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Donaldson Reports Record Fourth Quarter | Construction News

Donaldson Company Inc. announced its financial results for the fourth quarter of its fiscal year 2014.

For the three months ended July 31, 2014, net sales were $668 million, up 6% from $633 million for the same period of 2013.  Operating income stood at $99 million, down 1% compared to 2013. Net earnings stayed even at $73 million, while earnings per share rose 4% to $0.50.

For the twelve months ended July 31, 2014, net sales were $2.47 billion, up 2% from $2.44 billion the previous year. Likewise, operating income was $356 million, up 4% from $343 the year before. Earnings rose 5%, reaching $260 million, versus $247 million the prior year. Earnings per share were $1.76, up 7% from $1.64 the prior year.

"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% in local currency from last year, driven by increases in engine aftermarket and on-road sales of 16% and 8%, respectively. Our industrial products' sales increased 3% in local currency, with increases in special applications and in industrial filtration solutions of 11% and 4%, respectively, offsetting a 9% decline in our gas turbine shipments. Internationally, our local currency sales were strong, with Asia Pacific up 7%, Europe up 8%, and Latin America up 20%," said Cook.

"Looking forward to FY15, we are forecasting 4% to 8% sales growth. We expect sales of our replacement filters to remain strong and a continuing improvement in our OEM first-fit end markets for construction equipment, on-road trucks, and gas turbine systems. We will maintain our focus on our continuous improvement initiatives to help deliver a higher operating margin in FY15, while also continuing our strategic investments in our global ERP project and our targeted revenue growth initiatives. The combination of our top-line growth forecast and our continued emphasis on operational excellence results in our FY15 EPS forecast of between $1.81 and $2.01 per share."

FY15 Outlook

This outlook excludes the impact from our pending acquisition of Northern Technical L.L.C., which is expected to close in September.

  • We project our Company's sales to be between $2.57 and $2.67 billion, or an increase of 4 to 8 percent.
  • Our 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.
  • Our FY15 tax rate is anticipated to be between 27 and 30 percent.
  • We forecast our 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. Our capital spending is estimated to be between $90 and $100 million. We plan to repurchase between 2 to 4 percent of our diluted outstanding shares in FY15.

Engine Products: We forecast our FY15 sales to increase 3 to 7 percent, including the impact of foreign currency.

  • Our On-Road OEM Customers are expecting to increase production of heavy- and medium-duty trucks in 2015.
  • Demand from our 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.
  • We are anticipating strong growth globally for our Engine Aftermarket business. 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 first-fit filter systems, and through continued expansion of our product portfolio.
  • We forecast a mid-single digit percent sales increase for our Aerospace and Defense business as the continued slowdown in U.S. military activity should be offset by growth from our commercial aerospace sales.

Industrial Products: We forecast sales to increase 5 to 9 percent, including the impact of foreign currency. However, our Industrial Products' forecast excludes the impact from our pending acquisition of Northern Technical L.L.C., which is expected to close in September.

  • Our Industrial Filtration Solutions' sales are projected to increase 1 to 7 percent. We assume our replacement filter sales will remain strong due to improving general manufacturing conditions, while our new filtration system sales are forecasted to grow due to improvements in manufacturing capital spending and from our new product introductions.
  • We anticipate our Gas Turbine sales will increase 20 to 26 percent due to a forecasted improvement in the large turbine power generation market.
  • We forecast our Special Applications' sales to increase 1 to 5 percent due to improved demand for our membrane, semiconductor, and venting products.



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