Donaldson(US:DCI)2025-12-04 16:57Financial Performance - Net sales for the three months ended October 31, 2025, were $935.4 million, an increase of $35.3 million, or 3.9%, compared to $900.1 million for the same period in 2024[103] - Gross profit for the three months ended October 31, 2025, was $328.8 million, representing a gross margin of 35.2%, down from 35.5% in the prior year[103][108] - Net earnings for the three months ended October 31, 2025, were $113.9 million, an increase of $14.9 million, or 15.1%, compared to $99.0 million for the same period in 2024[115] Segment Performance - The Mobile Solutions segment reported net sales of $598.3 million for the three months ended October 31, 2025, an increase of $25.9 million, or 4.5%, from $572.4 million in 2024[120] - The Industrial Solutions segment achieved net sales of $257.8 million, slightly up from $257.6 million in the prior year[116] - The Life Sciences segment reported net sales of $79.3 million, an increase of $9.2 million, or 13.1%, compared to $70.1 million in 2024[116] - Aftermarket net sales increased by $29.1 million due to market share gains, while On-Road net sales decreased by $8.7 million due to a decline in global truck production[121] - Mobile Solutions segment earnings before income taxes for the three months ended October 31, 2025 were $111.3 million, or 18.6% of net sales, an increase from 18.3% in the same period of 2024[122] - Industrial Solutions segment net sales for the three months ended October 31, 2025 were $257.8 million, a slight increase of $0.2 million or 0.1% compared to $257.6 million in 2024[126] - Life Sciences segment net sales increased by $9.2 million, or 13.1%, reaching $79.3 million for the three months ended October 31, 2025, driven by strong sales in Food and Beverage and Disk Drive[131] Expenses and Taxation - Research and development expenses decreased to $19.2 million, or 2.1% of net sales, down from $22.7 million, or 2.5% of net sales, in the prior year[111] - Selling, general and administrative expenses were $169.6 million, or 18.1% of net sales, compared to $166.1 million, or 18.5% of net sales, in the previous year[109] - The effective tax rate for the three months ended October 31, 2025, was 22.8%, down from 24.2% in the same period of 2024[114] Cash Flow and Debt - Cash provided by operating activities for the three months ended October 31, 2025 was $125.4 million, an increase of $52.5 million from $72.9 million in 2024[135] - Cash used in investing activities decreased significantly to $3.4 million in the three months ended October 31, 2025, down from $96.0 million in 2024, primarily due to reduced equity investments[136] - Cash used in financing activities was $93.1 million for the three months ended October 31, 2025, a decrease of $102.9 million compared to cash provided of $9.8 million in 2024[137] - Total debt as of October 31, 2025 represented 31.0% of total capitalization, a slight decrease from 31.5% as of July 31, 2025[141] - Cash and cash equivalents increased to $210.7 million as of October 31, 2025, compared to $180.4 million as of July 31, 2025[139] Foreign Currency and Interest Rates - The estimated impact of foreign currency translation for the three months ended October 31, 2025 resulted in an increase in reported net sales of $11.9 million and an increase in reported net earnings of $1.7 million[152] - The total notional amount of foreign currency forward contracts designated as hedges was $55.5 million as of October 31, 2025, up from $35.7 million on July 31, 2025[154] - The total notional amount of foreign currency forward contracts not designated as hedges was $199.5 million as of October 31, 2025, compared to $189.6 million on July 31, 2025[154] - The total notional amount of net investment hedges was €80 million (approximately $88.8 million) as of October 31, 2025[155] - A 10% appreciation of the U.S. dollar compared to the Euro would result in a net gain of $8.7 million in the fair value of net investment hedges[156] - A hypothetical 0.5 percentage point increase in short-term interest rates would increase interest expense by approximately $0.5 million for the three months ended October 31, 2025[157] - The estimated fair values of fixed interest rate long-term debt were $252.5 million compared to carrying values of $275.0 million as of October 31, 2025[157] Commodity Price Exposure - The Company is exposed to fluctuating prices of commodity raw materials, which could result in lower gross profit if prices increase[159] - The Company strives to recover material cost increases through price adjustments to customers and cost reduction initiatives[159]