UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the period ended April 30, 1995
Commission File Number 1-7891
DONALDSON COMPANY, INC.
(Exact name of registrant as specified in its charter)
Delaware 41-0222640
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1400 West 94th Street
Minneapolis, Minnesota 55431
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code (612) 887-3131
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, $5 Par Value -- 26,254,269 shares as of May 31, 1995
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
<CAPTION>
CONDENSED STATEMENTS OF CONSOLIDATED EARNINGS
DONALDSON COMPANY, INC. AND SUBSIDIARIES
(Thousands of Dollars Except Per Share Amounts)
(Unaudited)
Three Months Ended Nine Months Ended
April 30 April 30
---------------------------- ----------------------------
1995 1994 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net Sales $ 186,764 $ 153,930 $ 519,800 $ 432,025
Cost of Sales 133,058 111,793 373,378 311,448
------------ ------------ ------------ ------------
Gross Margin 53,706 42,137 146,422 120,577
Operating Expenses 33,667 26,764 96,464 82,600
Other (Income) Expense (434) (599) 497 (1,369)
Interest Expense 973 738 2,501 2,209
------------ ------------ ------------ ------------
Earnings Before Income Taxes 19,500 15,234 46,960 37,137
Income Taxes 8,044 5,525 18,314 13,629
------------ ------------ ------------ ------------
Earnings Before Cumulative Effect
of Accounting Change 11,456 9,709 28,646 23,508
Cumulative Effect of Accounting
Change -- -- -- 2,206
------------ ------------ ------------ ------------
Net Earnings $ 11,456 $ 9,709 $ 28,646 $ 25,714
============ ============ ============ ============
Average Shares and
Equivalents Outstanding
During Period 26,615,154 27,347,817 26,650,793 27,409,417
============ ============ ============ ============
Earnings Per Share Before Cumulative
Effect of Accounting Change $ .43 $ .36 $ 1.07 $ .86
Cumulative Effect of Accounting
Change -- -- -- .08
------------ ------------ ------------ ------------
Net Earnings Per Share $ .43 $ .36 $ 1.07 $ .94
============ ============ ============ ============
Dividends Paid Per Share $ .07 $ .07 $ .21 $ .18
============ ============ ============ ============
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
DONALDSON COMPANY, INC. AND SUBSIDIARIES
(Thousands of Dollars)
(Unaudited)
April 30, July 31,
1995 1994
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $ 37,281 $ 22,945
Accounts Receivable, Net 138,457 122,167
Inventories
Materials 31,500 27,430
Work in Process 9,785 8,521
Finished Products 27,899 24,294
-------- --------
Total Inventories 69,184 60,245
Other 8,116 14,951
-------- --------
TOTAL CURRENT ASSETS 253,038 220,308
Property, Plant and Equipment, at Cost 287,187 258,923
Less Accumulated Depreciation 178,459 159,364
-------- --------
Property, Plant and Equipment, Net 108,728 99,559
Other Assets 20,863 17,493
-------- --------
TOTAL ASSETS $382,629 $337,360
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-Term Debt $ 18,273 $ 14,073
Current Maturities of Long-Term Debt 6,257 2,883
Trade Accounts Payable 51,802 44,541
Accrued Employee Compensation & Related Taxes 22,780 19,755
Other Current Liabilities 32,324 34,505
-------- --------
TOTAL CURRENT LIABILITIES 131,436 115,757
Long-Term Debt 12,519 16,028
Deferred Income Taxes 5,510 2,248
Other Long-Term Liabilities 19,464 13,630
SHAREHOLDERS' EQUITY
Preferred Stock, $1 par value,
1,000,000 shares authorized, no shares issued - -
Common Stock, $5 par value,
40,000,000 shares authorized,
27,063,407 issued on April 30, 1995
and July 31, 1994 135,317 135,317
Capital Surplus 52 -
Retained Earnings 88,117 65,654
Cumulative Translation Adjustment 14,321 8,244
Treasury Stock - 770,574 and 552,951 shares,
at cost (16,442) (11,853)
Receivable from ESOP (7,665) (7,665)
-------- --------
TOTAL SHAREHOLDERS' EQUITY 213,700 189,697
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $382,629 $337,360
======== ========
See Notes to Condensed Consolidated Financial Statements.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
DONALDSON COMPANY, INC. AND SUBSIDIARIES
(Thousands of Dollars)
(Unaudited)
Nine Months Ended
April 30
1995 1994
---- ----
OPERATING ACTIVITIES
Net Earnings $ 28,646 $ 25,714
Adjustments to Reconcile Net Earnings to
Net Cash Provided by Operating Activities:
Depreciation and Amortization 14,073 11,612
Property, Plant and Equipment Write Down 2,392 2,200
Cumulative Effect of Accounting Change -- (2,206)
Changes in Operating Assets and Liabilities (4,723) (8,417)
Other 3,832 (4,389)
-------- --------
44,220 24,514
INVESTING ACTIVITIES
Net Expenditures on PP&E (17,171) (14,547)
Business Acquisitions, Net of Cash Acquired (2,417) --
Dividends from Affiliate -- 2,850
-------- --------
(19,588) (11,697)
FINANCING ACTIVITIES
Purchase of Treasury Stock (5,453) (9,994)
Dividends Paid (5,534) (4,886)
Net Increase in Debt 272 4,094
Other 139 378
-------- --------
(10,576) (10,408)
Effect of Exchange Rate Changes on Cash 280 (1,761)
-------- --------
Increase in Cash and Cash Equivalents 14,336 648
Cash and Cash Equivalents-Beginning of Year 22,945 32,110
-------- --------
Cash and Cash Equivalents-End of Period $ 37,281 $ 32,758
======== ========
See Notes to Condensed Consolidated Financial Statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note A - The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and
Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of only normal recurring accruals) considered necessary for a fair
presentation have been included.
Note B - Effective August 1, 1993, the Company changed its method of accounting
for income taxes to comply with Financial Accounting Standards Board Statement
No. 109, "Accounting for Income Taxes" (FAS 109). The new Statement requires a
liability approach for computing income taxes. The cumulative effect of adopting
FAS 109 was to increase prior year first quarter net earnings by $2.2 million (8
cents per share).
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
A. Financial Condition
Positive cash flow totaled $14.3 million through the first nine months of this
year; cash inflows essentially balanced cash outflows in the third quarter.
Operating cash flows have increased this year due to higher net earnings and
non-cash expenses and smaller increases in working capital requirements. This
higher level of cash flows easily covered a relatively high capital spending
program this year as well as the acquisition of the remaining interest in our
Mexican operation (DMP). DMP was previously a joint venture owned 50% by
Donaldson Company, Inc. Dividend payments totaled $1.8 million in the third
quarter and $5.5 million for the year-to-date. Treasury stock repurchases
totaled $0.1 million in the third quarter and $5.5 million for the year-to-date.
At the end of the third quarter, the Company held $37.3 million in cash and cash
equivalents. Cash balances net of short-term debt and current maturities of
long-term debt totaled $12.8 million, up from $10.6 million at the end of the
second quarter. Long-term debt of $12.5 million at quarter-end, represented 5.5
percent of total long-term capital, down from 7.4 percent at the end of last
quarter. Long-term debt declined in the quarter as the Company decided to prepay
a $3.4 million 11 1/8% note on June 1, 1995. This debt was reclassified to a
current liability at April 30, 1995.
B. Results of Operations
For the third quarter ended April 30, 1995, net sales increased 21
percent to $186.8 million from $153.9 million in the same period last year. Net
earnings of $11.5 million were up 18 percent from prior-year earnings of $9.7
million. Earnings per share of 43 cents were up 19 percent compared to 36 cents
last year.
Revenue increases continue to be broad-based; healthy gains have been
achieved across all product lines and all major geographic segments. Worldwide
net sales of engine products totaled $123.8 million in the third quarter of
1995, up 21 percent from the same period last year. Worldwide net sales of
industrial products totaled $63.0 million in the most recent quarter, up 23
percent from last year.
Gross margins of 28.8 percent in the third quarter were significantly
higher than the same period last year. This improvement reflects manufacturing
efficiencies achieved from higher operating levels this year. In addition, asset
write-offs related to our Brazilian operation depressed last year's results. For
the year-to-date period, gross margins of 28.2 percent compare favorably to last
year. Although our manufacturing costs continue to rise faster than our rate of
price increases, we believe that current margin levels are sustainable through
higher productivity.
Operating expenses as a percent of sales were 18.0 percent in the third
quarter, slightly above the comparable period last year. For the year-to-date
period, operating expenses were 18.6 percent of sales, slightly lower than last
year. This improvement primarily reflects the unusually high levels of warranty
expense incurred last year related to the diesel particulate trap product, which
is no longer in production.
Total backlogs of $205.0 million were up 35 percent from the same
period last year and 5 percent from the end of the second quarter. Hard order
backlogs - goods scheduled for delivery in 90 days - of $123.1 million were up
21 percent from last year, unchanged from the end of the second quarter.
Although the rapid buildup of backlogs has abated, the current backlogs stand at
a historically high level, an encouraging indicator of future sales prospects.
PART II. OTHER INFORMATION
Item 6. - Exhibits and Reports on Form 8-K
(a) Exhibit Index
Exhibit 27 - Financial Data Schedule (For SEC use only).
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter ended
April 30, 1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DONALDSON COMPANY, INC.
(Registrant)
Date 6/9/95 By /s/James R. Giertz
James R. Giertz
Vice President -
Chief Financial Officer
Date 6/9/95 By /s/Raymond F. Vodovnik
Raymond F. Vodovnik
Vice President-Legal
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<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-31-1995
<PERIOD-END> APR-30-1995
<CASH> 37,281
<SECURITIES> 0
<RECEIVABLES> 144,169
<ALLOWANCES> 5,712
<INVENTORY> 69,184
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<PP&E> 287,187
<DEPRECIATION> 178,459
<TOTAL-ASSETS> 382,629
<CURRENT-LIABILITIES> 131,436
<BONDS> 12,519
<COMMON> 135,317
0
0
<OTHER-SE> 78,383
<TOTAL-LIABILITY-AND-EQUITY> 382,629
<SALES> 519,800
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<CGS> 373,378
<TOTAL-COSTS> 96,464
<OTHER-EXPENSES> 497
<LOSS-PROVISION> 708
<INTEREST-EXPENSE> 2,501
<INCOME-PRETAX> 46,960
<INCOME-TAX> 18,314
<INCOME-CONTINUING> 28,646
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