Cover Page
Cover Page - shares | 6 Months Ended | |
Jan. 31, 2022 | Feb. 23, 2022 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Jan. 31, 2022 | |
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, $5.00 par value | |
Trading Symbol(s) | DCI | |
Name of each exchange on which registered | NYSE | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 123,557,970 | |
Entity Central Index Key | 0000029644 | |
Current Fiscal Year End Date | --07-31 | |
Document Fiscal Year Focus | 2022 | |
Document Fiscal Period Focus | Q2 | |
Amendment Flag | false |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS - USD ($) shares in Millions, $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jan. 31, 2022 | Jan. 31, 2021 | Jan. 31, 2022 | Jan. 31, 2021 | |
Income Statement [Abstract] | ||||
Net sales | $ 802.5 | $ 679.1 | $ 1,563.4 | $ 1,315.8 |
Cost of sales | 552.7 | 453.8 | 1,056.6 | 867.8 |
Gross profit | 249.8 | 225.3 | 506.8 | 448 |
Operating expenses | 154.1 | 149.2 | 303.6 | 284.7 |
Operating income | 95.7 | 76.1 | 203.2 | 163.3 |
Interest expense | 3.6 | 3.3 | 7.1 | 6.8 |
Other (income) expense, net | (2.4) | (1.1) | (2.4) | 0.4 |
Earnings before income taxes | 94.5 | 73.9 | 198.5 | 156.1 |
Income taxes | 22.7 | 17.7 | 49.7 | 38 |
Net earnings | $ 71.8 | $ 56.2 | $ 148.8 | $ 118.1 |
Weighted average shares - basic (in shares) | 123.9 | 126.6 | 124.1 | 126.7 |
Weighted average shares - diluted (in shares) | 125.6 | 128.2 | 126 | 128.2 |
Net earnings per share - basic (in usd per share) | $ 0.58 | $ 0.44 | $ 1.20 | $ 0.93 |
Net earnings per share - diluted (in usd per share) | $ 0.57 | $ 0.44 | $ 1.18 | $ 0.92 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jan. 31, 2022 | Jan. 31, 2021 | Jan. 31, 2022 | Jan. 31, 2021 | |
Statement of Comprehensive Income [Abstract] | ||||
Net earnings | $ 71.8 | $ 56.2 | $ 148.8 | $ 118.1 |
Other comprehensive (loss) income: | ||||
Foreign currency translation (loss) income | (17.1) | 41.5 | (27.6) | 36.5 |
Pension liability adjustment, net of deferred taxes of $(0.6), $(0.2), $(1.1) and $(1.7), respectively | 2 | 0 | 4 | 6.1 |
Derivatives: | ||||
Gains (losses) on hedging derivatives, net of deferred taxes of $(0.2), $0.3, $(0.4) and $0.3, respectively | 0.7 | (1.4) | 1.7 | (1.1) |
Reclassifications of gains on hedging derivatives to net earnings, net of taxes of $0.2, $0.4, $(0.1) and $0.2, respectively | (0.3) | (0.3) | 0 | (0.5) |
Total derivatives | 0.4 | (1.7) | 1.7 | (1.6) |
Net other comprehensive (loss) income | (14.7) | 39.8 | (21.9) | 41 |
Comprehensive income | $ 57.1 | $ 96 | $ 126.9 | $ 159.1 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Parenthetical) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jan. 31, 2022 | Jan. 31, 2021 | Jan. 31, 2022 | Jan. 31, 2021 | |
Statement of Comprehensive Income [Abstract] | ||||
Deferred taxes on pension liability | $ (0.6) | $ (0.2) | $ (1.1) | $ (1.7) |
Deferred taxes on hedging derivatives | (0.2) | 0.3 | (0.4) | 0.3 |
Taxes on reclassifications of derivatives to net income | $ 0.2 | $ 0.4 | $ (0.1) | $ 0.2 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Millions | Jan. 31, 2022 | Jul. 31, 2021 |
Current assets: | ||
Cash and cash equivalents | $ 170.4 | $ 222.8 |
Accounts receivable, less allowances of $5.6 and $7.0, respectively | 553.4 | 552.7 |
Inventories, net | 480.7 | 384.5 |
Prepaid expenses and other current assets | 109.7 | 84 |
Total current assets | 1,314.2 | 1,244 |
Property, plant and equipment, net | 601 | 617.8 |
Goodwill | 344.3 | 322.5 |
Intangible assets, net | 79.4 | 61.6 |
Other long-term assets | 152.4 | 154.3 |
Total assets | 2,491.3 | 2,400.2 |
Current liabilities: | ||
Short-term borrowings | 63.9 | 48.5 |
Accounts payable | 324.5 | 293.9 |
Accrued employee compensation and related taxes | 89.6 | 126.8 |
Income taxes payable | 28.9 | 17.7 |
Dividend payable | 27.3 | 27.6 |
Other current liabilities | 104.3 | 92.1 |
Total current liabilities | 638.5 | 606.6 |
Long-term debt | 553.9 | 461 |
Non-current income taxes payable | 74.4 | 80.7 |
Deferred income taxes | 30.6 | 26.6 |
Other long-term liabilities | 77.1 | 88.2 |
Total liabilities | 1,374.5 | 1,263.1 |
Stockholders’ 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 | 12 | 5.8 |
Retained earnings | 1,702.5 | 1,608.4 |
Stock-based compensation plans | 15.5 | 12.8 |
Accumulated other comprehensive loss | (140.1) | (118.2) |
Treasury stock, 28,097,776 and 26,620,560 shares, respectively, at cost | (1,231.3) | (1,129.9) |
Total stockholders’ equity | 1,116.8 | 1,137.1 |
Total liabilities and stockholders’ equity | $ 2,491.3 | $ 2,400.2 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Millions | Jan. 31, 2022 | Jul. 31, 2021 |
Statement of Financial Position [Abstract] | ||
Accounts receivable, allowance | $ 5.6 | $ 7 |
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) | 28,097,776 | 26,620,560 |
CONDENSED CONSOLIDATED STATEM_4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Millions | 6 Months Ended | |
Jan. 31, 2022 | Jan. 31, 2021 | |
Operating Activities | ||
Net earnings | $ 148.8 | $ 118.1 |
Adjustments to reconcile net earnings to net cash provided by operating activities: | ||
Depreciation and amortization | 47.5 | 46.6 |
Deferred income taxes | 1.2 | (7) |
Stock-based compensation expense | 13.4 | 10.2 |
Other, net | 6.5 | 13.5 |
Changes in operating assets and liabilities | (137.6) | 20.9 |
Net cash provided by operating activities | 79.8 | 202.3 |
Investing Activities | ||
Purchases of property, plant and equipment | (33.5) | (30.4) |
Acquisitions, net of cash acquired | (49) | 0 |
Net cash used in investing activities | (82.5) | (30.4) |
Financing Activities | ||
Proceeds from long-term debt | 174.3 | 0 |
Repayments of long-term debt | (75) | (125) |
Change in short-term borrowings | 15.9 | 13 |
Purchase of non-controlling interests | 0 | (14.4) |
Purchase of treasury stock | (115.6) | (46.3) |
Dividends paid | (54.6) | (53.1) |
Tax withholding payments for stock compensation transactions | (1.2) | (3.5) |
Exercise of stock options | 10.5 | 18.7 |
Net cash used in financing activities | (45.7) | (210.6) |
Effect of exchange rate changes on cash | (4) | 9.4 |
Decrease in cash and cash equivalents | (52.4) | (29.3) |
Cash and cash equivalents, beginning of period | 222.8 | 236.6 |
Cash and cash equivalents, end of period | 170.4 | 207.3 |
Supplemental Cash Flow Information | ||
Income taxes paid | 50.4 | 51.9 |
Interest paid | 5 | 5.8 |
Supplemental Disclosure of Non-Cash Operating and Investing Transactions | ||
Accrued property, plant and equipment additions | 9.1 | 6 |
Leased assets obtained in exchange for new operating lease liabilities | $ 9.3 | $ 5.8 |
CONDENSED CONSOLIDATED STATEM_5
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ 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, 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 (loss) 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 (loss) 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) |
Beginning Balance at Jul. 31, 2021 | 1,137.1 | 758.2 | 5.8 | 1,608.4 | 0 | 12.8 | (118.2) | (1,129.9) |
Increase (Decrease) in Stockholders' Equity | ||||||||
Net earnings | 148.8 | 148.8 | ||||||
Other comprehensive (loss) income | (21.9) | (21.9) | ||||||
Treasury stock acquired | (115.6) | (115.6) | ||||||
Dividends declared | (54.3) | (54.3) | ||||||
Stock compensation and other activity | 22.7 | 6.2 | (0.4) | 2.7 | 14.2 | |||
Ending Balance at Jan. 31, 2022 | 1,116.8 | 758.2 | 12 | 1,702.5 | 0 | 15.5 | (140.1) | (1,231.3) |
Beginning Balance at Oct. 31, 2021 | 1,115.9 | 758.2 | 12.3 | 1,685.9 | 0 | 14.5 | (125.4) | (1,229.6) |
Increase (Decrease) in Stockholders' Equity | ||||||||
Net earnings | 71.8 | 71.8 | ||||||
Other comprehensive (loss) income | (14.7) | (14.7) | ||||||
Treasury stock acquired | (12.7) | (12.7) | ||||||
Dividends declared | (54.5) | (54.5) | ||||||
Stock compensation and other activity | 11 | (0.3) | (0.7) | 1 | 11 | |||
Ending Balance at Jan. 31, 2022 | $ 1,116.8 | $ 758.2 | $ 12 | $ 1,702.5 | $ 0 | $ 15.5 | $ (140.1) | $ (1,231.3) |
CONDENSED CONSOLIDATED STATEM_6
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (Parenthetical) - $ / shares | 3 Months Ended | 6 Months Ended | ||
Jan. 31, 2022 | Jan. 31, 2021 | Jan. 31, 2022 | Jan. 31, 2021 | |
Statement of Stockholders' Equity [Abstract] | ||||
Dividends, per share (in dollars per share) | $ 0.44 | $ 0.42 | $ 0.44 | $ 0.42 |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 6 Months Ended |
Jan. 31, 2022 | |
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 (GAAP) in the United States (U.S.) 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 stockholders’ equity have been included and are of a normal recurring nature. Operating results for the three and six months ended January 31, 2022 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, 2021. Principles of Consolidation The Condensed Consolidated Financial Statements include the accounts of the Company and all of its majority-owned subsidiaries. All intercompany accounts and transactions have been eliminated. The Company’s joint ventures are not majority-owned and are accounted for under the equity method. Use of Estimates 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 effects of the ongoing Coronavirus (COVID-19) pandemic continue to impact global economic conditions. The Company continues to experience supply chain disruptions, including global logistics and labor challenges and constrained supplies of steel, petrochemical products and filter media. These disruptions have slowed the Company’s production speed and increased lead times. The Company has undertaken steps to mitigate these negative impacts, such as qualifying additional suppliers. These disruptions impeded the Company’s ability to meet streng thening demand. This dynamic impacted results in the first half of fiscal 2022 and is expected to continue throughout fiscal 2022. New Accounting Standards Not Yet Adopted The Company considers the applicability and impact of the Financial Accounting Standards Board’s (FASB) Accounting Standards Updates (ASUs) issued but not yet adopted. In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. This ASU clarifies that an acquirer of a business should recognize and measure contract assets and contract liabilities in a business combination in accordance with ASU 2014-9, Revenue from Contracts with Customers |
Acquisitions
Acquisitions | 6 Months Ended |
Jan. 31, 2022 | |
Business Combination and Asset Acquisition [Abstract] | |
Acquisitions | Acquisitions Solaris Biotechnology Srl (Solaris) On November 22, 2021, the Company acquired Solaris, headquartered in Porto Mantovano, Italy, with U.S. operations based in Berkeley, California, for cash consideration of approximately €41 million, or $45.7 million. Solaris designs and manufactures bioprocessing equipment, including bioreactors, fermenters and tangential flow filtration systems for use in food and beverage, biotechnology and other life sciences markets. Solaris is reported within the Company’s Industrial Filtration Solutions business in the Industrial Products segment. In the second quarter of fiscal 2022, the Company assigned the fair values to the net assets acquired resulting in $27.2 million for goodwill and $20.8 million for intangible assets, none of which are expected to be deductible for tax purposes, as well as a deferred tax liability of $4.4 million. Pearson Arnold Industrial Services (PAIS) On November 1, 2021, the Company acquired PAIS, headquartered in the U.S., for cash consideration of approximately $3.3 million. PAIS provides equipment, parts and services for dust, mist and fume collection systems, industrial fans and compressed air systems. PAIS is reported within the Industrial Products segment. In the second quarter of fiscal 2022, the Company assigned the fair values to the net assets acquired resulting in $0.4 million for goodwill and $3.0 million for intangible assets, all of which are expected to be deductible for tax purposes. The purchase price allocations for these acquisitions are preliminary pending the outcome of the final valuations of the net assets acquired. Management expects to finalize the purchase accounting for these acquisitions by the first quarter of fiscal 2023. Pro forma financial information for these acquisitions has not been presented because the acquisitions were not material to the Company’s Condensed Consolidated Statement of Earnings. See Note 6 for goodwill and intangible assets acquired. |
Revenue
Revenue | 6 Months Ended |
Jan. 31, 2022 | |
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, were as follows (in millions): Three Months Ended Six Months Ended 2022 2021 2022 2021 U.S. and Canada $ 314.0 $ 256.2 $ 614.8 $ 507.2 Europe, Middle East and Africa (EMEA) 241.7 201.1 466.3 389.0 Asia Pacific 170.2 161.4 334.0 305.5 Latin America 76.6 60.4 148.3 114.1 Total net sales $ 802.5 $ 679.1 $ 1,563.4 $ 1,315.8 See Note 17 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 of 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 $17.5 million and $14.9 million as of January 31, 2022 and July 31, 2021, 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 on the Condensed Consolidated Balance Sheets. Contract liabilities were $19.8 million and $12.2 million as of January 31, 2022 and July 31, 2021, 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. |
Inventories, Net
Inventories, Net | 6 Months Ended |
Jan. 31, 2022 | |
Inventory Disclosure [Abstract] | |
Inventories, Net | Inventories, Net The components of inventories, net were as follows (in millions): January 31, July 31, Raw materials $ 188.9 $ 148.1 Work in process 55.5 43.2 Finished products 236.3 193.2 Total inventories, net $ 480.7 $ 384.5 |
Property, Plant and Equipment,
Property, Plant and Equipment, Net | 6 Months Ended |
Jan. 31, 2022 | |
Property, Plant and Equipment [Abstract] | |
Property, Plant and Equipment, Net | Property, Plant and Equipment, Net The components of property, plant and equipment, net were as follows (in millions): January 31, July 31, Land $ 26.9 $ 27.1 Buildings 407.2 410.8 Machinery and equipment 971.1 972.0 Computer software 143.5 144.3 Construction in progress 50.3 40.6 Less accumulated depreciation (998.0) (977.0) Total property, plant and equipment, net $ 601.0 $ 617.8 |
Goodwill and Intangible Assets
Goodwill and Intangible Assets | 6 Months Ended |
Jan. 31, 2022 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill and Intangible Assets | Goodwill and Intangible Assets Goodwill The Company allocates goodwill to reporting units within its Engine Products and Industrial Products segments. There were no dispositions or impairment charges recorded during the three and six months ended January 31, 2022 and 2021. Goodwill is assessed for impairment annually during the third quarter of the fiscal year, or more frequently if events or changes in circumstances indicate the asset may be impaired. The Company performed its annual impairment assessment during the third quarter of fiscal 2021 and did not record any impairment as a result of this assessment. Goodwill by reportable segment was as follows (in millions): Engine Industrial Total Balance as of July 31, 2021 $ 84.7 $ 237.8 $ 322.5 Goodwill acquired — 27.6 27.6 Currency translation (0.4) (5.4) (5.8) Balance as of January 31, 2022 $ 84.3 $ 260.0 $ 344.3 Intangible Assets Intangible assets recognized from the Solaris acquisition were $20.8 million, of which technology was $17.3 million with a 15 year useful life, trademarks and tradenames were $3.3 million with a 10 year useful life and backlog was $0.2 million with a six month useful life. Intangible assets recognized from the PAIS acquisition were $3.0 million, all of which were customer relationships with a 20 year useful life. See Note 2 for the acquisitions. Intangible asset classes were as follows (in millions): Customer Relationships Patents, trademarks and technology Gross Carrying Amount Accumulated Amortization Total Gross Carrying Amount Accumulated Amortization Total Total Balance as of July 31, 2021 $ 107.5 $ (56.4) $ 51.1 $ 24.3 $ (13.8) $ 10.5 $ 61.6 Intangible assets acquired 3.2 — 3.2 20.6 — 20.6 23.8 Amortization expense — (3.2) (3.2) — (1.3) (1.3) (4.5) Currency translation (1.8) 0.7 (1.1) (0.5) 0.1 (0.4) (1.5) Balance as of January 31, 2022 $ 108.9 $ (58.9) $ 50.0 $ 44.4 $ (15.0) $ 29.4 $ 79.4 Amortization expense was $2.4 million and $4.5 million for the three and six months ended January 31, 2022, respectively, and was $2.1 million and $4.2 million for the three and six months ended January 31, 2021, respectively. |
Long-Term Debt
Long-Term Debt | 6 Months Ended |
Jan. 31, 2022 | |
Debt Disclosure [Abstract] | |
Long-Term Debt | Long-Term DebtAs of January 31, 2022, there was $467.5 million available on the Company’s $500.0 million unsecured revolving credit facility that expires on May 21, 2026. In fiscal 2021, the Company entered into an agreement in which the Company would issue and sell two tranches of unsecured senior notes, totaling $150.0 million. The first tranche, issued in August 2021, was a $100.0 million 10 year note due 2031 at a fixed interest rate of 2.50%. The second tranche, issued in November 2021, was a $50.0 million seven year note due 2028 at a fixed interest rate of 2.12%. Certain debt agreements contain financial covenants related to interest coverage and leverage ratios, as well as other non-financial covenants. As of January 31, 2022, the Company was in compliance with all such covenants. |
Income Taxes
Income Taxes | 6 Months Ended |
Jan. 31, 2022 | |
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. The U.S. In ternal Revenue Service has completed examinations of the Company’s U.S. federal income tax returns through 2017. With few exceptions, the Company is no longer subject to state and foreign income tax examinations by tax authorities for years befo re 2016 . As of January 31, 2022, gross unrecognized tax benefits were $19.3 million and accrued interest and penalties on these unrecognized tax benefits were $1.8 million . The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income taxes in the Condensed Consolidated Statements of Earnings. The Company estimates within the next 12 months it is reasonably possible its uncertain tax positions could decrease by as much as $5.3 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 10 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 reserve for income taxes, although the quantification of such potential adjustments cannot be made at this time. |
Earnings Per Share
Earnings Per Share | 6 Months Ended |
Jan. 31, 2022 | |
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 other stock incentive plans. Basic and diluted net earnings per share calculations were as follows (in millions, except per share amounts): Three Months Ended Six Months Ended 2022 2021 2022 2021 Net earnings $ 71.8 $ 56.2 $ 148.8 $ 118.1 Weighted average common shares outstanding Weighted average common shares – basic 123.9 126.6 124.1 126.7 Dilutive impact of stock-based awards 1.7 1.6 1.9 1.5 Weighted average common shares – diluted 125.6 128.2 126.0 128.2 Net earnings per share – basic $ 0.58 $ 0.44 $ 1.20 $ 0.93 Net earnings per share – diluted $ 0.57 $ 0.44 $ 1.18 $ 0.92 Stock options excluded from net earnings per share calculation 1.6 0.8 — 0.9 |
Shareholders' Equity
Shareholders' Equity | 6 Months Ended |
Jan. 31, 2022 | |
Stockholders' Equity Note [Abstract] | |
Shareholders' Equity | Stockholders’ 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, 2022, the Company repurchased 1.8 million shares for $115.6 million. As of January 31, 2022, the Company had remaining authorization to repurchase 6.5 million shares under this plan. Dividends Paid Dividends paid were 22.0 cents and 44.0 cents per share for the three and six months ended January 31, 2022, respectively, and were 21.0 cents and 42.0 cents for the three and six months ended January 31, 2021, respectively. |
Accumulated Other Comprehensive
Accumulated Other Comprehensive Loss | 6 Months Ended |
Jan. 31, 2022 | |
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, 2022 and 2021 were as follows (in millions): Foreign Pension Derivative Total Balance as of October 31, 2021, net of tax $ (54.5) $ (72.7) $ 1.8 $ (125.4) Other comprehensive (loss) income before reclassifications and tax (17.1) (1.7) (1) 0.9 (17.9) Tax benefit (expense) — 0.4 (0.2) 0.2 Other comprehensive (loss) income before reclassifications, net of tax (17.1) (1.3) 0.7 (17.7) Reclassifications, before tax — 4.3 (2) (0.5) (3) 3.8 Tax (expense) benefit — (1.0) 0.2 (0.8) Reclassifications, net of tax — 3.3 (0.3) 3.0 Other comprehensive (loss) income, net of tax (17.1) 2.0 0.4 (14.7) Balance as of January 31, 2022, net of tax $ (71.6) $ (70.7) $ 2.2 $ (140.1) 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 (2) (0.7) (3) (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) (1) In fiscal 2022, pension settlement accounting was triggered. Remeasurement of the Company’s pension obligations resulted in an adjustment to accumulated other comprehensive loss of $1.7 million on the Condensed Consolidated Balance Sheet, see Note 13. (2) Includes reclassifications of $1.2 million in fiscal 2022, and in both periods, net amortization of prior service costs and actuarial losses included in other (income) expense, net in the Condensed Consolidated Statements of Earnings, see Note 13. (3) Relates to designated forward foreign currency exchange contracts that were reclassified from accumulated other comprehensive loss on the Condensed Consolidated Balance Sheets to net sales, cost of sales and operating expenses in the Condensed Consolidated Statements of Earnings, see Note 14. Changes in accumulated other comprehensive loss for the six months ended January 31, 2022 and 2021 were as follows (in millions): Foreign Pension Derivative Total Balance as of July 31, 2021, net of tax $ (44.0) $ (74.7) $ 0.5 $ (118.2) Other comprehensive (loss) income before reclassifications and tax (27.6) (1.7) (1) 2.1 (27.2) Tax benefit (expense) — 0.4 (0.4) — Other comprehensive (loss) income before reclassifications, net of tax (27.6) (1.3) 1.7 (27.2) Reclassifications, before tax — 6.8 (2) 0.1 (3) 6.9 Tax expense — (1.5) (0.1) (1.6) Reclassifications, net of tax — 5.3 — 5.3 Other comprehensive (loss) income, net of tax (27.6) 4.0 1.7 (21.9) Balance as of January 31, 2022, net of tax $ (71.6) $ (70.7) $ 2.2 $ (140.1) 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 as of January 31, 2021, net of tax $ (37.5) $ (103.9) $ (1.6) $ (143.0) (1) In fiscal 2022, pension settlement accounting was triggered. In fiscal 2021, pension curtailment accounting was triggered. Remeasurements of the Company’s pension obligations resulted in adjustments to accumulated other comprehensive loss of $1.7 million and $4.0 million, in fiscal 2022 and 2021, respectively, on the Condensed Consolidated Balance Sheets, see Note 13. (2) Includes reclassifications of $1.2 million and $0.8 million in fiscal 2022 and 2021, respectively, and in both periods, net amortization of prior service costs and actuarial losses included in other (income) expense, net in the Condensed Consolidated Statements of Earnings, see Note 13. (3) Relates to designated forward foreign currency exchange contracts that were reclassified from accumulated other comprehensive loss on the Condensed Consolidated Balance Sheets to net sales, cost of sales and operating expenses in the Condensed Consolidated Statements of Earnings, see Note 14. |
Stock-Based Compensation
Stock-Based Compensation | 6 Months Ended |
Jan. 31, 2022 | |
Share-based Payment Arrangement, Noncash Expense [Abstract] | |
Stock-Based Compensation | Stock-Based Compensation The Company recognizes 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. The Company issues treasury shares for stock options and performance-based awards. 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 t he date of grant and vest in equal increments over three years. Pretax stock-based compensation expense associated with options was $1.9 million and $8.8 million for the three and six months ended January 31, 2022, respectively, and was $2.3 million and $7.4 million for the three and six months ended January 31, 2021, respectively. Fair value is calculated using the Black-Scholes option pricing model. The weighted average fair value for options granted during the six months ended January 31, 2022 and 2021 was $14.27 and $10.21 per share, respectively. Option activity was as follows: Options Weighted Balance outstanding as of July 31, 2021 6,444,743 $ 44.05 Granted 878,305 59.36 Exercised (287,742) 37.16 Canceled/forfeited (21,562) 52.23 Balance outstanding as of January 31, 2022 7,013,744 $ 46.22 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. Pretax performance-based award expense was $2.1 million and $3.8 million for the three and six months ended January 31, 2022, respectively, and $1.2 million and $2.1 million for the three and six months ended January 31, 2021, respectively. Performance-based award for non-vested activity was as follows: Performance Shares Weighted Balance outstanding as of July 31, 2021 200,567 $ 48.76 Granted 88,400 59.40 Vested — — Canceled (3,580) 53.23 Balance outstanding as of January 31, 2022 285,387 $ 52.00 |
Employee Benefit Plans
Employee Benefit Plans | 6 Months Ended |
Jan. 31, 2022 | |
Retirement Benefits, Description [Abstract] | |
Employee Benefit Plans | Employee Benefit Plans The Company has defined benefit pension plans for many of its hourly and salaried employees. These plans generally provide pension benefits based on years of service and compensation level. Components of net periodic pension costs other than the service cost component are included in other (income) expense, net in the Condensed Consolidated Statements of Earnings. Net periodic pension costs for the Company’s pension plans were as follows (in millions): Three Months Ended Six Months Ended 2022 2021 2022 2021 Service cost $ 1.8 $ 1.8 $ 3.6 $ 4.0 Interest cost 2.5 2.5 5.0 4.9 Expected return on assets (6.2) (5.8) (12.5) (11.5) Prior service cost amortization — 0.1 0.1 0.2 Actuarial loss amortization 1.8 1.9 3.6 4.1 Settlement charge 1.2 — 1.2 — Curtailment charge — — — 0.8 Net periodic pension costs $ 1.1 $ 0.5 $ 1.0 $ 2.5 In the second quarter of fiscal 2022, the Company recorded a pension settlement charge of $1.2 million as a result of lump sum distributions exceeding the service and interest cost components of the annual net periodic pension cost. The corresponding remeasurement resulted in a decrease in the Company’s pension assets and a corresponding adjustment to other comprehensive loss in the Condensed Consolidated Statement of Comprehensive Income of $1.7 million. See Note 11. In the first quarter of fiscal 2021, the Company recorded a pension curtailment charge of $0.8 million as a result of freezing the pension benefits to certain employees. The corresponding remeasurement resulted in a decrease in the Company’s pension obligation and a corresponding adjustment to other comprehensive income in the Condensed Consolidated Statement of Comprehensive Income of $4.0 million. See Note 11. The Company’s general funding policy is to make at least the minimum required contributions as required by applicable regulations, plus any additional amounts it determines to be appropriate. Future required pension plan contributions may change significantly depending on the actual rate of return on plan assets, discount rates and regulatory requirements. |
Fair Value Measurements
Fair Value Measurements | 6 Months Ended |
Jan. 31, 2022 | |
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. Short-Term Financial Instruments As of January 31, 2022 and July 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. Long-Term Debt As of January 31, 2022, the estimated fair values of fixed interest rate long-term debt were $433.4 million compared to the carrying values of $425.0 million. As of July 31, 2021, the estimated fair values of fixed interest rate long-term debt were $297.4 million compared to the carrying values of $275.0 million. The fair values are estimated by discounting the projected cash flows using the interest rates at which similar amounts of debt could currently be borrowed. The carrying values of total variable interest rate long-term debt were $131.6 million an d $188.3 million as of January 31, 2022 and July 31, 2021, respectively, and approximate their fair values. Long-term debt is cl assified as Level 2 in the fair value hierarchy. Equity Method Investments The Company holds equity method investments in its joint ventures, which are included in other long-term assets on the Condensed Consolidated Balance Sheets. The aggregate carrying amount of these investments was $23.7 million and $24.2 million as of January 31, 2022 and July 31, 2021, 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 adjusted as there have been no triggering events or changes in circumstance that would have had an adverse impact on the value of these investments. In the event 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. 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. The fair values of the Company’s forward foreign currency exchange contracts and net investment hedges 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 are determined by standard calculations and models that use readily observable market parameters. These inputs include foreign currency exchange rates and interest rates. Industry standard data providers are the primary source for forward and spot rate information for both interest rates and foreign currency exchange rates. The fair values of the Company’s forward foreign currency exchange contracts and net investment hedges are classified as Level 2 in the fair value hierarchy. Forward Foreign Currency Exchange Contracts The Company buys materials from foreign suppliers. Those transactions can be denominated in those suppliers’ local currency. The Company also sells to customers in foreign countries. Those transactions can be denominated in those customers’ local currency. Both of these transaction types can create volatility in the Company’s financial statements. The Company uses forward currency exchange contracts to manage those exposures and fluctuations. These contracts generally mature in 12 months or less, which is consistent with the forecasts of the rel ated purchases and sales. Certain contracts are designated as cash flow hedges, whereas the remaining contracts, most of which are related to certain intercompany transactions, are not designated. 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 for designating these contracts as net investment hedges. Fair Value of Derivatives Contracts The fair value of the Company’s derivative contracts, recorded on the Condensed Consolidated Balance Sheets, was as follows (in millions): Total Notional Amounts Assets Liabilities January 31, July 31, January 31, July 31, January 31, July 31, 2022 2021 2022 2021 2022 2021 Designated as hedging instruments Forward foreign currency exchange contracts $ 70.7 $ 117.2 $ 1.5 $ 1.0 $ 1.4 $ 1.2 Net investment hedge 55.8 55.8 1.1 1.1 0.1 2.0 Total designated 126.5 173.0 2.6 2.1 1.5 3.2 Not designated as hedging instruments Forward foreign currency exchange contracts 215.9 154.2 1.3 0.5 1.7 0.4 Total not designated 215.9 154.2 1.3 0.5 1.7 0.4 Total $ 342.4 $ 327.2 $ 3.9 $ 2.6 $ 3.2 $ 3.6 Forward foreign currency exchange contract assets were recorded in other current assets and in other long-term assets on the Condensed Consolidated Balance Sheets. Forward foreign currency exchange contract liabilities were recorded in other current liabilities on the Condensed Consolidated Balance Sheets. The net investment hedge was recorded in other current assets and in other long-term liabilities on the Condensed Consolidated Balance Sheets. Changes in the fair value of the Company’s designated hedges are reported in accumulated other comprehensive loss on the Condensed Consolidated Balance Sheets until the related transaction occurs. Designated hedges are recognized as a component of net sales, cost of sales and operating expenses in the Condensed Consolidated Statements of Earnings upon occurrence of the related hedged transaction. Hedges which are not designated are recognized in other (income) expense, net in the Condensed Consolidated Statements of Earnings timed to coincide with the related hedged transactions. Changes in the fair value of these hedges are, likewise, recognized in other (income) expense, net in the Condensed Consolidated Statements of Earnings. The Company classifies cash flows from derivatives designated in a qualifying cash flow hedging relationship in the same category as the cash flows from the hedged items. Cash flows from these derivative transactions are recorded in operating activities in the Condensed Consolidated Statements of Cash Flows. Amounts related to forward foreign currency exchange contracts are expected to be reclassified into earnings during the next 12 months based on the timing of inventory purchases and sales. Amounts related to excluded components associated with the net investment hedge are expected to be reclassified into earnings through its termination in July 2029. See Note 11 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, 2022 and July 31, 2021, 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 on their credit ratings and certain other financial factors. |
Guarantees
Guarantees | 6 Months Ended |
Jan. 31, 2022 | |
Guarantees [Abstract] | |
Guarantees | Guarantees Letters of Credit The Company has letters of credit which guarantee payment to third parties in the event the Company is in breach of contract terms as detailed in each letter of credit. The outstanding debt contingent liability for standby letters of credit was as follows (in millions): January 31, July 31, Contingent liability for standby letters of credit issued under the Company’s revolving credit facility $ 7.5 $ 7.7 Amounts drawn for letters of credit under the Company’s revolving credit facility $ — $ — Advanced Filtration Systems Inc. (AFSI) The Company has an unconsolidated joint venture, AFSI, established by the Company and Caterpillar Inc. (Caterpillar) in 1986. AFSI designs and manufactures high-efficiency fluid filters used in Caterpillar’s machinery worldwide. The Company and Caterpillar equally own the shares of AFSI, and both companies guaran tee 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 AFSI, which the Company guarantees half, was $46.0 million and $37.8 million as of January 31, 2022 and July 31, 2021, respectively. AFSI’s $63.0 million revolving credit facility expires July 31, 2024. Earnings from AFSI, which are recorded in other (income) expense, net in the Condensed Consolidated Statements of Earnings were $2.0 million and $3.2 million for the three and six months ended January 31, 2022, respectively, and $1.9 million and $3.7 million for the three and six months ended January 31, 2021, respectively. |
Commitments and Contingencies
Commitments and Contingencies | 6 Months Ended |
Jan. 31, 2022 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and ContingenciesThe Company records provisions when it is probable a liability has been incurred and the amount of the loss can be reasonably estimated. Claims and litigation are reviewed quarterly and provisions are taken or adjusted to reflect the status of a particular matter. The Company believes the estimated liability in its Condensed Consolidated Financial Statements for claims or litigation is adequate and appropriate for the probable and estimable outcomes. Liabilities recorded were not material to the Company’s financial position, results of operations or liquidity. 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, 2022 | |
Segment Reporting, Measurement Disclosures [Abstract] | |
Segment Reporting | Segment Reporting The Company’s reportable segments are Engine Products and Industrial Products. The Company determines its operating segments consistent with the manner in which it manages its operations and evaluates performance for internal review and decision-making. Corporate and unallocated includes corporate expenses determined to be non-allocable to the segments, such as interest expense, restructuring charges and certain incentive compensation . The Company is an integrated enterprise, characterized by substantial intersegment cooperation, cost allocations and sharing of assets. Therefore, the Company does not represent these segments, if operated independently, would report earnings before income taxes and other financial information shown below. Segment details were as follows (in millions): Three Months Ended Six Months Ended 2022 2021 2022 2021 Net sales Engine Products segment $ 554.1 $ 462.4 $ 1,081.3 $ 898.6 Industrial Products segment 248.4 216.7 482.1 417.2 Total Company $ 802.5 $ 679.1 $ 1,563.4 $ 1,315.8 Earnings before income taxes Engine Products segment $ 65.0 $ 61.3 $ 137.3 $ 121.7 Industrial Products segment 37.5 25.8 75.8 53.3 Corporate and unallocated (8.0) (13.2) (14.6) (18.9) Total Company $ 94.5 $ 73.9 $ 198.5 $ 156.1 Net sales by product group were as follows (in millions): Three Months Ended Six Months Ended 2022 2021 2022 2021 Engine Products segment Off-Road $ 95.5 $ 77.9 $ 189.4 $ 142.6 On-Road 33.1 33.4 64.6 65.3 Aftermarket 398.4 330.2 772.7 647.4 Aerospace and Defense 27.1 20.9 54.6 43.3 Total Engine Products segment 554.1 462.4 1,081.3 898.6 Industrial Products segment Industrial Filtration Solutions 171.2 149.9 336.7 285.6 Gas Turbine Systems 29.6 23.4 46.2 46.4 Special Applications 47.6 43.4 99.2 85.2 Total Industrial Products segment 248.4 216.7 482.1 417.2 Total Company $ 802.5 $ 679.1 $ 1,563.4 $ 1,315.8 Concentrations |
Restructuring
Restructuring | 6 Months Ended |
Jan. 31, 2022 | |
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 EMEA. These activities resulted in restructuring expenses, primarily related to severance, of $14.8 million. Charges of $5.8 million were included in cost of sales and $9.0 million were included in operating expenses in the Condensed Consolidated Statement of Earnings for the year ended July 31, 2021. This initiative is now substantially completed. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 6 Months Ended |
Jan. 31, 2022 | |
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 (GAAP) in the United States (U.S.) 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 stockholders’ equity have been included and are of a normal recurring nature. Operating results for the three and six months ended January 31, 2022 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, 2021. |
Principles of Consolidation | Principles of ConsolidationThe Condensed Consolidated Financial Statements include the accounts of the Company and all of its majority-owned subsidiaries. All intercompany accounts and transactions have been eliminated. The Company’s joint ventures are not majority-owned and are accounted for under the equity method. |
Use of Estimates | Use of Estimates 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 effects of the ongoing Coronavirus (COVID-19) pandemic continue to impact global economic conditions. The Company continues to experience supply chain disruptions, including global logistics and labor challenges and constrained supplies of steel, petrochemical products and filter media. These disruptions have slowed the Company’s production speed and increased lead times. The Company has undertaken steps to mitigate these negative impacts, such as qualifying additional suppliers. These disruptions impeded the Company’s ability to meet streng thening demand. This dynamic impacted results in the first half of fiscal 2022 and is expected to continue throughout fiscal 2022. |
New Accounting Standards Not Yet Adopted | New Accounting Standards Not Yet Adopted The Company considers the applicability and impact of the Financial Accounting Standards Board’s (FASB) Accounting Standards Updates (ASUs) issued but not yet adopted. In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. This ASU clarifies that an acquirer of a business should recognize and measure contract assets and contract liabilities in a business combination in accordance with ASU 2014-9, Revenue from Contracts with Customers |
Revenue (Tables)
Revenue (Tables) | 6 Months Ended |
Jan. 31, 2022 | |
Revenue from Contract with Customer [Abstract] | |
Disaggregation of Revenue | Net sales, generally disaggregated by location where the customer’s order was placed, were as follows (in millions): Three Months Ended Six Months Ended 2022 2021 2022 2021 U.S. and Canada $ 314.0 $ 256.2 $ 614.8 $ 507.2 Europe, Middle East and Africa (EMEA) 241.7 201.1 466.3 389.0 Asia Pacific 170.2 161.4 334.0 305.5 Latin America 76.6 60.4 148.3 114.1 Total net sales $ 802.5 $ 679.1 $ 1,563.4 $ 1,315.8 See Note 17 for net sales disaggregated by segment. |
Inventories, Net (Tables)
Inventories, Net (Tables) | 6 Months Ended |
Jan. 31, 2022 | |
Inventory Disclosure [Abstract] | |
Components of inventory | The components of inventories, net were as follows (in millions): January 31, July 31, Raw materials $ 188.9 $ 148.1 Work in process 55.5 43.2 Finished products 236.3 193.2 Total inventories, net $ 480.7 $ 384.5 |
Property, Plant and Equipment_2
Property, Plant and Equipment, Net (Tables) | 6 Months Ended |
Jan. 31, 2022 | |
Property, Plant and Equipment [Abstract] | |
Components of property, plant and equipment | The components of property, plant and equipment, net were as follows (in millions): January 31, July 31, Land $ 26.9 $ 27.1 Buildings 407.2 410.8 Machinery and equipment 971.1 972.0 Computer software 143.5 144.3 Construction in progress 50.3 40.6 Less accumulated depreciation (998.0) (977.0) Total property, plant and equipment, net $ 601.0 $ 617.8 |
Goodwill and Intangible Assets
Goodwill and Intangible Assets (Tables) | 6 Months Ended |
Jan. 31, 2022 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Reconciliation of goodwill | Goodwill by reportable segment was as follows (in millions): Engine Industrial Total Balance as of July 31, 2021 $ 84.7 $ 237.8 $ 322.5 Goodwill acquired — 27.6 27.6 Currency translation (0.4) (5.4) (5.8) Balance as of January 31, 2022 $ 84.3 $ 260.0 $ 344.3 |
Schedule of finite-lived intangible assets | Intangible asset classes were as follows (in millions): Customer Relationships Patents, trademarks and technology Gross Carrying Amount Accumulated Amortization Total Gross Carrying Amount Accumulated Amortization Total Total Balance as of July 31, 2021 $ 107.5 $ (56.4) $ 51.1 $ 24.3 $ (13.8) $ 10.5 $ 61.6 Intangible assets acquired 3.2 — 3.2 20.6 — 20.6 23.8 Amortization expense — (3.2) (3.2) — (1.3) (1.3) (4.5) Currency translation (1.8) 0.7 (1.1) (0.5) 0.1 (0.4) (1.5) Balance as of January 31, 2022 $ 108.9 $ (58.9) $ 50.0 $ 44.4 $ (15.0) $ 29.4 $ 79.4 |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 6 Months Ended |
Jan. 31, 2022 | |
Earnings Per Share [Abstract] | |
Schedule of basic and diluted net earnings per share | Basic and diluted net earnings per share calculations were as follows (in millions, except per share amounts): Three Months Ended Six Months Ended 2022 2021 2022 2021 Net earnings $ 71.8 $ 56.2 $ 148.8 $ 118.1 Weighted average common shares outstanding Weighted average common shares – basic 123.9 126.6 124.1 126.7 Dilutive impact of stock-based awards 1.7 1.6 1.9 1.5 Weighted average common shares – diluted 125.6 128.2 126.0 128.2 Net earnings per share – basic $ 0.58 $ 0.44 $ 1.20 $ 0.93 Net earnings per share – diluted $ 0.57 $ 0.44 $ 1.18 $ 0.92 Stock options excluded from net earnings per share calculation 1.6 0.8 — 0.9 |
Accumulated Other Comprehensi_2
Accumulated Other Comprehensive Loss (Tables) | 6 Months Ended |
Jan. 31, 2022 | |
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, 2022 and 2021 were as follows (in millions): Foreign Pension Derivative Total Balance as of October 31, 2021, net of tax $ (54.5) $ (72.7) $ 1.8 $ (125.4) Other comprehensive (loss) income before reclassifications and tax (17.1) (1.7) (1) 0.9 (17.9) Tax benefit (expense) — 0.4 (0.2) 0.2 Other comprehensive (loss) income before reclassifications, net of tax (17.1) (1.3) 0.7 (17.7) Reclassifications, before tax — 4.3 (2) (0.5) (3) 3.8 Tax (expense) benefit — (1.0) 0.2 (0.8) Reclassifications, net of tax — 3.3 (0.3) 3.0 Other comprehensive (loss) income, net of tax (17.1) 2.0 0.4 (14.7) Balance as of January 31, 2022, net of tax $ (71.6) $ (70.7) $ 2.2 $ (140.1) 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 (2) (0.7) (3) (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) (1) In fiscal 2022, pension settlement accounting was triggered. Remeasurement of the Company’s pension obligations resulted in an adjustment to accumulated other comprehensive loss of $1.7 million on the Condensed Consolidated Balance Sheet, see Note 13. (2) Includes reclassifications of $1.2 million in fiscal 2022, and in both periods, net amortization of prior service costs and actuarial losses included in other (income) expense, net in the Condensed Consolidated Statements of Earnings, see Note 13. (3) Relates to designated forward foreign currency exchange contracts that were reclassified from accumulated other comprehensive loss on the Condensed Consolidated Balance Sheets to net sales, cost of sales and operating expenses in the Condensed Consolidated Statements of Earnings, see Note 14. Changes in accumulated other comprehensive loss for the six months ended January 31, 2022 and 2021 were as follows (in millions): Foreign Pension Derivative Total Balance as of July 31, 2021, net of tax $ (44.0) $ (74.7) $ 0.5 $ (118.2) Other comprehensive (loss) income before reclassifications and tax (27.6) (1.7) (1) 2.1 (27.2) Tax benefit (expense) — 0.4 (0.4) — Other comprehensive (loss) income before reclassifications, net of tax (27.6) (1.3) 1.7 (27.2) Reclassifications, before tax — 6.8 (2) 0.1 (3) 6.9 Tax expense — (1.5) (0.1) (1.6) Reclassifications, net of tax — 5.3 — 5.3 Other comprehensive (loss) income, net of tax (27.6) 4.0 1.7 (21.9) Balance as of January 31, 2022, net of tax $ (71.6) $ (70.7) $ 2.2 $ (140.1) 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 as of January 31, 2021, net of tax $ (37.5) $ (103.9) $ (1.6) $ (143.0) (1) In fiscal 2022, pension settlement accounting was triggered. In fiscal 2021, pension curtailment accounting was triggered. Remeasurements of the Company’s pension obligations resulted in adjustments to accumulated other comprehensive loss of $1.7 million and $4.0 million, in fiscal 2022 and 2021, respectively, on the Condensed Consolidated Balance Sheets, see Note 13. (2) Includes reclassifications of $1.2 million and $0.8 million in fiscal 2022 and 2021, respectively, and in both periods, net amortization of prior service costs and actuarial losses included in other (income) expense, net in the Condensed Consolidated Statements of Earnings, see Note 13. (3) Relates to designated forward foreign currency exchange contracts that were reclassified from accumulated other comprehensive loss on the Condensed Consolidated Balance Sheets to net sales, cost of sales and operating expenses in the Condensed Consolidated Statements of Earnings, see Note 14. |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 6 Months Ended |
Jan. 31, 2022 | |
Share-based Payment Arrangement, Noncash Expense [Abstract] | |
Summary of stock option activity | Option activity was as follows: Options Weighted Balance outstanding as of July 31, 2021 6,444,743 $ 44.05 Granted 878,305 59.36 Exercised (287,742) 37.16 Canceled/forfeited (21,562) 52.23 Balance outstanding as of January 31, 2022 7,013,744 $ 46.22 |
Schedule of performance shares activity | Performance-based award for non-vested activity was as follows: Performance Shares Weighted Balance outstanding as of July 31, 2021 200,567 $ 48.76 Granted 88,400 59.40 Vested — — Canceled (3,580) 53.23 Balance outstanding as of January 31, 2022 285,387 $ 52.00 |
Employee Benefit Plans (Tables)
Employee Benefit Plans (Tables) | 6 Months Ended |
Jan. 31, 2022 | |
Retirement Benefits, Description [Abstract] | |
Components of net periodic pension costs | Net periodic pension costs for the Company’s pension plans were as follows (in millions): Three Months Ended Six Months Ended 2022 2021 2022 2021 Service cost $ 1.8 $ 1.8 $ 3.6 $ 4.0 Interest cost 2.5 2.5 5.0 4.9 Expected return on assets (6.2) (5.8) (12.5) (11.5) Prior service cost amortization — 0.1 0.1 0.2 Actuarial loss amortization 1.8 1.9 3.6 4.1 Settlement charge 1.2 — 1.2 — Curtailment charge — — — 0.8 Net periodic pension costs $ 1.1 $ 0.5 $ 1.0 $ 2.5 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 6 Months Ended |
Jan. 31, 2022 | |
Fair Value Disclosures [Abstract] | |
Schedule of derivative on the balance sheet | The fair value of the Company’s derivative contracts, recorded on the Condensed Consolidated Balance Sheets, was as follows (in millions): Total Notional Amounts Assets Liabilities January 31, July 31, January 31, July 31, January 31, July 31, 2022 2021 2022 2021 2022 2021 Designated as hedging instruments Forward foreign currency exchange contracts $ 70.7 $ 117.2 $ 1.5 $ 1.0 $ 1.4 $ 1.2 Net investment hedge 55.8 55.8 1.1 1.1 0.1 2.0 Total designated 126.5 173.0 2.6 2.1 1.5 3.2 Not designated as hedging instruments Forward foreign currency exchange contracts 215.9 154.2 1.3 0.5 1.7 0.4 Total not designated 215.9 154.2 1.3 0.5 1.7 0.4 Total $ 342.4 $ 327.2 $ 3.9 $ 2.6 $ 3.2 $ 3.6 |
Guarantees (Tables)
Guarantees (Tables) | 6 Months Ended |
Jan. 31, 2022 | |
Guarantees [Abstract] | |
Guarantor obligations | The outstanding debt contingent liability for standby letters of credit was as follows (in millions): January 31, July 31, Contingent liability for standby letters of credit issued under the Company’s revolving credit facility $ 7.5 $ 7.7 Amounts drawn for letters of credit under the Company’s revolving credit facility $ — $ — |
Segment Reporting (Tables)
Segment Reporting (Tables) | 6 Months Ended |
Jan. 31, 2022 | |
Segment Reporting, Measurement Disclosures [Abstract] | |
Summary of segment details | Segment details were as follows (in millions): Three Months Ended Six Months Ended 2022 2021 2022 2021 Net sales Engine Products segment $ 554.1 $ 462.4 $ 1,081.3 $ 898.6 Industrial Products segment 248.4 216.7 482.1 417.2 Total Company $ 802.5 $ 679.1 $ 1,563.4 $ 1,315.8 Earnings before income taxes Engine Products segment $ 65.0 $ 61.3 $ 137.3 $ 121.7 Industrial Products segment 37.5 25.8 75.8 53.3 Corporate and unallocated (8.0) (13.2) (14.6) (18.9) Total Company $ 94.5 $ 73.9 $ 198.5 $ 156.1 Net sales by product group were as follows (in millions): Three Months Ended Six Months Ended 2022 2021 2022 2021 Engine Products segment Off-Road $ 95.5 $ 77.9 $ 189.4 $ 142.6 On-Road 33.1 33.4 64.6 65.3 Aftermarket 398.4 330.2 772.7 647.4 Aerospace and Defense 27.1 20.9 54.6 43.3 Total Engine Products segment 554.1 462.4 1,081.3 898.6 Industrial Products segment Industrial Filtration Solutions 171.2 149.9 336.7 285.6 Gas Turbine Systems 29.6 23.4 46.2 46.4 Special Applications 47.6 43.4 99.2 85.2 Total Industrial Products segment 248.4 216.7 482.1 417.2 Total Company $ 802.5 $ 679.1 $ 1,563.4 $ 1,315.8 |
Acquisitions (Details)
Acquisitions (Details) € in Millions, $ in Millions | Nov. 22, 2021USD ($) | Nov. 22, 2021EUR (€) | Nov. 01, 2021USD ($) | Jan. 31, 2022USD ($) | Jul. 31, 2021USD ($) |
Business Acquisition | |||||
Goodwill | $ 344.3 | $ 322.5 | |||
Solaris | |||||
Business Acquisition | |||||
Business combination, consideration transferred | $ 45.7 | € 41 | |||
Goodwill | 27.2 | ||||
Finite lived intangible assets acquired in business combination | 20.8 | ||||
Deferred tax liability | 4.4 | ||||
PAIS | |||||
Business Acquisition | |||||
Business combination, consideration transferred | $ 3.3 | ||||
Goodwill | 0.4 | ||||
Finite lived intangible assets acquired in business combination | $ 3 |
Revenue (Disaggregation of Reve
Revenue (Disaggregation of Revenue by Geographical Area) (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jan. 31, 2022 | Jan. 31, 2021 | Jan. 31, 2022 | Jan. 31, 2021 | |
Disaggregation of Revenue | ||||
Total net sales | $ 802.5 | $ 679.1 | $ 1,563.4 | $ 1,315.8 |
U.S. and Canada | ||||
Disaggregation of Revenue | ||||
Total net sales | 314 | 256.2 | 614.8 | 507.2 |
Europe, Middle East and Africa (EMEA) | ||||
Disaggregation of Revenue | ||||
Total net sales | 241.7 | 201.1 | 466.3 | 389 |
Asia Pacific | ||||
Disaggregation of Revenue | ||||
Total net sales | 170.2 | 161.4 | 334 | 305.5 |
Latin America | ||||
Disaggregation of Revenue | ||||
Total net sales | $ 76.6 | $ 60.4 | $ 148.3 | $ 114.1 |
Revenue (Narrative) (Details)
Revenue (Narrative) (Details) - USD ($) $ in Millions | Jan. 31, 2022 | Jul. 31, 2021 |
Revenue from Contract with Customer [Abstract] | ||
Contract assets | $ 17.5 | $ 14.9 |
Contract liabilities | $ 19.8 | $ 12.2 |
Inventories, Net (Details)
Inventories, Net (Details) - USD ($) $ in Millions | Jan. 31, 2022 | Jul. 31, 2021 |
Inventory, Net | ||
Raw materials | $ 188.9 | $ 148.1 |
Work in process | 55.5 | 43.2 |
Finished products | 236.3 | 193.2 |
Total inventories, net | $ 480.7 | $ 384.5 |
Property, Plant and Equipment_3
Property, Plant and Equipment, Net (Details) - USD ($) $ in Millions | Jan. 31, 2022 | Jul. 31, 2021 |
Property, Plant and Equipment | ||
Less accumulated depreciation | $ (998) | $ (977) |
Property, plant and equipment, net | 601 | 617.8 |
Land | ||
Property, Plant and Equipment | ||
Property, plant and equipment, gross | 26.9 | 27.1 |
Buildings | ||
Property, Plant and Equipment | ||
Property, plant and equipment, gross | 407.2 | 410.8 |
Machinery and equipment | ||
Property, Plant and Equipment | ||
Property, plant and equipment, gross | 971.1 | 972 |
Computer software | ||
Property, Plant and Equipment | ||
Property, plant and equipment, gross | 143.5 | 144.3 |
Construction in progress | ||
Property, Plant and Equipment | ||
Property, plant and equipment, gross | $ 50.3 | $ 40.6 |
Goodwill and Intangible Asset_2
Goodwill and Intangible Assets (Reconciliation of Goodwill) (Details) $ in Millions | 6 Months Ended |
Jan. 31, 2022USD ($) | |
Goodwill | |
Beginning balance | $ 322.5 |
Goodwill acquired | 27.6 |
Currency translation | (5.8) |
Ending balance | 344.3 |
Engine Products segment | |
Goodwill | |
Beginning balance | 84.7 |
Goodwill acquired | 0 |
Currency translation | (0.4) |
Ending balance | 84.3 |
Industrial Products segment | |
Goodwill | |
Beginning balance | 237.8 |
Goodwill acquired | 27.6 |
Currency translation | (5.4) |
Ending balance | $ 260 |
Goodwill and Intangible Asset_3
Goodwill and Intangible Assets (Reconciliation of Intangible Assets) (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jan. 31, 2022 | Jan. 31, 2021 | Jan. 31, 2022 | Jan. 31, 2021 | |
Total | ||||
Intangible assets, net, beginning balance | $ 61.6 | |||
Intangible assets acquired | 23.8 | |||
Amortization expense | $ (2.4) | $ (2.1) | (4.5) | $ (4.2) |
Currency translation | (1.5) | |||
Intangible assets, net, ending balance | 79.4 | 79.4 | ||
Customer Relationships | ||||
Gross Carrying Amount | ||||
Gross carrying amount beginning balance | 107.5 | |||
Intangible assets acquired | 3.2 | |||
Amortization expense | 0 | |||
Currency translation | (1.8) | |||
Gross carrying amount ending balance | 108.9 | 108.9 | ||
Accumulated Amortization | ||||
Accumulated amortization beginning balance | (56.4) | |||
Intangible assets acquired | 0 | |||
Amortization expense | (3.2) | |||
Currency translation | 0.7 | |||
Accumulated amortization ending balance | (58.9) | (58.9) | ||
Total | ||||
Intangible assets, net, beginning balance | 51.1 | |||
Intangible assets acquired | 3.2 | |||
Amortization expense | (3.2) | |||
Currency translation | (1.1) | |||
Intangible assets, net, ending balance | 50 | 50 | ||
Patents, trademarks and technology | ||||
Gross Carrying Amount | ||||
Gross carrying amount beginning balance | 24.3 | |||
Intangible assets acquired | 20.6 | |||
Amortization expense | 0 | |||
Currency translation | (0.5) | |||
Gross carrying amount ending balance | 44.4 | 44.4 | ||
Accumulated Amortization | ||||
Accumulated amortization beginning balance | (13.8) | |||
Intangible assets acquired | 0 | |||
Amortization expense | (1.3) | |||
Currency translation | 0.1 | |||
Accumulated amortization ending balance | (15) | (15) | ||
Total | ||||
Intangible assets, net, beginning balance | 10.5 | |||
Intangible assets acquired | 20.6 | |||
Amortization expense | (1.3) | |||
Currency translation | (0.4) | |||
Intangible assets, net, ending balance | $ 29.4 | $ 29.4 |
Goodwill and Intangible Asset_4
Goodwill and Intangible Assets (Narrative) (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jan. 31, 2022 | Jan. 31, 2021 | Jan. 31, 2022 | Jan. 31, 2021 | |
Finite-Lived Intangible Assets | ||||
Amortization expense | $ 2.4 | $ 2.1 | $ 4.5 | $ 4.2 |
Customer Relationships | ||||
Finite-Lived Intangible Assets | ||||
Amortization expense | 3.2 | |||
Solaris | ||||
Finite-Lived Intangible Assets | ||||
Finite lived intangible assets acquired in business combination | 20.8 | 20.8 | ||
Solaris | Technology | ||||
Finite-Lived Intangible Assets | ||||
Finite lived intangible assets acquired in business combination | 17.3 | $ 17.3 | ||
Useful life | 15 years | |||
Solaris | Trademarks and Trade Names | ||||
Finite-Lived Intangible Assets | ||||
Finite lived intangible assets acquired in business combination | 3.3 | $ 3.3 | ||
Useful life | 10 years | |||
Solaris | Backlog | ||||
Finite-Lived Intangible Assets | ||||
Finite lived intangible assets acquired in business combination | 0.2 | $ 0.2 | ||
Useful life | 6 months | |||
PAIS | ||||
Finite-Lived Intangible Assets | ||||
Finite lived intangible assets acquired in business combination | 3 | $ 3 | ||
Useful life | 20 years | |||
PAIS | Customer Relationships | ||||
Finite-Lived Intangible Assets | ||||
Finite lived intangible assets acquired in business combination | $ 3 | $ 3 |
Long-Term Debt (Details)
Long-Term Debt (Details) - USD ($) | 1 Months Ended | 6 Months Ended | |||
Nov. 30, 2021 | Aug. 31, 2021 | Jan. 31, 2022 | Jan. 31, 2021 | Jul. 31, 2021 | |
Debt Instrument | |||||
Proceeds from long-term debt | $ 174,300,000 | $ 0 | |||
Unsecured Debt | |||||
Debt Instrument | |||||
Debt instrument amount | $ 150,000,000 | ||||
2.5% 10 Year Note Due 2031 | Unsecured Debt | |||||
Debt Instrument | |||||
Proceeds from long-term debt | $ 100,000,000 | ||||
Debt instrument, term | 10 years | ||||
Fixed interest rate | 2.50% | ||||
2.12% 7 Year Note Due 2028 | Unsecured Debt | |||||
Debt Instrument | |||||
Proceeds from long-term debt | $ 50,000,000 | ||||
Debt instrument, term | 7 years | ||||
Fixed interest rate | 2.12% | ||||
Unsecured revolving credit facility | Unsecured revolving credit facility | |||||
Debt Instrument | |||||
Remaining borrowing capacity | 467,500,000 | ||||
Maximum borrowing capacity | $ 500,000,000 |
Income Taxes (Details)
Income Taxes (Details) $ in Millions | 6 Months Ended |
Jan. 31, 2022USD ($) | |
Income Tax Disclosure [Abstract] | |
Unrecognized tax benefits | $ 19.3 |
Accrued interest and penalties on unrecognized tax benefits | 1.8 |
Unrecognized reduction from lapse of statute of limitations | $ 5.3 |
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, 2022 | Jan. 31, 2021 | Jan. 31, 2022 | Jan. 31, 2021 | |
Earnings Per Share [Abstract] | ||||
Net earnings | $ 71.8 | $ 56.2 | $ 148.8 | $ 118.1 |
Weighted average common shares outstanding | ||||
Weighted average common shares - basic (in shares) | 123.9 | 126.6 | 124.1 | 126.7 |
Dilutive impact of share-based awards (in shares) | 1.7 | 1.6 | 1.9 | 1.5 |
Weighted average common shares - diluted (in shares) | 125.6 | 128.2 | 126 | 128.2 |
Net earnings per share - basic (in usd per share) | $ 0.58 | $ 0.44 | $ 1.20 | $ 0.93 |
Net earnings per share - diluted (in usd per share) | $ 0.57 | $ 0.44 | $ 1.18 | $ 0.92 |
Options excluded from the diluted net earnings per share calculation (in shares) | 1.6 | 0.8 | 0 | 0.9 |
Shareholders' Equity (Details)
Shareholders' Equity (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jan. 31, 2022 | Jan. 31, 2021 | Jan. 31, 2022 | Jan. 31, 2021 | |
Stockholders' Equity Note [Abstract] | ||||
Number of shares authorized to be repurchased (in shares) | 13,000,000 | 13,000,000 | ||
Stock repurchased during the period (in shares) | 1,800,000 | |||
Stock repurchased during the period | $ 115.6 | $ 46.3 | ||
Shares with remaining authorization for repurchase under stock repurchase plan (in shares) | 6,500,000 | 6,500,000 | ||
Dividends paid per share (in usd per share) | $ 0.22 | $ 0.21 | $ 0.44 | $ 0.42 |
Accumulated Other Comprehensi_3
Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | 12 Months Ended | |||
Jan. 31, 2022 | Jan. 31, 2021 | Oct. 31, 2020 | Jan. 31, 2022 | Jan. 31, 2021 | Jul. 31, 2021 | |
Accumulated Other Comprehensive Income (Loss), Net of Tax | ||||||
Beginning Balance | $ 1,115.9 | $ 1,052.6 | $ 992.9 | $ 1,137.1 | $ 992.9 | $ 992.9 |
Other comprehensive (loss) income before reclassifications and tax | (17.9) | 39.8 | (27.2) | 39.1 | ||
Tax benefit (expense) | 0.2 | 0.3 | 0 | (0.7) | ||
Other comprehensive (loss) income before reclassifications, net of tax | (17.7) | 40.1 | (27.2) | 38.4 | ||
Reclassifications, before tax | 3.8 | (0.5) | 6.9 | 3.1 | ||
Tax (expense) benefit | (0.8) | 0.2 | (1.6) | (0.5) | ||
Reclassifications, net of tax | 3 | (0.3) | 5.3 | 2.6 | ||
Net other comprehensive (loss) income | (14.7) | 39.8 | (21.9) | 41 | ||
Ending Balance | 1,116.8 | 1,074.4 | 1,052.6 | 1,116.8 | 1,074.4 | 1,137.1 |
Accumulated other comprehensive loss | (140.1) | (140.1) | (118.2) | |||
Settlement cost | 1.2 | |||||
Curtailment charge | 1.2 | 0.8 | 0.8 | |||
Scenario, Adjustment | ||||||
Accumulated Other Comprehensive Income (Loss), Net of Tax | ||||||
Accumulated other comprehensive loss | 1.7 | 1.7 | 4 | |||
Total | ||||||
Accumulated Other Comprehensive Income (Loss), Net of Tax | ||||||
Beginning Balance | (125.4) | (182.8) | (184) | (118.2) | (184) | (184) |
Net other comprehensive (loss) income | (14.7) | 39.8 | (21.9) | 41 | ||
Ending Balance | (140.1) | (143) | (182.8) | (140.1) | (143) | (118.2) |
Foreign Currency Translation Adjustment | ||||||
Accumulated Other Comprehensive Income (Loss), Net of Tax | ||||||
Beginning Balance | (54.5) | (79) | (74) | (44) | (74) | (74) |
Other comprehensive (loss) income before reclassifications and tax | (17.1) | 41.5 | (27.6) | 36.5 | ||
Tax benefit (expense) | 0 | 0 | 0 | 0 | ||
Other comprehensive (loss) income before reclassifications, net of tax | (17.1) | 41.5 | (27.6) | 36.5 | ||
Reclassifications, before tax | 0 | 0 | 0 | 0 | ||
Tax (expense) benefit | 0 | 0 | 0 | 0 | ||
Reclassifications, net of tax | 0 | 0 | 0 | 0 | ||
Net other comprehensive (loss) income | (17.1) | 41.5 | (27.6) | 36.5 | ||
Ending Balance | (71.6) | (37.5) | (79) | (71.6) | (37.5) | (44) |
Pension Benefits | ||||||
Accumulated Other Comprehensive Income (Loss), Net of Tax | ||||||
Beginning Balance | (72.7) | (103.9) | (110) | (74.7) | (110) | (110) |
Other comprehensive (loss) income before reclassifications and tax | (1.7) | 0 | (1.7) | 4 | ||
Tax benefit (expense) | 0.4 | 0 | 0.4 | (1) | ||
Other comprehensive (loss) income before reclassifications, net of tax | (1.3) | 0 | (1.3) | 3 | ||
Reclassifications, before tax | 4.3 | 0.2 | 6.8 | 3.8 | ||
Tax (expense) benefit | (1) | (0.2) | (1.5) | (0.7) | ||
Reclassifications, net of tax | 3.3 | 0 | 5.3 | 3.1 | ||
Net other comprehensive (loss) income | 2 | 0 | 4 | 6.1 | ||
Ending Balance | (70.7) | (103.9) | (103.9) | (70.7) | (103.9) | (74.7) |
Derivative Financial Instruments | ||||||
Accumulated Other Comprehensive Income (Loss), Net of Tax | ||||||
Beginning Balance | 1.8 | 0.1 | 0 | 0.5 | 0 | 0 |
Other comprehensive (loss) income before reclassifications and tax | 0.9 | (1.7) | 2.1 | (1.4) | ||
Tax benefit (expense) | (0.2) | 0.3 | (0.4) | 0.3 | ||
Other comprehensive (loss) income before reclassifications, net of tax | 0.7 | (1.4) | 1.7 | (1.1) | ||
Reclassifications, before tax | (0.5) | (0.7) | 0.1 | (0.7) | ||
Tax (expense) benefit | 0.2 | 0.4 | (0.1) | 0.2 | ||
Reclassifications, net of tax | (0.3) | (0.3) | 0 | (0.5) | ||
Net other comprehensive (loss) income | 0.4 | (1.7) | 1.7 | (1.6) | ||
Ending Balance | $ 2.2 | $ (1.6) | $ 0.1 | $ 2.2 | $ (1.6) | $ 0.5 |
Stock-Based Compensation (Narra
Stock-Based Compensation (Narratives) (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jan. 31, 2022 | Jan. 31, 2021 | Jan. 31, 2022 | Jan. 31, 2021 | |
Share-based Compensation Arrangement by Share-based Payment Award | ||||
Options granted, grant date fair value (in usd per share) | $ 14.27 | $ 10.21 | ||
Employee Stock Option | ||||
Share-based Compensation Arrangement by Share-based Payment Award | ||||
Pretax performance-based award expense | $ 1.9 | $ 2.3 | $ 8.8 | $ 7.4 |
Performance Shares | ||||
Share-based Compensation Arrangement by Share-based Payment Award | ||||
Pretax performance-based award expense | $ 2.1 | $ 1.2 | $ 3.8 | $ 2.1 |
2019 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 | |||
2019 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 | |||
2019 Master Stock Incentive Plan | Performance Shares | Minimum | ||||
Share-based Compensation Arrangement by Share-based Payment Award | ||||
Payout percentage based on target award (percentage) | 0.00% | |||
2019 Master Stock Incentive Plan | Performance Shares | Maximum | ||||
Share-based Compensation Arrangement by Share-based Payment Award | ||||
Payout percentage based on target award (percentage) | 200.00% |
Stock-Based Compensation (Summa
Stock-Based Compensation (Summary of Stock Option Activity) (Details) | 6 Months Ended |
Jan. 31, 2022$ / sharesshares | |
Options | |
Beginning balance (in shares) | shares | 6,444,743 |
Options granted (in shares) | shares | 878,305 |
Options exercised (in shares) | shares | (287,742) |
Options canceled/forfeited (in shares) | shares | (21,562) |
Ending balance (in shares) | shares | 7,013,744 |
Weighted Average Exercise Price | |
Beginning balance (in usd per share) | $ / shares | $ 44.05 |
Granted (in usd per share) | $ / shares | 59.36 |
Exercised (in usd per share) | $ / shares | 37.16 |
Canceled/forfeited (in usd per share) | $ / shares | 52.23 |
Ending balance (in usd per share) | $ / shares | $ 46.22 |
Stock-Based Compensation (Sum_2
Stock-Based Compensation (Summary of Performance Award Activity) (Details) - Performance Shares | 6 Months Ended |
Jan. 31, 2022$ / sharesshares | |
Performance Shares | |
Beginning balance (in shares) | shares | 200,567 |
Granted (shares) | shares | 88,400 |
Vested (shares) | shares | 0 |
Canceled/forfeited (shares) | shares | (3,580) |
Ending balance (in shares) | shares | 285,387 |
Weighted Average Grant Date Fair Value | |
Beginning balance (in usd per share) | $ / shares | $ 48.76 |
Granted (in usd per share) | $ / shares | 59.40 |
Vested (in usd per share) | $ / shares | 0 |
Canceled/forfeited (in usd per share) | $ / shares | 53.23 |
Ending balance (in usd per share) | $ / shares | $ 52 |
Employee Benefit Plans (Narrati
Employee Benefit Plans (Narrative) (Details) - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended | ||
Jan. 31, 2022 | Oct. 31, 2020 | Jul. 31, 2021 | Jan. 31, 2021 | |
Defined Benefit Plan, Plan Assets, Allocation | ||||
Curtailment charge | $ 1.2 | $ 0.8 | $ 0.8 | |
Accumulated other comprehensive loss | $ (140.1) | (118.2) | ||
Reclassification, Other | ||||
Defined Benefit Plan, Plan Assets, Allocation | ||||
Accumulated other comprehensive loss | $ 4 | $ 1.7 |
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, 2022 | Jan. 31, 2021 | Jan. 31, 2022 | Jan. 31, 2021 | |
Net periodic benefit costs | ||||
Service cost | $ 1.8 | $ 1.8 | $ 3.6 | $ 4 |
Interest cost | 2.5 | 2.5 | 5 | 4.9 |
Expected return on assets | (6.2) | (5.8) | (12.5) | (11.5) |
Prior service cost amortization | 0 | 0.1 | 0.1 | 0.2 |
Actuarial loss amortization | 1.8 | 1.9 | 3.6 | 4.1 |
Settlement charge | 1.2 | 0 | 1.2 | 0 |
Curtailment charge | 0 | 0 | 0 | 0.8 |
Net periodic pension costs | $ 1.1 | $ 0.5 | $ 1 | $ 2.5 |
Fair Value Measurements (Narrat
Fair Value Measurements (Narrative) (Details) - USD ($) $ in Millions | 6 Months Ended | |
Jan. 31, 2022 | Jul. 31, 2021 | |
Forward foreign currency exchange contracts | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Derivative instrument term (months) | 12 months | |
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 | $ 433.4 | $ 297.4 |
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 | 131.6 | 188.3 |
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 | 425 | 275 |
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 | 131.6 | 188.3 |
Fair Value, Inputs, Level 3 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis | ||
Equity method investments | $ 23.7 | $ 24.2 |
Fair Value Measurements (Deriva
Fair Value Measurements (Derivatives on the Balance Sheet) (Details) - Fair Value, Inputs, Level 2 - USD ($) $ in Millions | Jan. 31, 2022 | Jul. 31, 2021 |
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Notional amounts | $ 342.4 | $ 327.2 |
Derivative assets | 3.9 | 2.6 |
Derivative liabilities | 3.2 | 3.6 |
Designated as hedging instruments | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Notional amounts | 126.5 | 173 |
Derivative assets | 2.6 | 2.1 |
Derivative liabilities | 1.5 | 3.2 |
Designated as hedging instruments | Net investment hedge | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Notional amounts | 55.8 | 55.8 |
Derivative assets | 1.1 | 1.1 |
Derivative liabilities | 0.1 | 2 |
Designated as hedging instruments | Forward foreign currency exchange contracts | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Notional amounts | 70.7 | 117.2 |
Derivative assets | 1.5 | 1 |
Derivative liabilities | 1.4 | 1.2 |
Not designated as hedging instruments | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Notional amounts | 215.9 | 154.2 |
Derivative assets | 1.3 | 0.5 |
Derivative liabilities | 1.7 | 0.4 |
Not designated as hedging instruments | Forward foreign currency exchange contracts | ||
Fair Value, Balance Sheet Grouping, Financial Statement Captions | ||
Notional amounts | 215.9 | 154.2 |
Derivative assets | 1.3 | 0.5 |
Derivative liabilities | $ 1.7 | $ 0.4 |
Guarantees (Details)
Guarantees (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | |||
Jan. 31, 2022 | Jan. 31, 2021 | Jan. 31, 2022 | Jan. 31, 2021 | Jul. 31, 2021 | |
Guarantor Obligations | |||||
Contingent liability for standby letters of credit issued under the Company’s revolving credit facility | $ 7.5 | $ 7.5 | $ 7.7 | ||
Amounts drawn for letters of credit under the Company’s revolving credit facility | 0 | 0 | 0 | ||
Investment earnings | 2 | $ 1.9 | 3.2 | $ 3.7 | |
Revolving credit facility | |||||
Guarantor Obligations | |||||
AFSI outstanding debt (the Company guarantees half) | 63 | 63 | |||
Advanced Filtration Systems, Inc. | |||||
Guarantor Obligations | |||||
AFSI outstanding debt (the Company guarantees half) | $ 46 | $ 46 | $ 37.8 |
Segment Reporting (Summary of S
Segment Reporting (Summary of Segment Detail) (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jan. 31, 2022 | Jan. 31, 2021 | Jan. 31, 2022 | Jan. 31, 2021 | |
Segment Reporting Information | ||||
Net sales | $ 802.5 | $ 679.1 | $ 1,563.4 | $ 1,315.8 |
Earnings before income taxes | 94.5 | 73.9 | 198.5 | 156.1 |
Operating Segments | Engine Products segment | ||||
Segment Reporting Information | ||||
Net sales | 554.1 | 462.4 | 1,081.3 | 898.6 |
Earnings before income taxes | 65 | 61.3 | 137.3 | 121.7 |
Operating Segments | Engine Products segment | Off-Road | ||||
Segment Reporting Information | ||||
Net sales | 95.5 | 77.9 | 189.4 | 142.6 |
Operating Segments | Engine Products segment | On-Road | ||||
Segment Reporting Information | ||||
Net sales | 33.1 | 33.4 | 64.6 | 65.3 |
Operating Segments | Engine Products segment | Aftermarket | ||||
Segment Reporting Information | ||||
Net sales | 398.4 | 330.2 | 772.7 | 647.4 |
Operating Segments | Engine Products segment | Aerospace and Defense | ||||
Segment Reporting Information | ||||
Net sales | 27.1 | 20.9 | 54.6 | 43.3 |
Operating Segments | Industrial Products segment | ||||
Segment Reporting Information | ||||
Net sales | 248.4 | 216.7 | 482.1 | 417.2 |
Earnings before income taxes | 37.5 | 25.8 | 75.8 | 53.3 |
Operating Segments | Industrial Products segment | Industrial Filtration Solutions | ||||
Segment Reporting Information | ||||
Net sales | 171.2 | 149.9 | 336.7 | 285.6 |
Operating Segments | Industrial Products segment | Gas Turbine Systems | ||||
Segment Reporting Information | ||||
Net sales | 29.6 | 23.4 | 46.2 | 46.4 |
Operating Segments | Industrial Products segment | Special Applications | ||||
Segment Reporting Information | ||||
Net sales | 47.6 | 43.4 | 99.2 | 85.2 |
Corporate and unallocated | ||||
Segment Reporting Information | ||||
Earnings before income taxes | (8) | (13.2) | (14.6) | (18.9) |
Corporate and unallocated | Industrial Products segment | ||||
Segment Reporting Information | ||||
Net sales | $ 248.4 | $ 216.7 | $ 482.1 | $ 417.2 |
Restructuring (Details)
Restructuring (Details) - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended |
Jan. 31, 2021 | Jul. 31, 2021 | |
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 |