Donaldson achieved record sales of $2.85
billion in 2019, an increase of 4.0 percent from 2018
In 2019, Donaldson invested $150 million of
capital and returned $229 million to shareholders
Fiscal 2020 sales forecasted between a 2
percent decline and 4 percent increase
Operating margin expected to grow 0.3 to 0.9
percentage points in 2020, driven by gross margin
Donaldson Company, Inc. (NYSE: DCI) today reported 2019 net
earnings of $58.0 million in fourth quarter and $267.2 million for
the full year, compared with $102.4 million and $180.3 million,
respectively, in 2018. Excluding certain one-time items in the
current and prior years,1 adjusted earnings per share (EPS)2 were
$0.61 in fourth quarter and $2.21 for the full-year 2019, an
increase of 5.2 percent and 10.5 percent, respectively, from 2018.
A reconciliation of GAAP to non-GAAP measures is attached to this
press release.
“We generated record sales and profit in 2019, due in part to
strong performance in our Advance and Accelerate3 businesses, and
we made a record level of investments to drive long-term profitable
growth,” said Tod Carpenter, chairman, president and chief
executive officer. “We were pleased with sales results last
quarter, which matched our forecast, and earnings were also in line
as a better-than-expected tax rate offset the impact of demand
volatility on gross margin.
“Our fiscal 2020 plan reflects focused portfolio management in
an uneven demand environment. It is likely that uncertainty related
to global trade and the political environment will keep our
customers cautious, and some of our engine-related end markets are
nearing the peak of their economic cycle. As these factors affect
demand, our innovative products with recurring revenue, combined
with disciplined expense planning, give us greater stability and
flexibility as we remain focused on the future. We are making
incremental investments to drive our strategic priorities in 2020,
and we are aggressively pursuing gross margin improvement
opportunities. Our company is aligned on our strategic and
operational objectives, and we are excited about our path to
delivering another year of record profit.”
1
See the “Accounting Considerations”
section for more information about the adjusting items.
2
All earnings per share figures refer to
diluted earnings per share. Adjusted earnings are a non-GAAP
financial measure that exclude the impact of certain items not
related to ongoing operations.
3
Advance & Accelerate includes
Industrial Air Filtration (IAF) replacement parts, Engine
Aftermarket, Venting Solutions, Process Filtration, Semiconductor
and Industrial Hydraulics.
Operating Results
Fourth quarter 2019 sales increased 0.3 percent to $726.9
million from $724.7 million in 2018. Included within the
year-over-year change are the following items:
- The acquisition of BOFA International LTD (BOFA), which was
completed during first quarter 2019, added approximately 1.3
percentage points,
- Price increases added approximately 0.9 percentage points,
- Adoption of the revenue recognition accounting standard
(revenue recognition) added approximately 0.6 percentage points,
and
- Currency translation reduced sales by approximately 2.0
percent.
Three Months Ended
Twelve Months Ended
July 31, 2019
July 31, 2019
Reported % Change
Constant Currency % Change
Reported % Change
Constant Currency % Change
Off-Road
(10.1
)
%
(8.0
)
%
(3.7
)
%
(0.8
)
%
On-Road
1.5
2.2
16.6
18.4
Aftermarket
0.3
2.5
4.2
7.1
Aerospace and Defense
4.0
5.7
9.8
11.7
Total Engine Products segment
(1.1
)
%
0.9
%
4.2
%
6.9
%
Industrial Filtration Solutions
6.2
%
8.8
%
8.0
%
11.1
%
Gas Turbine Systems
6.9
8.5
(8.0
)
(6.5
)
Special Applications
(8.8
)
(8.0
)
(2.6
)
(0.7
)
Total Industrial Products segment
3.3
%
5.5
%
3.8
%
6.5
%
Total Company
0.3
%
2.3
%
4.0
%
6.8
%
Fourth quarter sales of Engine Products (Engine) decreased 1.1
percent from last year on a reported basis, and the sales increased
0.9 percent when excluding the negative impact from currency
translation. Engine realized benefits from pricing and revenue
recognition of 1.1 percent and 0.9 percent, respectively. Engine
faced mixed conditions across geographies and markets, with On-Road
experiencing continued strength in the US/CA market while Off-Road
and Aftermarket were stronger internationally. Timing of orders
contributed to the year-over-year growth in Aerospace and
Defense.
Fourth quarter sales of Industrial Products (Industrial)
increased 3.3 percent from last year. Industrial realized benefits
of 3.9 percent from BOFA and 0.5 percent from pricing, partially
offset by a negative impact from currency translation of 2.2
percent. Sales of Industrial Filtration Solutions (IFS) increased
6.2 percent, reflecting benefits from BOFA and replacement parts,
partially offset by lower sales of new equipment. Gas Turbine
Systems (GTS) sales increased due to the timing of new equipment
sales, and the Special Applications (SA) sales decline was due to
Disk Drive filters.
Fourth quarter 2019 operating income as a rate of sales
(operating margin) declined to 14.4 percent from 14.9 percent in
2018,4 including a negative impact of 0.1 percentage point from
revenue recognition.
Fourth quarter gross margin was 33.5 percent, compared with 34.9
percent in 2018, including a negative impact of 0.2 percentage
points from revenue recognition. The year-over-year gross margin
decline was driven by unfavorable mix of product sales within
markets, combined with higher raw materials and supply chain costs.
These gross margin pressures were partially offset by pricing
benefits. Operating expense as a percent of sales (expense rate)
improved 0.8 percentage points to 19.2 percent from 20.0 percent in
2018, reflecting lower incentive compensation expense, partially
offset by higher salary and other employee-related expenses.
Fourth quarter other expense was $0.5 million, compared with
income of $0.9 million in the prior year. The year-over-year change
was driven by charges related to Donaldson’s global cash
optimization efforts. Fourth quarter 2019 interest expense declined
to $5.2 million from $5.6 million in 2018.
Donaldson’s fourth quarter income tax expense included a charge
of $19.1 million related to final tax regulations that clarify
provisions of the Federal Tax Cuts and Jobs Act. Excluding this
impact, the fourth quarter 2019 adjusted tax rate was 21.4 percent,
compared with an adjusted tax rate of 26.2 percent in 2018. The
year-over-year decline was driven by benefits from a lower U.S.
corporate tax rate, combined with the favorable settlement of a tax
audit.
During fourth quarter 2019, Donaldson repurchased 500 thousand
shares of its common stock at an average price of $49.45 for a
total investment of $24.7 million. For the full year, the Company
repurchased 2.0 percent of its outstanding shares for a total
investment of $129.2 million. Donaldson paid dividends of $26.8
million in fourth quarter and $99.7 million for the full year.
Fiscal 2020 Outlook
Donaldson expects fiscal 2020 GAAP EPS between $2.21 and $2.37,
compared with fiscal 2019 GAAP and adjusted EPS of $2.05 and $2.21,
respectively.
Compared with 2019, fiscal 2020 sales are projected in a range
between a 2 percent decline and a 4 percent increase, including a
negative impact from currency translation of 1 to 2 percent that is
partially offset by price benefits of approximately 1 percent.
Compared with 2019, fiscal 2020 Engine sales are projected in a
range between a 4 percent decline and a 2 percent increase,
reflecting growth in Aerospace and Defense and Aftermarket,
combined with lower year-over-year sales in the Company’s first-fit
On-Road and Off-Road businesses. Industrial sales are expected to
increase from fiscal 2019 between 2 and 8 percent, reflecting
growth in IFS and GTS, partially offset by declining sales in SA.
Within Industrial, growth in IFS is due in part to one quarter of
incremental benefits from the acquisition of BOFA. Currency
translation is expected to negatively impact both segments by 1 to
2 percent.
4
Prior-period profit rates and other income
conform to the adoption of new accounting standards, which are
described in the “Accounting Considerations” section of this press
release.
Donaldson expects fiscal 2020 operating margin between 13.9 and
14.5 percent, compared with 13.6 percent in 2019. The
year-over-year improvement is due to higher gross margin, partially
offset by a higher expense rate.
The Company expects full-year 2020 interest expense between $18
million and $20 million, and other income is forecast between $4
million and $8 million. Donaldson’s fiscal 2020 effective income
tax rate is forecast between 25.0 and 27.0 percent.
The Company expects fiscal 2020 capital expenditures between
$110 million and $130 million, and cash conversion is forecast
between 80 and 95 percent. Donaldson expects to repurchase
approximately 2 percent of its outstanding shares during fiscal
2020.
Accounting
Considerations
Following the enactment of the Federal Tax Cuts and Jobs Act
(TCJA), the Company engaged in additional efforts related to
optimizing its global cash. During fourth quarter 2019, Donaldson
enhanced its subsidiary structure to leverage cash optimization
benefits made possible by the TCJA. This enhancement resulted in a
charge of $2.1 million in fourth quarter 2019. Other TCJA-related
matters resulted in fourth quarter and full-year 2019 net charges
of $19.1 million and $18.6 million, respectively, compared with a
benefit of $26.0 million in fourth quarter 2018 and a full-year
2018 charge of $84.1 million. The fourth quarter charge was driven
by final tax regulations issued during Donaldson’s fiscal fourth
quarter that were clarifying provisions of the TCJA. The fiscal
2019 and 2018 amounts are excluded from the Company’s calculation
of adjusted earnings.
On August 1, 2018, Donaldson adopted the FASB standards ASU
2014-09, Revenue from Contracts with Customers (“revenue
recognition”), and ASU 2017-07, Compensation – Retirement Benefits
(“pension accounting”).
Donaldson elected to adopt the new revenue recognition standard
using the modified retrospective method; therefore, fiscal 2019
results conform with the new standard, while results prior to
August 1, 2018, conform to the previous standard. Adoption of the
new standard resulted in additional sales in fourth quarter and
full-year 2019 of $4.5 million and $14.8 million, respectively. The
adoption also added $0.1 million to gross profit in fourth quarter
and reduced full-year 2019 gross profit by $0.5 million.
Under the new pension accounting standard, Donaldson continued
reporting the service component of retirement costs in operating
income and the non-service components was now reported in other
income. The new standard requires use of a retrospective method in
accounting for the change; therefore, results in all periods
presented conform with the new standard.
Miscellaneous
The Company will webcast its fourth quarter and full-year 2019
earnings conference call today at 9:00 a.m. CDT. To listen to the
webcast, visit the “Events & Presentations” section of
Donaldson’s Investor Relations website (IR.Donaldson.com), and
click on the “listen to webcast” option. The webcast replay will be
available at approximately 12:00 p.m. CDT today.
Statements in this release regarding future events and
expectations, such as forecasts, plans, trends and projections
relating to the Company’s business and financial performance, are
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995, and are identified by
words or phrases such as “will likely result,” “are expected to,”
“will continue,” “will allow,” “estimate,” “project,” “believe,”
“expect,” “anticipate,” “forecast,” “plan,” and similar
expressions. These forward-looking statements speak only as of the
date such statements are made and are subject to risks and
uncertainties that could cause the Company’s results to differ
materially from these statements. These factors include, but are
not limited to, economic and industrial conditions worldwide; the
Company's ability to maintain competitive advantages; threats from
disruptive innovation; highly competitive markets with pricing
pressure; the Company's ability to protect and enforce its
intellectual property; the difficulties in operating globally;
customer concentration in certain cyclical industries; significant
demand fluctuations; unavailable raw materials or material cost
inflation; inability of operations to meet customer demand;
difficulties with information technology systems and security;
foreign currency fluctuations; governmental laws and regulations;
litigation; changes in tax laws and tax rates, regulations and
results of examinations; the Company's ability to attract and
retain qualified personnel; changes in capital and credit markets;
execution of the Company's acquisition strategy; the possibility of
intangible asset impairment; the Company's ability to manage
productivity improvements; unexpected events and the disruption on
operations; the Company's ability to maintain an effective system
of internal control over financial reporting; and the United
Kingdom’s decision to end its membership in the European Union.
These and other risks and uncertainties are described in Item 1A of
the Company’s Annual Report on Form 10-K for the year ended July
31, 2018. The Company undertakes no obligation to publicly update
or revise any forward-looking statements, whether as a result of
new information, future events or otherwise, unless required by
law. The results presented herein are preliminary, unaudited and
subject to revision until the Company files its results with the
United States Securities and Exchange Commission on Form 10-K.
About Donaldson Company
Founded in 1915, Donaldson Company is a global leader in the
filtration industry with sales, manufacturing and distribution
locations around the world. Donaldson’s innovative technologies are
designed to solve complex filtration challenges and enhance
customers’ equipment performance. For more information, visit
www.Donaldson.com.
CONDENSED CONSOLIDATED
STATEMENTS OF EARNINGS
(In millions, except per share
amounts)
(Unaudited)
Three Months Ended
Twelve Months Ended
July 31,
July 31,
2019
2018
Change
2019
2018
Change
Net sales
$726.9
$724.7
0.3
%
$
2,844.9
$
2,734.2
4.0
%
Cost of sales
483.1
471.9
2.4
1,896.6
1,798.4
5.5
Gross profit
243.8
252.8
(3.6
)
948.3
935.8
1.3
Operating expenses
139.4
144.6
(3.6
)
560.1
558.8
0.2
Operating income
104.4
108.2
(3.5
)
388.2
377.0
3.0
Interest expense
5.2
5.6
(7.1
)
19.9
21.3
(6.6
)
Other expense (income), net
0.5
(0.9)
(155.6
)
(6.9
)
(7.9
)
(12.7
)
Earnings before income taxes
98.7
103.5
(4.6
)
375.2
363.6
3.2
Income taxes
40.7
1.1
3,600.0
108.0
183.3
(41.1
)
Net earnings
$58.0
$102.4
(43.4
)
%
$
267.2
$
180.3
48.2
%
Weighted average shares – basic
128.0
129.5
(1.2
)
%
128.3
130.3
(1.5
)
%
Weighted average shares – diluted
129.7
131.4
(1.3
)
%
130.3
132.2
(1.5
)
%
Net earnings per share – basic
$0.45
$0.79
(43.0
)
%
$
2.08
$
1.38
50.7
%
Net earnings per share – diluted
$0.45
$0.78
(42.3
)
%
$
2.05
$
1.36
50.7
%
Cash dividends paid per share
$0.21
$0.19
10.5
%
$
0.78
$
0.73
6.8
%
Note: Amounts may not foot due to
rounding.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In millions)
(Unaudited)
July 31,
July 31,
2019
2018
Assets
Current assets:
Cash and cash equivalents
$
177.8
$
204.7
Accounts receivable, net
529.5
534.6
Inventories, net
332.8
334.1
Prepaid expenses and other current
assets
82.5
52.3
Total current assets
1,122.6
1,125.7
Property, plant and equipment, net
588.9
509.3
Goodwill
303.1
238.4
Intangible assets, net
70.9
35.6
Deferred income taxes
14.2
19.2
Other long-term assets
42.9
48.4
Total assets
$
2,142.6
$
1,976.6
Liabilities and shareholders’
equity
Current liabilities:
Short-term borrowings
$
2.1
$
28.2
Current maturities of long-term debt
50.2
15.3
Trade accounts payable
237.5
201.3
Other current liabilities
193.1
224.6
Total current liabilities
482.9
469.4
Long-term debt
584.4
499.6
Non-current income taxes payable
110.9
105.3
Deferred income taxes
13.2
4.2
Other long-term liabilities
48.5
40.3
Total liabilities
1,239.9
1,118.8
Redeemable non-controlling interest
10.0
—
Total shareholders’ equity
892.7
857.8
Total liabilities & shareholders’
equity
$
2,142.6
$
1,976.6
CONDENSED CONSOLIDATED
STATEMENT OF CASH FLOWS
(In millions)
(Unaudited)
Twelve Months Ended
July 31,
2019
2018
Operating Activities
Net earnings
$
267.2
$
180.3
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization
81.1
76.7
Deferred income taxes
10.2
7.0
Stock-based compensation expense
15.0
16.7
Other, net
(8.8
)
(30.3
)
Changes in operating assets and
liabilities, excluding effect of acquired businesses
(18.9
)
12.5
Net cash provided by operating
activities
345.8
262.9
Investing Activities
Net expenditures on property, plant and
equipment
(150.4
)
(95.9
)
Acquisition, net of cash acquired
(96.0
)
0.5
Net cash used in investing activities
(246.4
)
(95.4
)
Financing Activities
Proceeds from long-term debt
155.0
197.7
Repayments of long-term debt
(45.9
)
(272.4
)
Change in short-term borrowings
(25.3
)
6.0
Purchase of treasury stock
(129.2
)
(122.0
)
Dividends paid
(99.7
)
(94.7
)
Tax withholding for stock compensation
transactions
(4.1
)
(2.6
)
Exercise of stock options
25.9
19.2
Net cash used in financing activities
(123.3
)
(268.8
)
Effect of exchange rate changes on
cash
(3.0
)
(2.4
)
Decrease in cash and cash equivalents
(26.9
)
(103.7
)
Cash and cash equivalents, beginning of
year
204.7
308.4
Cash and cash equivalents, end of year
$
177.8
$
204.7
CONSOLIDATED RATE
ANALYSIS
(Unaudited)
Three Months Ended
Twelve Months Ended
July 31,
July 31,
2019
2018
2019
2018
Gross margin
33.5
%
34.9
%
33.3
%
34.2
%
Operating expenses rate
19.2
%
20.0
%
19.7
%
20.4
%
Operating income rate
14.4
%
14.9
%
13.6
%
13.8
%
Other (expense) income, net rate
(0.1
)%
0.1
%
0.2
%
0.3
%
Depreciation and amortization rate
2.9
%
2.7
%
2.9
%
2.8
%
EBITDA rate
17.2
%
17.7
%
16.7
%
16.9
%
Effective tax rate
41.2
%
1.1
%
28.8
%
50.4
%
Cash conversion ratio
145.7
%
79.4
%
73.1
%
92.6
%
Three Months Ended
Twelve Months Ended
July 31,
July 31,
2019
2018
2019
2018
ADJUSTED RATES
Gross margin
33.5
%
34.9
%
33.3
%
34.2
%
Operating expenses rate
19.2
%
20.0
%
19.7
%
20.4
%
Operating income rate
14.4
%
14.9
%
13.6
%
13.8
%
Other income, net rate
0.2
%
0.1
%
0.3
%
0.3
%
Depreciation and amortization rate
2.9
%
2.7
%
2.9
%
2.8
%
EBITDA rate
17.2
%
17.7
%
16.7
%
16.9
%
Effective tax rate
21.4
%
26.2
%
23.7
%
27.3
%
Cash conversion ratio
106.8
%
106.4
%
70.7
%
76.4
%
Note: Rate analysis metrics are computed
by dividing the applicable amount by net sales, cash conversion
ratio reflects free cash flow divided by net income. Adjusted rates
are non-GAAP measures; see Reconciliation of Non-GAAP Financial
Measures schedule for additional information. Amounts may not foot
due to rounding.
SEGMENT DETAIL
(In millions)
(Unaudited)
Three Months Ended July 31,
Twelve Months Ended July 31
2019
2018
Change
2019
2018
Change
NET SALES
Engine Products segment
Off-Road
$
75.1
$
83.6
(10.1
)
%
$
315.1
$
327.4
(3.7
)
%
On-Road
44.2
43.5
1.5
179.8
154.2
16.6
Aftermarket
335.3
334.2
0.3
1,315.3
1,261.9
4.2
Aerospace and Defense
32.1
30.9
4.0
115.8
105.5
9.8
Total Engine Products segment
$
486.8
$
492.2
(1.1
)
%
$
1,926.0
$
1,849.0
4.2
%
Industrial Products segment
Industrial Filtration Solutions
$
172.5
$
162.5
6.2
%
$
641.7
$
594.3
8.0
%
Gas Turbine Systems
25.8
24.1
6.9
106.3
115.5
(8.0
)
Special Applications
41.9
45.9
(8.8
)
170.8
175.4
(2.6
)
Total Industrial Products segment
$
240.2
$
232.5
3.3
%
$
918.8
$
885.2
3.8
%
Total Company
$
726.9
$
724.7
0.3
%
$
2,844.9
$
2,734.2
4.0
%
EARNINGS BEFORE
INCOME TAXES
Engine Products segment
$
66.0
$
74.9
(11.9
)
%
$
254.6
$
258.8
(1.6
)
%
Industrial Products segment
38.6
39.8
(3.0
)
140.1
135.5
3.4
Corporate and Unallocated
(5.9
)
(11.2
)
(47.3
)
(19.5
)
(30.7
)
(36.5
)
Total Company
$
98.7
$
103.5
(4.6
)
%
$
375.2
$
363.6
3.2
%
EARNINGS BEFORE
INCOME TAXES %
Engine Products segment
13.6
%
15.2
%
(1.6
)
13.2
%
14.0
%
(0.8
)
Industrial Products segment
16.1
%
17.1
%
(1.0
)
15.2
%
15.3
%
(0.1
)
Note: Percentage is calculated by dividing
earnings before income taxes by sales. Amounts may not foot due to
rounding.
SEGMENT SALES PERCENT CHANGE
FROM PRIOR PERIODS BY GEOGRAPHY, AS REPORTED
(Unaudited)
Three Months Ended July 31,
2019
Engine Products segment
TOTAL
US/CA
EMEA
APAC
LATAM
Off-Road
(10.1
)
%
(16.4
)
%
5.2
%
(17.0
)
%
(49.7
)
%
On-Road
1.5
26.1
(20.1
)
(26.7
)
(32.5
)
Aftermarket
0.3
(1.3
)
(4.3
)
6.4
6.5
Aerospace and Defense
4.0
(7.1
)
29.6
55.1
Total Engine Products segment
(1.1
)
%
(1.2
)
%
(0.6
)
%
(3.4
)
%
2.1
%
Industrial Products segment
Industrial Filtration Solutions
6.2
%
4.6
%
9.4
%
9.5
%
(14.3
)
%
Gas Turbine Systems
6.9
24.4
15.1
(32.0
)
9.7
Special Applications
(8.8
)
9.4
2.1
(13.4
)
(48.7
)
Total Industrial Products segment
3.3
%
7.2
%
9.3
%
(4.8
)
%
(13.6
)
%
Total Company
0.3
%
0.9
%
3.2
%
(4.0
)
%
(0.8
)
%
Twelve Months Ended July 31
2019
Engine Products segment
TOTAL
US/CA
EMEA
APAC
LATAM
Off-Road
(3.7
)
%
(9.2
)
%
7.1
%
(2.6
)
%
(55.7
)
%
On-Road
16.6
32.5
(1.1
)
0.8
(26.5
)
Aftermarket
4.2
6.4
(1.1
)
4.6
6.6
Aerospace and Defense
9.8
8.1
13.6
1.9
Total Engine Products segment
4.2
%
6.8
%
1.9
%
2.5
%
1.7
%
Industrial Products segment
Industrial Filtration Solutions
8.0
%
7.0
%
9.5
%
6.3
%
9.6
%
Gas Turbine Systems
(8.0
)
(5.2
)
7.7
(42.6
)
(14.4
)
Special Applications
(2.6
)
14.2
3.7
(6.2
)
(27.6
)
Total Industrial Products segment
3.8
%
5.3
%
8.7
%
(3.9
)
%
5.1
%
Total Company
4.0
%
6.4
%
4.5
%
(0.2
)
%
2.2
%
Note: Amounts may not foot due to
rounding.
SEGMENT SALES PERCENT CHANGE
FROM PRIOR PERIODS BY GEOGRAPHY, CONSTANT CURRENCY
(Unaudited)
Three Months Ended July 31,
2019
Engine Products segment
TOTAL
US/CA
EMEA
APAC
LATAM
Off-Road
(8.0
)
%
(16.4
)
%
10.0
%
(15.2
)
%
(48.8
)
%
On-Road
2.2
26.1
(16.0
)
(26.2
)
(31.6
)
Aftermarket
2.5
(1.3
)
0.5
10.2
8.4
Aerospace and Defense
5.7
(7.1
)
35.5
57.1
Total Engine Products segment
0.9
%
(1.2
)
%
4.3
%
(0.6
)
%
4.0
%
Industrial Products segment
Industrial Filtration Solutions
8.8
%
4.6
%
14.4
%
12.9
%
(13.9
)
%
Gas Turbine Systems
8.5
24.4
17.4
(28.6
)
9.6
Special Applications
(8.0
)
9.4
6.9
(13.4
)
(47.6
)
Total Industrial Products segment
5.5
%
7.2
%
14.0
%
(3.1
)
%
(13.2
)
%
Total Company
2.3
%
0.9
%
8.0
%
(1.7
)
%
0.8
%
Twelve Months Ended July 31
2019
Engine Products segment
TOTAL
US/CA
EMEA
APAC
LATAM
Off-Road
(0.8
)
%
(9.2
)
%
12.7
%
0.7
%
(52.0
)
%
On-Road
18.4
32.5
4.5
3.8
(23.0
)
Aftermarket
7.1
6.4
4.7
9.5
10.7
Aerospace and Defense
11.7
8.1
19.5
5.1
Total Engine Products segment
6.9
%
6.8
%
7.6
%
6.8
%
5.7
%
Industrial Products segment
Industrial Filtration Solutions
11.1
%
7.0
%
15.3
%
10.3
%
13.0
%
Gas Turbine Systems
(6.5
)
(5.2
)
10.1
(39.2
)
(14.3
)
Special Applications
(0.7
)
14.2
9.0
(4.8
)
(22.8
)
Total Industrial Products segment
6.5
%
5.3
%
14.0
%
(1.3
)
%
8.1
%
Total Company
6.8
%
6.4
%
10.0
%
3.4
%
6.1
%
Note: The constant currency presentation,
which is a non-GAAP measure, excludes the impact of fluctuations in
foreign currency exchange rates. The Company believes providing
constant currency information provides valuable supplemental
information regarding its results of operations. The Company
calculates constant currency percentages by converting its current
period local currency financial results using the prior period
exchanges rates and compared these adjusted amounts to its prior
period reported results. Amounts may not foot due to rounding.
RECONCILIATION OF NON-GAAP
FINANCIAL MEASURES
(In millions, except per share
amounts)
(Unaudited)
Three Months Ended
Twelve Months Ended
July 31,
July 31,
2019
2018
2019
2018
Net cash provided by operating
activities
$
122.5
$
104.2
$
345.8
$
262.9
Net capital expenditures
(38.0
)
(22.8
)
(150.4
)
(95.9
)
Free cash flow
$
84.5
$
81.4
$
195.4
$
167.0
Free cash flow
$
84.5
$
81.4
$
195.4
$
167.0
Discretionary cash contribution to U.S.
pension plans
—
—
8.0
35.0
Adjusted free cash flow
$
84.5
$
81.4
$
203.4
$
202.0
Net earnings
$
58.0
$
102.4
$
267.2
$
180.3
Income taxes
40.7
1.1
108.0
183.3
Interest expense
5.2
5.6
19.9
21.3
Depreciation and amortization
21.4
19.3
81.1
76.7
EBITDA
$
125.3
$
128.4
$
476.2
$
461.6
Net earnings
$
58.0
$
102.4
$
267.2
$
180.3
Tax (benefit) expense for Federal Tax Cuts
and Jobs Act(a)
19.1
(26.0
)
18.6
84.1
Restructuring(a)
2.1
—
2.1
—
Adjusted Net Earnings
$
79.2
$
76.4
$
287.9
$
264.4
Diluted EPS
$
0.45
$
0.78
$
2.05
$
1.36
Tax (benefit) expense for Federal Tax Cuts
and Jobs Act(a)
0.14
(0.20
)
0.14
0.64
Restructuring(a)
0.02
—
0.02
—
Adjusted diluted EPS
$
0.61
$
0.58
$
2.21
$
2.00
(a) See the “Accounting Considerations”
section of this press release for additional information.
Note: Although free cash flow, adjusted
free cash flow, EBITDA, adjusted net earnings, adjusted diluted EPS
and adjusted effective tax rate 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. The Company evaluates its results
of operations both on an as reported and a constant currency basis.
The adjusted basis presentation excludes the impact of certain
matters not related to the Company’s ongoing operations. 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. Amounts may not foot due to
rounding.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190905005196/en/
Brad Pogalz (952) 887-3753
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