Exhibit 99.1
| FOR IMMEDIATE RELEASE: | FOR FURTHER INFORMATION: |
| Tuesday, February 24, 2015 | Jim Shaw (952) 887-3816 |
DONALDSON REPORTS SECOND QUARTER EARNINGS
Quarterly Sales up 7% in Constant Currencies
MINNEAPOLIS (February 24, 2015) — Donaldson Company, Inc. (NYSE: DCI) announced its financial results for its Fiscal 2015 second quarter. Summarized financial results are as follows (dollars in millions, except per share data):
| | | Three Months Ended
January 31 | | | Six Months Ended
January 31 | |
| | | 2015 | | | 2014 | | | Change | | | 2015 | | | 2014 | | | Change | |
| Net sales | | $ | 597 | | | $ | 582 | | | | 3% | | | $ | 1,193 | | | $ | 1,181 | | | | 1% | |
| Operating income | | | 68 | | | | 72 | | | | (6% | ) | | | 145 | | | | 164 | | | | (12% | ) |
| Net earnings | | | 50 | | | | 58 | | | | (14% | ) | | | 105 | | | | 120 | | | | (13% | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Diluted EPS | | $ | 0.35 | | | $ | 0.39 | | | $ | (0.04 | ) | | $ | 0.75 | | | $ | 0.80 | | | $ | (0.05 | ) |
The following table adjusts our reported quarterly net earnings and diluted earnings per share (EPS) for the impact of the strengthened U.S. dollar, a $3.9 million charge associated with the previously announced lump sum settlement of our U.S. pension plan, $0.7 million of costs associated with the closing of our Grinnell, Iowa, facility, and removes the impact of the $6.4 million, or $0.04, in tax benefits related to the favorable settlement of an audit in the prior year quarter:
| | | Adjusted
Three Months Ended January 31 | |
| | | 2015 | | | 2014 | | | Change
Before
FX | | | Adjusted
For FX | |
| Adjusted net sales | | $ | 597 | | | $ | 582 | | | | 3% | | | | 7% | |
| Adjusted operating income | | | 73 | | | | 73 | | | | — | | | | 7% | |
| Adjusted net earnings | | | 52 | | | | 52 | | | | — | | | | 5% | |
| | | | | | | | | | | | | | | | | |
| Adjusted Diluted EPS | | $ | 0.37 | | | $ | 0.35 | | | $ | 0.02 | | | $ | 0.04 | |
“We achieved solid constant currency sales growth of 7 percent in the quarter. The following are the drivers of our sales stated in constant currencies. Our Gas Turbine Products doubled over last year. Our Aerospace and Defense and On-Road businesses grew 16 and 12 percent, respectively. These increases and a modest sales increase in our Engine Aftermarket business were partially offset by an 18 percent decline in Off-Road Products, as a result of continued weak conditions in the global agriculture market and in the construction and mining markets in Asia Pacific. Overall, the currency headwinds were significant in the quarter and decreased our reported sales by $28 million compared to the prior year,” said Bill Cook, Donaldson’s CEO.
(more)
Donaldson Company, Inc.
February 24, 2015
Page 2
“Our reported operating margin decreased from the prior year quarter but included a $3.9 million charge for the previously announced lump sum settlement of our U.S. pension plan. We also incurred $0.7 million of costs associated with the closing of our Grinnell, Iowa, facility. The effect of these two items was a $0.02 reduction to our reported diluted EPS of $0.35. Also as a reminder, the prior year quarter included $6.4 million, or $0.04, in tax benefits related to the favorable settlement of a tax audit.”
“We expect global economic conditions to improve only slightly over the next year. In addition to the negative impact of the stronger U.S. dollar, the slow growth of the global economy combined with ongoing weak commodity prices is projected to have a negative impact on most of our OEM Customers’ sales, and as a result, ours. The slow global capital investment environment also negatively impacts our first-fit Dust Collector equipment sales. We have updated our outlook for Fiscal 2015 to reflect these conditions and an ongoing negative translation impact from the stronger U.S. dollar. Overall, we now expect our full-year sales to be flat to down 3 percent, which should result in Fiscal 2015 diluted EPS of between $1.65 and $1.85 per share, excluding restructuring and pension lump sum settlement expenses.”
“Since current conditions in many of our end markets remain weak, we will implement additional productivity improvement and restructuring actions during the balance of this fiscal year. This will allow us to continue to invest in our key growth initiatives as we execute our plan to grow to $5 billion in revenues by Fiscal 2021.”
Financial Statement Discussion
The impact of foreign currency translation decreased sales by $27.5 million, or 4.8 percent, during the quarter and decreased sales by $38.6 million, or 3.3 percent, year-to-date. The impact of foreign currency translation decreased reported net earnings by $2.7 million, or 4.7 percent, during the quarter and decreased net earnings by $3.9 million, or 3.3 percent, year-to-date. The percentage change in revenue in each of our businesses and the percentage change excluding the impact of foreign currency is as follows:
| | | Three Months Ended
January 31, 2015 | | | Six Months Ended
January 31, 2015 | |
| | | Reported
Change | | | Constant
Currency
Change | | | Reported
Change | | | Constant
Currency
Change | |
| Engine Products segment: | | | | | | | | | | | | | | | | |
| Off-Road Products | | | (23% | ) | | | (18% | ) | | | (20% | ) | | | (17% | ) |
| On-Road Products | | | 6% | | | | 12% | | | | 10% | | | | 14% | |
| Aftermarket Products | | | 1% | | | | 5% | | | | 4% | | | | 7% | |
| Aerospace and Defense Products | | | 13% | | | | 16% | | | | (3% | ) | | | (1% | ) |
| Total Engine Products segment | | | (3% | ) | | | 1% | | | | (1% | ) | | | 2% | |
| | | | | | | | | | | | | | | | | |
| Industrial Products segment: | | | | | | | | | | | | | | | | |
| Industrial Filtration Solutions Products | | | (2% | ) | | | 3% | | | | (1% | ) | | | 2% | |
| Gas Turbine Products | | | 91% | | | | 100% | | | | 39% | | | | 45% | |
| Special Applications Products | | | —% | | | | 4% | | | | —% | | | | 3% | |
| Total Industrial Products segment | | | 13% | | | | 19% | | | | 6% | | | | 9% | |
| | | | | | | | | | | | | | | | | |
| Total Company | | | 3% | | | | 7% | | | | 1% | | | | 4% | |
(more)
Donaldson Company, Inc.
February 24, 2015
Page 3
Gross margin was 34.4 percent for the quarter and 34.7 percent year-to-date, compared to prior year margins of 34.7 percent and 35.2 percent, respectively. The decreases are primarily attributable to the negative impact of lower fixed cost absorption due to reductions in our OEM Customer production volumes, a negative mix impact from the increase in large Gas Turbine project shipments, and the costs associated with the closing of our Grinnell, Iowa, facility. These decreases were partially offset by benefits from ourContinuous Improvement initiatives.
Operating expenses for the quarter were $137.2 million, up 6.0 percent from last year. As a percent of sales, operating expenses were 23.0 percent compared to last year’s 22.3 percent. Operating expenses year-to-date were $269.3 million, or 22.6 percent of sales, compared to $252.2 million, or 21.4 percent of sales, last year. The increase for both periods was primarily attributable to our lump sum pension settlement and our sales growth related initiatives.
Our effective tax rate for the quarter was 27.0 percent, compared to the prior year rate of 22.1 percent. The prior year quarter included $6.4 million in tax benefits related to the favorable settlement of a tax audit. The year-to-date effective tax rate was 27.3 percent, compared to the prior year rate of 27.6 percent.
Our operating margin for the quarter was 11.4 percent, which includes the $4.6 million of pension settlement and restructuring charges, down 100 basis points from the prior year. Year-to-date operating margin was 12.2 percent, down 170 basis points from Fiscal 2014.
As part of our ongoing share repurchase program we repurchased 1,045,000 shares for $39.9 million during the quarter. Year-to-date we have repurchased 4,387,000 shares, or 3.1 percent of our diluted outstanding shares, for $174.2 million.
FY15 Outlook
| · | We now project our Company’s sales to be between $2.40 and $2.50 billion. Our forecast is based on the Euro at US$1.13 and 117 Yen to the US$. |
| · | Our full-year operating margin forecast is 13.6 to 14.4 percent. Included in this forecast is approximately $10 million in operating expense increases for our Global ERP project and specific sales growth initiatives. This excludes the $3.9 million charge associated with the lump sum settlement of our U.S. pension plan recorded in the second quarter and our forecasted full-year restructuring charges. |
| · | Our FY15 tax rate is anticipated to be between 27 and 29 percent. |
| · | We forecast our full-year Fiscal 2015 adjusted diluted EPS to be between $1.65 and $1.85, excluding restructuring and pension lump sum settlement expenses. |
| · | We project that cash generated by our operating activities will be between $245 and $285 million. Capital spending is estimated to be between $90 and $100 million. |
(more)
Donaldson Company, Inc.
February 24, 2015
Page 4
Engine Products:We now forecast our FY15 sales growth to be down 0 to 3 percent, including the impact of foreign currency translation. In local currency, sales are forecasted to increase 1 percent to 5 percent.
| · | Our On-Road OEM Customers are expecting to increase production of heavy- and medium-duty trucks in 2015. |
| · | Demand from our Off-Road OEM Customers is anticipated to be mixed: build rates of construction equipment are expected to continue improving moderately in North America, remain stable in Europe and continued weak in Asia, build rates of agriculture equipment are forecasted to decrease in all regions, and build rates of mining equipment are expected to remain weak. |
| · | We are anticipating continued strong growth for our Engine Aftermarket business globally. Utilization rates for off-road equipment and on-road heavy truck fleets are expected to continue improving. We should also benefit from our continued expansion into emerging economies, the increasing number of first-fit systems installed in the field with our proprietary filters, and through continued expansion of our product portfolio. |
| · | We forecast a mid-single digit sales increase for our Aerospace and Defense business compared to last year as the continued slowdown in U.S. military activity should be mostly offset by growth from our commercial aerospace sales. |
Industrial Products: We forecast sales to increase 0 to 3 percent, including the impact of foreign currency translation. In local currency, sales are forecasted to increase 5 to 8 percent.
| · | Our Industrial Filtration Solutions’ sales are projected to be flat to 4 percent down. We anticipate our replacement filter sales will remain strong due to improving general manufacturing conditions but not strong enough to offset currency headwinds. |
| · | We anticipate our Gas Turbine sales will increase 20 to 26 percent due to awarded large turbine power generation projects and stronger aftermarket sales. This forecast includes $15 to $18 million from the Northern Technical acquisition, which was completed last September. |
| · | We forecast our Special Applications’ sales to be slightly down with improved demand for our semiconductor and venting products being offset by lower membrane sales and currency headwinds. |
(more)
Donaldson Company, Inc.
February 24, 2015
Page 5
About Donaldson Company
In 2015, Donaldson celebrates a century of providing global filtration solutions that improve people’s lives, enhance Customers’ equipment performance, and protect the environment. The 100-year-old, technology-driven Company is committed to satisfying Customers’ needs for filtration solutions through innovative research and development, application expertise, and global presence. Over 12,800 dedicated employees contribute to the Company’s success by supporting Customers at more than 140 sales, manufacturing, and distribution locations around the world. In Fiscal 2014, Donaldson reported sales of $2.5 billion and record earnings per share.
Donaldson is a member of the S&P MidCap 400 and Russell 1000 indices, whose 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, without limitation, forecasts, plans, trends, and projections relating to our business and financial performance and global economic conditions, which involve uncertainties that could materially impact results. All statements other than statements of historical fact are forward-looking statements. These statements do not guarantee future performance.
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, the reduced demand for hard disk drive products with the increased use of flash memory, currency fluctuations, commodity prices, political factors, the Company’s international operations, highly competitive markets, governmental laws and regulations, including the impact of the various economic stimulus and financial reform measures, the implementation of our new information technology systems, information security and data breaches, potential global events resulting in market instability including financial bailouts and defaults of sovereign nations, military and terrorist activities, including political unrest in the Middle East and Ukraine, health outbreaks, natural disasters, and all of the other risk factors included in our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. We undertake no obligation to publicly update or revise any forward-looking statements.
(more)
Donaldson Company, Inc.
February 24, 2015
Page 6
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 | |
| | | 2015 | | | 2014 | | | 2015 | | | 2014 | |
| Net sales | | $ | 596,944 | | | $ | 581,622 | | | $ | 1,193,454 | | | $ | 1,181,006 | |
| | | | | | | | | | | | | | | | | |
| Cost of sales | | | 391,469 | | | | 379,974 | | | | 778,927 | | | | 764,964 | |
| | | | | | | | | | | | | | | | | |
| Gross profit | | | 205,475 | | | | 201,648 | | | | 414,527 | | | | 416,042 | |
| | | | | | | | | | | | | | | | | |
| Operating expenses | | | 137,249 | | | | 129,540 | | | | 269,329 | | | | 252,187 | |
| | | | | | | | | | | | | | | | | |
| Operating income | | | 68,226 | | | | 72,108 | | | | 145,198 | | | | 163,855 | |
| | | | | | | | | | | | | | | | | |
| Other income, net | | | (3,313 | ) | | | (4,773 | ) | | | (7,138 | ) | | | (6,427 | ) |
| | | | | | | | | | | | | | | | | |
| Interest expense | | | 3,728 | | | | 1,999 | | | | 7,242 | | | | 4,613 | |
| | | | | | | | | | | | | | | | | |
| Earnings before income taxes | | | 67,811 | | | | 74,882 | | | | 145,094 | | | | 165,669 | |
| | | | | | | | | | | | | | | | | |
| Income taxes | | | 18,281 | | | | 16,542 | | | | 39,617 | | | | 45,737 | |
| | | | | | | | | | | | | | | | | |
| Net earnings | | $ | 49,530 | | | $ | 58,340 | | | $ | 105,477 | | | $ | 119,932 | |
| | | | | | | | | | | | | | | | | |
| Weighted average shares outstanding | | | 137,954,594 | | | | 146,957,131 | | | | 138,768,007 | | | | 147,140,135 | |
| | | | | | | | | | | | | | | | | |
| Diluted shares outstanding | | | 139,661,287 | | | | 149,021,755 | | | | 140,587,668 | | | | 149,204,090 | |
| | | | | | | | | | | | | | | | | |
| Net earnings per share | | $ | 0.36 | | | $ | 0.40 | | | $ | 0.76 | | | $ | 0.82 | |
| | | | | | | | | | | | | | | | | |
| Net earnings per share assuming dilution | | $ | 0.35 | | | $ | 0.39 | | | $ | 0.75 | | | $ | 0.80 | |
| | | | | | | | | | | | | | | | | |
| Dividends paid per share | | $ | 0.165 | | | $ | 0.140 | | | $ | 0.330 | | | $ | 0.270 | |
(more)
Donaldson Company, Inc.
February 24, 2015
Page 7
DONALDSON COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Thousands of dollars)
(Unaudited)
| | | January 31
2015 | | | July 31
2014 | |
| ASSETS | | | | | | | | |
| | | | | | | | | |
| Cash and cash equivalents | | $ | 228,998 | | | $ | 296,418 | |
| Short-term investments | | | 28,220 | | | | 127,201 | |
| Accounts receivable, net | | | 431,498 | | | | 474,157 | |
| Inventories, net | | | 272,007 | | | | 253,351 | |
| Prepaids and other current assets | | | 100,966 | | | | 74,150 | |
| | | | | | | | | |
| Total current assets | | | 1,061,689 | | | | 1,225,277 | |
| | | | | | | | | |
| Other assets and deferred taxes | | | 323,056 | | | | 265,469 | |
| Property, plant, and equipment, net | | | 465,505 | | | | 451,665 | |
| | | | | | | | | |
| Total assets | | $ | 1,850,250 | | | $ | 1,942,411 | |
| | | | | | | | | |
| LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | | | |
| | | | | | | | | |
| Trade accounts payable | | $ | 188,061 | | | $ | 216,603 | |
| Employee compensation and other liabilities | | | 185,002 | | | | 205,936 | |
| Short-term borrowings | | | 322,160 | | | | 185,303 | |
| Current maturity long-term debt | | | 1,830 | | | | 1,738 | |
| | | | | | | | | |
| Total current liabilities | | | 697,053 | | | | 609,580 | |
| | | | | | | | | |
| Long-term debt | | | 240,896 | | | | 243,726 | |
| Other long-term liabilities | | | 87,511 | | | | 86,622 | |
| | | | | | | | | |
| Total liabilities | | | 1,025,460 | | | | 939,928 | |
| | | | | | | | | |
| Equity | | | 824,790 | | | | 1,002,483 | |
| | | | | | | | | |
| Total liabilities and equity | | $ | 1,850,250 | | | $ | 1,942,411 | |
(more)
Donaldson Company, Inc.
February 24, 2015
Page 8
DONALDSON COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of dollars)
(Unaudited)
| | | Six Months Ended
January 31 | |
| | | 2015 | | | 2014 | |
| OPERATING ACTIVITIES | | | | | | | | |
| | | | | | | | | |
| Net earnings | | $ | 105,477 | | | $ | 119,932 | |
| Adjustments to reconcile net earnings to net cash provided by operating activities: | | | | | | | | |
| Depreciation and amortization | | | 37,399 | | | | 33,167 | |
| Changes in operating assets and liabilities | | | (70,956 | ) | | | 94 | |
| Tax benefit of equity plans | | | (5,383 | ) | | | (6,864 | ) |
| Stock compensation plan expense | | | 7,677 | | | | 7,137 | |
| Loss on sale of business | | | — | | | | 905 | |
| Other, net | | | 11,195 | | | | (2,766 | ) |
| Net cash provided by operating activities | | | 85,409 | | | | 151,605 | |
| | | | | | | | | |
| INVESTING ACTIVITIES | | | | | | | | |
| | | | | | | | | |
| Net expenditures on property and equipment | | | (50,969 | ) | | | (42,848 | ) |
| Net change in short-term investments | | | 87,474 | | | | 650 | |
| Acquisitions, net of cash acquired | | | (96,651 | ) | | | — | |
| Net cash used in investing activities | | | (60,146 | ) | | | (42,198 | ) |
| | | | | | | | | |
| FINANCING ACTIVITIES | | | | | | | | |
| | | | | | | | | |
| Purchase of treasury stock | | | (174,213 | ) | | | (66,331 | ) |
| Net change in debt and short-term borrowings | | | 135,880 | | | | 16,236 | |
| Dividends paid | | | (45,695 | ) | | | (39,414 | ) |
| Tax benefit of equity plans | | | 5,383 | | | | 6,864 | |
| Exercise of stock options | | | 8,147 | | | | 10,331 | |
| Net cash used in financing activities | | | (70,498 | ) | | | (72,314 | ) |
| | | | | | | | | |
| Effect of exchange rate changes on cash | | | (22,185 | ) | | | (2,112 | ) |
| | | | | | | | | |
| Increase (decrease) in cash and cash equivalents | | | (67,420 | ) | | | 34,981 | |
| | | | | | | | | |
| Cash and cash equivalents – beginning of year | | | 296,418 | | | | 224,138 | |
| | | | | | | | | |
| Cash and cash equivalents – end of period | | $ | 228,998 | | | $ | 259,119 | |
(more)
Donaldson Company, Inc.
February 24, 2015
Page 9
SEGMENT DETAIL
(Thousands of dollars)
(Unaudited)
| | | Engine
Products | | | Industrial
Products | | | Corporate &
Unallocated | | | Total
Company | |
| 3 Months Ended January 31, 2015: | | | | | | | | | | | | | | | | |
| Net sales | | $ | 357,109 | | | $ | 239,835 | | | | — | | | $ | 596,944 | |
| Earnings before income taxes | | | 41,436 | | | | 37,446 | | | | (11,071 | ) | | | 67,811 | |
| | | | | | | | | | | | | | | | | |
| 3 Months Ended January 31, 2014: | | | | | | | | | | | | | | | | |
| Net sales | | $ | 369,675 | | | $ | 211,947 | | | | — | | | $ | 581,622 | |
| Earnings before income taxes | | | 47,294 | | | | 28,032 | | | | (444 | ) | | | 74,882 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| 6 Months Ended January 31, 2015: | | | | | | | | | | | | | | | | |
| Net sales | | $ | 747,829 | | | $ | 445,625 | | | | — | | | $ | 1,193,454 | |
| Earnings before income taxes | | | 94,596 | | | | 65,089 | | | | (14,591 | ) | | | 145,094 | |
| | | | | | | | | | | | | | | | | |
| 6 Months Ended January 31, 2014: | | | | | | | | | | | | | | | | |
| Net sales | | $ | 758,791 | | | $ | 422,215 | | | | — | | | $ | 1,181,006 | |
| Earnings before income taxes | | | 109,367 | | | | 59,175 | | | | (2,873 | ) | | | 165,669 | |
NET SALES BY PRODUCT
(Thousands of dollars)
(Unaudited)
| | | Three Months Ended
January 31 | | | Six Months Ended
January 31 | |
| | | 2015 | | | 2014 | | | 2015 | | | 2014 | |
| Engine Products segment: | | | | | | | | | | | | | | | | |
| Off-Road Products | | $ | 63,703 | | | $ | 82,298 | | | $ | 137,257 | | | $ | 171,511 | |
| On-Road Products | | | 31,718 | | | | 29,828 | | | | 68,475 | | | | 62,317 | |
| Aftermarket Products | | | 235,576 | | | | 234,362 | | | | 492,115 | | | | 473,234 | |
| Aerospace and Defense Products | | | 26,112 | | | | 23,187 | | | | 49,982 | | | | 51,729 | |
| Total Engine Products segment | | $ | 357,109 | | | $ | 369,675 | | | $ | 747,829 | | | $ | 758,791 | |
| | | | | | | | | | | | | | | | | |
| Industrial Products segment: | | | | | | | | | | | | | | | | |
| Industrial Filtration Solutions Products | | $ | 130,191 | | | $ | 132,847 | | | $ | 260,721 | | | $ | 264,278 | |
| Gas Turbine Products | | | 63,923 | | | | 33,461 | | | | 94,953 | | | | 68,101 | |
| Special Applications Products | | | 45,721 | | | | 45,639 | | | | 89,951 | | | | 89,836 | |
| Total Industrial Products segment | | $ | 239,835 | | | $ | 211,947 | | | $ | 445,625 | | | $ | 422,215 | |
| | | | | | | | | | | | | | | | | |
| Total Company | | $ | 596,944 | | | $ | 581,622 | | | $ | 1,193,454 | | | $ | 1,181,006 | |
(more)
Donaldson Company, Inc.
February 24, 2015
Page 10
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Thousands of dollars, except per share amounts)
(Unaudited)
| | | Three Months Ended
January 31 | | | Six Months Ended
January 31 | |
| | | 2015 | | | 2014 | | | 2015 | | | 2014 | |
| Net cash provided by operating activities | | $ | 36,079 | | | $ | 52,686 | | | $ | 85,409 | | | $ | 151,605 | |
| Net capital expenditures | | | (24,012 | ) | | | (22,318 | ) | | | (50,969 | ) | | | (42,848 | ) |
| Free cash flow | | $ | 12,067 | | | $ | 30,368 | | | $ | 34,440 | | | $ | 108,757 | |
| | | | | | | | | | | | | | | | | |
| Net earnings | | $ | 49,530 | | | $ | 58,340 | | | $ | 105,477 | | | $ | 119,932 | |
| Income taxes | | | 18,281 | | | | 16,542 | | | | 39,617 | | | | 45,737 | |
| Interest expense | | | 3,728 | | | | 1,999 | | | | 7,242 | | | | 4,613 | |
| Depreciation and amortization | | | 19,270 | | | | 16,900 | | | | 37,399 | | | | 33,167 | |
| EBITDA | | $ | 90,809 | | | $ | 93,781 | | | $ | 189,735 | | | $ | 203,449 | |
| | | | | | | | | | | | | | | | | |
| Operating income | | $ | 68,226 | | | $ | 72,108 | | | $ | 145,198 | | | $ | 163,855 | |
| Restructuring charges | | | 681 | (a) | | | 585 | (c) | | | 681 | (a) | | | 2,232 | (d) |
| Pension lump sum settlement charge | | | 3,906 | (b) | | | — | | | | 3,906 | (b) | | | — | |
| | | | | | | | | | | | | | | | | |
| Adjusted Operating Income | | $ | 72,813 | | | $ | 72,693 | | | $ | 149,785 | | | $ | 166,087 | |
| | | | | | | | | | | | | | | | | |
| Net earnings | | $ | 49,530 | | | $ | 58,340 | | | $ | 105,477 | | | $ | 119,932 | |
| Restructuring charges, net of tax | | | 422 | (a) | | | 418 | (c) | | | 422 | (a) | | | 1,861 | (d) |
| Pension lump sum settlement charge, net of tax | | | 2,422 | (b) | | | — | | | | 2,422 | (b) | | | — | |
| Tax audit settlement | | | — | | | | (6,392 | )(e) | | | — | | | | (6,392 | )(e) |
| | | | | | | | | | | | | | | | | |
| Adjusted Net Earnings | | $ | 52,374 | | | $ | 52,366 | | | $ | 108,321 | | | $ | 115,401 | |
| | | | | | | | | | | | | | | | | |
| Diluted EPS | | $ | 0.35 | | | $ | 0.39 | | | $ | 0.75 | | | $ | 0.80 | |
| Restructuring charges per share, net of tax | | | — | (a) | | | — | (c) | | | — | (a) | | | 0.01 | (d) |
| Pension lump sum settlement charge, net of tax | | | 0.02 | (b) | | | — | | | | 0.02 | (b) | | | — | |
| Tax audit settlement | | | — | | | | (0.04 | )(e) | | | — | | | | (0.04 | )(e) |
| | | | | | | | | | | | | | | | | |
| Adjusted Diluted EPS | | $ | 0.37 | | | $ | 0.35 | | | $ | 0.77 | | | $ | 0.77 | |
(more)
Donaldson Company, Inc.
February 24, 2015
Page 11
(a)Current year restructuring charges include accrued severance, project management fees, warehousing costs, moving expenses, and supplies and equipment related to the closing of our Grinnell, IA facility.
(b) The pension lump sum settlement charge relates to the Company’s offer to settle liabilities with certain vested participants in our U.S. pension plans.
(c) The prior year quarter restructuring charges include severance costs associated with a reduction in workforce in our Wuxi, China facility due to decreased customer demand.
(d) The prior year restructuring charges include severance costs associated with a reduction in workforce in our Wuxi, China and Duelmen, Germany facilities due to decreases in customer demand and expenses associated with the sale of our Flensburg, Germany facility in the first quarter of Fiscal 2014.
(e) The prior year tax audit settlement relates to favorable settlement of an audit in the prior year quarter.
Although free cash flow, EBITDA, adjusted operating income, adjusted net earnings, and adjusted diluted EPS 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. We evaluate our results of operations both on an as reported and a constant currency basis. The constant currency presentation, which is a non-GAAP measure, excludes the impact of fluctuations in foreign currency exchange rates. We believe providing constant currency information provides valuable supplemental information regarding our results of operations, consistent with how we evaluate our performance. We calculate constant currency percentages by converting our current period local currency financial results using the prior period exchanges rates and compared these adjusted amounts to our prior period reports results. 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.
###
