ENP Newswire -
Release date- 21052014 -
'We are proud of our execution during the quarter while we remain aggressively focused on additional growth opportunities,' said
However, our Industrial Products' sales decreased 7 percent in local currency as a result of a 40 percent decline in our Gas Turbine shipments from last year's record third quarter. As previously discussed, we had a surge in our gas turbine shipments last year, and the overall industry is now installing that new electrical generation capacity.
Partially offsetting our Gas Turbine sales decrease were our Industrial Filtration Solutions and Special Applications businesses, which grew 8 percent and 4 percent, respectively. Internationally, excluding our Gas Turbine sales, our local currency sales were strong with
'As we begin our fourth quarter, we have narrowed our guidance ranges. We reduced our Industrial Products' sales outlook due to a couple of factors. First, the continued geopolitical uncertainty continues to negatively impact the recovery for general industrial capital investment and, as a result, the demand for our new Industrial Filtration Solutions systems. Second, several of our large gas turbine projects that were scheduled for shipment in our fourth quarter have been rescheduled by our Customers to be delivered in our FY15.
As a result, we are now forecasting our full-year Company sales to be a slight increase over last year. The midpoint of our operating margin forecast is 14.3 percent, a 20 basis point improvement over the prior year. The combination of our updated outlook for sales and operational performance results in our FY14 EPS forecast of between
Financial Statement Discussion
The impact of foreign currency translation decreased sales by
Gross margin was 35.8 percent for the quarter, consistent with last year. During the quarter, we realized positive mix impact from a higher percentage of replacement filter sales. We also benefitted from our Continuous Improvement initiatives. These offset higher compensation expenses. Year-to-date, our gross margin is 35.4 percent versus 34.3 percent last year.
Operating expenses for the quarter were
Our operating margin for the quarter was 14.9 percent, down 100 basis points from the prior year. Year-to-date operating margin was 14.2 percent, up 70 basis points from last year.
Our effective tax rate for the quarter was 28.5 percent, compared to the prior year rate of 29.8 percent. This decrease compared to the prior year was primarily due to changes in the mix of earnings between tax jurisdictions. The year-to-date effective tax rate was 27.9 percent, compared to the prior year rate of 29.2 percent.
As part of our ongoing share repurchase program we repurchased 2,400,000 shares for
We project our Company's sales to be between
Our full-year operating margin forecast is 14.1 to 14.5 percent. Included in this forecast is approximately
Our FY14 tax rate is anticipated to be between 28 and 29 percent.
We forecast our full-year FY14 EPS to be between
Cash generated by operating activities is projected to be between
Engine Products: We now forecast our FY14 sales to increase 3 to 7 percent, including the negative impact of foreign currency.
Our On-Road OEM Customers are planning to build more heavy- and medium-duty trucks in 2014.
Demand from our Off-Road OEM Customers is anticipated to continue to be mixed: build rates of construction equipment are expected to improve in
We are anticipating continued growth 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 filters, and through continued expansion of our product portfolio.
We forecast sales to decline slightly for our Aerospace and Defense business compared to last year as the continued slowdown in U.S. military activity should be mostly offset by growth from our commercial aerospace sales.
Industrial Products: We now forecast sales to decrease 4 to 7 percent, including the negative impact of foreign currency.
Our Industrial Filtration Solutions' sales are projected to increase 2 to 5 percent. We assume our replacement filter sales will remain at record levels due to improving general manufacturing conditions, while our new filtration system sales will remain flat in the near-term due to continuing low levels of new equipment investment by manufacturers.
We anticipate our Gas Turbine sales will decrease 29 to 32 percent from our record sales last year due to the current slowdown in large turbine power generation projects by our Customers.
We now forecast our Special Applications' sales to increase 2 to 5 percent due to improved market demand for our semiconductor and venting products.
Donaldson is a leading worldwide provider of filtration systems that improve people's lives, enhance our Customers' equipment performance, and protect our environment. We are a technology-driven Company committed to satisfying our Customers' needs for filtration solutions through innovative research and development, application expertise, and global presence. Our approximately 12,300 employees contribute to the Company's success by supporting our Customers at our more than 140 sales, manufacturing, and distribution locations around the world.
Donaldson is a member of the S&P MidCap 400 and Russell 1000 indices, and our shares trade on the
SAFE HARBOR STATEMENT UNDER THE SECURITIES REFORM ACT OF 1995
The Company desires to take advantage of the 'safe harbor' provisions of the Private Securities Litigation Reform Act of 1995 (the 'Act') and is making this cautionary statement in connection with such safe harbor legislation.
This announcement contains forward-looking statements, including, without limitation, forecasts, plans, trends, and projections relating to our business and financial performance and global economic conditions, which involve uncertainties that could materially impact results. All statements other than statements of historical fact are forward-looking statements. These statements do not guarantee future performance.
The Company wishes to caution investors that any forward-looking statements are subject to uncertainties and other risk factors that could cause actual results to differ materially from such statements, including but not limited to risks associated with: world economic factors and the ongoing global economic uncertainty, the reduced demand for hard disk drive products with the increased use of flash memory, the potential for some Customers to increase their reliance on their own filtration capabilities, currency fluctuations, commodity prices, political factors, the Company's international operations, highly competitive markets, governmental laws and regulations, including the impact of the various economic stimulus and financial reform measures, the implementation of our new information technology systems, potential global events resulting in market instability including financial bailouts and defaults of sovereign nations, military and terrorist activities, health outbreaks, natural disasters, and all of the other risk factors included in our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q.
We undertake no obligation to publicly update or revise any forward-looking statements.
Although free cash flow, EBITDA, net sales excluding foreign currency translation, and net earnings excluding foreign currency translation 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. Both net sales and net earnings excluding foreign currency translation provide a comparable measure for understanding the operating results of the company's foreign entities excluding the impact of foreign exchange. 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.
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