Cover Page
Cover Page - shares | 6 Months Ended | |
Jan. 31, 2021 | Feb. 25, 2021 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Jan. 31, 2021 | |
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 each class | Common Stock, $5.00 par value | |
Trading Symbol(s) | DCI | |
Name of each exchange on which registered | NYSE | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 126,123,546 | |
Entity Central Index Key | 0000029644 | |
Current Fiscal Year End Date | --07-31 | |
Document Fiscal Year Focus | 2021 | |
Document Fiscal Period Focus | Q2 | |
Amendment Flag | false |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS - USD ($) shares in Millions, $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jan. 31, 2021 | Jan. 31, 2020 | Jan. 31, 2021 | Jan. 31, 2020 | |
Income Statement [Abstract] | ||||
Net sales | $ 679.1 | $ 662 | $ 1,315.8 | $ 1,334.7 |
Cost of sales | 453.8 | 438.8 | 867.8 | 880.3 |
Gross profit | 225.3 | 223.2 | 448 | 454.4 |
Operating expenses | 149.2 | 138.7 | 284.7 | 281.4 |
Operating income | 76.1 | 84.5 | 163.3 | 173 |
Interest expense | 3.3 | 4.5 | 6.8 | 9 |
Other (income) expense, net | (1.1) | (2.8) | 0.4 | (5.5) |
Earnings before income taxes | 73.9 | 82.8 | 156.1 | 169.5 |
Income taxes | 17.7 | 18.4 | 38 | 40 |
Net earnings | $ 56.2 | $ 64.4 | $ 118.1 | $ 129.5 |
Weighted average shares - basic (in shares) | 126.6 | 127.1 | 126.7 | 127 |
Weighted average shares - diluted (in shares) | 128.2 | 128.9 | 128.2 | 128.8 |
Net earnings per share - basic (in usd per share) | $ 0.44 | $ 0.51 | $ 0.93 | $ 1.02 |
Net earnings per share - diluted (in usd per share) | $ 0.44 | $ 0.50 | $ 0.92 | $ 1.01 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jan. 31, 2021 | Jan. 31, 2020 | Jan. 31, 2021 | Jan. 31, 2020 | |
Statement of Comprehensive Income [Abstract] | ||||
Net earnings | $ 56.2 | $ 64.4 | $ 118.1 | $ 129.5 |
Other comprehensive income (loss): | ||||
Foreign currency translation income | 41.5 | 2.4 | 36.5 | 10.5 |
Pension liability adjustment, net of deferred taxes of $(0.2), $(0.4), $(1.7), and $(0.3), respectively | 0 | 1.2 | 6.1 | 2 |
Derivatives: | ||||
(Loss) gain on hedging derivatives, net of deferred taxes of $0.3, $0.5, $0.3, and $0.7, respectively | (1.4) | 0.5 | (1.1) | 0.8 |
Reclassifications of (gains) losses on hedging derivatives to net earnings, net of taxes of $0.4, $0.0, $0.2, and $(0.7), respectively | (0.3) | 0.1 | (0.5) | 1.3 |
Total derivatives | (1.7) | 0.6 | (1.6) | 2.1 |
Net other comprehensive income | 39.8 | 4.2 | 41 | 14.6 |
Comprehensive income | $ 96 | $ 68.6 | $ 159.1 | $ 144.1 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Parenthetical) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jan. 31, 2021 | Jan. 31, 2020 | Jan. 31, 2021 | Jan. 31, 2020 | |
Statement of Comprehensive Income [Abstract] | ||||
Deferred taxes on pension liability | $ (0.2) | $ (0.4) | $ (1.7) | $ (0.3) |
Deferred taxes on hedging derivatives | 0.3 | 0.5 | 0.3 | 0.7 |
Taxes on reclassifications of derivatives to net income | $ 0.4 | $ 0 | $ 0.2 | $ (0.7) |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Millions | Jan. 31, 2021 | Jul. 31, 2020 |
Current assets: | ||
Cash and cash equivalents | $ 207.3 | $ 236.6 |
Accounts receivable, less allowances of $8.3 and $6.2, respectively | 492.9 | 455.3 |
Inventories, net | 347.6 | 322.7 |
Prepaid expenses and other current assets | 78.5 | 82.1 |
Total current assets | 1,126.3 | 1,096.7 |
Property, plant and equipment, net | 624.3 | 631.6 |
Goodwill | 322.1 | 316.8 |
Other long-term assets | 198.4 | 199.5 |
Total assets | 2,271.1 | 2,244.6 |
Current liabilities: | ||
Short-term borrowings | 16.7 | 3.8 |
Current maturities of long-term debt | 5.7 | 5.7 |
Accounts payable | 228.1 | 187.7 |
Accrued employee compensation and related taxes | 99.4 | 71.2 |
Current income taxes | 18.3 | 17.6 |
Other current liabilities | 131.3 | 120.8 |
Total current liabilities | 499.5 | 406.8 |
Long-term debt | 495.1 | 617.4 |
Other long-term liabilities | 202.1 | 216.6 |
Total liabilities | 1,196.7 | 1,240.8 |
Redeemable non-controlling interest | 0 | 10.9 |
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 |
Additional paid-in capital | 5.1 | 0 |
Retained earnings | 1,494.4 | 1,430 |
Non-controlling interest | 0 | 5.8 |
Stock-based compensation plans | 13.2 | 15.9 |
Accumulated other comprehensive loss | (143) | (184) |
Treasury stock, 25,544,032 and 25,304,515 shares, respectively, at cost | (1,053.5) | (1,033) |
Total shareholders’ equity | 1,074.4 | 992.9 |
Total liabilities and shareholders’ equity | $ 2,271.1 | $ 2,244.6 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Millions | Jan. 31, 2021 | Jul. 31, 2020 |
Statement of Financial Position [Abstract] | ||
Accounts receivable, allowance | $ 8.3 | $ 6.2 |
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) | 25,544,032 | 25,304,515 |
CONDENSED CONSOLIDATED STATEM_4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Millions | 6 Months Ended | |
Jan. 31, 2021 | Jan. 31, 2020 | |
Operating Activities | ||
Net earnings | $ 118.1 | $ 129.5 |
Adjustments to reconcile net earnings to net cash provided by operating activities: | ||
Depreciation and amortization | 46.6 | 42.8 |
Deferred income taxes | (7) | 2.5 |
Stock-based compensation expense | 10.2 | 10.2 |
Other, net | 13.5 | 10.5 |
Changes in operating assets and liabilities | 20.9 | (18.7) |
Net cash provided by operating activities | 202.3 | 176.8 |
Investing Activities | ||
Net expenditures on property, plant and equipment | (30.4) | (79.7) |
Net cash used in investing activities | (30.4) | (79.7) |
Financing Activities | ||
Proceeds from long-term debt | 0 | 122.7 |
Repayments of long-term debt | (125) | (111.1) |
Change in short-term borrowings | 13 | 32.2 |
Purchase of non-controlling interests | (14.4) | 0 |
Purchase of treasury stock | (46.3) | (65) |
Dividends paid | (53.1) | (53.2) |
Tax withholding payments for stock compensation transactions | (3.5) | (6) |
Exercise of stock options | 18.7 | 17.4 |
Net cash used in financing activities | (210.6) | (63) |
Effect of exchange rate changes on cash | 9.4 | (0.8) |
(Decrease) increase in cash and cash equivalents | (29.3) | 33.3 |
Cash and cash equivalents, beginning of period | 236.6 | 177.8 |
Cash and cash equivalents, end of period | 207.3 | 211.1 |
Supplemental Cash Flow Information | ||
Income taxes paid | 51.9 | 45.3 |
Interest paid | 5.8 | 9.4 |
Supplemental Disclosure of Non-Cash Operating and Investing Transactions | ||
Accrued property, plant and equipment additions | 6 | 12.5 |
Right-of-use lease assets obtained in exchange for new lease liabilities | $ 5.8 | $ 19.1 |
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-Based Compensation Plans | Accumulated Other Comprehensive Loss | Treasury Stock |
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 | 129.5 | 129.5 | ||||||
Other comprehensive income | 14.6 | 14.6 | ||||||
Treasury stock acquired | (65) | (65) | ||||||
Dividends declared | (53.1) | (53.1) | ||||||
Stock compensation and other activity | 21.7 | (3.8) | 0.2 | (7.2) | 32.5 | |||
Ending Balance at Jan. 31, 2020 | 940.4 | 758.2 | 0 | 1,354.1 | 5.6 | 14.5 | (178.3) | (1,013.7) |
Beginning Balance at Oct. 31, 2019 | 917 | 758.2 | 0 | 1,346 | 5.4 | 15.1 | (182.5) | (1,025.2) |
Increase (Decrease) in Stockholders' Equity | ||||||||
Net earnings | 64.4 | 64.4 | ||||||
Other comprehensive income | 4.2 | 4.2 | ||||||
Dividends declared | (53.3) | (53.3) | ||||||
Stock compensation and other activity | 8.1 | (3) | 0.2 | (0.6) | 11.5 | |||
Ending Balance at Jan. 31, 2020 | 940.4 | 758.2 | 0 | 1,354.1 | 5.6 | 14.5 | (178.3) | (1,013.7) |
Beginning Balance at Jul. 31, 2020 | 992.9 | 758.2 | 0 | 1,430 | 5.8 | 15.9 | (184) | (1,033) |
Increase (Decrease) in Stockholders' Equity | ||||||||
Net earnings | 118.1 | 118.1 | ||||||
Other comprehensive income | 41 | 41 | ||||||
Treasury stock acquired | (46.3) | (46.3) | ||||||
Dividends declared | (53) | (53) | ||||||
Purchase of non-controlling interests | (3.7) | 2.2 | (5.9) | |||||
Stock compensation and other activity | 25.4 | 2.9 | (0.7) | 0.1 | (2.7) | 25.8 | ||
Ending Balance at Jan. 31, 2021 | 1,074.4 | 758.2 | 5.1 | 1,494.4 | 0 | 13.2 | (143) | (1,053.5) |
Beginning Balance at Oct. 31, 2020 | 1,052.6 | 758.2 | 2.7 | 1,491.9 | 5.8 | 13 | (182.8) | (1,036.2) |
Increase (Decrease) in Stockholders' Equity | ||||||||
Net earnings | 56.2 | 56.2 | ||||||
Other comprehensive income | 39.8 | 39.8 | ||||||
Treasury stock acquired | (30.7) | (30.7) | ||||||
Dividends declared | (53.1) | (53.1) | ||||||
Purchase of non-controlling interests | (3.7) | 2.2 | (5.9) | |||||
Stock compensation and other activity | 13.3 | 0.2 | (0.6) | 0.1 | 0.2 | 13.4 | ||
Ending Balance at Jan. 31, 2021 | $ 1,074.4 | $ 758.2 | $ 5.1 | $ 1,494.4 | $ 0 | $ 13.2 | $ (143) | $ (1,053.5) |
CONDENSED CONSOLIDATED STATEM_6
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Parenthetical) - $ / shares | 3 Months Ended | 6 Months Ended | ||
Jan. 31, 2021 | Jan. 31, 2020 | Jan. 31, 2021 | Jan. 31, 2020 | |
Statement of Stockholders' Equity [Abstract] | ||||
Dividends, per share (in dollars per share) | $ 0.42 | $ 0.42 | $ 0.42 | $ 0.42 |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 6 Months Ended |
Jan. 31, 2021 | |
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 changes in shareholders’ equity have been included and are of a normal recurring nature. Operating results for the three and six month periods ended January 31, 2021 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, 2020. 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. The coronavirus (COVID-19) outbreak, which was declared by the World Health Organization to be a pandemic, continues to impact economic conditions. Significant uncertainty exists at this time with respect to the severity and duration of the COVID-19 pandemic. Management cannot predict with specificity the extent and duration of any future impact on the business and financial results from COVID-19 . The Company’s supply chain and manufacturing operations have, and may continue in the future to experience logistic and production-limiting constraints. The Company’s businesses have generally been designated as essential; however, it is possible that the businesses may not continue to operate u nder 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. New Accounting Standards Recently Adopted In June 2016, the Financial Accounting Standards Board (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 and other financial assets measured at amortized cost and other off-balance sheet credit exposures. The Company adopted ASU 2016-13 in the first quarter of fiscal 2021 using the modified retrospective approach. The adoption did not have a material impact on its Condensed 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 Company adopted ASU 2019-04 in the first quarter of fiscal 2021 using the modified retrospective approach. The adoption did not have a material impact on its Condensed Consolidated Financial Statements. |
Acquisitions and Divestitures
Acquisitions and Divestitures | 6 Months Ended |
Jan. 31, 2021 | |
Business Combinations [Abstract] | |
Acquisitions and Divestitures | Acquisitions and Divestitures In fiscal 2019, the Company acquired 91% of the shares of BOFA International LTD (BOFA), headquartered in the United Kingdom, for cash consideration of $101.3 million less cash acquired of $2.2 million. 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. In the second quarter of fiscal 2021, the Company acquired the remaining 9% of the shares of BOFA for $8.0 million. |
Supplemental Balance Sheet Info
Supplemental Balance Sheet Information | 6 Months Ended |
Jan. 31, 2021 | |
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): January 31, July 31, Raw materials $ 117.1 $ 109.6 Work in process 31.9 32.8 Finished products 198.6 180.3 Total inventories, net $ 347.6 $ 322.7 The components of net property, plant and equipment are as follows (in millions): January 31, July 31, Land $ 25.5 $ 24.9 Buildings 397.4 384.5 Machinery and equipment 931.4 880.1 Computer software 145.0 145.4 Construction in progress 79.7 102.8 Less: accumulated depreciation (954.7) (906.1) Total property, plant and equipment, net $ 624.3 $ 631.6 |
Earnings Per Share
Earnings Per Share | 6 Months Ended |
Jan. 31, 2021 | |
Earnings Per Share [Abstract] | |
Earnings Per Share | Earnings Per Share Basic net earnings per share is computed by dividing net earnings by the weighted average number of outstanding common shares. 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. Basic and diluted net earnings per share calculations are as follows (in millions, except per share amounts): Three Months Ended Six Months Ended 2021 2020 2021 2020 Net earnings $ 56.2 $ 64.4 $ 118.1 $ 129.5 Weighted average common shares outstanding: Weighted average common shares – basic 126.6 127.1 126.7 127.0 Dilutive impact of stock-based awards 1.6 1.8 1.5 1.8 Weighted average common shares – diluted 128.2 128.9 128.2 128.8 Net earnings per share – basic $ 0.44 $ 0.51 $ 0.93 $ 1.02 Net earnings per share – diluted $ 0.44 $ 0.50 $ 0.92 $ 1.01 Stock options excluded from net earnings per share calculation 0.8 0.8 0.9 0.8 |
Goodwill and Intangible Assets
Goodwill and Intangible Assets | 6 Months Ended |
Jan. 31, 2021 | |
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 most recent annual impairment assessment during the third quarter of fiscal 2020 and did not record any impairment as a result of this assessment. Goodwill by reportable segment for the six months ended January 31, 2021 is as follows (in millions): Engine Industrial Total Balance as of July 31, 2020 $ 84.8 $ 232.0 $ 316.8 Goodwill acquired — — — Currency translation 0.1 5.2 5.3 Balance as of January 31, 2021 $ 84.9 $ 237.2 $ 322.1 Intangible asset classes as of January 31, 2021 are as follows (in millions): Gross Carrying Amount Accumulated Amortization Total Customer relationships $ 107.2 $ (53.4) $ 53.8 Patents, trademarks and technology 24.3 (12.8) 11.5 Total intangible assets, net $ 131.5 $ (66.2) $ 65.3 Intangible asset classes as of July 31, 2020 are as follows (in millions): Gross Carrying Amount Accumulated Amortization Total Customer relationships $ 105.2 $ (50.0) $ 55.2 Patents, trademarks and technology 23.7 (11.6) 12.1 Total intangible assets, net $ 128.9 $ (61.6) $ 67.3 Amortization expense was $2.1 million and $4.2 million for the three and six months ended January 31, 2021, respectively, and was $2.0 million and $4.1 million for the three and six months ended January 31, 2020, respectively. |
Revenue
Revenue | 6 Months Ended |
Jan. 31, 2021 | |
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 globe. 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, generally disaggregated by location where the customer’s order was placed, are as follows (in millions): Three Months Ended Six Months Ended 2021 2020 2021 2020 United States and Canada $ 256.2 $ 267.5 $ 507.2 $ 554.4 Europe, Middle East and Africa (EMEA) 201.1 194.1 389.0 388.8 Asia Pacific 161.4 144.4 305.5 278.0 Latin America 60.4 56.0 114.1 113.5 Total net sales $ 679.1 $ 662.0 $ 1,315.8 $ 1,334.7 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 other current assets on the Condensed Consolidated Balance Sheets. Contract assets were $11.4 million and $11.9 million as of January 31, 2021 and July 31, 2020, respectively. In other limited circumstances, the customer may make a payment at a time earlier than when revenue is recognized and prior to the satisfaction of performance obligations, resulting in contract liabilities, which are reported in other current liabilities and other long-term liabilities on the Condensed Consolidated Balance Sheets. Contract liabilities were $15.4 million and $10.0 million as of January 31, 2021 and July 31, 2020, 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 | 6 Months Ended |
Jan. 31, 2021 | |
Standard Product Warranty Disclosure [Abstract] | |
Warranty | Warranty The Company estimates warranty expense on certain products at the time of sale. The reconciliation of warranty reserves is as follows (in millions): Six Months Ended 2021 2020 Balance at beginning of period $ 9.5 $ 11.2 Accruals for warranties issued during the reporting period 0.3 0.6 Accruals related to pre-existing warranties (including changes in estimates) (1.4) (0.5) Settlements made during the period (1.4) (1.4) Balance at end of period $ 7.0 $ 9.9 There were no individually material specific warranty matters accrued for or significant settlements made in the six months ended January 31, 2021 or 2020. |
Stock-Based Compensation
Stock-Based Compensation | 6 Months Ended |
Jan. 31, 2021 | |
Share-based Payment Arrangement, Noncash Expense [Abstract] | |
Stock-Based Compensation | Stock-Based Compensation The Company recognizes stock-based compensation expense for all stock-based awards based on the grant date fair value of the award. Stock-based awards consist primarily of non-qualified stock options, performance-based awards, restricted stock awards and restricted stock units. Grants related to restricted stock awards and restricted stock units are immaterial. Stock Options The exercise price of options granted is equal to the market price of the Company’s common stock at the date of the grant. Options are generally exercisable for up to 10 years from the grant date and vest in equal increments over three years. Stock option expense is as follows (in millions): Three Months Ended Six Months Ended 2021 2020 2021 2020 Pretax compensation expense associated with stock options $ 2.3 $ 2.4 $ 7.4 $ 7.7 Stock-based compensation expense is recognized using the fair value method for all stock option awards. The Company determines the fair value of these awards using the Black-Scholes option pricing model. Stock option activity is as follows: Options Weighted Outstanding as of July 31, 2020 6,533,979 $ 42.44 Granted 998,131 46.52 Exercised (564,012) 34.40 Canceled/forfeited (23,049) 50.18 Outstanding as of January 31, 2021 6,945,049 $ 43.66 Performance-Based Awards Performance-based awards are payable in common stock and are based on a formula that measures Company performance over a three year period. These awards are settled after three years with payouts ranging from zero to 200% of the target award value depending on achievement. Performance-based award expense is as follows (in millions): Three Months Ended Six Months Ended 2021 2020 2021 2020 Pretax compensation expense associated with performance-based awards $ 1.2 $ 0.9 $ 2.1 $ 1.8 Performance-based award activity is as follows: Performance Shares Weighted Non-vested at July 31, 2020 198,200 $ 54.93 Granted 106,100 46.06 Vested — — Canceled — — Non-vested at January 31, 2021 304,300 $ 51.84 |
Employee Benefit Plans
Employee Benefit Plans | 6 Months Ended |
Jan. 31, 2021 | |
Retirement Benefits, Description [Abstract] | |
Employee Benefit Plans | Employee Benefit PlansThe 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 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 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 consist of plans in Belgium, Germany, Mexico and the United Kingdom. These defined 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) expense, net on the Condensed Consolidated Statements of Earnings. Net periodic benefit costs for the Company’s pension plans are as follows (in millions): Three Months Ended Six Months Ended 2021 2020 2021 2020 Net periodic benefit costs: Service cost $ 1.8 $ 1.5 $ 4.0 $ 3.1 Interest cost 2.5 3.4 4.9 6.8 Expected return on assets (5.8) (6.5) (11.5) (13.0) Prior service cost amortization 0.1 0.2 0.2 0.3 Actuarial loss amortization 1.9 1.6 4.1 3.2 Curtailment charge — — 0.8 — Net periodic benefit costs $ 0.5 $ 0.2 $ 2.5 $ 0.4 During the first quarter of fiscal 2021, the Company recorded a pension curtailment charge of $0.8 million as a result of freezing the pension benefit to certain employees in the Hourly Pension Plan. The corresponding remeasurement resulted in a decrease in the Company’s pension obligations and an adjustment to other comprehensive income (loss) on the Condensed Consolidated Statements of Comprehensive Income of $4.0 million. 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. 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 | 6 Months Ended |
Jan. 31, 2021 | |
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 2015. The United States Internal Revenue Service has completed examinations of the Company’s U.S. federal income tax returns through 2016. As of January 31, 2021, gross unrecognized tax benefits were $18.6 million and accrued interest and penalties on these unrecognized tax benefits were $2.4 million. The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income taxes on the Condensed Consolidated Statements of Earnings. The Company estimates that within the next 12 months it is reasonably possible that its uncertain tax positions could decrease by as much as $5.4 million due to lapses in statutes of limitation. The statutes of limitation periods for the Company’s various tax jurisdictions range from two years to ten years. 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 | 6 Months Ended |
Jan. 31, 2021 | |
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. For Level 1, inputs to the fair value measurement are quoted prices in active markets for identical assets or liabilities. For 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. For Level 3, inputs to the fair value measurement are unobservable inputs or are based on valuation techniques. As of January 31, 2021, the carrying values of cash and cash equivalents, accounts receivable, short-term borrowings and 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 January 31, 2021, the estimated fair values of fixed interest rate long-term debt were $297.5 million compared to the carrying values of $275.0 million. As of July 31, 2020, the estimated fair values of fixed interest rate long-term debt were $297.3 million compared to the carrying values of $275.0 million. The fair values are estimated by discounting the projected cash flows using the rates at which similar amounts of debt could currently be borrowed. Long-term debt is classified as Level 2 in the fair value hierarchy. The carrying values of variable interest rate long-term debt, including current maturities, were $227.4 million and $350.0 million as of January 31, 2021 and July 31, 2020, respectively, and approximate fair values. The fair values of the Company’s financial assets and liabilities for forward foreign currency exchange contracts, net investment hedges and interest rate swaps 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, net investment hedges and interest rate swaps, to manage risk in connection with changes in foreign currency and interest rates. 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 using 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 to hedge its exposure to adverse foreign currency exchange rate movements for its operations in Europe. The Company has elected the spot method of designating these contracts. Interest Rate Swaps The Company uses swap agreements to hedge exposure related to interest expense and to manage its exposure to interest rate movements. During the first quarter of fiscal 2021, the Company entered into an interest rate swap agreement designated as a cash flow hedge with an aggregate notional amount of $40.0 million hedging future fixed-rate debt issuances, which effectively fixed a portion of interest payments based on the ten year treasury rates. This instrument has a mandatory termination date of on or before July 31, 2021. 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 fair value of the Company’s derivative contracts, which are recorded on a gross basis on the Company’s Condensed Consolidated Balance Sheets as of January 31, 2021 and July 31, 2020, are as follows (in millions): Fair Values Significant Other Observable Inputs Notional Amounts Assets (1) Liabilities (2) (3) January 31, July 31, January 31, July 31, January 31, July 31, 2021 2020 2021 2020 2021 2020 Forward foreign currency exchange contracts $ 20.6 $ 26.2 $ 1.5 $ 2.1 $ (2.3) $ (1.4) Net investment hedge 50.0 55.8 1.1 1.2 (3.3) — Interest rate swap 40.0 — 1.1 — — — Total $ 110.6 $ 82.0 $ 3.7 $ 3.3 $ (5.6) $ (1.4) (1) As of January 31, 2021, the Company recorded $3.7 million in other current assets on the Company’s Condensed Consolidated Balance Sheets. As of July 31, 2020, the Company recorded $3.2 million and $0.1 million in other current assets and other long-term assets, respectively, on the Company’s Condensed Consolidated Balance Sheets. (2) The forward foreign currency exchange contracts are recorded in other current liabilities on the Company’s Condensed Consolidated Balance Sheets. (3) The net investment hedge is recorded in other long-term liabilities on the Company’s Condensed Consolidated Balance Sheets. Changes in the fair value of the Company’s forward foreign currency exchange contracts, net gain or loss on the net investment hedge and the interest rate swap, and interest earned on the net investment hedge are reported in accumulated other comprehensive loss on the Company’s Condensed Consolidated Balance Sheets. Amounts reported in accumulated other comprehensive loss reported on the Company’s Condensed Consolidated Balance Sheets are reclassified into net earnings as the related transaction occurs. Changes in the fair value of forward foreign currency exchange contracts are recognized as a component of cost of sales; net gain or loss on the net investment hedge and the interest rate swap, and interest earned on the net investment hedge are reported in other (income) expense, net on the Company’s Condensed Consolidated Statements of Earnings. Amounts related to forward foreign currency exchange contracts are expected to be reclassified into earnings during the next 12 months, based upon the timing of inventory purchases and sales. Amounts related to the net investment hedge and the interest rate swap are expected to be reclassified into earnings through their termination in July 2029 and July 2021, respectively. See Note 13 for additional information on accumulated other comprehensive loss. 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 January 31, 2021 and July 31, 2020, 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. Equity Method Investments The Company holds equity method investments, which are classified in other long-term assets on the accompanying Condensed Consolidated Balance Sheets. The aggregate carrying amount of these investments was $23.3 million and $21.7 million as of January 31, 2021 and July 31, 2020, respectively. These equity method investments are measured at fair value on a non-recurring 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 circumstance 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 | 6 Months Ended |
Jan. 31, 2021 | |
Stockholders' Equity Note [Abstract] | |
Shareholders' Equity | Shareholders’ Equity Share Repurchases The Company’s Board of Directors has 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 six months ended January 31, 2021, the Company repurchased 871,203 shares for $46.3 million. As of January 31, 2021, the Company had remaining authorization to repurchase 9.8 million shares under this plan. Dividends Paid Dividends paid were 42.0 cents per common share for the six months ended January 31, 2021 and 2020. |
Accumulated Other Comprehensive
Accumulated Other Comprehensive Loss | 6 Months Ended |
Jan. 31, 2021 | |
Other Comprehensive Income (Loss), Net of Tax [Abstract] | |
Accumulated Other Comprehensive Loss | Accumulated Other Comprehensive Loss Changes in accumulated other comprehensive loss for the three months ended January 31, 2021 and 2020 are as follows (in millions): Foreign Pension Derivative Total Balance as of October 31, 2020, net of tax $ (79.0) $ (103.9) $ 0.1 $ (182.8) Other comprehensive income (loss) before reclassifications and tax 41.5 — (1.7) 39.8 Tax benefit — — 0.3 0.3 Other comprehensive income (loss) before reclassifications, net of tax 41.5 — (1.4) 40.1 Reclassifications, before tax — 0.2 (1) (0.7) (2) (0.5) Tax (expense) benefit — (0.2) 0.4 0.2 Reclassifications, net of tax — — (0.3) (0.3) Other comprehensive income (loss), net of tax 41.5 — (1.7) 39.8 Balance as of January 31, 2021, net of tax $ (37.5) $ (103.9) $ (1.6) $ (143.0) Balance as of October 31, 2019, net of tax $ (84.6) $ (98.2) $ 0.3 $ (182.5) Other comprehensive income before reclassifications and tax 2.4 — — 2.4 Tax benefit — — 0.5 0.5 Other comprehensive income before reclassifications, net of tax 2.4 — 0.5 2.9 Reclassifications, before tax — 1.6 (1) 0.1 (2) 1.7 Tax expense — (0.4) — (0.4) Reclassifications, net of tax — 1.2 0.1 1.3 Other comprehensive income, net of tax 2.4 1.2 0.6 4.2 Balance as of January 31, 2020, net of tax $ (82.2) $ (97.0) $ 0.9 $ (178.3) (1) Includes net amortization of prior service costs and actuarial losses included in net periodic benefit costs (see Note 9) that were reclassified from accumulated other comprehensive loss on the Company’s Condensed Consolidated Balance Sheets to cost of sales and operating expenses on the Company’s Condensed Consolidated Statements of Earnings. (2) Relates to foreign currency cash flow hedges that were reclassified from accumulated other comprehensive loss to other (income) expense, net on the Company’s Condensed Consolidated Statements of Earnings. Changes in accumulated other comprehensive loss for the six months ended January 31, 2021 and 2020 are as follows (in millions): Foreign Pension Derivative Total Balance as of July 31, 2020, net of tax $ (74.0) $ (110.0) $ — $ (184.0) Other comprehensive income (loss) before reclassifications and tax 36.5 4.0 (1) (1.4) 39.1 Tax (expense) benefit — (1.0) 0.3 (0.7) Other comprehensive income (loss) before reclassifications, net of tax 36.5 3.0 (1.1) 38.4 Reclassifications, before tax — 3.8 (2) (0.7) (3) 3.1 Tax (expense) benefit — (0.7) 0.2 (0.5) Reclassifications, net of tax — 3.1 (0.5) 2.6 Other comprehensive income (loss), net of tax 36.5 6.1 (1.6) 41.0 Balance at January 31, 2021, net of tax $ (37.5) $ (103.9) $ (1.6) $ (143.0) Balance as of July 31, 2019, net of tax $ (92.7) $ (99.0) $ (1.2) $ (192.9) Other comprehensive income before reclassifications and tax 10.5 — 0.1 10.6 Tax benefit — — 0.7 0.7 Other comprehensive income before reclassifications, net of tax 10.5 — 0.8 11.3 Reclassifications, before tax — 2.3 (2) 2.0 (3) 4.3 Tax expense — (0.3) (0.7) (1.0) Reclassifications, net of tax — 2.0 1.3 3.3 Other comprehensive income, net of tax 10.5 2.0 2.1 14.6 Balance as of January 31, 2020, net of tax $ (82.2) $ (97.0) $ 0.9 $ (178.3) (1) In the first quarter of fiscal 2021, pension curtailment accounting was triggered and the Company recorded a charge of $0.8 million (see Note 9). As a result of the related remeasurement, the Company’s pension obligations decreased with a corresponding adjustment to other comprehensive loss on the Company’s Condensed Consolidated Balance Sheets of $4.0 million. (2) Includes net amortization of prior service costs and actuarial losses included in net periodic benefit costs (see Note 9) that were reclassified from accumulated other comprehensive loss on the Company’s Condensed Consolidated Balance Sheets to cost of sales and operating expenses on 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) expense, net on the Company’s Condensed Consolidated Statements of Earnings. |
Guarantees
Guarantees | 6 Months Ended |
Jan. 31, 2021 | |
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 and banking services, including credit and debit cards, merchant processing and treasury management services, of the joint venture. The Company accounts for AFSI as an equity method investment. The outstanding debt relating to the joint venture and the contingent liability for standby letters of credit relating to the Company are as follows (in millions): January 31, July 31, Outstanding debt (the Company guarantees half) $ 33.7 $ 40.0 Contingent liability for standby letters of credit $ 7.7 $ 7.5 Amounts drawn for letters of credit $ — $ — 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. Items relating to the Company’s joint venture in AFSI are as follows (in millions): Three Months Ended January 31, Six Months Ended 2021 2020 2021 2020 Investment earnings from AFSI $ 0.2 $ 0.3 $ 0.5 $ 0.4 Royalty income from AFSI $ 1.7 $ 1.7 $ 3.2 $ 3.6 |
Commitments and Contingencies
Commitments and Contingencies | 6 Months Ended |
Jan. 31, 2021 | |
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 on 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 | 6 Months Ended |
Jan. 31, 2021 | |
Segment Reporting, Measurement Disclosures [Abstract] | |
Segment Reporting | Segment Reporting The Company has 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 intersegment 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 details are as follows (in millions): Three Months Ended Six Months Ended 2021 2020 2021 2020 Net sales Engine Products segment $ 462.4 $ 435.6 $ 898.6 $ 894.7 Industrial Products segment 216.7 226.4 417.2 440.0 Total Company $ 679.1 $ 662.0 $ 1,315.8 $ 1,334.7 Earnings before income taxes Engine Products segment $ 61.3 $ 53.3 $ 121.7 $ 115.7 Industrial Products segment 25.8 34.6 53.3 64.1 Corporate and unallocated (13.2) (5.1) (18.9) (10.3) Total Company $ 73.9 $ 82.8 $ 156.1 $ 169.5 Net sales are as follows (in millions): Three Months Ended Six Months Ended 2021 2020 2021 2020 Engine Products segment Off-Road $ 77.9 $ 67.5 $ 142.6 $ 136.1 On-Road 33.4 33.8 65.3 74.5 Aftermarket 330.2 308.1 647.4 627.5 Aerospace and Defense 20.9 26.2 43.3 56.6 Total Engine Products segment 462.4 435.6 898.6 894.7 Industrial Products segment Industrial Filtration Solutions 149.9 155.0 285.6 304.1 Gas Turbine Systems 23.4 24.3 46.4 45.0 Special Applications 43.4 47.1 85.2 90.9 Total Industrial Products segment 216.7 226.4 417.2 440.0 Total Company $ 679.1 $ 662.0 $ 1,315.8 $ 1,334.7 |
Borrowings
Borrowings | 6 Months Ended |
Jan. 31, 2021 | |
Debt Disclosure [Abstract] | |
Borrowings | Borrowings The Company has a $500.0 million unsecured revolving credit facility that expires July 21, 2022. As of January 31, 2021, there was $377.3 million available on this facility. The Company also has a 364 day revolving credit agreement for $100.0 million tha t provides incremental borrowing capacity above the Company’s $500.0 million unsecured revolving credit facility. It has a maturity date of May 17, 2021 and a one year credit extension can be requested. As of January 31, 2021, there was $100.0 million av ailable on this facility. Certain debt agreements contain financial covenants related to interest coverage and leverage ratios, as well as customary non-financial covenants. As of January 31, 2021, the Company was in compliance with all such covenants. |
Restructuring
Restructuring | 6 Months Ended |
Jan. 31, 2021 | |
Restructuring and Related Activities [Abstract] | |
Restructuring | RestructuringIn the second quarter of fiscal 2021, the Company initiated activities to further improve its operating and manufacturing cost structure, primarily in its EMEA region. These activities resulted in the Company incurring restructuring expenses, primarily related to severance, of $14.8 million in the second quarter. At this time, the Company does not expect to incur additional restructuring expenses in fiscal 2021. Restructuring expenses of $5.8 million are included in cost of sales and $9.0 million are included in operating expenses on the Condensed Consolidated Statement of Earnings. Expenses of $2.5 million relate to the Engine Products segment, $6.5 million relate to the Industrial Products segment and $5.8 million relate to Corporate and unallocated segment. For the three months ended January 31, 2021 $0.6 million of the restructuring expenses were paid and $14.2 million were accrued at January 31, 2021. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 6 Months Ended |
Jan. 31, 2021 | |
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 changes in shareholders’ equity have been included and are of a normal recurring nature. Operating results for the three and six month periods ended January 31, 2021 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, 2020. 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. The coronavirus (COVID-19) outbreak, which was declared by the World Health Organization to be a pandemic, continues to impact economic conditions. Significant uncertainty exists at this time with respect to the severity and duration of the COVID-19 pandemic. Management cannot predict with specificity the extent and duration of any future impact on the business and financial results from COVID-19 . The Company’s supply chain and manufacturing operations have, and may continue in the future to experience logistic and production-limiting constraints. The Company’s businesses have generally been designated as essential; however, it is possible that the businesses may not continue to operate u |
New Accounting Standards Recently Adopted | New Accounting Standards Recently Adopted In June 2016, the Financial Accounting Standards Board (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 and other financial assets measured at amortized cost and other off-balance sheet credit exposures. The Company adopted ASU 2016-13 in the first quarter of fiscal 2021 using the modified retrospective approach. The adoption did not have a material impact on its Condensed 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 Company adopted ASU 2019-04 in the first quarter of fiscal 2021 using the modified retrospective approach. The adoption did not have a material impact on its Condensed Consolidated Financial Statements. |
Supplemental Balance Sheet In_2
Supplemental Balance Sheet Information (Tables) | 6 Months Ended |
Jan. 31, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Components of inventory | The components of net inventories are as follows (in millions): January 31, July 31, Raw materials $ 117.1 $ 109.6 Work in process 31.9 32.8 Finished products 198.6 180.3 Total inventories, net $ 347.6 $ 322.7 |
Components of property, plant and equipment | The components of net property, plant and equipment are as follows (in millions): January 31, July 31, Land $ 25.5 $ 24.9 Buildings 397.4 384.5 Machinery and equipment 931.4 880.1 Computer software 145.0 145.4 Construction in progress 79.7 102.8 Less: accumulated depreciation (954.7) (906.1) Total property, plant and equipment, net $ 624.3 $ 631.6 |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 6 Months Ended |
Jan. 31, 2021 | |
Earnings Per Share [Abstract] | |
Schedule of basic and diluted net earnings per share | Basic and diluted net earnings per share calculations are as follows (in millions, except per share amounts): Three Months Ended Six Months Ended 2021 2020 2021 2020 Net earnings $ 56.2 $ 64.4 $ 118.1 $ 129.5 Weighted average common shares outstanding: Weighted average common shares – basic 126.6 127.1 126.7 127.0 Dilutive impact of stock-based awards 1.6 1.8 1.5 1.8 Weighted average common shares – diluted 128.2 128.9 128.2 128.8 Net earnings per share – basic $ 0.44 $ 0.51 $ 0.93 $ 1.02 Net earnings per share – diluted $ 0.44 $ 0.50 $ 0.92 $ 1.01 Stock options excluded from net earnings per share calculation 0.8 0.8 0.9 0.8 |
Goodwill and Intangible Assets
Goodwill and Intangible Assets (Tables) | 6 Months Ended |
Jan. 31, 2021 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Reconciliation of goodwill | Goodwill by reportable segment for the six months ended January 31, 2021 is as follows (in millions): Engine Industrial Total Balance as of July 31, 2020 $ 84.8 $ 232.0 $ 316.8 Goodwill acquired — — — Currency translation 0.1 5.2 5.3 Balance as of January 31, 2021 $ 84.9 $ 237.2 $ 322.1 |
Schedule of finite-lived intangible assets | Intangible asset classes as of January 31, 2021 are as follows (in millions): Gross Carrying Amount Accumulated Amortization Total Customer relationships $ 107.2 $ (53.4) $ 53.8 Patents, trademarks and technology 24.3 (12.8) 11.5 Total intangible assets, net $ 131.5 $ (66.2) $ 65.3 Intangible asset classes as of July 31, 2020 are as follows (in millions): Gross Carrying Amount Accumulated Amortization Total Customer relationships $ 105.2 $ (50.0) $ 55.2 Patents, trademarks and technology 23.7 (11.6) 12.1 Total intangible assets, net $ 128.9 $ (61.6) $ 67.3 |
Revenue (Tables)
Revenue (Tables) | 6 Months Ended |
Jan. 31, 2021 | |
Revenue from Contract with Customer [Abstract] | |
Disaggregation of Revenue | Net sales, generally disaggregated by location where the customer’s order was placed, are as follows (in millions): Three Months Ended Six Months Ended 2021 2020 2021 2020 United States and Canada $ 256.2 $ 267.5 $ 507.2 $ 554.4 Europe, Middle East and Africa (EMEA) 201.1 194.1 389.0 388.8 Asia Pacific 161.4 144.4 305.5 278.0 Latin America 60.4 56.0 114.1 113.5 Total net sales $ 679.1 $ 662.0 $ 1,315.8 $ 1,334.7 See Note 16 for net sales disaggregated by segment. |
Warranty (Tables)
Warranty (Tables) | 6 Months Ended |
Jan. 31, 2021 | |
Standard Product Warranty Disclosure [Abstract] | |
Reconciliation of warranty reserves | The reconciliation of warranty reserves is as follows (in millions): Six Months Ended 2021 2020 Balance at beginning of period $ 9.5 $ 11.2 Accruals for warranties issued during the reporting period 0.3 0.6 Accruals related to pre-existing warranties (including changes in estimates) (1.4) (0.5) Settlements made during the period (1.4) (1.4) Balance at end of period $ 7.0 $ 9.9 |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 6 Months Ended |
Jan. 31, 2021 | |
Share-based Payment Arrangement, Noncash Expense [Abstract] | |
Stock options expense | Stock option expense is as follows (in millions): Three Months Ended Six Months Ended 2021 2020 2021 2020 Pretax compensation expense associated with stock options $ 2.3 $ 2.4 $ 7.4 $ 7.7 Performance-based award expense is as follows (in millions): Three Months Ended Six Months Ended 2021 2020 2021 2020 Pretax compensation expense associated with performance-based awards $ 1.2 $ 0.9 $ 2.1 $ 1.8 |
Summary of stock option activity | Stock option activity is as follows: Options Weighted Outstanding as of July 31, 2020 6,533,979 $ 42.44 Granted 998,131 46.52 Exercised (564,012) 34.40 Canceled/forfeited (23,049) 50.18 Outstanding as of January 31, 2021 6,945,049 $ 43.66 |
Schedule of performance shares activity | Performance-based award activity is as follows: Performance Shares Weighted Non-vested at July 31, 2020 198,200 $ 54.93 Granted 106,100 46.06 Vested — — Canceled — — Non-vested at January 31, 2021 304,300 $ 51.84 |
Employee Benefit Plans (Tables)
Employee Benefit Plans (Tables) | 6 Months Ended |
Jan. 31, 2021 | |
Retirement Benefits, Description [Abstract] | |
Components of net periodic pension costs | Net periodic benefit costs for the Company’s pension plans are as follows (in millions): Three Months Ended Six Months Ended 2021 2020 2021 2020 Net periodic benefit costs: Service cost $ 1.8 $ 1.5 $ 4.0 $ 3.1 Interest cost 2.5 3.4 4.9 6.8 Expected return on assets (5.8) (6.5) (11.5) (13.0) Prior service cost amortization 0.1 0.2 0.2 0.3 Actuarial loss amortization 1.9 1.6 4.1 3.2 Curtailment charge — — 0.8 — Net periodic benefit costs $ 0.5 $ 0.2 $ 2.5 $ 0.4 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 6 Months Ended |
Jan. 31, 2021 | |
Fair Value Disclosures [Abstract] | |
Schedule of derivative on the balance sheet | The fair value of the Company’s derivative contracts, which are recorded on a gross basis on the Company’s Condensed Consolidated Balance Sheets as of January 31, 2021 and July 31, 2020, are as follows (in millions): Fair Values Significant Other Observable Inputs Notional Amounts Assets (1) Liabilities (2) (3) January 31, July 31, January 31, July 31, January 31, July 31, 2021 2020 2021 2020 2021 2020 Forward foreign currency exchange contracts $ 20.6 $ 26.2 $ 1.5 $ 2.1 $ (2.3) $ (1.4) Net investment hedge 50.0 55.8 1.1 1.2 (3.3) — Interest rate swap 40.0 — 1.1 — — — Total $ 110.6 $ 82.0 $ 3.7 $ 3.3 $ (5.6) $ (1.4) (1) As of January 31, 2021, the Company recorded $3.7 million in other current assets on the Company’s Condensed Consolidated Balance Sheets. As of July 31, 2020, the Company recorded $3.2 million and $0.1 million in other current assets and other long-term assets, respectively, on the Company’s Condensed Consolidated Balance Sheets. (2) The forward foreign currency exchange contracts are recorded in other current liabilities on the Company’s Condensed Consolidated Balance Sheets. (3) The net investment hedge is recorded in other long-term liabilities on the Company’s Condensed Consolidated Balance Sheets. |
Accumulated Other Comprehensi_2
Accumulated Other Comprehensive Loss (Tables) | 6 Months Ended |
Jan. 31, 2021 | |
Other Comprehensive Income (Loss), Net of Tax [Abstract] | |
Schedule of changes in accumulated other comprehensive loss | Changes in accumulated other comprehensive loss for the three months ended January 31, 2021 and 2020 are as follows (in millions): Foreign Pension Derivative Total Balance as of October 31, 2020, net of tax $ (79.0) $ (103.9) $ 0.1 $ (182.8) Other comprehensive income (loss) before reclassifications and tax 41.5 — (1.7) 39.8 Tax benefit — — 0.3 0.3 Other comprehensive income (loss) before reclassifications, net of tax 41.5 — (1.4) 40.1 Reclassifications, before tax — 0.2 (1) (0.7) (2) (0.5) Tax (expense) benefit — (0.2) 0.4 0.2 Reclassifications, net of tax — — (0.3) (0.3) Other comprehensive income (loss), net of tax 41.5 — (1.7) 39.8 Balance as of January 31, 2021, net of tax $ (37.5) $ (103.9) $ (1.6) $ (143.0) Balance as of October 31, 2019, net of tax $ (84.6) $ (98.2) $ 0.3 $ (182.5) Other comprehensive income before reclassifications and tax 2.4 — — 2.4 Tax benefit — — 0.5 0.5 Other comprehensive income before reclassifications, net of tax 2.4 — 0.5 2.9 Reclassifications, before tax — 1.6 (1) 0.1 (2) 1.7 Tax expense — (0.4) — (0.4) Reclassifications, net of tax — 1.2 0.1 1.3 Other comprehensive income, net of tax 2.4 1.2 0.6 4.2 Balance as of January 31, 2020, net of tax $ (82.2) $ (97.0) $ 0.9 $ (178.3) (1) Includes net amortization of prior service costs and actuarial losses included in net periodic benefit costs (see Note 9) that were reclassified from accumulated other comprehensive loss on the Company’s Condensed Consolidated Balance Sheets to cost of sales and operating expenses on the Company’s Condensed Consolidated Statements of Earnings. (2) Relates to foreign currency cash flow hedges that were reclassified from accumulated other comprehensive loss to other (income) expense, net on the Company’s Condensed Consolidated Statements of Earnings. Changes in accumulated other comprehensive loss for the six months ended January 31, 2021 and 2020 are as follows (in millions): Foreign Pension Derivative Total Balance as of July 31, 2020, net of tax $ (74.0) $ (110.0) $ — $ (184.0) Other comprehensive income (loss) before reclassifications and tax 36.5 4.0 (1) (1.4) 39.1 Tax (expense) benefit — (1.0) 0.3 (0.7) Other comprehensive income (loss) before reclassifications, net of tax 36.5 3.0 (1.1) 38.4 Reclassifications, before tax — 3.8 (2) (0.7) (3) 3.1 Tax (expense) benefit — (0.7) 0.2 (0.5) Reclassifications, net of tax — 3.1 (0.5) 2.6 Other comprehensive income (loss), net of tax 36.5 6.1 (1.6) 41.0 Balance at January 31, 2021, net of tax $ (37.5) $ (103.9) $ (1.6) $ (143.0) Balance as of July 31, 2019, net of tax $ (92.7) $ (99.0) $ (1.2) $ (192.9) Other comprehensive income before reclassifications and tax 10.5 — 0.1 10.6 Tax benefit — — 0.7 0.7 Other comprehensive income before reclassifications, net of tax 10.5 — 0.8 11.3 Reclassifications, before tax — 2.3 (2) 2.0 (3) 4.3 Tax expense — (0.3) (0.7) (1.0) Reclassifications, net of tax — 2.0 1.3 3.3 Other comprehensive income, net of tax 10.5 2.0 2.1 14.6 Balance as of January 31, 2020, net of tax $ (82.2) $ (97.0) $ 0.9 $ (178.3) (1) In the first quarter of fiscal 2021, pension curtailment accounting was triggered and the Company recorded a charge of $0.8 million (see Note 9). As a result of the related remeasurement, the Company’s pension obligations decreased with a corresponding adjustment to other comprehensive loss on the Company’s Condensed Consolidated Balance Sheets of $4.0 million. (2) Includes net amortization of prior service costs and actuarial losses included in net periodic benefit costs (see Note 9) that were reclassified from accumulated other comprehensive loss on the Company’s Condensed Consolidated Balance Sheets to cost of sales and operating expenses on 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) expense, net on the Company’s Condensed Consolidated Statements of Earnings. |
Guarantees (Tables)
Guarantees (Tables) | 6 Months Ended |
Jan. 31, 2021 | |
Guarantees [Abstract] | |
Guarantor obligations | The outstanding debt relating to the joint venture and the contingent liability for standby letters of credit relating to the Company are as follows (in millions): January 31, July 31, Outstanding debt (the Company guarantees half) $ 33.7 $ 40.0 Contingent liability for standby letters of credit $ 7.7 $ 7.5 Amounts drawn for letters of credit $ — $ — |
Joint venture items | Items relating to the Company’s joint venture in AFSI are as follows (in millions): Three Months Ended January 31, Six Months Ended 2021 2020 2021 2020 Investment earnings from AFSI $ 0.2 $ 0.3 $ 0.5 $ 0.4 Royalty income from AFSI $ 1.7 $ 1.7 $ 3.2 $ 3.6 |
Segment Reporting (Tables)
Segment Reporting (Tables) | 6 Months Ended |
Jan. 31, 2021 | |
Segment Reporting, Measurement Disclosures [Abstract] | |
Summary of segment detail | Segment details are as follows (in millions): Three Months Ended Six Months Ended 2021 2020 2021 2020 Net sales Engine Products segment $ 462.4 $ 435.6 $ 898.6 $ 894.7 Industrial Products segment 216.7 226.4 417.2 440.0 Total Company $ 679.1 $ 662.0 $ 1,315.8 $ 1,334.7 Earnings before income taxes Engine Products segment $ 61.3 $ 53.3 $ 121.7 $ 115.7 Industrial Products segment 25.8 34.6 53.3 64.1 Corporate and unallocated (13.2) (5.1) (18.9) (10.3) Total Company $ 73.9 $ 82.8 $ 156.1 $ 169.5 Net sales are as follows (in millions): Three Months Ended Six Months Ended 2021 2020 2021 2020 Engine Products segment Off-Road $ 77.9 $ 67.5 $ 142.6 $ 136.1 On-Road 33.4 33.8 65.3 74.5 Aftermarket 330.2 308.1 647.4 627.5 Aerospace and Defense 20.9 26.2 43.3 56.6 Total Engine Products segment 462.4 435.6 898.6 894.7 Industrial Products segment Industrial Filtration Solutions 149.9 155.0 285.6 304.1 Gas Turbine Systems 23.4 24.3 46.4 45.0 Special Applications 43.4 47.1 85.2 90.9 Total Industrial Products segment 216.7 226.4 417.2 440.0 Total Company $ 679.1 $ 662.0 $ 1,315.8 $ 1,334.7 |
Acquisitions and Divestitures (
Acquisitions and Divestitures (Details) - BOFA International LTD - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended |
Jan. 31, 2021 | Jul. 31, 2019 | |
Business Acquisition | ||
Business acquisition, percentage of voting interests acquired | 9.00% | 91.00% |
Business combination, consideration transferred | $ 8 | $ 101.3 |
Cash acquired | $ 2.2 |
Supplemental Balance Sheet In_3
Supplemental Balance Sheet Information (Inventory) (Details) - USD ($) $ in Millions | Jan. 31, 2021 | Jul. 31, 2020 |
Inventory, Net | ||
Raw materials | $ 117.1 | $ 109.6 |
Work in process | 31.9 | 32.8 |
Finished products | 198.6 | 180.3 |
Total inventories, net | $ 347.6 | $ 322.7 |
Supplemental Balance Sheet In_4
Supplemental Balance Sheet Information (Property, Plant and Equipment) (Details) - USD ($) $ in Millions | Jan. 31, 2021 | Jul. 31, 2020 |
Property, Plant and Equipment, Net | ||
Less: accumulated depreciation | $ (954.7) | $ (906.1) |
Total property, plant and equipment, net | 624.3 | 631.6 |
Land | ||
Property, Plant and Equipment, Net | ||
Property, plant and equipment, gross | 25.5 | 24.9 |
Buildings | ||
Property, Plant and Equipment, Net | ||
Property, plant and equipment, gross | 397.4 | 384.5 |
Machinery and equipment | ||
Property, Plant and Equipment, Net | ||
Property, plant and equipment, gross | 931.4 | 880.1 |
Computer software | ||
Property, Plant and Equipment, Net | ||
Property, plant and equipment, gross | 145 | 145.4 |
Construction in progress | ||
Property, Plant and Equipment, Net | ||
Property, plant and equipment, gross | $ 79.7 | $ 102.8 |
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 | 6 Months Ended | ||
Jan. 31, 2021 | Jan. 31, 2020 | Jan. 31, 2021 | Jan. 31, 2020 | |
Earnings Per Share [Abstract] | ||||
Net earnings | $ 56.2 | $ 64.4 | $ 118.1 | $ 129.5 |
Weighted average common shares outstanding: | ||||
Weighted average common shares - basic (in shares) | 126.6 | 127.1 | 126.7 | 127 |
Dilutive impact of share-based awards (in shares) | 1.6 | 1.8 | 1.5 | 1.8 |
Weighted average common shares - diluted (in shares) | 128.2 | 128.9 | 128.2 | 128.8 |
Net earnings per share - basic (in usd per share) | $ 0.44 | $ 0.51 | $ 0.93 | $ 1.02 |
Net earnings per share - diluted (in usd per share) | $ 0.44 | $ 0.50 | $ 0.92 | $ 1.01 |
Stock options excluded from net earnings per share calculation (in shares) | 0.8 | 0.8 | 0.9 | 0.8 |
Goodwill and Intangible Asset_2
Goodwill and Intangible Assets (Reconciliation of Goodwill) (Details) $ in Millions | 6 Months Ended |
Jan. 31, 2021USD ($) | |
Goodwill | |
Beginning balance | $ 316.8 |
Goodwill acquired | 0 |
Currency translation | 5.3 |
Ending balance | 322.1 |
Engine Products | |
Goodwill | |
Beginning balance | 84.8 |
Goodwill acquired | 0 |
Currency translation | 0.1 |
Ending balance | 84.9 |
Industrial Products | |
Goodwill | |
Beginning balance | 232 |
Goodwill acquired | 0 |
Currency translation | 5.2 |
Ending balance | $ 237.2 |
Goodwill and Intangible Asset_3
Goodwill and Intangible Assets (Reconciliation of Intangible Assets) (Details) - USD ($) $ in Millions | Jan. 31, 2021 | Jul. 31, 2020 |
Finite-Lived Intangible Assets | ||
Gross Carrying Amount | $ 131.5 | $ 128.9 |
Accumulated Amortization | (66.2) | (61.6) |
Total | 65.3 | 67.3 |
Customer relationships | ||
Finite-Lived Intangible Assets | ||
Gross Carrying Amount | 107.2 | 105.2 |
Accumulated Amortization | (53.4) | (50) |
Total | 53.8 | 55.2 |
Patents, trademarks and technology | ||
Finite-Lived Intangible Assets | ||
Gross Carrying Amount | 24.3 | 23.7 |
Accumulated Amortization | (12.8) | (11.6) |
Total | $ 11.5 | $ 12.1 |
Goodwill and Intangible Asset_4
Goodwill and Intangible Assets (Narrative) (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jan. 31, 2021 | Jan. 31, 2020 | Jan. 31, 2021 | Jan. 31, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ||||
Amortization expense | $ 2.1 | $ 2 | $ 4.2 | $ 4.1 |
Revenue (Disaggregation of Reve
Revenue (Disaggregation of Revenue by Geographical Area) (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jan. 31, 2021 | Jan. 31, 2020 | Jan. 31, 2021 | Jan. 31, 2020 | |
Disaggregation of Revenue | ||||
Total net sales | $ 679.1 | $ 662 | $ 1,315.8 | $ 1,334.7 |
United States and Canada | ||||
Disaggregation of Revenue | ||||
Total net sales | 256.2 | 267.5 | 507.2 | 554.4 |
Europe, Middle East and Africa (EMEA) | ||||
Disaggregation of Revenue | ||||
Total net sales | 201.1 | 194.1 | 389 | 388.8 |
Asia Pacific | ||||
Disaggregation of Revenue | ||||
Total net sales | 161.4 | 144.4 | 305.5 | 278 |
Latin America | ||||
Disaggregation of Revenue | ||||
Total net sales | $ 60.4 | $ 56 | $ 114.1 | $ 113.5 |
Revenue (Narrative) (Details)
Revenue (Narrative) (Details) - USD ($) $ in Millions | Jan. 31, 2021 | Jul. 31, 2020 |
Revenue from Contract with Customer [Abstract] | ||
Contract assets | $ 11.4 | $ 11.9 |
Contract liabilities | $ 15.4 | $ 10 |
Warranty (Details)
Warranty (Details) - USD ($) $ in Millions | 6 Months Ended | |
Jan. 31, 2021 | Jan. 31, 2020 | |
Movement in Standard and Extended Product Warranty, Increase (Decrease) | ||
Balance at beginning of period | $ 9.5 | $ 11.2 |
Accruals for warranties issued during the reporting period | 0.3 | 0.6 |
Accruals related to pre-existing warranties (including changes in estimates) | (1.4) | (0.5) |
Settlements made during the period | (1.4) | (1.4) |
Balance at end of period | $ 7 | $ 9.9 |
Stock-Based Compensation (Narra
Stock-Based Compensation (Narratives) (Details) - 2019 Master Stock Incentive Plan | 6 Months Ended |
Jan. 31, 2021 | |
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 |
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 |
Performance Shares | Minimum | |
Share-based Compensation Arrangement by Share-based Payment Award | |
Payout percentage based on target award (percentage) | 0.00% |
Performance Shares | Maximum | |
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 | 6 Months Ended | ||
Jan. 31, 2021 | Jan. 31, 2020 | Jan. 31, 2021 | Jan. 31, 2020 | |
Employee Stock Option | ||||
Share-based Compensation Arrangement by Share-based Payment Award | ||||
Pretax compensation expense associated with stock options | $ 2.3 | $ 2.4 | $ 7.4 | $ 7.7 |
Performance Shares | ||||
Share-based Compensation Arrangement by Share-based Payment Award | ||||
Pretax compensation expense associated with stock options | $ 1.2 | $ 0.9 | $ 2.1 | $ 1.8 |
Stock-Based Compensation (Summa
Stock-Based Compensation (Summary of Stock Option Activity) (Details) | 6 Months Ended |
Jan. 31, 2021$ / sharesshares | |
Options Outstanding | |
Beginning balance (in shares) | shares | 6,533,979 |
Options granted (in shares) | shares | 998,131 |
Options exercised (in shares) | shares | (564,012) |
Options canceled/forfeited (in shares) | shares | (23,049) |
Ending balance (in shares) | shares | 6,945,049 |
Weighted Average Exercise Price | |
Beginning balance (in usd per share) | $ / shares | $ 42.44 |
Granted (in usd per share) | $ / shares | 46.52 |
Exercised (in usd per share) | $ / shares | 34.40 |
Canceled/forfeited (in usd per share) | $ / shares | 50.18 |
Ending balance (in usd per share) | $ / shares | $ 43.66 |
Stock-Based Compensation (Sum_2
Stock-Based Compensation (Summary of Performance Award Activity) (Details) - Performance Shares | 6 Months Ended |
Jan. 31, 2021$ / sharesshares | |
Performance Shares Outstanding | |
Beginning balance (in shares) | shares | 198,200 |
Granted (shares) | shares | 106,100 |
Vested (shares) | shares | 0 |
Canceled/forfeited (shares) | shares | 0 |
Ending balance (in shares) | shares | 304,300 |
Weighted Average Grant Date Fair Value | |
Beginning balance (in usd per share) | $ / shares | $ 54.93 |
Granted (in usd per share) | $ / shares | 46.06 |
Vested (in usd per share) | $ / shares | 0 |
Canceled/forfeited (in usd per share) | $ / shares | 0 |
Ending balance (in usd per share) | $ / shares | $ 51.84 |
Employee Benefit Plans (Details
Employee Benefit Plans (Details) $ in Millions | 3 Months Ended | 6 Months Ended | |
Oct. 31, 2020USD ($) | Jan. 31, 2021USD ($)plan | Jul. 31, 2020USD ($) | |
Defined Benefit Plan Disclosure | |||
Number of U.S. plans | plan | 2 | ||
Annual company retirement contribution in addition to 401 (k) match, percent | 3.00% | ||
Other comprehensive income (loss) | $ (143) | $ (184) | |
Reclassification, Other | |||
Defined Benefit Plan Disclosure | |||
Curtailment charge | $ 0.8 | ||
Other comprehensive income (loss) | $ 4 |
Employee Benefit Plans (Compone
Employee Benefit Plans (Components of Net Periodic Pension Costs) (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jan. 31, 2021 | Jan. 31, 2020 | Jan. 31, 2021 | Jan. 31, 2020 | |
Net periodic benefit costs: | ||||
Service cost | $ 1.8 | $ 1.5 | $ 4 | $ 3.1 |
Interest cost | 2.5 | 3.4 | 4.9 | 6.8 |
Expected return on assets | (5.8) | (6.5) | (11.5) | (13) |
Prior service cost amortization | 0.1 | 0.2 | 0.2 | 0.3 |
Actuarial loss amortization | 1.9 | 1.6 | 4.1 | 3.2 |
Curtailment charge | 0 | 0 | 0.8 | 0 |
Net periodic benefit costs | $ 0.5 | $ 0.2 | $ 2.5 | $ 0.4 |
Income Taxes (Details)
Income Taxes (Details) $ in Millions | 6 Months Ended |
Jan. 31, 2021USD ($) | |
Income Tax Disclosure [Abstract] | |
Unrecognized tax benefits | $ 18.6 |
Accrued interest and penalties on unrecognized tax benefits | 2.4 |
Unrecognized reduction from lapse of statute of limitations | $ 5.4 |
Fair Value Measurements (Narrat
Fair Value Measurements (Narrative) (Details) - USD ($) | 3 Months Ended | ||
Oct. 31, 2020 | Jan. 31, 2021 | Jul. 31, 2020 | |
Interest rate swap | Cash Flow Hedge | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | |||
Notional amounts | $ 40,000,000 | ||
Maximum length of time hedged in interest rate ( in years) | 10 years | ||
Fair Value, Inputs, Level 2 | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | |||
Notional amounts | $ 110,600,000 | $ 82,000,000 | |
Fair Value, Inputs, Level 2 | Interest rate swap | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | |||
Notional amounts | 40,000,000 | 0 | |
Fair Value, Inputs, Level 2 | Fair Value | Fixed Interest Rate | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | |||
Debt instrument, fair value disclosure | 297,500,000 | 297,300,000 | |
Fair Value, Inputs, Level 2 | Fair Value | Variable Interest Rate | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | |||
Debt instrument, fair value disclosure | 227,400,000 | 350,000,000 | |
Fair Value, Inputs, Level 2 | Carrying Value | Fixed Interest Rate | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | |||
Debt instrument, fair value disclosure | 275,000,000 | 275,000,000 | |
Fair Value, Inputs, Level 2 | Carrying Value | Variable Interest Rate | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | |||
Debt instrument, fair value disclosure | 227,400,000 | 350,000,000 | |
Fair Value, Inputs, Level 3 | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | |||
Equity method investments | $ 23,300,000 | $ 21,700,000 |
Fair Value Measurements (Deriva
Fair Value Measurements (Derivatives on the Balance Sheet) (Details) - Fair Value, Inputs, Level 2 - USD ($) $ in Millions | Jan. 31, 2021 | Jul. 31, 2020 |
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Notional amounts | $ 110.6 | $ 82 |
Derivative assets | 3.7 | 3.3 |
Derivative liabilities | (5.6) | (1.4) |
Prepaid expenses and other current assets | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Derivative assets | 3.7 | 3.2 |
Other long-term assets | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Derivative assets | 0.1 | |
Net investment hedge | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Notional amounts | 50 | 55.8 |
Derivative assets | 1.1 | 1.2 |
Derivative liabilities | (3.3) | 0 |
Forward foreign currency exchange contracts | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Notional amounts | 20.6 | 26.2 |
Derivative assets | 1.5 | 2.1 |
Derivative liabilities | (2.3) | (1.4) |
Interest rate swap | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Notional amounts | 40 | 0 |
Derivative assets | 1.1 | 0 |
Derivative liabilities | $ 0 | $ 0 |
Shareholders' Equity (Details)
Shareholders' Equity (Details) - USD ($) $ / shares in Units, $ in Millions | 6 Months Ended | |
Jan. 31, 2021 | Jan. 31, 2020 | |
Stockholders' Equity Note [Abstract] | ||
Number of shares authorized to be repurchased (in shares) | 13,000,000 | |
Stock repurchased during the period (in shares) | 871,203 | |
Stock repurchased during the period | $ 46.3 | $ 65 |
Shares with remaining authorization for repurchase under stock repurchase plan (in shares) | 9,800,000 | |
Dividends paid per share (in usd per share) | $ 0.420 | $ 0.420 |
Accumulated Other Comprehensi_3
Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||||
Jan. 31, 2021 | Oct. 31, 2020 | Jan. 31, 2020 | Jan. 31, 2021 | Jan. 31, 2020 | Jul. 31, 2020 | |
Accumulated Other Comprehensive Income (Loss), Net of Tax | ||||||
Beginning Balance | $ 1,052.6 | $ 992.9 | $ 917 | $ 992.9 | $ 892.7 | |
Other comprehensive income (loss) before reclassifications and tax | 39.8 | 2.4 | 39.1 | 10.6 | ||
Tax (expense) benefit | 0.3 | 0.5 | (0.7) | 0.7 | ||
Other comprehensive income (loss) before reclassifications, net of tax | 40.1 | 2.9 | 38.4 | 11.3 | ||
Reclassifications, before tax | (0.5) | 1.7 | 3.1 | 4.3 | ||
Tax (expense) benefit | 0.2 | (0.4) | (0.5) | (1) | ||
Reclassifications, net of tax | (0.3) | 1.3 | 2.6 | 3.3 | ||
Other comprehensive income (loss), net of tax | 39.8 | 4.2 | 41 | 14.6 | ||
Ending Balance | 1,074.4 | 1,052.6 | 940.4 | 1,074.4 | 940.4 | |
Accumulated other comprehensive loss | (143) | (143) | $ (184) | |||
Reclassification, Other | ||||||
Accumulated Other Comprehensive Income (Loss), Net of Tax | ||||||
Curtailment charge | 0.8 | |||||
Accumulated other comprehensive loss | 4 | |||||
Total | ||||||
Accumulated Other Comprehensive Income (Loss), Net of Tax | ||||||
Beginning Balance | (182.8) | (184) | (182.5) | (184) | (192.9) | |
Other comprehensive income (loss), net of tax | 39.8 | 4.2 | 41 | 14.6 | ||
Ending Balance | (143) | (182.8) | (178.3) | (143) | (178.3) | |
Foreign Currency Translation Adjustment | ||||||
Accumulated Other Comprehensive Income (Loss), Net of Tax | ||||||
Beginning Balance | (79) | (74) | (84.6) | (74) | (92.7) | |
Other comprehensive income (loss) before reclassifications and tax | 41.5 | 2.4 | 36.5 | 10.5 | ||
Tax (expense) benefit | 0 | 0 | 0 | 0 | ||
Other comprehensive income (loss) before reclassifications, net of tax | 41.5 | 2.4 | 36.5 | 10.5 | ||
Reclassifications, before tax | 0 | 0 | 0 | 0 | ||
Tax (expense) benefit | 0 | 0 | 0 | 0 | ||
Reclassifications, net of tax | 0 | 0 | 0 | 0 | ||
Other comprehensive income (loss), net of tax | 41.5 | 2.4 | 36.5 | 10.5 | ||
Ending Balance | (37.5) | (79) | (82.2) | (37.5) | (82.2) | |
Pension Benefits | ||||||
Accumulated Other Comprehensive Income (Loss), Net of Tax | ||||||
Beginning Balance | (103.9) | (110) | (98.2) | (110) | (99) | |
Other comprehensive income (loss) before reclassifications and tax | 0 | 0 | 4 | 0 | ||
Tax (expense) benefit | 0 | 0 | (1) | 0 | ||
Other comprehensive income (loss) before reclassifications, net of tax | 0 | 0 | 3 | 0 | ||
Reclassifications, before tax | 0.2 | 1.6 | 3.8 | 2.3 | ||
Tax (expense) benefit | (0.2) | (0.4) | (0.7) | (0.3) | ||
Reclassifications, net of tax | 0 | 1.2 | 3.1 | 2 | ||
Other comprehensive income (loss), net of tax | 0 | 1.2 | 6.1 | 2 | ||
Ending Balance | (103.9) | (103.9) | (97) | (103.9) | (97) | |
Derivative Financial Instruments | ||||||
Accumulated Other Comprehensive Income (Loss), Net of Tax | ||||||
Beginning Balance | 0.1 | 0 | 0.3 | 0 | (1.2) | |
Other comprehensive income (loss) before reclassifications and tax | (1.7) | 0 | (1.4) | 0.1 | ||
Tax (expense) benefit | 0.3 | 0.5 | 0.3 | 0.7 | ||
Other comprehensive income (loss) before reclassifications, net of tax | (1.4) | 0.5 | (1.1) | 0.8 | ||
Reclassifications, before tax | (0.7) | 0.1 | (0.7) | 2 | ||
Tax (expense) benefit | 0.4 | 0 | 0.2 | (0.7) | ||
Reclassifications, net of tax | (0.3) | 0.1 | (0.5) | 1.3 | ||
Other comprehensive income (loss), net of tax | (1.7) | 0.6 | (1.6) | 2.1 | ||
Ending Balance | $ (1.6) | $ 0.1 | $ 0.9 | $ (1.6) | $ 0.9 |
Guarantees (Details)
Guarantees (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | |||
Jan. 31, 2021 | Jan. 31, 2020 | Jan. 31, 2021 | Jan. 31, 2020 | Jul. 31, 2020 | |
Guarantor Obligations | |||||
Royalty income | $ 679.1 | $ 662 | $ 1,315.8 | $ 1,334.7 | |
Advanced Filtration Systems, Inc. | |||||
Guarantor Obligations | |||||
Outstanding debt (the Company guarantees half) | 33.7 | 33.7 | $ 40 | ||
Contingent liability for standby letters of credit | 7.7 | 7.7 | 7.5 | ||
Amounts drawn for letters of credit | 0 | 0 | $ 0 | ||
Investment earnings | 0.2 | 0.3 | 0.5 | 0.4 | |
Advanced Filtration Systems, Inc. | Royalty | |||||
Guarantor Obligations | |||||
Royalty income | $ 1.7 | $ 1.7 | $ 3.2 | $ 3.6 |
Segment Reporting (Details)
Segment Reporting (Details) | 6 Months Ended |
Jan. 31, 2021segment | |
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 | 6 Months Ended | ||
Jan. 31, 2021 | Jan. 31, 2020 | Jan. 31, 2021 | Jan. 31, 2020 | |
Segment Reporting Information | ||||
Net sales | $ 679.1 | $ 662 | $ 1,315.8 | $ 1,334.7 |
Earnings before income taxes | 73.9 | 82.8 | 156.1 | 169.5 |
Operating Segments | Engine Products segment | ||||
Segment Reporting Information | ||||
Net sales | 462.4 | 435.6 | 898.6 | 894.7 |
Earnings before income taxes | 61.3 | 53.3 | 121.7 | 115.7 |
Operating Segments | Engine Products segment | Off-Road | ||||
Segment Reporting Information | ||||
Net sales | 77.9 | 67.5 | 142.6 | 136.1 |
Operating Segments | Engine Products segment | On-Road | ||||
Segment Reporting Information | ||||
Net sales | 33.4 | 33.8 | 65.3 | 74.5 |
Operating Segments | Engine Products segment | Aftermarket | ||||
Segment Reporting Information | ||||
Net sales | 330.2 | 308.1 | 647.4 | 627.5 |
Operating Segments | Engine Products segment | Aerospace and Defense | ||||
Segment Reporting Information | ||||
Net sales | 20.9 | 26.2 | 43.3 | 56.6 |
Operating Segments | Industrial Products segment | ||||
Segment Reporting Information | ||||
Net sales | 216.7 | 226.4 | 417.2 | 440 |
Earnings before income taxes | 25.8 | 34.6 | 53.3 | 64.1 |
Operating Segments | Industrial Products segment | Industrial Filtration Solutions | ||||
Segment Reporting Information | ||||
Net sales | 149.9 | 155 | 285.6 | 304.1 |
Operating Segments | Industrial Products segment | Gas Turbine Systems | ||||
Segment Reporting Information | ||||
Net sales | 23.4 | 24.3 | 46.4 | 45 |
Operating Segments | Industrial Products segment | Special Applications | ||||
Segment Reporting Information | ||||
Net sales | 43.4 | 47.1 | 85.2 | 90.9 |
Corporate and unallocated | ||||
Segment Reporting Information | ||||
Earnings before income taxes | $ (13.2) | $ (5.1) | $ (18.9) | $ (10.3) |
Borrowings (Details)
Borrowings (Details) - Unsecured revolving credit facility | 6 Months Ended |
Jan. 31, 2021USD ($) | |
Debt Instrument | |
Remaining borrowing capacity | $ 100,000,000 |
Unsecured revolving credit facility maturing July 2022 | |
Debt Instrument | |
Maximum borrowing capacity | 500,000,000 |
Remaining borrowing capacity | $ 377,300,000 |
Revolving credit agreement (term) | 364 days |
Increase to borrowing capacity | $ 100,000,000 |
Extension term (term) | 1 year |
Restructuring (Details)
Restructuring (Details) $ in Millions | 3 Months Ended |
Jan. 31, 2021USD ($) | |
Restructuring Cost and Reserve | |
Payments for restructuring | $ 0.6 |
Accrual adjustment | 14.2 |
Corporate and unallocated | |
Restructuring Cost and Reserve | |
Restructuring charges | 5.8 |
Engine Products segment | |
Restructuring Cost and Reserve | |
Restructuring charges | 2.5 |
Industrial Products segment | |
Restructuring Cost and Reserve | |
Restructuring charges | 6.5 |
Cost of Sales | |
Restructuring Cost and Reserve | |
Restructuring charges | 5.8 |
Operating Expense | |
Restructuring Cost and Reserve | |
Restructuring charges | 9 |
Employee Severance | |
Restructuring Cost and Reserve | |
Restructuring charges | $ 14.8 |