Exhibit 99.1
| FOR IMMEDIATE RELEASE: | FOR FURTHER INFORMATION: |
| Wednesday, February 22, 2012 | Rich Sheffer (952) 887-3753 |
DONALDSON REPORTS RECORD SECOND QUARTER RESULTS
MINNEAPOLIS (February 22, 2012) — Donaldson Company, Inc. (NYSE: DCI) announced itsfinancial results for its fiscal 2012 second quarter. Summarized financial results are as follows (dollars in millions, except per share data):
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||
| January 31 | January 31 | |||||||||||||||||||||||
| 2012 | 2011 | Change | 2012 | 2011 | Change | |||||||||||||||||||
| Net sales | $ | 581 | $ | 537 | 8 | % | $ | 1,189 | $ | 1,074 | 11 | % | ||||||||||||
| Operating income | 75 | 67 | 11 | % | 165 | 142 | 16 | % | ||||||||||||||||
| Net earnings | 54 | 45 | 21 | % | 122 | 98 | 25 | % | ||||||||||||||||
| Diluted EPS | $ | 0.70 | $ | 0.56 | 25 | % | $ | 1.60 | $ | 1.24 | 29 | % | ||||||||||||
“We are very pleased to reach the midpoint of our year with another strong performance as we established second quarter records in sales, operating margin, and EPS,” said Bill Cook, Chairman, President and CEO. “Sales in our Engine Products segment increased 12 percent as new equipment build rates at our global Off-Road and On-Road OEM Customers remained healthy. Within our Industrial Products segment, sales of our Torit® dust collectors were strong this quarter. ”
“Our operating margin performance was very good at 12.9 percent. Our ongoingContinuous Improvement initiatives helped us again. We also continue to leverage our fixed cost base as our sales grow. The combination of our solid revenue growth, our strong margin performance, and a lower tax rate drove second quarter net income and EPS up 21 percent and 25 percent, respectively.”
“We now forecast our full year sales to grow between 7 and 12 percent over last year. Forecasted business conditions in our end markets vary: strong in the Americas, stable in Europe, and improving in China. Currency translation is now projected to be unfavorable during the second half of our year due to the strengthening of the U.S. dollar, with an estimated reduction of our full year EPS estimate of $0.05 from our previous forecast. As a result, we now forecast our FY12 EPS to be between $3.25 and $3.45, which would be another new record, and would be up 13 percent to 20 percent over last year.”
Financial Statement Discussion
The impact of foreign currency translation decreased sales by $4.2 million, or 0.8 percent, during the second quarter and increased sales by $9.2 million, or 0.9 percent, year-to-date, compared to the same periods last year. The impact of foreign currency translation decreased reported net earnings by $0.6 million, or 1.3 percent, during the second quarter and increased reported net earnings by $0.7 million, or 0.8 percent, for the year.
Gross margin was 34.6 percent for the quarter and 35.0 percent year-to-date, compared to prior year margins of 35.3 percent and 35.2 percent, respectively. The decrease in the quarter was due to lower absorption of fixed costs resulting from the Thai floods and from fewer shipping days compared to last year’s second quarter. These were partially offset by cost reductions from our ongoingContinuous Improvement initiatives.
Operating expenses for the quarter were $126.0 million, up 3.2 percent from $122.1 million last year primarily due to the increased sales volume. As a percent of sales, operating expenses were 21.7 percent compared to last year’s 22.7 percent for the second quarter. Operating expenses year-to-date were $250.7 million, or 21.1 percent of sales, compared to $235.7 million, or 21.9 percent of sales, last year.
The effective tax rate for the quarter was 29.6 percent, compared to a prior year rate of 34.4 percent. The prior year’s quarter included a $4.0 million tax charge related to the reorganization of our subsidiary holdings to improve our global business and legal entity structure, partially offset by $0.9 million in tax benefits primarily from the retroactive reinstatement of the Research and Experimentation Credit in the U.S. The year-to-date effective tax rate was 27.3 percent compared to a prior year rate of 30.2 percent.
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Donaldson Company, Inc.
February 22, 2012
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We did not repurchase any shares during the second quarter, and year-to-date we have repurchased 1,376,000 shares, or 1.8 percent of our diluted outstanding shares, for $73.6 million.
FY12 Outlook
We forecast our FY12 sales to be between $2.45 and $2.55 billion, or up about 7 to 12 percent from the prior year. Our current forecast is based on the Euro at US$1.32 and 76 Yen to the US$, which, in aggregate, is less favorable than our previous currency guidance issued in November.
| • | Our full year operating margin is forecast to be 13.7 to 14.5 percent. | |
| • | Our full year FY12 tax rate is anticipated to be between 27 and 30 percent. | |
| • | Cash generated by operating activities is projected to be between $250 and $280 million. Capital spending is now estimated to be approximately $85 million. |
Engine Products:We expect full year sales to increase 8 to 12 percent, including the impact of foreign currency translation.
| • | We anticipate sales to both our Off-Road and On-Road OEM Customers will remain strong in the second half of FY12. We will continue to benefit from increased market share on our Customers’ new Tier IV equipment platforms. | |
| • | Sales of our Aftermarket Products are expected to increase moderately based on current utilization rates for both off-road equipment and on-road heavy trucks. We should also benefit from our continued expansion into the emerging economies and from the increasing number of systems installed in the field with our proprietary filtration systems, such as our PowerCore® products. | |
| • | We forecast Aerospace and Defense Products’ sales to be level with the prior year as the continued slowdown in military spending is anticipated to be offset by increased commercial aerospace sales. |
Industrial Products: We forecast full year sales to increase 7 to 11 percent, including the impact of foreign currency translation.
| • | Our Industrial Filtration Solutions’ sales are projected to increase 7 to 11 percent and assume a continuing improvement in general manufacturing activity in the U.S., stable conditions in Europe, and improving conditions in Asia. | |
| • | We anticipate our Gas Turbine Products’ sales to be up 18 to 22 percent due to the recent strengthening in the large turbine power generation market and ongoing strength in the oil and gas market segment. | |
| • | Special Applications Products’ sales are forecast to be level with the prior year as growth in our membrane and venting product sales should offset the reduction in our disk drive filter sales related to the Thai floods last fall. |
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Donaldson Company, Inc.
February 22, 2012
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About Donaldson Company
Donaldson is a leading worldwide provider of filtration systems that improve people’s lives, enhance our Customers’ equipment performance, and protect our environment. We are a technology-driven Company committed to satisfying our Customers’ needs for filtration solutions through innovative research and development, application expertise, and global presence. Our nearly 13,000 employees contribute to the Company’s success by supporting our Customers at our more than 100 sales, manufacturing, and distribution locations around the world.
Donaldson is a member of the S&P MidCap 400 and Russell 1000 indices, and our shares trade on the NYSE under the symbol DCI. Additional information is available atwww.donaldson.com.
SAFE HARBOR STATEMENT UNDER THE SECURITIES REFORM ACT OF 1995
The Company desires to take advantage of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 (the “Act”) and is making this cautionary statement in connection with such safe harbor legislation. This announcement contains forward-looking statements, including forecasts, plans, and projections relating to our business and financial performance and global economic conditions, which involve uncertainties that could materially impact results.
The Company wishes to caution investors that any forward-looking statements are subject to uncertainties and other risk factors that could cause actual results to differ materially from such statements, including but not limited to risks associated with: world economic factors and the ongoing economic uncertainty, reduced demand for hard disk drive products with the increased use of flash memory, the potential for some Customers to increase their reliance on their own filtration capabilities, currency fluctuations, commodity prices, political factors, the Company’s international operations, highly competitive markets, governmental laws and regulations including the impact of various economic stimulus and financial reform measures, the implementation of our new information technology systems, potential global events resulting in market instability including financial bailouts and defaults of sovereign nations, military and terrorist activities, health outbreaks, natural disasters, and other factors included in our Annual and Quarterly Reports. We undertake no obligation to publicly update or revise any forward-looking statements.
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Donaldson Company, Inc.
February 22, 2012
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CONDENSED STATEMENTS OF CONSOLIDATED EARNINGS
DONALDSON COMPANY, INC. AND SUBSIDIARIES
(Thousands of dollars, except share and per share amounts)
(Unaudited)
| Three Months Ended January 31 | Six Months Ended January 31 | |||||||||||||||
| 2012 | 2011 | 2012 | 2011 | |||||||||||||
| Net sales | $ | 580,883 | $ | 537,105 | $ | 1,189,178 | $ | 1,074,014 | ||||||||
| Cost of sales | 380,066 | 347,562 | 773,427 | 696,381 | ||||||||||||
| Gross margin | 200,817 | 189,543 | 415,751 | 377,633 | ||||||||||||
| Operating expenses | 126,049 | 122,102 | 250,656 | 235,689 | ||||||||||||
| Operating income | 74,768 | 67,441 | 165,095 | 141,944 | ||||||||||||
| Other income, net | (4,550 | ) | (3,502 | ) | (9,410 | ) | (4,609 | ) | ||||||||
| Interest expense | 2,899 | 2,936 | 6,069 | 6,589 | ||||||||||||
| Earnings before income taxes | 76,419 | 68,007 | 168,436 | 139,964 | ||||||||||||
| Income taxes | 22,598 | 23,428 | 46,062 | 42,251 | ||||||||||||
| Net earnings | $ | 53,821 | $ | 44,579 | $ | 122,374 | $ | 97,713 | ||||||||
| Weighted average shares outstanding* | 75,052,805 | 77,580,064 | 75,154,873 | 77,375,086 | ||||||||||||
| Diluted shares outstanding* | 76,412,785 | 78,977,509 | 76,480,673 | 78,766,895 | ||||||||||||
| Net earnings per share* | $ | 0.72 | $ | 0.57 | $ | 1.63 | $ | 1.26 | ||||||||
| Net earnings per share assuming dilution* | $ | 0.70 | $ | 0.56 | $ | 1.60 | $ | 1.24 | ||||||||
| Dividends paid per share* | $ | 0.150 | $ | 0.130 | $ | 0.300 | $ | 0.255 | ||||||||
* Earnings and dividends declared per share and weighted average shares outstanding are presented before the effect of a 100 percent stock dividend declared on January 27, 2012, to be distributed on March 23, 2012 to shareholders of record on March 2, 2012.
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Donaldson Company, Inc.
February 22, 2012
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DONALDSON COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Thousands of dollars)
(Unaudited)
| January 31 2012 | July 31 2011 | |||||||
| ASSETS | ||||||||
| Cash, cash equivalents and short-term investments | $ | 272,315 | $ | 273,494 | ||||
| Accounts receivable – net | 408,462 | 445,700 | ||||||
| Inventories – net | 270,212 | 271,476 | ||||||
| Prepaids and other current assets | 78,697 | 75,912 | ||||||
| Total current assets | 1,029,686 | 1,066,582 | ||||||
| Other assets and deferred taxes | 268,746 | 268,009 | ||||||
| Property, plant and equipment – net | 382,957 | 391,502 | ||||||
| Total assets | $ | 1,681,389 | $ | 1,726,093 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Trade accounts payable | $ | 190,076 | $ | 215,918 | ||||
| Employee compensation and other liabilities | 176,030 | 219,326 | ||||||
| Short-term borrowings | 92,728 | 13,129 | ||||||
| Current maturity long-term debt | 2,356 | 47,871 | ||||||
| Total current liabilities | 461,190 | 496,244 | ||||||
| Long-term debt | 205,217 | 205,748 | ||||||
| Other long-term liabilities | 99,569 | 89,390 | ||||||
| Total liabilities | 765,976 | 791,382 | ||||||
| Equity | 915,413 | 934,711 | ||||||
| Total liabilities and equity | $ | 1,681,389 | $ | 1,726,093 | ||||
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Donaldson Company, Inc.
February 22, 2012
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DONALDSON COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of dollars)
(Unaudited)
| Six Months Ended | ||||||||
| January 31 | ||||||||
| 2012 | 2011 | |||||||
| OPERATING ACTIVITIES | ||||||||
| Net earnings | $ | 122,374 | $ | 97,713 | ||||
| Adjustments to reconcile net earnings to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 30,896 | 30,478 | ||||||
| Changes in operating assets and liabilities | (43,485 | ) | (19,947 | ) | ||||
| Tax benefit of equity plans | (7,576 | ) | (7,445 | ) | ||||
| Stock compensation plan expense | 6,440 | 6,089 | ||||||
| Other, net | (6,451 | ) | (13,828 | ) | ||||
| Net cash provided by operating activities | 102,198 | 93,060 | ||||||
| INVESTING ACTIVITIES | ||||||||
| Net expenditures on property and equipment | (36,349 | ) | (24,051 | ) | ||||
| Purchases of short-term investments | (93,455 | ) | (66,494 | ) | ||||
| Acquisitions and divestitures, net | — | 3,613 | ||||||
| Net cash used in investing activities | (129,804 | ) | (86,932 | ) | ||||
| FINANCING ACTIVITIES | ||||||||
| Purchase of treasury stock | (73,558 | ) | (6,491 | ) | ||||
| Net change in debt and short-term borrowings | 33,452 | (21,254 | ) | |||||
| Dividends paid | (22,342 | ) | (19,542 | ) | ||||
| Tax benefit of equity plans | 7,576 | 7,445 | ||||||
| Exercise of stock options | 9,791 | 12,113 | ||||||
| Net cash used in financing activities | (45,081 | ) | (27,729 | ) | ||||
| Effect of exchange rate changes on cash | (19,877 | ) | 9,236 | |||||
| Decrease in cash and cash equivalents | (92,564 | ) | (12,365 | ) | ||||
| Cash and cash equivalents – beginning of year | 273,494 | 232,000 | ||||||
| Cash and cash equivalents – end of period | $ | 180,930 | $ | 219,635 | ||||
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Donaldson Company, Inc.
February 22, 2012
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SEGMENT DETAIL
(Thousands of dollars)
(Unaudited)
| Engine Products | Industrial Products | Corporate & Unallocated | Total Company | |||||||||||||
| 3 Months Ended January 31, 2012: | ||||||||||||||||
| Net sales | $ | 370,834 | $ | 210,049 | — | $ | 580,883 | |||||||||
| Earnings before income taxes | 48,418 | 30,597 | (2,596 | ) | 76,419 | |||||||||||
| 3 Months Ended January 31, 2011: | ||||||||||||||||
| Net sales | $ | 331,122 | $ | 205,983 | — | $ | 537,105 | |||||||||
| Earnings before income taxes | 44,203 | 29,127 | (5,323 | ) | 68,007 | |||||||||||
| 6 Months Ended January 31, 2012: | ||||||||||||||||
| Net sales | $ | 764,559 | $ | 424,619 | — | $ | 1,189,178 | |||||||||
| Earnings before income taxes | 108,296 | 64,896 | (4,756 | ) | 168,436 | |||||||||||
| 6 Months Ended January 31, 2011: | ||||||||||||||||
| Net sales | $ | 664,891 | $ | 409,123 | — | $ | 1,074,014 | |||||||||
| Earnings before income taxes | 92,654 | 59,162 | (11,852 | ) | 139,964 | |||||||||||
NET SALES BY PRODUCT
(Thousands of dollars)
(Unaudited)
| Three Months Ended | Six Months Ended | |||||||||||||||
| January 31 | January 31 | |||||||||||||||
| 2012 | 2011 | 2012 | 2011 | |||||||||||||
| Engine Products segment: | ||||||||||||||||
| Off-Road Products | $ | 87,035 | $ | 73,852 | $ | 181,143 | $ | 146,498 | ||||||||
| On-Road Products | 39,376 | 28,747 | 82,001 | 57,802 | ||||||||||||
| Aftermarket Products | 214,070 | 199,891 | 440,967 | 401,758 | ||||||||||||
| Retrofit Emissions Products | 4,651 | 4,908 | 9,288 | 8,255 | ||||||||||||
| Aerospace and Defense Products | 25,702 | 23,724 | 51,160 | 50,578 | ||||||||||||
| Total Engine Products segment | $ | 370,834 | $ | 331,122 | $ | 764,559 | $ | 664,891 | ||||||||
| Industrial Products segment: | ||||||||||||||||
| Industrial Filtration Solutions Products | $ | 132,041 | $ | 123,430 | $ | 265,440 | $ | 242,783 | ||||||||
| Gas Turbine Products | 37,011 | 34,871 | 72,592 | 70,376 | ||||||||||||
| Special Applications Products | 40,997 | 47,682 | 86,587 | 95,964 | ||||||||||||
| Total Industrial Products segment | $ | 210,049 | $ | 205,983 | $ | 424,619 | $ | 409,123 | ||||||||
| Total Company | $ | 580,883 | $ | 537,105 | $ | 1,189,178 | $ | 1,074,014 | ||||||||
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Donaldson Company, Inc.
February 22, 2012
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RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Thousands of dollars, except per share amounts)
(Unaudited)
| Three Months Ended | Six Months Ended | |||||||||||||||
| January 31 | January 31 | |||||||||||||||
| 2012 | 2011 | 2012 | 2011 | |||||||||||||
| Free cash flow | $ | 26,654 | $ | 16,294 | $ | 65,849 | $ | 69,009 | ||||||||
| Net capital expenditures | 17,858 | 14,003 | 36,349 | 24,051 | ||||||||||||
| Net cash provided by operating activities | $ | 44,512 | $ | 30,297 | $ | 102,198 | $ | 93,060 | ||||||||
| EBITDA | $ | 93,530 | $ | 85,911 | $ | 203,492 | $ | 175,919 | ||||||||
| Income taxes | (22,598 | ) | (23,428 | ) | (46,062 | ) | (42,251 | ) | ||||||||
| Interest expense (net) | (1,789 | ) | (2,344 | ) | (4,160 | ) | (5,477 | ) | ||||||||
| Depreciation and amortization | (15,322 | ) | (15,560 | ) | (30,896 | ) | (30,478 | ) | ||||||||
| Net earnings | $ | 53,821 | $ | 44,579 | $ | 122,374 | $ | 97,713 | ||||||||
| Net sales, excluding foreign currency translation | $ | 585,085 | $ | 540,594 | $ | 1,179,960 | $ | 1,081,230 | ||||||||
| Foreign currency translation | (4,202 | ) | (3,489 | ) | 9,218 | (7,216 | ) | |||||||||
| Net sales | $ | 580,883 | $ | 537,105 | $ | 1,189,178 | $ | 1,074,014 | ||||||||
| Net earnings, excluding foreign currency translation | $ | 54,408 | $ | 44,417 | $ | 121,630 | $ | 97,432 | ||||||||
| Foreign currency translation | (587 | ) | 162 | 744 | 281 | |||||||||||
| Net earnings | $ | 53,821 | $ | 44,579 | $ | 122,374 | $ | 97,713 | ||||||||
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Donaldson Company, Inc.
February 22, 2012
Page 9
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (CONTINUED)
(Thousands of dollars, except per share amounts)
(Unaudited)
| Three Months Ended | Six Months Ended | |||||||||||||||
| January 31 | January 31 | |||||||||||||||
| 2012 | 2011 | 2012 | 2011 | |||||||||||||
| Net earnings, excluding special items | $ | 53,821 | $ | 44,579 | $ | 122,374 | $ | 98,279 | ||||||||
| Restructuring charges, net of tax | — | — | — | (566 | ) | |||||||||||
| Net earnings | $ | 53,821 | $ | 44,579 | $ | 122,374 | $ | 97,713 | ||||||||
| Net earnings per share assuming dilution, excluding special items | $ | 0.70 | $ | 0.56 | $ | 1.60 | $ | 1.25 | ||||||||
| Restructuring charges per share, net of tax | — | — | — | (0.01 | ) | |||||||||||
| Net earnings per share assuming dilution | $ | 0.70 | $ | 0.56 | $ | 1.60 | $ | 1.24 | ||||||||
Although free cash flow, EBITDA, net sales excluding foreign currency translation, net earnings excluding foreign currency translation, net earnings excluding restructuring charges and net earnings per share assuming dilution excluding restructuring charges are not measures of financial performance under GAAP, the Company believes they are useful in understanding its financial results. Free cash flow is a commonly used measure of a company’s ability to generate cash in excess of its operating needs. EBITDA is a commonly used measure of operating earnings less non-cash expenses. Both net sales and net earnings excluding foreign currency translation provide a comparable measure for understanding the operating results of the company’s foreign entities excluding the impact of foreign exchange. Both net earnings excluding restructuring charges and earnings per share excluding restructuring charges provide a comparable measure for understanding the results of the Company as compared to prior periods. A shortcoming of these financial measures is that they do not reflect the company’s actual results under GAAP. Management does not intend these items to be considered in isolation or as a substitute for the related GAAP measures.
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