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 January 31, 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 -- 26,291,122 shares as of February 28, 1995
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
CONDENSED STATEMENTS OF CONSOLIDATED EARNINGS
DONALDSON COMPANY, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
(Thousands of Dollars Except Per Share Amounts)
(Unaudited)
Three Months Ended Six Months Ended
January 31 January 31
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net Sales $ 168,861 $ 135,577 $ 333,036 $ 278,095
Cost of Sales 121,478 97,673 240,320 199,655
Gross Margin 47,383 37,904 92,716 78,440
Operating Expenses 32,961 28,155 62,797 55,836
Other Expense (Income) 1,353 (844) 931 (770)
Interest Expense 745 788 1,528 1,471
Earnings Before Income Taxes 12,324 9,805 27,460 21,903
Income Taxes 4,639 3,567 10,270 8,104
Earnings Before Cumulative Effect
of Accounting Change 7,685 6,238 17,190 13,799
Cumulative Effect of Accounting
Change -- -- -- 2,206
Net Earnings $ 7,685 $ 6,238 $ 17,190 $ 16,005
Average Shares and
Equivalents Outstanding
During Period 26,541,012 27,370,880 26,668,500 27,377,772
Earnings Per Share Before Cumulative
Effect of Accounting Change $ .29 $ .23 $ .64 $ .50
Cumulative Effect of Accounting
Change -- -- -- .08
Net Earnings Per Share $ .29 $ .23 $ .64 $ .58
Dividends Paid Per Share $ .07 $ .06 $ .14 $ .11
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
DONALDSON COMPANY, INC. AND SUBSIDIARIES
(Thousands of Dollars)
(Unaudited)
January 31, July 31,
1995 1994
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $ 37,344 $ 22,945
Accounts Receivable, Net 126,193 122,167
Inventories
Materials 28,499 27,430
Work in Process 8,853 8,521
Finished Products 25,240 24,294
Total Inventories 62,592 60,245
Other 10,102 14,951
TOTAL CURRENT ASSETS 236,231 220,308
Property, Plant and Equipment, at Cost 267,711 258,923
Less Accumulated Depreciation 166,333 159,364
Property, Plant and Equipment, Net 101,378 99,559
Other Assets 19,753 17,493
TOTAL ASSETS $357,362 $337,360
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-Term Debt $ 23,867 $ 14,073
Current Maturities of Long-Term Debt 2,893 2,883
Trade Accounts Payable 46,874 44,541
Accrued Employee Compensation & Related Taxes 18,716 19,755
Other Current Liabilities 30,378 34,505
TOTAL CURRENT LIABILITIES 122,728 115,757
Long-Term Debt 15,879 16,028
Deferred Income Taxes 2,332 2,248
Other Long-Term Liabilities 18,498 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 January 31, 1995
and July 31, 1994 135,317 135,317
Retained Earnings 78,606 65,654
Cumulative Translation Adjustment 8,180 8,244
Treasury Stock - 774,845 and 552,951 shares,
at cost (16,513) (11,853)
Receivable from ESOP (7,665) (7,665)
TOTAL SHAREHOLDERS' EQUITY 197,925 189,697
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $357,362 $337,360
See Notes to Condensed Consolidated Financial Statements.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
DONALDSON COMPANY, INC. AND SUBSIDIARIES
(Thousands of Dollars)
(Unaudited)
Six Months Ended
January 31
1995 1994
OPERATING ACTIVITIES
Net Earnings $ 17,190 $ 16,005
Adjustments to Reconcile Net Earnings to
Net Cash Provided by Operating Activities:
Depreciation and Amortization 8,638 7,761
Property, Plant and Equipment Write Down 2,467 --
Cumulative Effect of Accounting Change -- (2,206)
Changes in Operating Assets and Liabilities (4,191) (5,206)
Other 2,351 (2,973)
26,455 13,381
INVESTING ACTIVITIES
Net Expenditures on PP&E (13,069) (9,256)
Dividends from Affiliate -- 2,050
(13,069) (7,206)
FINANCING ACTIVITIES
Purchase of Treasury Stock (5,314) (5,600)
Net Increase in Debt 9,622 2,633
Dividends Paid (3,692) (2,989)
Other 121 403
737 (5,553)
Effect of Exchange Rate Changes on Cash 276 (1,055)
Increase(Decrease) in Cash and Cash Equivalents 14,399 (433)
Cash and Cash Equivalents-Beginning of Year 22,945 32,110
Cash and Cash Equivalents-End of Period $ 37,344 $ 31,677
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 in the second quarter totaled $8.1 million; for the
year-to-date, positive cash flow totaled $14.4 million. Strong operating
earnings continue to more than cover new plant and equipment expenditures and
increased working capital requirements related to higher sales levels. Capital
expenditures for the year are higher than last year due to the expansion of the
Stevens Point facility and the addition of a new product line at the Cresco
facility. Dividend payments totaled $1.8 million in the second quarter and $3.7
million for the year-to-date. $.2 million of treasury stock was repurchased in
the second quarter.
At the end of the second 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 $10.6 million at the end of the second quarter, up from
$8.0 million at the end of the prior quarter. Long-term debt, totalling $15.9
million at quarter-end, represented 7.4 percent of total long-term capital,
essentially unchanged from 7.6 percent at the end of the prior quarter.
B. Results of Operations
Second quarter net sales of $168.9 million were up nearly 25 percent from
prior-year sales of $135.6 million. Second quarter net earnings of $7.7 million,
or 29 cents per share, were up 23 percent from last year's earnings of $6.2
million, or 23 cents per share. Worldwide net sales of engine products totaled
$112.5 million in the second quarter of 1995, up 26 percent from the same period
last year. Worldwide net sales of industrial products totaled $56.4 million in
the most recent quarter, up 22 percent from last year. Sales increases have been
recorded for all product lines in all markets, with the exception of the Gas
Turbine Systems business which has been flat relative to last year.
Gross margins of 28.1 percent in the second quarter were essentially
unchanged from the prior year. For the year-to-date, gross margins of 27.8
percent were slightly lower than the prior year, primarily due to charges taken
in the first quarter to provide for the residual net book value of certain
production lines at two of the Company's plants. Going forward, margins are
expected to remain close to the second quarter level as increased raw material
prices are recovered through operating efficiencies and modest price increases.
Operating expenses as a percentage of sales were 19.5 percent in the second
quarter and 18.9 percent for the year-to-date period. These expense levels, as a
percentage of sales, were below the unusually high prior-year levels when
warranty reserves were increased related to the diesel particulate trap product,
the production of which has been discontinued.
Net other expenses totaled $1.4 million in the second quarter of 1995 compared
to net other income of $.8 million in the second quarter of 1994. The $2.2
million change is due to lower joint venture income relative to the year ago
period and increases in other miscellaneous expenses.
Total backlogs of $196.0 million were up 35 percent relative to the same period
last year and 9 percent from the prior quarter end. Hard order backlogs -- goods
scheduled for delivery in 90 days -- of $123.5 million were up 29 percent from
the same period last year and up 5 percent from the first quarter.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security holders
(a) The Annual meeting of shareholders of Registrant was held on
November 18, 1994. A total of 26,510,661 shares were outstanding
and entitled to vote at the meeting.
(b) Not Applicable.
(c) Of the total outstanding 1,900,822 shares were general
abstentions and broker nonvotes resulting in a shareholder vote
as follows:
(i) Election of Directors:
Name of Nominee Vote Tabulation
For Withheld
Michael R. Bonsignore 24,075,596 534,243
Jack W. Eugster 24,067,994 541,845
William G. Van Dyke 24,036,495 573,344
C. Angus Wurtele 24,013,855 595,984
(ii) Approved the Annual Cash Bonus Plan with the following vote:
For - 20,785,443; Against - 3,139,758; Abstaining - 684,638.
(iii) Ratified selection of Ernst & Young LLP as Registrant's
independent public auditors for the fiscal year ending July
31, 1995 with the following vote: For - 24,330,837; Against
- 113,101; Abstaining - 165,901.
(d) Not Applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit Index
None
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter ended
January 31, 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 3/14/95 By /s/James R. Giertz
James R. Giertz
Vice President-
Chief Financial Officer
Date 3/14/95 By /s/Raymond F. Vodovnik
Raymond F. Vodovnik
Vice President-Legal
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<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-31-1995
<PERIOD-START> NOV-01-1994
<PERIOD-END> JAN-31-1995
<CASH> 37,344
<SECURITIES> 0
<RECEIVABLES> 130,913
<ALLOWANCES> 4,720
<INVENTORY> 62,592
<CURRENT-ASSETS> 236,231
<PP&E> 267,711
<DEPRECIATION> 166,333
<TOTAL-ASSETS> 357,362
<CURRENT-LIABILITIES> 122,728
<BONDS> 15,879
<COMMON> 135,317
0
0
<OTHER-SE> 62,608
<TOTAL-LIABILITY-AND-EQUITY> 357,362
<SALES> 333,036
<TOTAL-REVENUES> 0
<CGS> 240,320
<TOTAL-COSTS> 62,797
<OTHER-EXPENSES> 931
<LOSS-PROVISION> 472
<INTEREST-EXPENSE> 1,528
<INCOME-PRETAX> 27,460
<INCOME-TAX> 10,270
<INCOME-CONTINUING> 17,190
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