value measurement are unobservable inputs or valuation techniques. As of April 30, 2020, the carrying values of cash and cash equivalents, accounts receivables, short-term borrowings and trade accounts payable approximate fair value because of the short-term nature of these instruments, and are classified as Level 1 in the fair value hierarchy. As of April 30, 2020, the estimated fair value of long-term debt with fixed interest rates was $283.9 million compared to its carrying value of $275.0 million. The carrying values of long-term debt with variable interest rates of $461.8 million as of April 30, 2020 approximate fair value. The fair value is estimated by discounting the projected cash flows using the rate at which similar amounts of debt could currently be borrowed. Long-term debt is classified as Level 2 in the fair value hierarchy. The fair values of the Company’s financial assets and liabilities listed below reflect the amounts that would be received to sell the assets or paid to transfer the liabilities in an orderly transaction between market participants at the measurement date (exit price). The fair values are based on inputs other than quoted prices that are observable for the asset or liability, and therefore are classified as Level 2 in the fair value hierarchy. These inputs include foreign currency exchange rates and interest rates. The financial assets and liabilities are primarily valued using standard calculations and models that use as their basis readily observable market parameters. Industry standard data providers are the primary source for forward and spot rate information for both interest rates and currency rates. Derivative Fair Value Measurements The Company enters into derivative instrument agreements, including forward foreign currency exchange contracts and net investment hedges, to manage risk in connection with changes in foreign currency. The Company only enters into derivative instrument agreements with counterparties who have highly rated credit. The Company does not enter into derivative instrument agreements for trading or speculative purposes. Forward Foreign Currency Exchange Contracts The Company uses forward currency exchange contracts to manage exposure to fluctuations in foreign currency. The Company enters into certain purchase commitments with foreign suppliers based on the value of its purchasing subsidiaries’ local currency relative to the currency’s requirement of the supplier on the date of the commitment. The Company also sells into foreign countries based on the value of the purchaser’s local currency. The Company mitigates risk through forward currency contracts that generally mature in 12 months or less, which is consistent with the related purchases and sales. Contracts that qualify for hedge accounting are designated as cash flow hedges. Net Investment Hedges The Company uses fixed-to-fixed cross-currency swap agreements, which mature in July 2029, to hedge its exposure to adverse foreign currency exchange rate movements for its operations in Europe. The Company has elected the spot method for assessing effectiveness of these contracts. The Company determines the fair values of its derivatives based on valuation models which project future cash flows and discount the future amounts to a present value using market-based observable inputs including foreign currency rates, interest rate curves, futures and basis spreads, as applicable. The following table details the fair value of the Company’s derivative contracts, which are recorded on a gross basis in the Company’s Condensed Consolidated Balance Sheets as of April 30, 2020 and July 31, 2019 (in millions): Fair Values Significant Other Observable Inputs Notional Amounts Assets (1) Liabilities (2) (3) April 30, July 31, April 30, July 31, April 30, July 31, 2020 2019 2020 2019 2020 2019 Forward foreign currency exchange contracts $ 25.3 $ 28.2 $ 3.9 $ 1.6 $ 1.6 $ 1.8 Net investment hedges 55.8 55.8 5.7 1.1 — 1.9 Total $ 81.1 $ 84.0 $ 9.6 $ 2.7 $ 1.6 $ 3.7 (1) Amounts of $5.0 million and of $4.6 million, respectively, are recorded within prepaid expenses and other current assets, and in other long-term assets, in the Company’s Condensed Consolidated Balance Sheets as of April 30, 2020. Amount of $2.7 million is recorded within prepaid expenses and other current assets in the Company’s Condensed Consolidated Balance Sheets as of July 31, 2019. (2) Forward foreign currency exchange contracts are recorded within other current liabilities in the Company’s Condensed Consolidated Balance Sheets. (3) Net investment hedges are recorded within other long-term liabilities in the Company’s Condensed Consolidated Balance Sheets. Changes in the fair value of the Company’s forward foreign currency exchange contracts are recorded in equity as a component of accumulated other comprehensive loss, and are reclassified from accumulated other comprehensive income into earnings when the items underlying the hedged transactions are recognized into earnings, as a component of cost of sales within the Company’s Condensed Consolidated Statements of Earnings and Condensed Consolidated Statements of Comprehensive Income. The net gain or loss on net investment hedges are reported within foreign currency translation gains and losses as a component of accumulated other comprehensive loss in the Company’s Condensed Consolidated Balance Sheets. The interest earned is reclassified out of accumulated other comprehensive loss and into other income, net on the Company’s Condensed Consolidated Statements of Earnings. Credit Risk Related Contingent Features Contract provisions may require the posting of collateral or settlement of the contracts for various reasons, including if the Company’s credit ratings are downgraded below its investment grade credit rating by any of the major credit agencies or for cross default contractual provisions if there is a failure under other financing arrangements related to payment terms or covenants. As of April 30, 2020 and July 31, 2019, no collateral was posted. Counterparty Credit Risk There is risk that counterparties to derivative contracts will fail to meet their contractual obligations. In order to mitigate counterparty credit risk, the Company only enters into contracts with carefully selected financial institutions based upon their credit ratings and certain other financial factors. The following table summarizes the pre-tax impact of the gains and losses on the Company’s designated forward foreign currency exchange contracts and net investment hedges (in millions): Pre-tax Gains (Losses) Recognized in Accumulated Other Comprehensive Loss Three Months Ended April 30, Nine Months Ended April 30, 2020 2019 2020 2019 Forward foreign currency exchange contracts $ (1.7) $ 0.1 $ (3.8) $ 1.1 Net investment hedges $ 4.0 $ — $ 6.2 $ — Pre-tax (Gains) Losses Reclassified from Accumulated Other Comprehensive Loss Three Months Ended April 30, Nine Months Ended April 30, 2020 2019 2020 2019 Forward foreign currency exchange contracts $ 3.3 $ (0.1) $ 5.3 $ (0.4) Net investment hedges $ — $ — $ — $ — The Company expects that substantially all the amounts recorded in accumulated other comprehensive loss for its forward foreign currency exchange contracts recorded within the Company’s Condensed Consolidated Balance Sheet will be reclassified into earnings during the next 12 months, based upon the timing of inventory purchases and sales. See Note 13 for additional information on accumulated other comprehensive loss. The Company holds equity method investments, which are classified in other long-term assets in the accompanying Condensed Consolidated Balance Sheets. The aggregate carrying amount of these investments was $24.2 million and $23.0 million as of April 30, 2020 and July 31, 2019, respectively. These equity method investments are measured at fair value on a nonrecurring basis. The fair value of the Company’s equity method investments has not been estimated as there have been no identified events or changes in circumstances that would have had an adverse impact on the value of these investments. In the event that these investments are required to be measured, they would fall within Level 3 of the fair value hierarchy due to the use of significant unobservable inputs to determine fair value, as the investments are in privately-held entities. |
Shareholders' Equity
Shareholders' Equity | 9 Months Ended |
Apr. 30, 2020 | |
Stockholders' Equity Note [Abstract] | |
Shareholders' Equity | Shareholders’ Equity In fiscal 2019, the Company’s Board of Directors authorized the repurchase of up to 13.0 million shares of common stock under the Company’s stock repurchase plan. This repurchase authorization is effective until terminated by the Board of Directors. During the nine months ended April 30, 2020, the Company repurchased 2.0 million shares for $94.3 million. As of April 30, 2020, the Company had remaining authorization to repurchase 10.7 million shares under this plan. Dividends paid per share were 63.0 cents and 57.0 cents for the nine months ended April 30, 2020 and 2019, respectively. |
Accumulated Other Comprehensive
Accumulated Other Comprehensive Loss | 9 Months Ended |
Apr. 30, 2020 | |
Other Comprehensive Income (Loss), Net of Tax [Abstract] | |
Accumulated Other Comprehensive Loss | Accumulated Other Comprehensive Loss Changes in accumulated other comprehensive loss by component for the three months ended April 30, 2020 and 2019 are as follows (in millions): Foreign Pension Derivative Total Balance as of January 31, 2020, net of tax $ (82.2) $ (97.0) $ 0.9 $ (178.3) Other comprehensive (loss) income before reclassifications and tax (35.3) (7.9) (1) 2.3 (40.9) Tax benefit (expense) — 1.9 (0.9) 1.0 Other comprehensive (loss) income before reclassifications, net of tax (35.3) (6.0) 1.4 (39.9) Reclassifications, before tax — 5.2 (1) 3.3 8.5 Tax expense — (1.2) (1.2) (2.4) Reclassifications, net of tax — 4.0 (2) 2.1 (3) 6.1 Other comprehensive (loss) income, net of tax (35.3) (2.0) 3.5 (33.8) Balance as of April 30, 2020, net of tax $ (117.5) $ (99.0) $ 4.4 $ (212.1) Balance as of January 31, 2019, net of tax $ (66.6) $ (80.8) $ (0.3) $ (147.7) Other comprehensive loss before reclassifications and tax (11.9) — (0.1) (12.0) Other comprehensive loss before reclassifications, net of tax (11.9) — (0.1) (12.0) Reclassifications, before tax — 1.7 (0.2) 1.5 Tax (expense) benefit — (0.5) 0.1 (0.4) Reclassifications, net of tax — 1.2 (2) (0.1) (3) 1.1 Other comprehensive (loss) income, net of tax (11.9) 1.2 (0.2) (10.9) Balance as of April 30, 2019, net of tax $ (78.5) $ (79.6) $ (0.5) $ (158.6) (1) In the third quarter of fiscal 2020, pension settlement accounting was triggered and the Company recorded a pension settlement charge of $2.3 million (see Note 9). As a result of the related remeasurement, the Company’s pension obligations increased with a corresponding adjustment to other comprehensive loss of $7.9 million. (2) Primarily includes net amortization of prior service costs and actuarial losses included in net periodic benefit cost (see Note 9) that were reclassified from accumulated other comprehensive loss in the Company’s Condensed Consolidated Balance Sheet to operating expenses or cost of sales in the Company’s Condensed Consolidated Statements of Earnings. (3) Relates to foreign currency cash flow hedges that were reclassified from accumulated other comprehensive loss to other income, net in the Company’s Condensed Consolidated Statements of Earnings. Changes in accumulated other comprehensive loss by component for the nine months ended April 30, 2020 and 2019 are as follows (in millions): Foreign Pension Derivative Total Balance as of July 31, 2019, net of tax $ (92.7) $ (99.0) $ (1.2) $ (192.9) Other comprehensive (loss) income before reclassifications and tax (24.8) (7.9) (1) 2.4 (30.3) Tax benefit (expense) — 1.9 (0.2) 1.7 Other comprehensive (loss) income before reclassifications, net of tax (24.8) (6.0) 2.2 (28.6) Reclassifications, before tax — 7.5 (1) 5.3 12.8 Tax expense — (1.5) (1.9) (3.4) Reclassifications, net of tax — 6.0 (2) 3.4 (3) 9.4 Other comprehensive (loss) income, net of tax (24.8) — 5.6 (19.2) Balance as of April 30, 2020, net of tax $ (117.5) $ (99.0) $ 4.4 $ (212.1) Balance as of July 31, 2018, net of tax $ (66.1) $ (82.9) $ (0.8) $ (149.8) Other comprehensive (loss) income before reclassifications and tax (12.4) — 1.0 (11.4) Tax expense — — (0.3) (0.3) Other comprehensive (loss) income before reclassifications, net of tax (12.4) — 0.7 (11.7) Reclassifications, before tax — 4.4 (0.6) 3.8 Tax (expense) benefit — (1.1) 0.2 (0.9) Reclassifications, net of tax — 3.3 (2) (0.4) (3) 2.9 Other comprehensive (loss) income, net of tax (12.4) 3.3 0.3 (8.8) Balance as of April 30, 2019, net of tax $ (78.5) $ (79.6) $ (0.5) $ (158.6) (1) In the third quarter of fiscal 2020, pension settlement accounting was triggered and the Company recorded a pension settlement charge of $2.3 million (see Note 9). As a result of the related remeasurement, the Company’s pension obligations increased with a corresponding adjustment to other comprehensive loss of $7.9 million. (2) Primarily includes net amortization of prior service costs and actuarial losses included in net periodic benefit cost (see Note 9) that were reclassified from accumulated other comprehensive loss in the Company’s Condensed Consolidated Balance Sheet to operating expenses or cost of sales in the Company’s Condensed Consolidated Statements of Earnings. (3) Relates to foreign currency cash flow hedges that were reclassified from accumulated other comprehensive loss to other income, net in the Company’s Condensed Consolidated Statements of Earnings. |
Guarantees
Guarantees | 9 Months Ended |
Apr. 30, 2020 | |
Guarantees [Abstract] | |
Guarantees | Guarantees The Company and Caterpillar Inc. equally own the shares of Advanced Filtration Systems Inc. (AFSI), an unconsolidated joint venture, and guarantee certain debt of the joint venture. The Company accounts for AFSI as an equity method investment. In the following table, the outstanding debt relates to the joint venture and the contingent liability for standby letters of credit relate to the Company (in millions): April 30, July 31, Outstanding debt (the Company guarantees half) $ 39.6 $ 38.8 Contingent liability for standby letters of credit (1) $ 7.5 $ 11.0 Amounts drawn for letters of credit $ — $ — (1) The letters of credit guarantee payment to third parties in the event the Company is in breach of contract terms as detailed in each letter of credit. The following items relate to the Company’s joint venture in AFSI (in millions): Three Months Ended April 30, Nine Months Ended 2020 2019 2020 2019 Investment earnings from AFSI (1) $ 0.8 $ 0.4 $ 1.2 $ 0.1 Royalty income from AFSI (1) $ 1.6 $ 1.5 $ 5.2 $ 4.8 |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Apr. 30, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and ContingenciesThe Company records provisions with respect to identified claims or lawsuits when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Claims and lawsuits are reviewed quarterly, and provisions are adjusted to reflect the status of a particular matter. The Company believes the recorded estimated liability in its Condensed Consolidated Financial Statements is adequate considering the probable and estimable outcomes. The recorded liabilities were not material to the Company’s results of operations, liquidity or financial position and the Company believes it is remote that the settlement of any of the currently identified claims or litigation will be materially in excess of what is accrued. |
Segment Reporting
Segment Reporting | 9 Months Ended |
Apr. 30, 2020 | |
Segment Reporting, Measurement Disclosures [Abstract] | |
Segment Reporting | Segment Reporting The Company has identified two reportable segments: Engine Products and Industrial Products. Segment determination is based on the internal organization structure, management of operations and performance evaluation by management and the Company’s Board of Directors. Corporate and Unallocated includes corporate expenses determined to be non-allocable to the segments, such as interest expense. The Company is an integrated enterprise, characterized by substantial inter-segment cooperation, cost allocations and sharing of assets. Therefore, the Company does not represent that these segments, if operated independently, would report the earnings before income taxes and other financial information shown below. Segment detail is summarized as follows (in millions): Three Months Ended Nine Months Ended 2020 2019 2020 2019 Net sales Engine Products segment $ 420.4 $ 489.4 $ 1,315.2 $ 1,439.3 Industrial Products segment 209.3 223.4 649.2 678.6 Total $ 629.7 $ 712.8 $ 1,964.4 $ 2,117.9 Earnings before income taxes Engine Products segment $ 56.5 $ 71.5 $ 172.2 $ 188.6 Industrial Products segment 34.7 32.7 98.8 101.5 Corporate and Unallocated (6.8) (4.7) (17.1) (13.7) Total $ 84.4 $ 99.5 $ 253.9 $ 276.4 Net sales by product group within the Engine Products segment and Industrial Products segment is summarized as follows (in millions): Three Months Ended Nine Months Ended 2020 2019 2020 2019 Engine Products segment Off-Road $ 63.5 $ 84.8 $ 199.6 $ 240.0 On-Road 25.1 46.9 99.5 135.6 Aftermarket 301.9 327.7 929.4 980.0 Aerospace and Defense 29.9 30.0 86.7 83.7 Engine Products segment net sales 420.4 489.4 1,315.2 1,439.3 Industrial Products segment Industrial Filtration Solutions 137.4 155.2 441.4 469.2 Gas Turbine Systems 29.2 27.5 74.2 80.5 Special Applications 42.7 40.7 133.6 128.9 Industrial Products segment net sales 209.3 223.4 649.2 678.6 Total net sales $ 629.7 $ 712.8 $ 1,964.4 $ 2,117.9 |
Leases
Leases | 9 Months Ended |
Apr. 30, 2020 | |
Leases [Abstract] | |
Leases | Leases The Company leases certain real estate properties, information technology equipment, manufacturing and warehouse equipment, vehicles and other equipment through operating lease arrangements. The Company determines whether an arrangement that provides control over the use of an asset to the Company is a lease. The Company recognizes a lease liability and corresponding right-of-use asset on the Condensed Consolidated Balance Sheets based on the present value of future lease payments, and recognizes lease expense on a straight-line basis over the lease term. Leases with an initial term of 12 months or less are not recorded on the Condensed Consolidated Balance Sheets. The Company has elected to separate payments for lease components from non-lease components for all asset classes. Lease agreements may include extension, termination or purchase options, all of which are considered in calculating the lease liability and right-of-use assets when it is reasonably certain the Company will exercise the option. Most lease agreements do not explicitly state the discount rate implicit in the lease, therefore, the Company’s incremental borrowing rate on the commencement date is used to calculate the present value of future payments for most leases. The Company has elected to exercise the package of practical expedients and has not elected to exercise hindsight in determining lease term and in assessing impairment of the Company’s right-of-use assets. The Company’s finance leases are not significant and therefore, are not included in the following disclosures. Information for the Company’s operating lease costs is as follows (in millions): Three Months Ended April 30, Nine Months Ended April 30, 2020 2020 Operating lease cost $ 7.5 $ 22.7 Short-term lease cost 0.5 1.6 Total lease costs $ 8.0 $ 24.3 Supplemental balance sheet information for the Company is as follows (in millions): April 30, August 1, Right-of-use lease assets $ 71.4 $ 71.5 Current lease liabilities $ 24.0 $ 26.0 Long-term lease liabilities $ 47.4 $ 45.5 Additional information related to operating leases is as follows: April 30, August 1, Weighted average remaining lease term (years) 5.0 3.7 Weighted average discount rates 3.57 % 3.76 % Payments for operating leases having initial terms of more than one year at April 30, 2020 were as follows (in millions): Amounts Due in Fiscal Year Ending April 30, Remainder of 2020 $ 7.2 2021 23.4 2022 15.3 2023 9.0 2024 5.8 Thereafter 17.8 Total future lease payments 78.5 Less imputed interest 7.1 Present value of future lease payments $ 71.4 Payments for operating leases having initial terms of more than one year at July 31, 2019 were as follows (in millions): Amounts Due in Fiscal Year Ending July 31, 2020 $ 24.0 2021 17.5 2022 11.3 2023 6.4 2024 4.6 Thereafter 19.0 Total future lease payments $ 82.8 Right-of-use lease assets obtained in exchange for new lease liabilities were $23.3 million for the nine months ended April 30, 2020. |
Borrowings
Borrowings | 9 Months Ended |
Apr. 30, 2020 | |
Debt Disclosure [Abstract] | |
Borrowings | Borrowings The Company has a $500.0 million unsecured revolving credit facility that expires July 21, 2022. As of April 30, 2020, there was $142.5 million available on this facility. In March 2020, the Company borrowed $100.0 million on its revolver as a precautionary measure to strengthen its liquidity position due to uncertainty related to COVID-19. Certain debt agreements contain financial covenants related to interest coverage and leverage ratios, as well as other non-financial covenants. As of April 30, 2020, the Company was in compliance with all such covenants. In October 2019, the Company entered into a term loan agreement of €80.0 million, or $89.2 million, based on the exchange rate in effect on October 28, 2019. The loan is unsecured and matures in October 2024. As of April 30, 2020, the Compan y had borrowed the full capacity of the term loan. The term loan includes customary representations and warranties and covenants for a transaction of this type. The loan has a floating rate based on margin plus EURIBOR. The margin will vary according to a leverage-based pricing grid. The rate as of April 30, 2020 was 0.7%. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Apr. 30, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying unaudited Condensed Consolidated Financial Statements of Donaldson Company, Inc. and its subsidiaries (the Company) have been prepared in accordance with generally accepted accounting prin ciples in the United States (GAAP) and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and notes required for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair statement of earnings, comprehensive income, financial position, cash flows and shareholders’ equity have been included and are of a normal recurring nature. Operating results for the three and nine month periods ended April 30, 2020 are not necessarily indicative of the results that may be expected for future periods. The year-end Condensed Consolidated Balance Sheet information was derived from the Company’s audited Consolidated Financial Statements but does not include all disclosures required by GAAP. For further information, refer to the Audited Consolidated Financial Statements and Notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended July 31, 2019. The preparation of the Company’s financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amount of assets and liabilities and the disclosures regarding contingent assets and liabilities at period end and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. With the recent outbreak of coronavirus, or COVID-19, which has been declared by the World Health Organization to be a pandemic, management has evaluated the Company’s accounting estimates that require consideration of forecasted financial information, including its allowances for doubtful accounts and inventory obsolescence, the carrying value of goodwill, intangible assets and other long-lived assets. This assessment was conducted with current information, as well as consideration of future potential impacts of COVID-19 on the business as of April 30, 2020. Management determined that due to a majority of the Company’s business being deemed “essential” under applicable governmental orders otherwise restricting business activities, the limited downtime of certain operations and its ability to adapt and to continue to operate in the current environment, no triggering event for impairment existed at April 30, 2020. In addition, management completed its annual impairment assessment for goodwill and concluded there was no impairment. However, because of uncertainties at this time with respect to the severity and duration of the COVID-19 outbreak, the duration and terms of related governmental orders restricting activities, and the timing and pace of any economic recovery as COVID-19 impacts ultimately abate, management cannot predict with specificity the extent and duration of any future impact on the business and financial results from COVID-19. In addition, although most operations have continued, it is possible that they may not continue under future government orders, or may be subject to site-specific health and safety concerns which could require certain operations to be halted for some period. Accordingly, such impact could potentially result in impairments of assets and increases in allowances in future periods. |
New Accounting Standards Recently Adopted and New Accounting Standards Not Yet Adopted | New Accounting Standards Recently Adopted In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-02, Leases (Topic 842) (ASU 2016-02), which requires lessees to recognize right-of-use assets and lease liabilities for substantially all leases. This accounting guidance was effective for the Company in the beginning of the first quarter of fiscal 2020 and the Company adopted the guidance on a modified retrospective basis. In December 2018, the FASB issued ASU 2018-20, Leases (Topic 842) Narrow-Scope Improvements for Lessors (ASU 2018-20), which amends ASU 2016-02, to provide additional guidance on accounting for certain expenses such as property taxes and insurance paid on behalf of the lessor by the lessee. The Company adopted ASU 2016-02 in the first quarter of fiscal 2020, and increased assets and liabilities by $71.5 million, as of August 1, 2019. Refer to Note 17 for further discussion. In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (ASU 2018-02). The guidance allows a company to elect to reclassify from accumulated other comprehensive income (AOCI) to retained earnings the stranded tax effects from the adoption of the new federal corporate tax rate that became effective January 1, 2018 as a result of the U.S. Tax Cuts and Jobs Act (TCJA). The amount of the reclassification is calculated as the difference between the amount initially charged to other comprehensive income at the previously enacted tax rate that remains in AOCI and the amount that would have been charged using the newly enacted tax rate, excluding any valuation allowance prior to tax reform. The Company adopted ASU 2018-02 in the first quarter of fiscal 2020 and elected to not reclassify tax effects stranded in accumulated other comprehensive loss. As such, there is no impact on the Company’s Condensed Consolidated Financial Statements. New Accounting Standards Not Yet Adopted In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments (ASU 2016-13). In November 2018, the FASB issued an update, ASU 2018-19, that clarifies the scope of the standard in the amendments in ASU 2016-13. This guidance introduces a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses. Financial instruments impacted include accounts receivable, trade receivables, other financial assets measured at amortized cost and other off-balance sheet credit exposures. The guidance is effective for the Company beginning in the first quarter of fiscal 2021, with early adoption permitted. The Company is evaluating the impact of the adoption of ASU 2016-13 on its Consolidated Financial Statements. In April 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815 Derivatives and Hedging and Topic 825, Financial Instruments (ASU 2019-04). This guidance clarifies the standards on credit losses (Topic 326), derivatives and hedging (Topic 815), and recognition and measurement of financial instruments (Topic 825). The guidance is effective for the Company beginning in the first quarter of fiscal 2021, with early adoption permitted. The Company is evaluating the impact of the adoption of ASU 2019-04 on its Consolidated Financial Statements. |
Supplemental Balance Sheet In_2
Supplemental Balance Sheet Information (Tables) | 9 Months Ended |
Apr. 30, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Components of inventory | The components of net inventories are as follows (in millions): April 30, July 31, Raw materials $ 114.8 $ 114.7 Work in process 35.6 33.0 Finished products 196.1 185.1 Inventories, net $ 346.5 $ 332.8 |
Components of property, plant and equipment | The components of net property, plant and equipment are as follows (in millions): April 30, July 31, Land $ 23.7 $ 24.2 Buildings 346.3 325.3 Machinery and equipment 834.9 813.5 Computer software 143.9 142.8 Construction in progress 137.5 114.3 Less: accumulated depreciation (872.0) (831.2) Property, plant and equipment, net $ 614.3 $ 588.9 |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 9 Months Ended |
Apr. 30, 2020 | |
Earnings Per Share [Abstract] | |
Schedule of information necessary to calculate basic and diluted net earnings per common share | The following table presents the information necessary to calculate basic and diluted net earnings per share (in millions, except per share amounts): Three Months Ended Nine Months Ended 2020 2019 2020 2019 Net earnings for basic and diluted earnings per share computation $ 63.4 $ 75.2 $ 192.9 $ 209.1 Weighted average common shares outstanding: Weighted average common shares – basic 126.9 128.2 127.0 128.5 Dilutive impact of share-based awards 0.8 1.8 1.5 1.9 Weighted average common shares – diluted 127.7 130.0 128.5 130.4 Net earnings per share – basic $ 0.50 $ 0.59 $ 1.52 $ 1.63 Net earnings per share – diluted $ 0.50 $ 0.58 $ 1.50 $ 1.60 |
Goodwill and Intangible Assets
Goodwill and Intangible Assets (Tables) | 9 Months Ended |
Apr. 30, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Reconciliation of goodwill | The following is a reconciliation of goodwill by reportable segment for the nine months ended April 30, 2020 (in millions): Engine Industrial Total Balance as of July 31, 2019 $ 84.5 $ 218.6 $ 303.1 Goodwill acquired — — — Currency translation (0.4) 1.1 0.7 Balance as of April 30, 2020 $ 84.1 $ 219.7 $ 303.8 |
Schedule of finite-lived intangible assets | The following table summarizes the net intangible asset classes as of April 30, 2020 (in millions): Gross Carrying Amount Accumulated Amortization Total Customer relationships $ 101.8 $ (47.9) $ 53.9 Patents, trademarks and technology 22.4 (11.0) 11.4 Total intangible assets, net $ 124.2 $ (58.9) $ 65.3 The following table summarizes the net intangible asset classes as of July 31, 2019 (in millions): Gross Carrying Amount Accumulated Amortization Total Customer relationships $ 101.5 $ (43.3) $ 58.2 Patents, trademarks and technology 22.3 (9.6) 12.7 Total intangible assets, net $ 123.8 $ (52.9) $ 70.9 |
Revenue (Tables)
Revenue (Tables) | 9 Months Ended |
Apr. 30, 2020 | |
Revenue from Contract with Customer [Abstract] | |
Disaggregation of Revenue | Net sales disaggregated by geography based on the location where the customer’s order was placed are as follows (in millions): Three Months Ended Nine Months Ended 2020 2019 2020 2019 United States $ 265.2 $ 301.5 $ 819.6 $ 896.0 Europe, Middle East and Africa 182.1 208.0 570.9 611.7 Asia Pacific 134.9 146.8 412.8 443.4 Latin America 47.5 56.5 161.1 166.8 Total net sales $ 629.7 $ 712.8 $ 1,964.4 $ 2,117.9 See Note 16 for net sales disaggregated by segment. |
Warranty (Tables)
Warranty (Tables) | 9 Months Ended |
Apr. 30, 2020 | |
Standard Product Warranty Disclosure [Abstract] | |
Reconciliation of warranty reserves | The following is a reconciliation of warranty reserves for the nine months ended April 30, 2020 and 2019 (in millions): Nine Months Ended 2020 2019 Balance at beginning of period $ 11.2 $ 18.9 Accruals for warranties issued during the reporting period 2.0 1.6 Accruals related to pre-existing warranties (including changes in estimates) (0.9) (2.0) Less: settlements made during the period (2.5) (6.9) Balance at end of period $ 9.8 $ 11.6 |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 9 Months Ended |
Apr. 30, 2020 | |
Share-based Payment Arrangement, Noncash Expense [Abstract] | |
Stock options expense | The following table summarizes expenses associated with stock options during the three and nine months ended April 30, 2020 and 2019 (in millions): Three Months Ended Nine Months Ended 2020 2019 2020 2019 Pretax compensation expense associated with stock options $ 1.3 $ 1.4 $ 9.0 $ 8.3 Tax benefits associated with stock options $ 0.3 $ 0.3 $ 1.4 $ 1.7 The following table summarizes expenses associated with performance-based awards during the three and nine months ended April 30, 2020 and 2019 (in millions): Three Months Ended Nine Months Ended 2020 2019 2020 2019 Pretax compensation expense associated with performance-based awards $ (0.3) $ 1.5 $ 1.5 $ 4.5 |
Summary of stock option activity | The following table summarizes stock option activity during the nine months ended April 30, 2020: Options Weighted Outstanding as of July 31, 2019 6,531,250 $ 39.66 Granted 929,941 51.96 Exercised (667,564) 29.79 Canceled (79,279) 52.37 Outstanding as of April 30, 2020 6,714,348 $ 42.19 |
Schedule of performance shares activity | The following table summarizes performance-based award activity during the nine months ended April 30, 2020: Performance Shares Weighted Non-vested at July 31, 2019 174,100 $ 52.87 Granted 100,500 51.61 Vested — — Canceled/forfeited (2,500) 58.35 Non-vested at April 30, 2020 272,100 $ 52.35 |
Employee Benefit Plans (Tables)
Employee Benefit Plans (Tables) | 9 Months Ended |
Apr. 30, 2020 | |
Retirement Benefits, Description [Abstract] | |
Components of net periodic pension costs | Net periodic benefit costs for the Company’s pension plans include the following components (in millions): Three Months Ended Nine Months Ended 2020 2019 2020 2019 Net periodic benefit costs: Service cost $ 1.5 $ 1.5 $ 4.7 $ 4.5 Interest cost 3.3 4.1 10.1 12.3 Expected return on assets (6.5) (6.6) (19.5) (19.9) Prior service cost amortization 0.2 0.1 0.5 0.4 Actuarial loss amortization 1.6 1.1 4.8 3.3 Settlement charge 2.3 — 2.3 — Net periodic benefit costs $ 2.4 $ 0.2 $ 2.9 $ 0.6 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 9 Months Ended |
Apr. 30, 2020 | |
Fair Value Disclosures [Abstract] | |
Schedule of derivative on the balance sheet | The following table details the fair value of the Company’s derivative contracts, which are recorded on a gross basis in the Company’s Condensed Consolidated Balance Sheets as of April 30, 2020 and July 31, 2019 (in millions): Fair Values Significant Other Observable Inputs Notional Amounts Assets (1) Liabilities (2) (3) April 30, July 31, April 30, July 31, April 30, July 31, 2020 2019 2020 2019 2020 2019 Forward foreign currency exchange contracts $ 25.3 $ 28.2 $ 3.9 $ 1.6 $ 1.6 $ 1.8 Net investment hedges 55.8 55.8 5.7 1.1 — 1.9 Total $ 81.1 $ 84.0 $ 9.6 $ 2.7 $ 1.6 $ 3.7 (1) Amounts of $5.0 million and of $4.6 million, respectively, are recorded within prepaid expenses and other current assets, and in other long-term assets, in the Company’s Condensed Consolidated Balance Sheets as of April 30, 2020. Amount of $2.7 million is recorded within prepaid expenses and other current assets in the Company’s Condensed Consolidated Balance Sheets as of July 31, 2019. (2) Forward foreign currency exchange contracts are recorded within other current liabilities in the Company’s Condensed Consolidated Balance Sheets. (3) Net investment hedges are recorded within other long-term liabilities in the Company’s Condensed Consolidated Balance Sheets. |
Schedule of cash flow hedges | The following table summarizes the pre-tax impact of the gains and losses on the Company’s designated forward foreign currency exchange contracts and net investment hedges (in millions): Pre-tax Gains (Losses) Recognized in Accumulated Other Comprehensive Loss Three Months Ended April 30, Nine Months Ended April 30, 2020 2019 2020 2019 Forward foreign currency exchange contracts $ (1.7) $ 0.1 $ (3.8) $ 1.1 Net investment hedges $ 4.0 $ — $ 6.2 $ — Pre-tax (Gains) Losses Reclassified from Accumulated Other Comprehensive Loss Three Months Ended April 30, Nine Months Ended April 30, 2020 2019 2020 2019 Forward foreign currency exchange contracts $ 3.3 $ (0.1) $ 5.3 $ (0.4) Net investment hedges $ — $ — $ — $ — |
Schedule of net investment hedges | The following table summarizes the pre-tax impact of the gains and losses on the Company’s designated forward foreign currency exchange contracts and net investment hedges (in millions): Pre-tax Gains (Losses) Recognized in Accumulated Other Comprehensive Loss Three Months Ended April 30, Nine Months Ended April 30, 2020 2019 2020 2019 Forward foreign currency exchange contracts $ (1.7) $ 0.1 $ (3.8) $ 1.1 Net investment hedges $ 4.0 $ — $ 6.2 $ — Pre-tax (Gains) Losses Reclassified from Accumulated Other Comprehensive Loss Three Months Ended April 30, Nine Months Ended April 30, 2020 2019 2020 2019 Forward foreign currency exchange contracts $ 3.3 $ (0.1) $ 5.3 $ (0.4) Net investment hedges $ — $ — $ — $ — |
Accumulated Other Comprehensi_2
Accumulated Other Comprehensive Loss (Tables) | 9 Months Ended |
Apr. 30, 2020 | |
Other Comprehensive Income (Loss), Net of Tax [Abstract] | |
Schedule of changes in accumulated other comprehensive loss | Changes in accumulated other comprehensive loss by component for the three months ended April 30, 2020 and 2019 are as follows (in millions): Foreign Pension Derivative Total Balance as of January 31, 2020, net of tax $ (82.2) $ (97.0) $ 0.9 $ (178.3) Other comprehensive (loss) income before reclassifications and tax (35.3) (7.9) (1) 2.3 (40.9) Tax benefit (expense) — 1.9 (0.9) 1.0 Other comprehensive (loss) income before reclassifications, net of tax (35.3) (6.0) 1.4 (39.9) Reclassifications, before tax — 5.2 (1) 3.3 8.5 Tax expense — (1.2) (1.2) (2.4) Reclassifications, net of tax — 4.0 (2) 2.1 (3) 6.1 Other comprehensive (loss) income, net of tax (35.3) (2.0) 3.5 (33.8) Balance as of April 30, 2020, net of tax $ (117.5) $ (99.0) $ 4.4 $ (212.1) Balance as of January 31, 2019, net of tax $ (66.6) $ (80.8) $ (0.3) $ (147.7) Other comprehensive loss before reclassifications and tax (11.9) — (0.1) (12.0) Other comprehensive loss before reclassifications, net of tax (11.9) — (0.1) (12.0) Reclassifications, before tax — 1.7 (0.2) 1.5 Tax (expense) benefit — (0.5) 0.1 (0.4) Reclassifications, net of tax — 1.2 (2) (0.1) (3) 1.1 Other comprehensive (loss) income, net of tax (11.9) 1.2 (0.2) (10.9) Balance as of April 30, 2019, net of tax $ (78.5) $ (79.6) $ (0.5) $ (158.6) (1) In the third quarter of fiscal 2020, pension settlement accounting was triggered and the Company recorded a pension settlement charge of $2.3 million (see Note 9). As a result of the related remeasurement, the Company’s pension obligations increased with a corresponding adjustment to other comprehensive loss of $7.9 million. (2) Primarily includes net amortization of prior service costs and actuarial losses included in net periodic benefit cost (see Note 9) that were reclassified from accumulated other comprehensive loss in the Company’s Condensed Consolidated Balance Sheet to operating expenses or cost of sales in the Company’s Condensed Consolidated Statements of Earnings. (3) Relates to foreign currency cash flow hedges that were reclassified from accumulated other comprehensive loss to other income, net in the Company’s Condensed Consolidated Statements of Earnings. Changes in accumulated other comprehensive loss by component for the nine months ended April 30, 2020 and 2019 are as follows (in millions): Foreign Pension Derivative Total Balance as of July 31, 2019, net of tax $ (92.7) $ (99.0) $ (1.2) $ (192.9) Other comprehensive (loss) income before reclassifications and tax (24.8) (7.9) (1) 2.4 (30.3) Tax benefit (expense) — 1.9 (0.2) 1.7 Other comprehensive (loss) income before reclassifications, net of tax (24.8) (6.0) 2.2 (28.6) Reclassifications, before tax — 7.5 (1) 5.3 12.8 Tax expense — (1.5) (1.9) (3.4) Reclassifications, net of tax — 6.0 (2) 3.4 (3) 9.4 Other comprehensive (loss) income, net of tax (24.8) — 5.6 (19.2) Balance as of April 30, 2020, net of tax $ (117.5) $ (99.0) $ 4.4 $ (212.1) Balance as of July 31, 2018, net of tax $ (66.1) $ (82.9) $ (0.8) $ (149.8) Other comprehensive (loss) income before reclassifications and tax (12.4) — 1.0 (11.4) Tax expense — — (0.3) (0.3) Other comprehensive (loss) income before reclassifications, net of tax (12.4) — 0.7 (11.7) Reclassifications, before tax — 4.4 (0.6) 3.8 Tax (expense) benefit — (1.1) 0.2 (0.9) Reclassifications, net of tax — 3.3 (2) (0.4) (3) 2.9 Other comprehensive (loss) income, net of tax (12.4) 3.3 0.3 (8.8) Balance as of April 30, 2019, net of tax $ (78.5) $ (79.6) $ (0.5) $ (158.6) (1) In the third quarter of fiscal 2020, pension settlement accounting was triggered and the Company recorded a pension settlement charge of $2.3 million (see Note 9). As a result of the related remeasurement, the Company’s pension obligations increased with a corresponding adjustment to other comprehensive loss of $7.9 million. (2) Primarily includes net amortization of prior service costs and actuarial losses included in net periodic benefit cost (see Note 9) that were reclassified from accumulated other comprehensive loss in the Company’s Condensed Consolidated Balance Sheet to operating expenses or cost of sales in the Company’s Condensed Consolidated Statements of Earnings. (3) Relates to foreign currency cash flow hedges that were reclassified from accumulated other comprehensive loss to other income, net in the Company’s Condensed Consolidated Statements of Earnings. |
Guarantees (Tables)
Guarantees (Tables) | 9 Months Ended |
Apr. 30, 2020 | |
Guarantees [Abstract] | |
Guarantor obligations | In the following table, the outstanding debt relates to the joint venture and the contingent liability for standby letters of credit relate to the Company (in millions): April 30, July 31, Outstanding debt (the Company guarantees half) $ 39.6 $ 38.8 Contingent liability for standby letters of credit (1) $ 7.5 $ 11.0 Amounts drawn for letters of credit $ — $ — (1) The letters of credit guarantee payment to third parties in the event the Company is in breach of contract terms as detailed in each letter of credit. |
Joint venture items | The following items relate to the Company’s joint venture in AFSI (in millions): Three Months Ended April 30, Nine Months Ended 2020 2019 2020 2019 Investment earnings from AFSI (1) $ 0.8 $ 0.4 $ 1.2 $ 0.1 Royalty income from AFSI (1) $ 1.6 $ 1.5 $ 5.2 $ 4.8 |
Segment Reporting (Tables)
Segment Reporting (Tables) | 9 Months Ended |
Apr. 30, 2020 | |
Segment Reporting, Measurement Disclosures [Abstract] | |
Summary of segment detail | Segment detail is summarized as follows (in millions): Three Months Ended Nine Months Ended 2020 2019 2020 2019 Net sales Engine Products segment $ 420.4 $ 489.4 $ 1,315.2 $ 1,439.3 Industrial Products segment 209.3 223.4 649.2 678.6 Total $ 629.7 $ 712.8 $ 1,964.4 $ 2,117.9 Earnings before income taxes Engine Products segment $ 56.5 $ 71.5 $ 172.2 $ 188.6 Industrial Products segment 34.7 32.7 98.8 101.5 Corporate and Unallocated (6.8) (4.7) (17.1) (13.7) Total $ 84.4 $ 99.5 $ 253.9 $ 276.4 Net sales by product group within the Engine Products segment and Industrial Products segment is summarized as follows (in millions): Three Months Ended Nine Months Ended 2020 2019 2020 2019 Engine Products segment Off-Road $ 63.5 $ 84.8 $ 199.6 $ 240.0 On-Road 25.1 46.9 99.5 135.6 Aftermarket 301.9 327.7 929.4 980.0 Aerospace and Defense 29.9 30.0 86.7 83.7 Engine Products segment net sales 420.4 489.4 1,315.2 1,439.3 Industrial Products segment Industrial Filtration Solutions 137.4 155.2 441.4 469.2 Gas Turbine Systems 29.2 27.5 74.2 80.5 Special Applications 42.7 40.7 133.6 128.9 Industrial Products segment net sales 209.3 223.4 649.2 678.6 Total net sales $ 629.7 $ 712.8 $ 1,964.4 $ 2,117.9 |
Leases (Tables)
Leases (Tables) | 9 Months Ended |
Apr. 30, 2020 | |
Leases [Abstract] | |
Lease cost | Information for the Company’s operating lease costs is as follows (in millions): Three Months Ended April 30, Nine Months Ended April 30, 2020 2020 Operating lease cost $ 7.5 $ 22.7 Short-term lease cost 0.5 1.6 Total lease costs $ 8.0 $ 24.3 |
Supplemental balance sheet information | Supplemental balance sheet information for the Company is as follows (in millions): April 30, August 1, Right-of-use lease assets $ 71.4 $ 71.5 Current lease liabilities $ 24.0 $ 26.0 Long-term lease liabilities $ 47.4 $ 45.5 Additional information related to operating leases is as follows: April 30, August 1, Weighted average remaining lease term (years) 5.0 3.7 Weighted average discount rates 3.57 % 3.76 % |
Operating lease liability schedule | Payments for operating leases having initial terms of more than one year at April 30, 2020 were as follows (in millions): Amounts Due in Fiscal Year Ending April 30, Remainder of 2020 $ 7.2 2021 23.4 2022 15.3 2023 9.0 2024 5.8 Thereafter 17.8 Total future lease payments 78.5 Less imputed interest 7.1 Present value of future lease payments $ 71.4 |
Operating lease liability schedule | Payments for operating leases having initial terms of more than one year at July 31, 2019 were as follows (in millions): Amounts Due in Fiscal Year Ending July 31, 2020 $ 24.0 2021 17.5 2022 11.3 2023 6.4 2024 4.6 Thereafter 19.0 Total future lease payments $ 82.8 |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Details) - USD ($) $ in Millions | Apr. 30, 2020 | Aug. 01, 2019 | Jul. 31, 2019 |
New Accounting Pronouncements or Change in Accounting Principle | |||
Assets | $ 2,338.5 | $ 2,142.6 | |
Liabilities | $ 1,383.7 | $ 1,239.9 | |
Accounting Standards Update 2016-02 | |||
New Accounting Pronouncements or Change in Accounting Principle | |||
Assets | $ 71.5 | ||
Liabilities | $ 71.5 |
Acquisitions and Divestitures (
Acquisitions and Divestitures (Details) - BOFA International LTD - USD ($) $ in Millions | 3 Months Ended | |
Jul. 31, 2019 | Oct. 31, 2018 | |
Business Acquisition | ||
Business acquisition, percentage of voting interests acquired | 91.00% | 88.00% |
Business combination, consideration transferred | $ 98.2 | |
Cash acquired | $ 2.2 | |
Additional voting interest acquired (percentage) | 3.00% |
Supplemental Balance Sheet In_3
Supplemental Balance Sheet Information (Inventory) (Details) - USD ($) $ in Millions | Apr. 30, 2020 | Jul. 31, 2019 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Raw materials | $ 114.8 | $ 114.7 |
Work in process | 35.6 | 33 |
Finished products | 196.1 | 185.1 |
Inventories, net | $ 346.5 | $ 332.8 |
Supplemental Balance Sheet In_4
Supplemental Balance Sheet Information (Property, Plant and Equipment) (Details) - USD ($) $ in Millions | Apr. 30, 2020 | Jul. 31, 2019 |
Property, Plant and Equipment | ||
Less: accumulated depreciation | $ (872) | $ (831.2) |
Property, plant and equipment, net | 614.3 | 588.9 |
Land | ||
Property, Plant and Equipment | ||
Property, plant and equipment, gross | 23.7 | 24.2 |
Buildings | ||
Property, Plant and Equipment | ||
Property, plant and equipment, gross | 346.3 | 325.3 |
Machinery and equipment | ||
Property, Plant and Equipment | ||
Property, plant and equipment, gross | 834.9 | 813.5 |
Computer software | ||
Property, Plant and Equipment | ||
Property, plant and equipment, gross | 143.9 | 142.8 |
Construction in progress | ||
Property, Plant and Equipment | ||
Property, plant and equipment, gross | $ 137.5 | $ 114.3 |
Earnings Per Share (Details)
Earnings Per Share (Details) - shares shares in Millions | 3 Months Ended | 9 Months Ended | ||
Apr. 30, 2020 | Apr. 30, 2019 | Apr. 30, 2020 | Apr. 30, 2019 | |
Earnings Per Share [Abstract] | ||||
Options excluded from the diluted net earnings per share calculation (in shares) | 2.5 | 0.8 | 1.7 | 0.8 |
Earnings Per Share (Information
Earnings Per Share (Information Necessary to Calculate Basic and Diluted Net Earnings Per Common Share) (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions | 3 Months Ended | 9 Months Ended | ||
Apr. 30, 2020 | Apr. 30, 2019 | Apr. 30, 2020 | Apr. 30, 2019 | |
Earnings Per Share [Abstract] | ||||
Net earnings for basic and diluted earnings per share computation | $ 63.4 | $ 75.2 | $ 192.9 | $ 209.1 |
Weighted average common shares outstanding: | ||||
Weighted average common shares - basic (in shares) | 126.9 | 128.2 | 127 | 128.5 |
Dilutive impact of share based awards (in shares) | 0.8 | 1.8 | 1.5 | 1.9 |
Weighted average common shares - diluted (in shares) | 127.7 | 130 | 128.5 | 130.4 |
Net earnings per share - basic (in usd per share) | $ 0.50 | $ 0.59 | $ 1.52 | $ 1.63 |
Net earnings per share - diluted (in usd per share) | $ 0.50 | $ 0.58 | $ 1.50 | $ 1.60 |
Goodwill and Intangible Asset_2
Goodwill and Intangible Assets (Reconciliation of Goodwill) (Details) $ in Millions | 9 Months Ended |
Apr. 30, 2020USD ($) | |
Goodwill | |
Beginning balance | $ 303.1 |
Goodwill acquired | 0 |
Currency translation | 0.7 |
Ending balance | 303.8 |
Engine Products | |
Goodwill | |
Beginning balance | 84.5 |
Goodwill acquired | 0 |
Currency translation | (0.4) |
Ending balance | 84.1 |
Industrial Products | |
Goodwill | |
Beginning balance | 218.6 |
Goodwill acquired | 0 |
Currency translation | 1.1 |
Ending balance | $ 219.7 |
Goodwill and Intangible Asset_3
Goodwill and Intangible Assets (Reconciliation of Intangible Assets) (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Apr. 30, 2020 | Apr. 30, 2019 | Apr. 30, 2020 | Apr. 30, 2019 | Jul. 31, 2019 | |
Finite-Lived Intangible Assets | |||||
Gross Carrying Amount | $ 124.2 | $ 124.2 | $ 123.8 | ||
Accumulated Amortization | (58.9) | (58.9) | (52.9) | ||
Total | 65.3 | 65.3 | 70.9 | ||
Amortization expense | 2.1 | $ 2.1 | 6.4 | $ 5.6 | |
Customer relationships | |||||
Finite-Lived Intangible Assets | |||||
Gross Carrying Amount | 101.8 | 101.8 | 101.5 | ||
Accumulated Amortization | (47.9) | (47.9) | (43.3) | ||
Total | 53.9 | 53.9 | 58.2 | ||
Patents, trademarks and technology | |||||
Finite-Lived Intangible Assets | |||||
Gross Carrying Amount | 22.4 | 22.4 | 22.3 | ||
Accumulated Amortization | (11) | (11) | (9.6) | ||
Total | $ 11.4 | $ 11.4 | $ 12.7 |
Revenue (Disaggregation of Reve
Revenue (Disaggregation of Revenue by Geographical Area) (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Apr. 30, 2020 | Apr. 30, 2019 | Apr. 30, 2020 | Apr. 30, 2019 | |
Disaggregation of Revenue | ||||
Total net sales | $ 629.7 | $ 712.8 | $ 1,964.4 | $ 2,117.9 |
United States | ||||
Disaggregation of Revenue | ||||
Total net sales | 265.2 | 301.5 | 819.6 | 896 |
Europe, Middle East and Africa | ||||
Disaggregation of Revenue | ||||
Total net sales | 182.1 | 208 | 570.9 | 611.7 |
Asia Pacific | ||||
Disaggregation of Revenue | ||||
Total net sales | 134.9 | 146.8 | 412.8 | 443.4 |
Latin America | ||||
Disaggregation of Revenue | ||||
Total net sales | $ 47.5 | $ 56.5 | $ 161.1 | $ 166.8 |
Revenue (Narrative) (Details)
Revenue (Narrative) (Details) - USD ($) $ in Millions | 9 Months Ended | |
Apr. 30, 2020 | Jul. 31, 2019 | |
Revenue from Contract with Customer [Abstract] | ||
Contract assets | $ 14.8 | $ 12.4 |
Contract liabilities | $ 13.3 | $ 10.4 |
Description of performance obligation timing | Generally, these contracts have terms of one year or less |
Warranty (Details)
Warranty (Details) - USD ($) $ in Millions | 9 Months Ended | |
Apr. 30, 2020 | Apr. 30, 2019 | |
Movement in Standard and Extended Product Warranty, Increase (Decrease) | ||
Balance at beginning of period | $ 11.2 | $ 18.9 |
Accruals for warranties issued during the reporting period | 2 | 1.6 |
Accruals related to pre-existing warranties (including changes in estimates) | (0.9) | (2) |
Less: settlements made during the period | (2.5) | (6.9) |
Balance at end of period | $ 9.8 | $ 11.6 |
Stock-Based Compensation (Detai
Stock-Based Compensation (Details) - USD ($) $ / shares in Units, $ in Millions | 9 Months Ended | |
Apr. 30, 2020 | Apr. 30, 2019 | |
Share-based Compensation Arrangement by Share-based Payment Award | ||
Total intrinsic value of options exercised | $ 15.3 | |
Options granted, grant date fair value (in usd per share) | $ 10.94 | $ 12.27 |
Employee Stock Option | ||
Share-based Compensation Arrangement by Share-based Payment Award | ||
Aggregate intrinsic value of options outstanding | $ 31.8 | |
Aggregate intrinsic value of options exercisable | 31.8 | |
Unrecognized compensation expense | 8.6 | |
Performance Shares | ||
Share-based Compensation Arrangement by Share-based Payment Award | ||
Unrecognized compensation expense | 3.5 | |
Fair value of awards granted | $ 5.2 | |
2010 Master Stock Incentive Plan | Employee Stock Option | ||
Share-based Compensation Arrangement by Share-based Payment Award | ||
Stock options exercisable term (in years) | 10 years | |
Stock option, award vesting period (in years) | 3 years | |
2010 Master Stock Incentive Plan | Performance Shares | ||
Share-based Compensation Arrangement by Share-based Payment Award | ||
Performance award measurement period (in years) | 3 years | |
Expiration period (in years) | 3 years | |
Minimum | 2010 Master Stock Incentive Plan | Performance Shares | ||
Share-based Compensation Arrangement by Share-based Payment Award | ||
Payout percentage based on target award (percentage) | 0.00% | |
Maximum | 2010 Master Stock Incentive Plan | Performance Shares | ||
Share-based Compensation Arrangement by Share-based Payment Award | ||
Payout percentage based on target award (percentage) | 200.00% |
Stock-Based Compensation (Compe
Stock-Based Compensation (Compensation Expense) (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Apr. 30, 2020 | Apr. 30, 2019 | Apr. 30, 2020 | Apr. 30, 2019 | |
Employee Stock Option | ||||
Share-based Compensation Arrangement by Share-based Payment Award | ||||
Pretax compensation expense | $ 1.3 | $ 1.4 | $ 9 | $ 8.3 |
Tax benefits associated with stock options | 0.3 | 0.3 | 1.4 | 1.7 |
Performance Shares | ||||
Share-based Compensation Arrangement by Share-based Payment Award | ||||
Pretax compensation expense | $ (0.3) | $ 1.5 | $ 1.5 | $ 4.5 |
Stock-Based Compensation (Summa
Stock-Based Compensation (Summary of Stock Option Activity) (Details) | 9 Months Ended |
Apr. 30, 2020$ / sharesshares | |
Options Outstanding | |
Beginning balance (in shares) | shares | 6,531,250 |
Options granted (in shares) | shares | 929,941 |
Options exercised (in shares) | shares | (667,564) |
Options canceled (in shares) | shares | (79,279) |
Ending balance (in shares) | shares | 6,714,348 |
Weighted Average Exercise Price | |
Beginning balance (in usd per share) | $ / shares | $ 39.66 |
Granted (in usd per share) | $ / shares | 51.96 |
Exercised (in usd per share) | $ / shares | 29.79 |
Canceled (in usd per share) | $ / shares | 52.37 |
Ending balance (in usd per share) | $ / shares | $ 42.19 |
Stock-Based Compensation (Sum_2
Stock-Based Compensation (Summary of Performance Award Activity) (Details) - Performance Shares | 9 Months Ended |
Apr. 30, 2020$ / sharesshares | |
Performance Shares Outstanding | |
Non-vested at July 31, 2019 (shares) | shares | 174,100 |
Granted (shares) | shares | 100,500 |
Vested (shares) | shares | 0 |
Canceled/forfeited (shares) | shares | (2,500) |
Non-vested at April 30, 2020 (shares) | shares | 272,100 |
Weighted Average Grant Date Fair Value | |
Non-vested at July 31, 2019 (in usd per share) | $ / shares | $ 52.87 |
Granted (in usd per share) | $ / shares | 51.61 |
Vested (in usd per share) | $ / shares | 0 |
Canceled/forfeited (in usd per share) | $ / shares | 58.35 |
Non-vested at April 30, 2020 (in usd per share) | $ / shares | $ 52.35 |
Employee Benefit Plans (Details
Employee Benefit Plans (Details) $ in Millions | 1 Months Ended | 3 Months Ended | 9 Months Ended | ||||
May 31, 2020USD ($) | Apr. 30, 2020USD ($) | Apr. 30, 2019USD ($) | Apr. 30, 2020USD ($)plan | Apr. 30, 2019USD ($) | Jul. 31, 2020USD ($) | Jul. 31, 2019USD ($) | |
Defined Benefit Plan Disclosure | |||||||
Number of U.S. plans | plan | 2 | ||||||
Annual company retirement contribution in addition to 401 (k) match, percent | 3.00% | ||||||
Settlement charge | $ 2.3 | $ 0 | $ 2.3 | $ 0 | |||
Accumulated other comprehensive loss | (212.1) | (212.1) | $ (192.9) | ||||
Pension Plan | United States | |||||||
Defined Benefit Plan Disclosure | |||||||
Minimum funding requirement | $ 4.4 | ||||||
Company contributions | 3.5 | ||||||
Pension Plan | United States | Subsequent Event | |||||||
Defined Benefit Plan Disclosure | |||||||
Company contributions | $ 0.5 | ||||||
Pension Plan | Foreign Plan | |||||||
Defined Benefit Plan Disclosure | |||||||
Company contributions | 1.4 | 1 | |||||
Estimated future contributions to pension plans | 0.1 | 0.1 | |||||
Reclassification | |||||||
Defined Benefit Plan Disclosure | |||||||
Accumulated other comprehensive loss | $ 7.9 | $ 7.9 |
Employee Benefit Plans (Compone
Employee Benefit Plans (Components of Net Periodic Pension Costs) (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Apr. 30, 2020 | Apr. 30, 2019 | Apr. 30, 2020 | Apr. 30, 2019 | |
Net periodic benefit costs: | ||||
Service cost | $ 1.5 | $ 1.5 | $ 4.7 | $ 4.5 |
Interest cost | 3.3 | 4.1 | 10.1 | 12.3 |
Expected return on assets | (6.5) | (6.6) | (19.5) | (19.9) |
Prior service cost amortization | 0.2 | 0.1 | 0.5 | 0.4 |
Actuarial loss amortization | 1.6 | 1.1 | 4.8 | 3.3 |
Settlement charge | 2.3 | 0 | 2.3 | 0 |
Net periodic benefit costs | $ 2.4 | $ 0.2 | $ 2.9 | $ 0.6 |
Income Taxes (Details)
Income Taxes (Details) $ in Millions | Apr. 30, 2020USD ($) |
Income Tax Disclosure [Abstract] | |
Unrecognized tax benefits | $ 16.9 |
Accrued interest and penalties on unrecognized tax benefits | 2.2 |
Unrecognized tax benefits that could potentially expire | $ 6.3 |
Fair Value Measurements (Detail
Fair Value Measurements (Details) - USD ($) $ in Millions | Apr. 30, 2020 | Jul. 31, 2019 |
Fair Value, Inputs, Level 2 | Long-term Debt | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Debt instrument, fair value disclosure | $ 283.9 | |
Debt carrying value | 275 | |
Fair Value, Inputs, Level 2 | Long-Term Debt, Variable Interest Rate | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Debt instrument, fair value disclosure | 461.8 | |
Fair Value, Inputs, Level 3 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Equity method investments | $ 24.2 | $ 23 |
Fair Value Measurements (Deriva
Fair Value Measurements (Derivatives on the Balance Sheet) (Details) - USD ($) $ in Millions | Apr. 30, 2020 | Jul. 31, 2019 |
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Notional amounts | $ 81.1 | $ 84 |
Forward foreign currency exchange contracts | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Notional amounts | 25.3 | 28.2 |
Net investment hedges | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Notional amounts | 55.8 | 55.8 |
Fair Value, Inputs, Level 2 | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Derivative assets | 9.6 | 2.7 |
Derivative liabilities | 1.6 | 3.7 |
Fair Value, Inputs, Level 2 | Prepaid expenses and other current assets | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Derivative assets | 5 | 2.7 |
Fair Value, Inputs, Level 2 | Other long-term assets | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Derivative assets | 4.6 | |
Fair Value, Inputs, Level 2 | Forward foreign currency exchange contracts | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Derivative assets | 3.9 | 1.6 |
Derivative liabilities | 1.6 | 1.8 |
Fair Value, Inputs, Level 2 | Net investment hedges | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Derivative assets | 5.7 | 1.1 |
Derivative liabilities | $ 0 | $ 1.9 |
Fair Value Measurements Fair Va
Fair Value Measurements Fair Value Measurements (Pre-tax Impact of Derivatives) (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Apr. 30, 2020 | Apr. 30, 2019 | Apr. 30, 2020 | Apr. 30, 2019 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||||
Pre-tax gains (losses) recognized in accumulated other comprehensive income (loss) - Net investment hedges | $ 4 | $ 0 | $ 6.2 | $ 0 |
Pre-tax (gains) losses reclassified from accumulated other comprehensive income (loss) - Net investment hedges | 0 | 0 | 0 | 0 |
Forward foreign currency exchange contracts | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||||
Pre-tax gains (losses) recognized in accumulated other comprehensive income (loss) | (1.7) | 0.1 | (3.8) | 1.1 |
Pre-tax (gains) losses reclassified from accumulated other comprehensive income (loss) | $ 3.3 | $ (0.1) | $ 5.3 | $ (0.4) |
Shareholders' Equity (Details)
Shareholders' Equity (Details) - USD ($) $ / shares in Units, $ in Millions | May 29, 2020 | Apr. 30, 2020 | Apr. 30, 2019 | Jul. 31, 2019 |
Class of Stock | ||||
Number of shares authorized to be repurchased (in shares) | 13,000,000 | |||
Stock repurchased during the period (in shares) | 2,000,000 | |||
Stock repurchased during the period | $ 94.3 | $ 104.4 | ||
Shares with remaining authorization for repurchase under stock repurchase plan (in shares) | 10,700,000 | |||
Dividends paid per share (in usd per share) | $ 0.630 | $ 0.570 | ||
Subsequent Event | ||||
Class of Stock | ||||
Dividends paid per share (in usd per share) | $ 0.210 |
Accumulated Other Comprehensi_3
Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Apr. 30, 2020 | Apr. 30, 2019 | Apr. 30, 2020 | Apr. 30, 2019 | Jul. 31, 2019 | |
Accumulated Other Comprehensive Income (Loss), Net of Tax | |||||
Beginning Balance | $ 940.4 | $ 872.6 | $ 892.7 | $ 857.8 | |
Other comprehensive (loss) income before reclassifications and tax | (40.9) | (12) | (30.3) | (11.4) | |
Tax benefit (expense) | 1 | 1.7 | (0.3) | ||
Other comprehensive income (loss) before reclassifications, net of tax | (39.9) | (12) | (28.6) | (11.7) | |
Reclassifications, before tax | 8.5 | 1.5 | 12.8 | 3.8 | |
Tax benefit (expense) | (2.4) | (0.4) | (3.4) | (0.9) | |
Reclassifications, net of tax | 6.1 | 1.1 | 9.4 | 2.9 | |
Other comprehensive (loss) income, net of tax | (33.8) | (10.9) | (19.2) | (8.8) | |
Ending Balance | 944.5 | 944.9 | 944.5 | 944.9 | |
Settlement charge | 2.3 | 0 | 2.3 | 0 | |
Accumulated other comprehensive loss | (212.1) | (212.1) | $ (192.9) | ||
Reclassification | |||||
Accumulated Other Comprehensive Income (Loss), Net of Tax | |||||
Accumulated other comprehensive loss | 7.9 | 7.9 | |||
Total | |||||
Accumulated Other Comprehensive Income (Loss), Net of Tax | |||||
Beginning Balance | (178.3) | (147.7) | (192.9) | (149.8) | |
Other comprehensive (loss) income, net of tax | (33.8) | (10.9) | (19.2) | (8.8) | |
Ending Balance | (212.1) | (158.6) | (212.1) | (158.6) | |
Foreign Currency Translation Adjustment | |||||
Accumulated Other Comprehensive Income (Loss), Net of Tax | |||||
Beginning Balance | (82.2) | (66.6) | (92.7) | (66.1) | |
Other comprehensive (loss) income before reclassifications and tax | (35.3) | (11.9) | (24.8) | (12.4) | |
Tax benefit (expense) | 0 | 0 | 0 | ||
Other comprehensive income (loss) before reclassifications, net of tax | (35.3) | (11.9) | (24.8) | (12.4) | |
Reclassifications, before tax | 0 | 0 | 0 | 0 | |
Tax benefit (expense) | 0 | 0 | 0 | 0 | |
Reclassifications, net of tax | 0 | 0 | 0 | 0 | |
Other comprehensive (loss) income, net of tax | (35.3) | (11.9) | (24.8) | (12.4) | |
Ending Balance | (117.5) | (78.5) | (117.5) | (78.5) | |
Pension Benefits | |||||
Accumulated Other Comprehensive Income (Loss), Net of Tax | |||||
Beginning Balance | (97) | (80.8) | (99) | (82.9) | |
Other comprehensive (loss) income before reclassifications and tax | (7.9) | 0 | (7.9) | 0 | |
Tax benefit (expense) | 1.9 | 1.9 | 0 | ||
Other comprehensive income (loss) before reclassifications, net of tax | (6) | 0 | (6) | 0 | |
Reclassifications, before tax | 5.2 | 1.7 | 7.5 | 4.4 | |
Tax benefit (expense) | (1.2) | (0.5) | (1.5) | (1.1) | |
Reclassifications, net of tax | 4 | 1.2 | 6 | 3.3 | |
Other comprehensive (loss) income, net of tax | (2) | 1.2 | 0 | 3.3 | |
Ending Balance | (99) | (79.6) | (99) | (79.6) | |
Derivative Financial Instruments | |||||
Accumulated Other Comprehensive Income (Loss), Net of Tax | |||||
Beginning Balance | 0.9 | (0.3) | (1.2) | (0.8) | |
Other comprehensive (loss) income before reclassifications and tax | 2.3 | (0.1) | 2.4 | 1 | |
Tax benefit (expense) | (0.9) | (0.2) | (0.3) | ||
Other comprehensive income (loss) before reclassifications, net of tax | 1.4 | (0.1) | 2.2 | 0.7 | |
Reclassifications, before tax | 3.3 | (0.2) | 5.3 | (0.6) | |
Tax benefit (expense) | (1.2) | 0.1 | (1.9) | 0.2 | |
Reclassifications, net of tax | 2.1 | (0.1) | 3.4 | (0.4) | |
Other comprehensive (loss) income, net of tax | 3.5 | (0.2) | 5.6 | 0.3 | |
Ending Balance | $ 4.4 | $ (0.5) | $ 4.4 | $ (0.5) |
Guarantees (Details)
Guarantees (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Apr. 30, 2020 | Apr. 30, 2019 | Apr. 30, 2020 | Apr. 30, 2019 | Jul. 31, 2019 | |
Guarantor Obligations | |||||
Royalty income | $ 629.7 | $ 712.8 | $ 1,964.4 | $ 2,117.9 | |
Advanced Filtration Systems, Inc. | |||||
Guarantor Obligations | |||||
Outstanding debt (the Company guarantees half) | 39.6 | 39.6 | $ 38.8 | ||
Contingent liability for standby letters of credit | 7.5 | 7.5 | 11 | ||
Amounts drawn for letters of credit | 0 | 0 | $ 0 | ||
Investment earnings (loss) | 0.8 | 0.4 | 1.2 | 0.1 | |
Advanced Filtration Systems, Inc. | Royalty | |||||
Guarantor Obligations | |||||
Royalty income | $ 1.6 | $ 1.5 | $ 5.2 | $ 4.8 |
Segment Reporting (Details)
Segment Reporting (Details) | 9 Months Ended |
Apr. 30, 2020segment | |
Segment Reporting, Measurement Disclosures [Abstract] | |
Number of reportable segments | 2 |
Segment Reporting (Summary of S
Segment Reporting (Summary of Segment Detail) (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Apr. 30, 2020 | Apr. 30, 2019 | Apr. 30, 2020 | Apr. 30, 2019 | |
Segment Reporting Information | ||||
Net sales | $ 629.7 | $ 712.8 | $ 1,964.4 | $ 2,117.9 |
Earnings before income taxes | 84.4 | 99.5 | 253.9 | 276.4 |
Operating Segments | Engine Products segment | ||||
Segment Reporting Information | ||||
Net sales | 420.4 | 489.4 | 1,315.2 | 1,439.3 |
Earnings before income taxes | 56.5 | 71.5 | 172.2 | 188.6 |
Operating Segments | Engine Products segment | Off-Road | ||||
Segment Reporting Information | ||||
Net sales | 63.5 | 84.8 | 199.6 | 240 |
Operating Segments | Engine Products segment | On-Road | ||||
Segment Reporting Information | ||||
Net sales | 25.1 | 46.9 | 99.5 | 135.6 |
Operating Segments | Engine Products segment | Aftermarket | ||||
Segment Reporting Information | ||||
Net sales | 301.9 | 327.7 | 929.4 | 980 |
Operating Segments | Engine Products segment | Aerospace and Defense | ||||
Segment Reporting Information | ||||
Net sales | 29.9 | 30 | 86.7 | 83.7 |
Operating Segments | Industrial Products segment | ||||
Segment Reporting Information | ||||
Net sales | 209.3 | 223.4 | 649.2 | 678.6 |
Earnings before income taxes | 34.7 | 32.7 | 98.8 | 101.5 |
Operating Segments | Industrial Products segment | Industrial Filtration Solutions | ||||
Segment Reporting Information | ||||
Net sales | 137.4 | 155.2 | 441.4 | 469.2 |
Operating Segments | Industrial Products segment | Gas Turbine Systems | ||||
Segment Reporting Information | ||||
Net sales | 29.2 | 27.5 | 74.2 | 80.5 |
Operating Segments | Industrial Products segment | Special Applications | ||||
Segment Reporting Information | ||||
Net sales | 42.7 | 40.7 | 133.6 | 128.9 |
Corporate and Unallocated | ||||
Segment Reporting Information | ||||
Earnings before income taxes | $ (6.8) | $ (4.7) | $ (17.1) | $ (13.7) |
Leases (Lease Cost) (Details)
Leases (Lease Cost) (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended |
Apr. 30, 2020 | Apr. 30, 2020 | |
Leases [Abstract] | ||
Operating lease cost | $ 7.5 | $ 22.7 |
Short-term lease cost | 0.5 | 1.6 |
Total lease costs | $ 8 | $ 24.3 |
Leases (Supplemental Informatio
Leases (Supplemental Information) (Details) - USD ($) $ in Millions | Apr. 30, 2020 | Aug. 01, 2019 | Jul. 31, 2019 |
Leases [Abstract] | |||
Right-of-use lease assets | $ 71.4 | $ 71.5 | $ 0 |
Current lease liabilities | 24 | 26 | 0 |
Long-term lease liabilities | $ 47.4 | $ 45.5 | $ 0 |
Weighted average remaining lease term (years) | 5 years | 3 years 8 months 12 days | |
Weighted average discount rates (percentage) | 3.57% | 3.76% |
Leases (Maturities) (Details)
Leases (Maturities) (Details) - USD ($) $ in Millions | 9 Months Ended | |
Apr. 30, 2020 | Jul. 31, 2019 | |
Lessee, Operating Lease, Liability, Payment, Due [Abstract] | ||
Remainder of 2020 | $ 7.2 | |
2021 | 23.4 | |
2022 | 15.3 | |
2023 | 9 | |
2024 | 5.8 | |
Thereafter | 17.8 | |
Total future lease payments | 78.5 | |
Less imputed interest | 7.1 | |
Present value of future lease payments | 71.4 | |
Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract] | ||
2020 | $ 24 | |
2021 | 17.5 | |
2022 | 11.3 | |
2023 | 6.4 | |
2024 | 4.6 | |
Thereafter | 19 | |
Total future lease payments | $ 82.8 | |
Right-of-use lease assets obtained in exchange for new lease liabilities | $ 23.3 |
Borrowings (Details)
Borrowings (Details) | 1 Months Ended | ||||
Mar. 31, 2020USD ($) | May 18, 2020USD ($) | Apr. 30, 2020USD ($) | Oct. 31, 2019USD ($) | Oct. 31, 2019EUR (€) | |
Unsecured debt maturing October 2024 | Unsecured Debt | |||||
Debt Instrument | |||||
Maximum borrowing capacity | $ 89,200,000 | € 80,000,000 | |||
Basis spread on variable rate (percentage) | 0.70% | ||||
Unsecured revolving credit facility | Unsecured revolving credit facility maturing July 2022 | |||||
Debt Instrument | |||||
Maximum borrowing capacity | $ 500,000,000 | ||||
Remaining borrowing capacity | $ 142,500,000 | ||||
Proceeds from lines of credit | $ 100,000,000 | ||||
Unsecured revolving credit facility | Unsecured revolving credit facility maturing July 2022 | Subsequent Event | |||||
Debt Instrument | |||||
Increase to borrowing capacity | $ 100,000,000 |