First Quarter Results:
Engine/Mobile Filtration Segment
Net sales at our Engine/Mobile Filtration segment increased 8% compared with the first quarter of 2011. Overall, these higher net sales were the result of 12% growth domestically and 3% growth outside the U.S. Domestic growth was driven by higher trucking activity in conjunction with our introduction of aftermarket products into new markets. Foreign sales grew 3%—despite a 15% reduction in China—due to the execution of our growth strategies in other developing filtration markets. The first quarter reduction in China sales, which was influenced by a significant reduction in diesel engine manufacturing in the first quarter, was more than offset by higher heavy-duty engine filtration sales into other foreign markets including South America, Mexico, the Middle East, South Africa, and Australia.
Operating profit at our Engine/Mobile Filtration segment increased 10% from the first quarter of 2011. This increase was primarily the result of higher heavy-duty engine filter sales. Our operating margin improved 0.4 percentage points from last year’s first quarter to 19.4%—the highest first quarter operating margin in our Engine/Mobile Filtration segment since 2007. The increase in our operating margin from the first quarter of 2011 was primarily due to our ability to leverage our manufacturing overhead and selling and administrative costs with higher sales.Industrial/Environmental Filtration Segment Net sales at our Industrial/Environmental Filtration segment increased 8% from the first quarter of 2011. Overall, these higher net sales were the result of 13% sales growth domestically and 4% lower foreign sales. Our growth in domestic sales was heavily influenced by higher natural gas vessel sales as we continue to develop our capability to support the natural gas extraction and transportation process from shale formations. Many other markets in this reporting segment also experienced strong first quarter sales growth including our Total Filtration Services (TFS) distribution business which has steadily increased sales and operating profit over the last several years. Our United Air Specialists (UAS) dust collector business increased U.S. sales almost 40% in the first quarter from the growth of its OEM business, and our sales of general industrial filtration products in this reporting segment increased over 10%. The reduction in sales outside the U.S. was influenced by an 11% reduction in sales in Europe due to continuing issues with the Euro zone economies. Our lower European sales were partially offset by higher natural gas vessel and aftermarket filter sales in Asia and Brazil—where sales more than doubled from the first quarter of 2011 through our continued focus on the development of customer relationships in that geographic market.