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, 1996
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 -- 25,638,897 shares as of May 31, 1996
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
CONDENSED STATEMENTS OF CONSOLIDATED EARNINGS
DONALDSON COMPANY, INC. AND SUBSIDIARIES
(Thousands of Dollars Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
April 30 April 30
---------------------------- ---------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net Sales $ 185,225 $ 186,764 $ 556,257 $ 519,800
Cost of Sales 129,853 133,058 394,547 373,378
------------ ------------ ------------ ------------
Gross Margin 55,372 53,706 161,710 146,422
Operating Expenses 34,378 33,667 106,623 96,464
Other (Income) Expense (251) (434) 169 497
Interest Expense 819 973 2,195 2,501
------------ ------------ ------------ ------------
Earnings Before Income Taxes 20,426 19,500 52,723 46,960
Income Taxes 7,801 8,044 20,720 18,314
------------ ------------ ------------ ------------
Net Earnings $ 12,625 $ 11,456 $ 32,003 $ 28,646
============ ============ ============ ============
Average Shares and
Equivalents Outstanding
During Period 25,941,827 26,615,154 26,060,561 26,650,793
============ ============ ============ ============
Net Earnings Per Share $ .49 $ .43 $ 1.23 $ 1.07
============ ============ ============ ============
Dividends Paid Per Share $ .08 $ .07 $ .22 $ .21
============ ============ ============ ============
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
DONALDSON COMPANY, INC. AND SUBSIDIARIES
(Thousands of Dollars)
(Unaudited)
<TABLE>
<CAPTION>
April 30, July 31,
1996 1995
--------- ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $ 30,195 $ 28,565
Accounts Receivable, Net 144,984 137,155
Inventories
Materials 31,048 32,225
Work in Process 11,724 12,168
Finished Products 27,975 29,035
--------- ---------
Total Inventories 70,747 73,428
Prepaids and Other Current Assets 5,058 8,756
--------- ---------
TOTAL CURRENT ASSETS 250,984 247,904
Property, Plant and Equipment, at Cost 298,031 292,192
Less Accumulated Depreciation 183,385 181,552
--------- ---------
Property, Plant and Equipment, Net 114,646 110,640
Other Assets 22,779 22,498
--------- ---------
TOTAL ASSETS $ 388,409 $ 381,042
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-Term Debt $ 12,776 $ 17,802
Current Maturities of Long-Term Debt 3,086 2,998
Trade Accounts Payable 55,968 53,576
Accrued Employee Compensation & Related Taxes 23,162 23,114
Other Current Liabilities 30,184 26,257
--------- ---------
TOTAL CURRENT LIABILITIES 125,176 123,747
Long-Term Debt 13,622 10,167
Deferred Income Taxes 5,232 5,233
Other Long-Term Liabilities 21,367 20,722
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, 1996 and July 31, 1995 135,317 135,317
Capital Surplus 3,184 2,639
Retained Earnings 119,658 93,746
Cumulative Translation Adjustment 3,791 14,824
Treasury Stock - 1,422,925 and 878,243 shares, at cost (33,688) (20,103)
Receivable from ESOP (5,250) (5,250)
TOTAL SHAREHOLDERS' EQUITY 223,012 221,173
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 388,409 $ 381,042
========= =========
</TABLE>
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
--------------------
1996 1995
-------- --------
OPERATING ACTIVITIES
Net Earnings $ 32,003 $ 28,646
Adjustments to Reconcile Net Earnings to
Net Cash Provided by Operating Activities:
Depreciation and Amortization 15,424 14,073
Property, Plant and Equipment Write-downs 1,398 2,392
Changes in Operating Assets and Liabilities (971) (4,723)
Other (2,172) 3,832
-------- --------
45,682 44,220
INVESTING ACTIVITIES
Net Expenditures on PP&E (24,870) (17,171)
Business Acquisition, Net of Cash Acquired (278) (2,417)
Dividend from Affiliate 616 --
-------- --------
(24,532) (19,588)
FINANCING ACTIVITIES
Purchase of Treasury Stock (14,852) (5,453)
Net Change in Debt (579) 272
Dividends Paid (5,674) (5,534)
Other 1,396 139
-------- --------
(19,709) (10,576)
Effect of Exchange Rate Changes on Cash 189 280
-------- --------
Increase in Cash and Cash Equivalents 1,630 14,336
Cash and Cash Equivalents-Beginning of Year 28,565 22,945
-------- --------
Cash and Cash Equivalents-End of Period $ 30,195 $ 37,281
======== ========
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.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
A. Financial Condition
Operating cash flows increased 3 percent over the prior year primarily due to
higher net earnings and depreciation and amortization offset by lower property,
plant and equipment write-downs. Operating cash flow was used to fund $24.9
million of capital spending primarily related to capacity expansion programs and
information systems upgrades. In addition, operating cash flow was sufficient to
fund an active share repurchase program; treasury stock repurchases totaled $0.2
million in the third quarter and $14.9 million for the nine month period ended
April 30, 1996.
At the end of the third quarter, the Company held $30.2 million in cash and cash
equivalents. Cash balances net of short-term debt and current maturities of
long-term debt totaled $14.3 million, up from $7.8 million at July 31, 1995.
Long-term debt of $13.6 million at April 30, 1996, represented 5.8 percent of
total long-term capital, up from 4.4 percent at July 31, 1995.
In December 1995, the Company entered into a five year multi-currency revolving
credit facility totaling $100 million with a group of international banks, led
by Citibank as the agent. There were no amounts outstanding under this facility
at April 30, 1996.
B. Results of Operations
The Company reported record net earnings for the third quarter and the nine
months ended April 30, 1996. Third quarter net earnings were $12.6 million,
compared to $11.5 million in the third quarter of 1995. Net earnings per share
of 49 cents, were up 14.0 percent from 43 cents a year earlier. Year-to-date net
earnings were $32.0 million, compared with $28.6 million in 1995. Quarterly net
earnings improved primarily due to higher gross margins and a reduction in the
effective income tax rate. Increased sales levels and gross margin improvements
were the primary reasons for the increase in year-to-date net earnings.
For the nine month period, net sales of $556.3 million were up 7.0 percent from
prior year sales of $519.8 million. Third quarter net sales of $185.2 million
were down approximately 1.0 percent compared to last year's exceptionally strong
quarter. Year-to-date sales increased primarily due to higher demand for the
Company's dust collection and gas turbine systems products. In addition, the
original equipment engine business benefited from new light duty truck programs
combined with solid growth in Off-Road markets worldwide. Third quarter sales
increases in the engine aftermarket and off-road markets were offset by
weaknesses in the North American heavy duty transportation and the worldwide gas
turbine product markets.
For the third quarter, gross margins increased to 29.9 percent from 28.8 percent
in the third quarter of 1995. Year-to-date margins improved to 29.1 percent from
28.2 percent in the prior year. The increase in 1996 third quarter margins was
partially due to improved gross margins on the new light duty truck programs.
Year-to-date margins benefited from fewer manufacturing asset write-downs in
1996 as well as the improvement in light duty truck margins.
Operating expenses during the third quarter of 1996 were $34.4 million, 18.6
percent of sales, compared to $33.7 million, 18.0 percent of sales in the same
quarter of 1995. Operating expenses for the first nine months were $106.6
million, 19.2 percent of sales, compared to $96.5 million, 18.6 percent of sales
in 1995. Operating expenses in the quarter and for the year-to-date period were
higher primarily due to increased warranty reserves.
Hard order backlogs -- goods scheduled for delivery in 90 days -- of $126.0
million at April 30, 1996, increased 2.4 percent from the same period last year.
Strong order increases in the dust collection, high purity products and engine
original equipment markets were partially offset by declines in the gas turbine
systems market
PART II. OTHER INFORMATION
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
April 30, 1996.
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 6/13/96 By /s/ James R. Giertz
James R. Giertz
Vice President -
Chief Financial Officer
Date 6/13/96 By /s/ Raymond F. Vodovnik
Raymond F. Vodovnik
Vice President-Legal
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<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> AUG-01-1995
<PERIOD-END> APR-30-1996
<CASH> 30,195
<SECURITIES> 0
<RECEIVABLES> 148,810
<ALLOWANCES> 3,826
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<PP&E> 298,031
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0
0
<COMMON> 135,317
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<TOTAL-LIABILITY-AND-EQUITY> 388,409
<SALES> 556,257
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<INCOME-PRETAX> 52,723
<INCOME-TAX> 20,720
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