Tuesday, filtration systems maker Donaldson Company Inc. (DCI), reported a decline in the third-quarter profit from the year-ago period, primarily due to an almost 30% decline in sales. Additionally, the company also cut its fiscal 2009 earnings outlook.
The Minneapolis, Minnesota-based company reported a third-quarter net income of $26.60 million or $0.34 per share, down from $45.99 million or $0.57 per share in the corresponding quarter last year. Donaldson noted that the impact of foreign currency translation decreased reported net earnings by $0.9 million or 2% in the quarter
Excluding items, non-GAAP net income for the third-quarter was $31.28 million or $0.40 per share, down from $45.99 million or $0.57 per share in the year-ago quarter. On average, ten analysts polled by Thomson Reuters estimated earnings of $0.30 per share for the quarter. Analysts' estimates typically exclude special items.
Net sales for the quarter declined 29.7% to $413.45 million down from $587.76 million in the similar period last year. Analysts estimated net sales of $435.31 million for the quarter.
The impact of foreign currency translation decreased reported sales by $33.6 million or 5.7%, in the quarter.
Bill Cook, Chairman, President and CEO said, "Although we continue to experience very challenging and severe recessionary conditions in almost all of our end markets, I am very pleased that our gross margin improvement, cost reduction, and working capital improvement projects helped us significantly in our third quarter."
Segment wise, total Engine Products segment which includes Off-road products, Transportation products and Aftermarket products reported quarterly net sales of $223.75 million, down from $324.99 million in the comparable period last year.
Off-road products sales for the quarter were $82.22 million, down from $120.93 million in the last year. Transportation products sales for the third-quarter were $13.41 million compared to $33.19 million in the comparable period last year. Aftermarket products sales for the quarter were $128.13 million, down from $170.87 million in the third-quarter of fiscal 2008.
Total Industrial products segment that includes Industrial Filtration Solutions products, Gas Turbine products and Special Application products reported quarterly net sales of $189.70 million, down from $262.77 million in the similar period last year.
Industrial Filtration Solutions products net sales for the quarter was $111.98 million, down from $155.21 million in the third-quarter of fiscal 2008. Gas Turbine products sales was $45.17 million compared to $58.86 million in the comparable period of fiscal 2008. Special Applications Products sales for the quarter were $32.56 million, compared to $48.70 million in the year-ago corresponding quarter.
Operating income for the quarter was $37.66 million compared to $63.52 million in the comparable period of fiscal 2008.
Interest expense for the third-quarter of fiscal 2009 was $4.07 million, compared to $4.24 million in the prior-year similar period.
Income tax for the quarter was $8.78 million, down from $15.86 million in the third-quarter of fiscal 2008.
The company generated free cash flow of $100 million in the quarter and $171 million year-to-date, allowing for further reduction in debts by $39 million during the quarter while still increasing global cash reserves. Donaldson repurchased 802,000 shares year-to-date for $32.8 million, but none during the third-quarter.
The company anticipates the cumulative effect of the restructuring actions during fiscal 2009 to generate approximately $100 million of annualized cost savings when completed.
Among others in the industry, Columbus, Indiana-based engine and power generation equipment maker Cummins Inc. (CMI) reported a decline in first quarter profit from last year on lower sales. The company reported net income of $14 million for the first quarter, down from $202 million in the same quarter last year. Net income attributable to Cummins for the first quarter fell to $7 million or $0.04 per share, from $190 million or $0.97 per share in the year-ago quarter. Net sales for the quarter decreased 30% to $2.44 billion from $3.47 billion in the prior-year quarter.
East Hills, New York-based filtration and purification products maker Pall Corp. (PLL) stated that its second quarter profit declined from last year, hurt by lower revenues amid a deteriorating economic scenario and the negative impact of foreign currency translation. Pall reported second quarter net earnings of $38.9 million or $0.33 per share, down from $48.0 million or $0.39 per share in the prior year quarter.
Excluding restructuring and other charges, pro forma earnings dropped to $45.2 million or $0.38 per share from $57.2 million or $0.46 per share in the year-ago quarter. Second quarter sales declined to $543.3 million from $625.7 million in the same quarter last year.
For the nine-month period, net earnings declined to $108.35 million or $1.37 per share from $123.38 million or $1.52 per share in the corresponding period last year.
Excluding items, net income for the nine-month period was $116.0 million or $1.47 per share, compared to $123.38 million or $1.52 per share in the similar period of 2008.
Net sales for the period declined 10.9% to $1.45 billion from $1.63 billion in the nine-month period of fiscal 2008.
Looking forward, the company lowered its full year 2009 earnings to the range of $1.55 to $1.70 per share from prior earnings estimate in the range of $1.70 to $1.90 per share. Analysts currently estimate earnings of $1.72 per share for the fiscal 2009.
Donaldson also lowered its fiscal 2009 net sales to a range of $1.8 billion to $1.9 billion or down 15% to 20% from the prior year. Previous sales estimate was $1.9 billion to $2.0 billion for the full year 2009. Analysts currently estimate revenue of $1.93 billion for the fiscal 2009. The company indicated that foreign currency translation is expected to account for about 25% of the decrease.
Due to lower sales outlook and additional restructuring actions that could result in an additional $10 million to $12 million in costs in fourth quarter, the company now expects full year operating margin guidance to between 8% to 9%.
The company anticipates to record full year free cash flow of $180 million to $200 million, up approximately $80 million to $100 million from the prior year.
Donaldson foresees full year 2009 sales of engine products to decline by 16% to 21%, inclusive of the impact of foreign currency translation. The company anticipates fiscal 2009 industrial products revenue to decrease by 12% to 17%, inclusive of the impact of foreign currency translation.
Donaldson Company closed Tuesday's regular trading at $33.27, up $1.66 or 5.25%, on a volume of 0.59 million shares on the NYSE. In after-hours, however, the stock lost $1.66 or 4.99%, trading at $31.61.
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