First quarter sales of $900.1 million, a
6.4% year-over-year increase
GAAP EPS of $0.81, up 8.1% versus prior
year; adjusted EPS of $0.83
Reaffirming fiscal 2025 outlook
Donaldson Company, Inc. (NYSE: DCI) (Donaldson or the Company),
a global leader in technology-led filtration products and
solutions, today reported first quarter fiscal 2025 generally
accepted accounting principles (GAAP) net earnings of $99.0
million, compared with $92.1 million in fiscal 2024. First quarter
2025 GAAP earnings per share (EPS)1 were $0.81 compared with 2024
EPS of $0.75. First quarter 2025 adjusted EPS2,3 was $0.83. The
tables attached to this press release include a reconciliation of
GAAP to non-GAAP measures.
“Donaldson’s record first quarter earnings, driven by robust
sales growth and continued margin strength, mark a strong start to
fiscal 2025,” said Tod Carpenter, chairman, president and chief
executive officer. “We gained share in several of our key
businesses while continuing the footprint and cost optimization
initiatives we began last quarter, strengthening our foundation for
higher profitability.
“For the balance of the year, our focus is on delivery to
customers, execution of optimization initiatives, and shareholder
value creation through another year of record sales and earnings.
We are committed to maintaining our position as the leader in
technology-led filtration with disciplined investments in key
strategic areas, including in our Life Sciences segment and
bioprocessing businesses.”
First Quarter Operating
Results
Sales of $900.1 million were up 6.4% compared with 2024, mainly
as a result of volume growth in all segments.
Three Months Ended
October 31, 2024
Reported % Change
Constant Currency %
Change
Mobile Solutions segment
Off-Road
(5.9
)%
(6.7
)%
On-Road
(15.0
)
(15.2
)
Aftermarket
10.7
10.1
Total Mobile Solutions segment
6.0
5.4
Industrial Solutions segment
Industrial Filtration Solutions
0.8
(0.1
)
Aerospace and Defense
26.8
26.0
Total Industrial Solutions segment
4.6
3.7
Life Sciences segment
Total Life Sciences segment
16.6
13.9
Total Company
6.4
%
5.5
%
Mobile Solutions segment (Mobile) sales rose 6.0%. Aftermarket
sales increased 10.7% from continued market share gains and
customer destocking in the prior year period. On-Road and Off-Road
sales decreased 15.0% and 5.9%, respectively, due to declines in
global equipment production, including in agriculture and
transportation.
Industrial Solutions segment (Industrial) sales increased 4.6%
from strength in Aerospace and Defense sales, which grew 26.8% as a
result of robust end-market conditions. Industrial Filtration
Solutions (IFS) sales grew 0.8% driven by Power Generation project
timing.
Life Sciences segment (Life Sciences) sales increased 16.6% from
share gains and improved market conditions in Disk Drive and a
double-digit increase in Food & Beverage sales.
Gross margin was 35.5%, down 10 basis points from 35.6% in 2024,
due to higher costs, including for footprint optimization and
distribution. Adjusted gross margin, which excludes the impact from
restructuring and other charges, was 35.6%, flat to prior year.
Operating expenses as a percentage of sales were 21.0%, an
increase from 20.8% in the prior year, as a result of restructuring
and other charges. Adjusted operating expenses as a percentage of
sales were 20.7%, down 10 basis points from prior year.
Operating income as a percentage of sales (operating margin) of
14.5% decreased 20 basis points from 14.7% in 2024 driven primarily
by restructuring and other charges. Adjusted operating income was
14.9%, a 20 basis point increase from 14.7% in 2024.
Interest expense was $5.5 million, flat compared with prior
year. Other income, net increased to $5.2 million compared with
$3.8 million in 2024, primarily due to higher joint venture income.
The Company’s effective tax rate was 24.2% versus 25.1% a year ago
driven by an increase in net discrete tax benefits.
During the first quarter, Donaldson paid $32.4 million in
dividends and repurchased 0.8% of its outstanding shares for $74.9
million.
Reaffirming Fiscal 2025
Outlook
Adjusted full-year EPS, which excludes $0.02 of first quarter
restructuring and other charges, is forecast to be between $3.56
and $3.72, consistent with previous guidance. 2024 GAAP and
adjusted4 EPS were $3.38 and $3.42, respectively. Sales are
expected to increase between 2% and 6% year over year, with a
pricing benefit of approximately 1%.
Mobile sales are projected to be flat to up 4% versus prior
year. Off-Road sales are forecast to grow low-single digits from
market share gains. On-Road sales are expected to decrease
low-double digits due to an exit from non-strategic product sales
combined with unfavorable end-market conditions. Aftermarket sales
are projected to increase low-single digits, driven by high vehicle
utilization rates and market share gains.
Industrial sales are forecast to grow between 4% and 8% versus
2024. IFS sales are projected to increase high-single digits with
strength across most businesses, including dust collection,
Industrial Hydraulics and Industrial Gases. Aerospace and Defense
sales are expected to be flat after cycling against double-digit
growth in the prior year.
Life Sciences sales are forecast to increase low-double digits
compared with prior year driven by growth in Disk Drive and Food
& Beverage.
Adjusted operating margin, driven by continued gross margin
strength and operating expense leverage, is expected to be between
15.3% and 15.9% versus 15.2%, or 15.4% on an adjusted basis, in
2024.
Interest expense is estimated to be approximately $21 million
and other income is forecast to be between $16 million and $20
million. Donaldson projects a fiscal 2025 effective income tax rate
of between 23% and 25%.
Capital expenditures are forecast to be between $85 million and
$105 million and free cash flow conversion is expected to be
between 85% and 95%. For the full year, Donaldson anticipates
repurchasing 2% to 3% of its shares outstanding.
_________________________________
1 All EPS figures refer to diluted
EPS.
2 Adjusted EPS is a non-GAAP financial
measure that excludes the impact of certain items not related to
ongoing operations.
3 First quarter fiscal 2025 adjusted
results exclude $3.3 million of pre-tax restructuring and other
charges, primarily related to targeted cost reduction initiatives
in the Life Sciences segment and global footprint optimization
actions.
4 Fiscal 2024 adjusted results exclude
$6.4 million of pre-tax restructuring and other charges largely
related to footprint optimization and cost reduction
initiatives.
Miscellaneous
The Company will webcast its first quarter fiscal 2025 earnings
conference call today at 9:00 a.m. CT. 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. CT today. Also available on the website is
the Company’s supplemental quarterly earnings presentation.
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 affect the Company’s performance and could cause the
Company’s actual results for future periods to differ materially
from any opinions or statements expressed. These factors include,
but are not limited to, challenges in global operations; impacts of
global economic, industrial and political conditions on product
demand; impacts from unexpected events, including natural
disasters; effects of unavailable raw materials or material cost
inflation; inability to attract and retain qualified personnel;
inability to meet customer demand; inability to maintain
competitive advantages; threats from disruptive technologies;
effects of highly competitive markets with pricing pressure;
exposure to customer concentration in certain cyclical industries;
inability to manage productivity improvements; inability to achieve
commitments to ESG; results of execution of any acquisition,
divestiture and other strategic transactions; vulnerabilities
associated with information technology systems and security;
inability to protect and enforce intellectual property rights;
costs associated with governmental laws and regulations; impacts of
foreign currency fluctuations; and effects of changes in capital
and credit markets. These and other factors are described in Part
I, Item 1A, “Risk Factors” of the Company’s Annual Report on Form
10-K for the fiscal year ended July 31, 2024. 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-Q.
About Donaldson Company,
Inc.
Founded in 1915, Donaldson (NYSE: DCI) is a global leader in
technology-led filtration products and solutions, serving a broad
range of industries and advanced markets. Diverse, skilled
employees at over 140 locations on six continents partner with
customers – from small business owners to R&D organizations and
the world’s biggest OEM brands. Donaldson solves complex filtration
challenges through three primary segments: Mobile Solutions,
Industrial Solutions and Life Sciences. Additional information is
available at www.Donaldson.com.
DONALDSON COMPANY, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF EARNINGS
(In millions, except per share
amounts)
(Unaudited)
Three Months Ended
October 31,
2024
2023
Change
Net sales
$
900.1
$
846.3
6.4
%
Cost of sales
580.5
545.4
6.4
Gross profit
319.6
300.9
6.2
Selling, general and administrative
166.1
155.0
7.2
Research and development
22.7
21.3
6.4
Operating expenses
188.8
176.3
7.1
Operating income
130.8
124.6
4.9
Interest expense
5.5
5.5
—
Other income, net
(5.2
)
(3.8
)
38.8
Earnings before income taxes
130.5
122.9
6.2
Income taxes
31.5
30.8
2.3
Net earnings
$
99.0
$
92.1
7.5
%
Weighted average shares – basic
119.9
120.9
(0.8
)%
Weighted average shares – diluted
121.9
122.6
(0.5
)%
Net EPS – basic
$
0.83
$
0.76
8.4
%
Net EPS – diluted
$
0.81
$
0.75
8.1
%
Dividends paid per share
$
0.27
$
0.25
8.0
%
Note: Amounts may not foot due to
rounding.
DONALDSON COMPANY, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In millions)
(Unaudited)
October 31,
July 31,
2024
2024
Assets
Current assets:
Cash and cash equivalents
$
221.2
$
232.7
Accounts receivable, net
631.3
629.7
Inventories, net
520.0
476.7
Prepaid expenses and other current
assets
106.9
99.0
Total current assets
1,479.4
1,438.1
Property, plant and equipment, net
647.4
645.5
Goodwill
479.9
478.4
Intangible assets, net
168.3
171.9
Other long-term assets
268.6
180.4
Total assets
$
3,043.6
$
2,914.3
Liabilities and Stockholders’
Equity
Current liabilities:
Short-term borrowings
$
78.2
$
28.3
Current maturities of long-term debt
25.0
25.0
Accounts payable
373.5
379.4
Accrued employee compensation and related
taxes
135.3
140.9
Deferred revenue
24.8
19.7
Income taxes payable
60.5
42.6
Dividends payable
—
32.5
Other current liabilities
103.3
114.1
Total current liabilities
800.6
782.5
Long-term debt
538.6
483.4
Non-current income taxes payable
40.4
39.8
Deferred income taxes
15.3
16.1
Other long-term liabilities
105.7
103.4
Total liabilities
1,500.6
1,425.2
Total stockholders’ equity
1,543.0
1,489.1
Total liabilities and stockholders’
equity
$
3,043.6
$
2,914.3
DONALDSON COMPANY, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Three Months Ended
October 31,
2024
2023
Operating Activities
Net earnings
$
99.0
$
92.1
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization
25.5
24.3
Deferred income taxes
(4.7
)
(4.6
)
Stock-based compensation expense
12.2
10.5
Other, net
(2.4
)
(0.2
)
Changes in operating assets and
liabilities
(56.7
)
15.9
Net cash provided by operating
activities
72.9
138.0
Investing Activities
Purchases of property, plant and
equipment
(25.0
)
(23.2
)
Equity investment
(71.0
)
—
Net cash used in investing activities
(96.0
)
(23.2
)
Financing Activities
Proceeds from long-term debt
55.0
35.0
Repayments of long-term debt
—
(73.8
)
Change in short-term borrowings
50.1
41.5
Purchase of treasury stock
(74.4
)
(53.3
)
Dividends paid
(32.4
)
(30.2
)
Exercise of stock options and other
11.5
1.9
Net cash provided by (used in) in
financing activities
9.8
(78.9
)
Effect of exchange rate changes on
cash
1.8
(5.2
)
(Decrease) increase in cash and cash
equivalents
(11.5
)
30.7
Cash and cash equivalents, beginning of
period
232.7
187.1
Cash and cash equivalents, end of
period
$
221.2
$
217.8
CONSOLIDATED RATE
ANALYSIS
(Unaudited)
Three Months Ended
October 31,
2024
2023
Gross margin
35.5
%
35.6
%
Operating expenses
21.0
%
20.8
%
Operating margin
14.5
%
14.7
%
Other income, net
(0.6
)%
(0.4
)%
Depreciation and amortization
2.8
%
2.9
%
EBITDA
17.9
%
18.0
%
Effective tax rate
24.2
%
25.1
%
Earnings before income taxes - Mobile
Solutions
18.3
%
17.1
%
Earnings before income taxes - Industrial
Solutions
15.9
%
17.6
%
Loss before income taxes - Life
Sciences
(7.6
)%
(7.0
)%
Cash conversion ratio
48.4
%
124.6
%
Three Months Ended
October 31,
2024
2023
Adjusted Rates
Gross margin
35.6
%
35.6
%
Operating expenses
20.7
%
20.8
%
Operating margin
14.9
%
14.7
%
Other income, net
(0.6
)%
(0.4
)%
Depreciation and amortization
2.8
%
2.9
%
EBITDA
18.3
%
18.0
%
Effective tax rate
24.2
%
25.1
%
Earnings before income taxes - Mobile
Solutions
18.3
%
17.1
%
Earnings before income taxes - Industrial
Solutions
15.9
%
17.6
%
Loss before income taxes - Life
Sciences
(7.6
)%
(7.0
)%
Cash conversion ratio
47.2
%
124.6
%
Note: Rate analysis metrics are computed
by dividing the applicable amount by net sales, and cash conversion
ratio reflects free cash flow divided by net earnings. Adjusted
rates exclude the impact of certain items not related to ongoing
operations. Adjusted rates are non-GAAP measures; see the
Reconciliation of Non-GAAP Financial Measures schedule for
additional information.
SEGMENT DETAIL
(In millions)
(Unaudited)
Three Months Ended October
31,
2024
2023
Change
Net sales
Mobile Solutions segment
Off-Road
$
89.1
$
94.7
(5.9
)%
On-Road
32.1
37.8
(15.0
)
Aftermarket
451.2
407.5
10.7
Total Mobile Solutions segment
572.4
540.0
6.0
Industrial Solutions segment
Industrial Filtration Solutions
212.4
210.6
0.8
Aerospace and Defense
45.2
35.6
26.8
Total Industrial Solutions segment
257.6
246.2
4.6
Life Sciences segment
Total Life Sciences segment
70.1
60.1
16.6
Total Company
$
900.1
$
846.3
6.4
%
Earnings (loss) before income
taxes
Mobile Solutions segment
$
104.7
$
92.2
13.6
%
Industrial Solutions segment
41.0
43.3
(5.3
)
Life Sciences segment
(5.3
)
(4.2
)
(26.2
)
Corporate and unallocated
(9.9
)
(8.4
)
(17.9
)
Total Company
$
130.5
$
122.9
6.2
%
Earnings (loss) before income taxes
percentage
Mobile Solutions segment
18.3
%
17.1
%
1.2
%
Industrial Solutions segment
15.9
%
17.6
%
(1.7
)%
Life Sciences segment
(7.6
)%
(7.0
)%
(0.6
)%
Note: Earnings before income taxes
percentage is calculated by dividing earnings before income taxes
by net sales. Amounts may not foot due to rounding.
SEGMENT SALES PERCENT CHANGE
FROM PRIOR PERIODS BY GEOGRAPHY, AS REPORTED
(Unaudited)
Three Months Ended October 31,
2024
TOTAL
U.S.(1)/CA(2)
EMEA(3)
APAC(4)
LATAM(5)
Mobile Solutions segment
Off-Road
(5.9
)%
2.2
%
(20.1
)%
5.8
%
8.8
%
On-Road
(15.0
)
(14.3
)
4.0
(27.9
)
8.7
Aftermarket
10.7
10.1
14.7
12.1
6.1
Total Mobile Solutions segment
6.0
6.6
4.7
6.5
6.2
Industrial Solutions segment
Industrial Filtration Solutions
0.8
1.6
0.3
4.2
(12.0
)
Aerospace and Defense
26.8
41.0
(11.8
)
9.0
N/A
Total Industrial Solutions segment
4.6
9.0
(1.2
)
4.3
(12.0
)
Life Sciences segment
Total Life Sciences segment
16.6
5.1
4.4
36.1
12.0
Total Company
6.4
%
7.4
%
2.8
%
10.8
%
4.2
%
Note: Amounts may not foot due to
rounding.
(1) United States (U.S.)
(2) Canada (CA)
(3) Europe, Middle East and Africa
(EMEA)
(4) Asia Pacific (APAC)
(5) Latin America (LATAM)
SEGMENT SALES PERCENT CHANGE
FROM PRIOR PERIODS BY GEOGRAPHY, CONSTANT CURRENCY
(Unaudited)
Three Months Ended October 31,
2024
TOTAL
U.S./CA
EMEA
APAC
LATAM
Mobile Solutions segment
Off-Road
(6.7
)%
2.2
%
(22.5
)%
5.4
%
13.4
%
On-Road
(15.2
)
(14.3
)
2.3
(29.0
)
18.4
Aftermarket
10.1
10.1
11.0
10.4
9.0
Total Mobile Solutions segment
5.4
6.6
1.4
5.1
9.4
Industrial Solutions segment
Industrial Filtration Solutions
(0.1
)
1.6
(2.5
)
2.9
(10.1
)
Aerospace and Defense
26.0
41.0
(14.9
)
9.1
N/A
Total Industrial Solutions segment
3.7
9.0
(4.1
)
3.1
(10.1
)
Life Sciences segment
Total Life Sciences segment
13.9
5.1
1.0
32.3
16.4
Total Company
5.5
%
7.4
%
(0.3
)%
9.1
%
7.2
%
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
exchange rates and compares these adjusted amounts to its prior
period reported results. Amounts may not foot due to rounding.
RECONCILIATION OF NON-GAAP
FINANCIAL MEASURES
(In millions)
(Unaudited)
Three Months Ended
October 31,
2024
2023
Net cash provided by operating
activities
$
72.9
$
138.0
Net capital expenditures
(25.0
)
(23.2
)
Free cash flow
$
47.9
$
114.8
Net earnings
$
99.0
$
92.1
Income taxes
31.5
30.8
Interest expense
5.5
5.5
Depreciation and amortization
25.5
24.3
EBITDA
$
161.5
$
152.7
Adjusted net earnings
$
101.5
$
92.1
Adjusted income taxes
32.3
30.8
Interest expense
5.5
5.5
Depreciation and amortization
25.5
24.3
Adjusted EBITDA
$
164.8
$
152.7
Gross profit
$
319.6
$
300.9
Restructuring and other charges
1.1
—
Adjusted gross profit
$
320.7
$
300.9
Operating expense
$
188.8
$
176.3
Restructuring and other charges
(2.2
)
—
Adjusted operating expense
$
186.6
$
176.3
Operating income
$
130.8
$
124.6
Restructuring and other charges
3.3
—
Adjusted operating income
$
134.1
$
124.6
Net earnings
$
99.0
$
92.1
Restructuring and other charges, net of
tax
2.5
—
Adjusted net earnings
$
101.5
$
92.1
Diluted EPS
$
0.81
$
0.75
Restructuring and other charges per
share
0.02
—
Adjusted diluted EPS
$
0.83
$
0.75
2025 Adjusted EPS Guidance
A reconciliation of the Company’s fiscal 2025 adjusted EPS
guidance to fiscal 2025 GAAP EPS guidance is not included in this
release due to the number of variables in the projected GAAP EPS
range and the Company’s current inability to reasonably quantify
certain amounts, such as restructuring or other charges, that would
be included in the GAAP measure or the individual adjustments for
such reconciliation.
Note: Although free cash flow, EBITDA, adjusted EBITDA, adjusted
gross profit, adjusted operating expense, adjusted operating
income, adjusted net earnings and adjusted diluted EPS 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 adjusted
basis presentation excludes the impact of certain matters not
related to the Company’s ongoing operations. Management believes
that the adjusted basis presentation reflects management’s
performance in operating the Company and provides a meaningful
representation of the performance of the Company’s core business
and is useful to understanding its financial results. 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/20241203084792/en/
Sarika Dhadwal (952) 887-3753 Sarika.Dhadwal@Donaldson.com
Donaldson (NYSE:DCI)
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