Donaldson(US:DCI)2023-03-07 16:00Financial Performance - Net sales for the three months ended January 31, 2023, increased by $25.8 million, or 3.2%, to $828.3 million compared to $802.5 million in the same period of 2022[111]. - Net earnings for the three months ended January 31, 2023, were $86.0 million, an increase of $14.2 million, or 19.8%, compared to $71.8 million in the same period of 2022[118]. - For the six months ended January 31, 2023, net sales increased by $112.2 million, or 7.2%, to $1,675.6 million from $1,563.4 million in the same period of 2022[121]. - Total company net sales for the three months ended January 31, 2023, were $828.3 million, an increase of 3.2% from $802.5 million in the same period of 2022[130]. - Total company earnings before income taxes for the three months ended January 31, 2023, were $113.3 million, an increase from $94.5 million in the same period of 2022[130]. Segment Performance - The Industrial Solutions segment saw a sales increase of $27.9 million, or 12.8%, for the three months ended January 31, 2023, while the Life Sciences segment declined by $11.1 million, or 15.6%[111]. - Mobile Solutions segment net sales for the three months ended January 31, 2023, were $522.5 million, up 1.7% from $513.5 million in the prior year, with a 5.9% increase excluding foreign currency translation effects[131][132]. - Industrial Solutions segment net sales for the three months ended January 31, 2023, were $246.4 million, reflecting a 12.8% increase from $218.5 million in the same period of 2022, with a 16.7% increase excluding foreign currency translation[137][138]. - Life Sciences segment net sales for the three months ended January 31, 2023, were $59.4 million, down 15.6% from $70.5 million in the prior year, primarily due to weak market demand in the disk drive business[144][145]. - Mobile Solutions segment earnings before income taxes for the three months ended January 31, 2023, were $78.6 million, or 15.0% of net sales, up from 11.4% in the prior year[133]. - Industrial Solutions segment earnings before income taxes for the three months ended January 31, 2023, were $46.3 million, or 18.8% of net sales, an increase from 12.4% in the same period of 2022[140]. - Life Sciences segment earnings before income taxes for the three months ended January 31, 2023, were $6.3 million, or 10.6% of net sales, down from 23.7% in the prior year[146]. Expenses and Costs - Gross margin as a percentage of net sales improved to 34.3% for the three months ended January 31, 2023, up from 31.1% in the prior year, driven by pricing actions[112]. - Research and development expenses for the three months ended January 31, 2023, were $18.5 million, or 2.2% of net sales, compared to $16.6 million, or 2.1% of net sales, in the same period of 2022[114]. - Selling, general and administrative expenses for the six months ended January 31, 2023, were $298.8 million, or 17.8% of net sales, an increase of $28.3 million, or 10.5%, from the prior year[123]. - Interest expense for the six months ended January 31, 2023, was $9.2 million, an increase of $2.1 million, or 30.2%, compared to $7.1 million in the same period of 2022[125]. Cash Flow and Debt - Cash provided by operating activities for the six months ended January 31, 2023, was $220.5 million, an increase of $140.7 million from $79.8 million in the same period of 2022[150][151]. - Cash used in financing activities for the six months ended January 31, 2023, was $176.8 million, an increase of $131.1 million from $45.7 million in the prior year, primarily due to net debt repayment[153]. - As of January 31, 2023, total debt represented 34.5% of total capitalization, down from 36.4% as of July 31, 2022[157]. - Long-term debt outstanding decreased by $19.5 million to $624.8 million as of January 31, 2023, primarily due to repayments on the unsecured revolving credit facility[158]. Accounts and Inventory - Accounts receivable, net decreased by $42.1 million to $574.5 million as of January 31, 2023, with days sales outstanding increasing to 64 days[160]. - Inventories, net decreased slightly by $1.1 million to $501.3 million as of January 31, 2023, with days inventory outstanding increasing to 84 days[161]. - Accounts payable decreased by $36.4 million to $302.1 million as of January 31, 2023, with days payable outstanding increasing to 53 days[162]. Foreign Currency Impact - The Company experienced a foreign currency translation impact that decreased net sales by $34.1 million for the three months ended January 31, 2023[111]. - The estimated impact of foreign currency translation for the six months ended January 31, 2023, resulted in a decrease in reported net sales of $93.0 million and a decrease in reported net earnings of $11.8 million[170]. - The total notional amounts of foreign currency forward contracts designated as hedges were $77.2 million as of January 31, 2023, down from $158.0 million as of July 31, 2022[172]. Tax and Interest Rates - The effective tax rate for the three months ended January 31, 2023, was 24.1%, consistent with the prior year, benefiting from increased tax benefits on export income[117]. - Assuming a hypothetical 0.5 percentage point increase in short-term interest rates, interest expense would have increased approximately $0.4 million in the six months ended January 31, 2023[175]. Liquidity - The Company believes its liquidity from operating activities and available credit will be sufficient to meet cash requirements for the next 12 months and beyond[156].