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Donaldson Reports Record Third Quarter Results

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 at www.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.

   
 
CONDENSED STATEMENTS OF CONSOLIDATED EARNINGS
DONALDSON COMPANY, INC. AND SUBSIDIARIES
(Thousands of dollars, except share and per share amounts)

(Unaudited)

           

 

Three Months Ended

Nine Months Ended

April 30 April 30
2012 2011 2012 2011
Net sales $ 647,237 $ 594,565 $ 1,836,415 $ 1,668,579
 
Cost of sales   419,008     385,407     1,192,435     1,081,788  
 
Gross margin 228,229 209,158 643,980 586,791
 
Operating expenses   129,792     125,826     380,448     361,515  
 
Operating income 98,437 83,332 263,532 225,276
 
Other income, net (4,340 ) (1,381 ) (13,750 ) (5,990 )
 
Interest expense   2,787     2,897     8,856     9,486  
 
Earnings before income taxes 99,990 81,816 268,426 221,780
 
Income taxes   29,044     20,005     75,106     62,256  
 
Net earnings $ 70,946   $ 61,811   $ 193,320   $ 159,524  
 
Weighted average shares
Outstanding (*) 150,536,631 154,651,222 150,385,389 154,716,918
 
Diluted shares outstanding (*) 153,207,471 157,408,094 153,067,148 157,524,628
 
Net earnings per share (*) $ 0.47 $ 0.40 $ 1.29 $ 1.03
 
Net earnings per share
assuming dilution (*) $ 0.46 $ 0.39 $ 1.26 $ 1.01
 
Dividends paid per share (*)     $ 0.080       $ 0.065       $ 0.230       $ 0.193  
 

(*) Current and prior year shares and per share amounts reflect the impact of the Company’s two-for-one stock split that occurred March 23, 2012.

 
DONALDSON COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Thousands of dollars)
(Unaudited)
 
    April 30     July 31
2012 2011
ASSETS
 
Cash, cash equivalents and short-term investments $ 308,046 $ 273,494
Accounts receivable – net 453,488 445,700
Inventories – net 265,461 271,476
Prepaids and other current assets   72,781   75,912
 
Total current assets 1,099,776 1,066,582
 
Other assets and deferred taxes 263,712 268,009
Property, plant and equipment – net   390,785   391,502
 
Total assets $ 1,754,273 $ 1,726,093
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
Trade accounts payable $ 204,491 $ 215,918
Employee compensation and other liabilities 185,228 219,326
Short-term borrowings 83,623 13,129
Current maturity long-term debt   2,311   47,871
 
Total current liabilities 475,653 496,244
 
Long-term debt 203,646 205,748
Other long-term liabilities   77,062   89,390
 
Total liabilities 756,361 791,382
 
Equity   997,912   934,711
 
Total liabilities and equity $ 1,754,273 $ 1,726,093
 
 
DONALDSON COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of dollars)
(Unaudited)
 
    Nine Months Ended
April 30
2012     2011
OPERATING ACTIVITIES
 
Net earnings $ 193,320 $ 159,524

Adjustments to reconcile net earnings to net cash provided by operating activities:

 

 

Depreciation and amortization 46,214 45,276
Changes in operating assets and liabilities (43,836 ) (23,958 )
Tax benefit of equity plans (9,698 ) (8,272 )
Stock compensation plan expense 8,624 7,560
Other, net   (12,223 )   (11,587 )
Net cash provided by operating activities 182,401 168,543
 
INVESTING ACTIVITIES
 
Net expenditures on property and equipment (57,987 ) (42,400 )
Purchases of short-term investments (119,930 ) (67,985 )
Acquisitions and divestitures, net   -     3,493  
Net cash used in investing activities (177,917 ) (106,892 )
 
FINANCING ACTIVITIES
 
Purchase of treasury stock (82,573 ) (43,101 )
Net change in debt and short-term borrowings 24,435 (1,516 )
Dividends paid (34,277 ) (29,547 )
Tax benefit of equity plans 9,698 8,272
Exercise of stock options   12,345     13,535  
Net cash used in financing activities (70,372 ) (52,357 )
 

Effect of exchange rate changes on cash

 

(18,586

)

 

22,199

 

Increase/(Decrease) in cash and cash equivalents

(84,474

)

31,493

Cash and cash equivalents – beginning of year

 

273,494

   

232,000

 

Cash and cash equivalents – end of period

$

189,020

 

$

263,493

 
 
 
SEGMENT DETAIL
(Thousands of dollars)
(Unaudited)
               
Engine Industrial Corporate & Total
Products Products Unallocated Company
3 Months Ended April 30, 2012:
Net sales $ 407,041 $ 240,196 --- $ 647,237
Earnings before income taxes 62,136 38,792 (938) 99,990
 
3 Months Ended April 30, 2011:
Net sales $ 377,609 $ 216,956 --- $ 594,565
Earnings before income taxes 56,469 33,074 (7,727) 81,816
 
 
9 Months Ended April 30, 2012:
Net sales $ 1,171,600 $ 664,815 --- $ 1,836,415
Earnings before income taxes 170,432 103,688 (5,694) 268,426
 
9 Months Ended April 30, 2011:
Net sales $ 1,042,500 $ 626,079 --- $ 1,668,579
Earnings before income taxes 149,123 92,236 (19,579) 221,780
 
 
NET SALES BY PRODUCT
(Thousands of dollars)
(Unaudited)
               
Three Months Ended Nine Months Ended
April 30 April 30
2012 2011 2012 2011
Engine Products segment:
Off-Road Products $ 100,307 $ 90,174 $ 281,450 $ 236,672
On-Road Products 42,133 30,924 124,134 88,726
Aftermarket Products 231,298 223,284 672,265 625,042
Retrofit Emissions Products 4,038 6,033 13,326 14,288
Aerospace and Defense Products   29,265   27,194   80,425   77,772
Total Engine Products segment $ 407,041 $ 377,609 $ 1,171,600 $ 1,042,500
 
Industrial Products segment:
Industrial Filtration Solutions Products $ 136,082 $ 126,226 $ 401,522 $ 369,009
Gas Turbine Products 51,036 44,231 123,628 114,607
Special Applications Products   53,078   46,499   139,665   142,463
Total Industrial Products segment $ 240,196 $ 216,956 $ 664,815 $ 626,079
 
Total Company $ 647,237 $ 594,565 $ 1,836,415 $ 1,668,579
 
 

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(Thousands of dollars, except per share amounts)
(Unaudited)
       
Three Months Ended Nine Months Ended
April 30 April 30
2012     2011 2012     2011
 
Free cash flow $ 58,565 $ 57,134 $ 124,414 $ 126,143
Net capital expenditures   21,638     18,349     57,987     42,400  
Net cash provided by operating activities $ 80,203   $ 75,483   $ 182,401   $ 168,543  
 
EBITDA $ 116,861 $ 98,667 $ 320,353 $ 274,586
Income taxes (29,044 ) (20,005 ) (75,106 ) (62,256 )
Interest expense (net) (1,553 ) (2,053 ) (5,713 ) (7,530 )
Depreciation and amortization   (15,318 )   (14,798 )   (46,214 )   (45,276 )
 
Net earnings $ 70,946   $ 61,811   $ 193,320   $ 159,524  
 
Net sales, excluding foreign currency translation $ 658,886 $ 577,858 $ 1,838,846 $ 1,659,088
Foreign currency translation   (11,649 )   16,707     (2,431 )   9,491  
 
Net sales $ 647,237   $ 594,565   $ 1,836,415   $ 1,668,579  
 
Net earnings, excluding foreign currency translation $ 71,844 $ 59,991 $ 193,474 $ 157,423
Foreign currency translation   (898 )   1,820     (154 )   2,101  
 
Net earnings $ 70,946   $ 61,811   $ 193,320   $ 159,524  
 
 
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (CONTINUED)
(Thousands of dollars, except per share amounts)
(Unaudited)
       
Three Months Ended Nine Months Ended
April 30 April 30
2012     2011 2012     2011
Net earnings, excluding special items $ 70,946 $ 61,811 $ 193,320 $ 160,090

Restructuring charges, net of tax

 

---

 

---

 

---

  (566 )
 
Net earnings $ 70,946 $ 61,811 $ 193,320 $ 159,524  
 

Net earnings per share assuming dilution, excluding special items (*)

$ 0.46 $ 0.39 $ 1.26 $ 1.01

Restructuring charges per share, net of tax (*)

 

---

 

---

 

---

 

---

 
 

Net earnings per share assuming dilution (*)

$ 0.46 $ 0.39 $ 1.26 $ 1.01  
 

(*) Current and prior year per share amounts reflect the impact of the Company’s two-for-one stock split that occurred March 23, 2012.

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