Donaldson(DCI) - 2025 Q2 - Quarterly Report

Financial Performance - Net sales for the three months ended January 31, 2025 were $870.0 million, a decrease of$ 6.7 million or 0.8% compared to $876.7 million for the same period in 2024[105]. - Net earnings for the three months ended January 31, 2025 were$ 95.9 million, a decrease of $2.8 million or 2.7% from$ 98.7 million in the same period of 2024[117]. - For the six months ended January 31, 2025, net sales were $1,770.1 million, an increase from$ 1,723.0 million in the same period of 2024[118]. - Net earnings for the six months ended January 31, 2025 were $194.9 million, an increase of$ 4.1 million, or 2.2%, compared to $190.8 million for the same period in 2024[128]. Segment Performance - The Mobile Solutions segment experienced a decline in sales of$ 2.8 million or 0.5%, while the Industrial Solutions segment saw a decrease of $9.7 million or 3.7%. In contrast, the Life Sciences segment grew by$ 5.8 million or 9.2%[109]. - Net sales for the Mobile Solutions segment for the six months ended January 31, 2025 were $1,119.9 million, an increase of$ 29.6 million, or 2.7%[134]. - Net sales for the Industrial Solutions segment for the six months ended January 31, 2025 were $511.3 million, an increase of$ 1.7 million, or 0.3%[144]. - Life Sciences segment net sales for the three months ended January 31, 2025 were $68.8 million, an increase of$ 5.8 million or 9.2% compared to $63.0 million for the same period in 2024[149]. - For the six months ended January 31, 2025, net sales for the Life Sciences segment were$ 138.9 million, an increase of $15.8 million or 12.8% compared to$ 123.1 million for the same period in 2024[153]. Expenses - Selling, general and administrative expenses increased to $159.2 million, or 18.3% of net sales, up from$ 156.8 million or 17.9% in the previous year[111]. - Research and development expenses were $21.2 million, or 2.4% of net sales, approximately flat compared to$ 22.1 million or 2.5% in the prior year[112]. - Selling, general and administrative expenses increased by $13.5 million, or 4.3%, to$ 325.3 million, representing 18.4% of net sales for the six months ended January 31, 2025[123]. - Research and development expenses were approximately flat at $43.9 million, or 2.5% of net sales, for the six months ended January 31, 2025[124]. Profitability Metrics - Gross profit for the three months ended January 31, 2025 was$ 305.9 million, maintaining a gross margin of 35.2%, consistent with the prior year[110]. - Gross margin as a percentage of net sales for the six months ended January 31, 2025 was 35.3%, slightly down from 35.4% for the same period in 2024[122]. - Earnings before income taxes for the Mobile Solutions segment for the six months ended January 31, 2025 were $200.2 million, or 17.9% of net sales, an increase from 17.6% for the same period in 2024[136]. - Earnings before income taxes for the Industrial Solutions segment for the six months ended January 31, 2025 were$ 81.9 million, or 16.0% of net sales, a decrease from 17.8% for the same period in 2024[146]. - Losses before income taxes for the Life Sciences segment for the three months ended January 31, 2025 were $0.5 million, representing 0.7% of net sales, a significant improvement from 9.2% of net sales in the same period of 2024[150]. - Losses before income taxes for the six months ended January 31, 2025 were$ 5.8 million, or 4.2% of net sales, down from 8.1% of net sales for the same period in 2024[154]. Taxation - The effective tax rate decreased to 23.2% for the three months ended January 31, 2025, compared to 23.5% for the same period in 2024[115]. - The effective tax rate decreased to 23.7% for the six months ended January 31, 2025, down from 24.2% for the same period in 2024, primarily due to an increase in discrete tax benefits[127]. Cash Flow and Debt - Cash provided by operating activities for the six months ended January 31, 2025 was $163.3 million, a decrease of$ 61.7 million from $225.0 million for the same period in 2024[157]. - Cash used in investing activities for the six months ended January 31, 2025 was$ 115.1 million, an increase of $70.6 million compared to$ 44.5 million for the same period in 2024[158]. - Cash used in financing activities for the six months ended January 31, 2025 was $88.5 million, a decrease of$ 83.2 million from $171.7 million for the same period in 2024[159]. - As of January 31, 2025, total debt represented 27.2% of total capitalization, up from 26.5% as of July 31, 2024[163]. - Long-term debt outstanding was$ 539.7 million as of January 31, 2025, an increase of $31.3 million from$ 508.4 million as of July 31, 2024[164]. Foreign Currency and Interest Rates - The estimated impact of foreign currency translation for the six months ended January 31, 2025 resulted in a decrease in reported net sales of $7.3 million and a decrease in reported net earnings of$ 0.6 million[174]. - As of January 31, 2025, the total notional amount of foreign currency forward contracts designated as hedges was $48.1 million, up from$ 32.3 million as of July 31, 2024[176]. - The total notional amount of foreign currency forward contracts not designated as hedges was $214.9 million as of January 31, 2025, down from$ 249.7 million as of July 31, 2024[176]. - A hypothetical 0.5 percentage point increase in short-term interest rates would increase interest expense by approximately $0.7 million for the six months ended January 31, 2025[179]. Commodity Prices - The Company is exposed to fluctuating prices of commodity raw materials, which could result in lower gross profit if prices increase[182]. - The Company aims to recover material cost increases through price adjustments to customers and cost reduction initiatives[182].