Donaldson Reports Fourth Quarter Sales, Earnings

August 27, 2014

Donaldson Company Inc. announced its financial results for its fiscal 2014 fourth quarter ended July 31. Fourth-quarter sales totaled $668 million, up 6 percent from the same period in 2013. Operating income decreased slightly, from $100 million in 4Q 2013 to $99 million this year. Net earnings were $73 million, equal to the 4Q 2013 total.

"We are very pleased to report a strong finish to our FY14, with record sales, net earnings and EPS in our fourth quarter, and also record EPS for the full year," said Bill Cook, Donaldson's CEO. "Our replacement filter sales were strong again this quarter, with double-digit percent growth in both our Engine and Industrial segments. Our Engine Products' sales increased 6 percent in local currency from last year, driven by increases in Engine Aftermarket and On-Road sales of 16 and 8 percent, respectively. Our Industrial Products' sales increased 3 percent in local currency, with increases in Special Applications and in Industrial Filtration Solutions of 11 and 4 percent, respectively, offsetting a 9 percent decline in our Gas Turbine shipments. Internationally, our local currency sales were strong, with Asia Pacific up 7 percent, Europe up 8 percent, and Latin America up 20 percent."

The company expects sales for the year to be between $2.57 and $2.67 billion, or an increase of 4 to 8 percent. The full-year operating margin forecast is 14.1 to 14.9 percent. Included in this forecast is approximately $10 million in incremental operating expenses for our Global ERP Project and our targeted sales growth initiatives.

The FY15 tax rate is anticipated to be between 27 and 30 percent. The company forecasts its full-year FY15 EPS to be between $1.81 and $2.01. Cash generated by operating activities is projected to be between $260 and $300 million. Capital spending is estimated to be between $90 and $100 million. Donaldson plans to repurchase between 2 to 4 percent of its diluted outstanding shares in FY15.

Engine Products FY15 sales are expected to increase 3 to 7 percent, including the impact of foreign currency.

The company's On-Road OEM Customers are expecting to increase production of heavy- and medium-duty trucks in 2015. Demand from global Off-Road OEM Customers is anticipated to be mixed: build rates of construction equipment are expected to improve with North America forecasted to be the strongest region, build rates of agriculture equipment are forecasted to decrease in all regions, and build rates of mining equipment are expected to remain stable at their current low levels.

The company anticipates strong growth globally for its Engine Aftermarket business. Utilization rates for off-road equipment and on-road heavy truck fleets are expected to continue improving. The company expects should also benefit from continued expansion into emerging economies, the increasing number of first-fit systems installed in the field with the company's proprietary first-fit filter systems, and through continued expansion of its product portfolio.

The company forecasts industrial product sales to increase 5 to 9 percent, including the impact of foreign currency. The Industrial Products' forecast excludes the impact from the pending acquisition of Northern Technical L.L.C., which is expected to close in September.

Donaldson anticipates Gas Turbine sales will increase 20 to 26 percent due to a forecasted improvement in the large turbine power generation market. Special Applications' sales are expected to increase 1 to 5 percent due to improved demand for membrane, semiconductor and venting products.