Investor Presentation

Transcription

1 Investor Presentation November 30, 2017 For additional information, contact: Brad Pogalz Director, Investor Relations and Corporate Communications

2 Safe Harbor Statement This presentation includes forward looking statements which reflect the Company s current views with respect to future events and financial performance, but involve uncertainties that could significantly impact results. 2

3 Overview of Donaldson

4 Donaldson Company We are a filtration company Technology leader in our markets Diversified portfolio of global businesses 4

5 Value Proposition To Our Customers Technology Advantages Higher efficiency Small system size Longer filter life Reduced operating and maintenance costs Better Aftermarket Retention 5

6 Value Proposition To Our Shareholders Diversified portfolio of technology and products Global sales, production and distribution footprint Committed to growth & financial performance Disciplined capital deployment 6

7 Diversified Product Assortment: Engine 7

8 Diversified Product Assortment: Industrial 8

9 Performance and Outlook

10 Segment Composition and Performance Fiscal 2017 sales of $2.37 billion; 6.8% over last year Revenue Composition Engine: +11.6%* 16% 7% 7% Aftermarket Off Road Industrial 35% Engine 65% 70% On Road A&D Industrial: (1.2)%* 20% 15% 65% Ind. Filtration Spec. Apps Gas Turbine *Fiscal year ended July 31,

11 Fiscal 2017 Sales Performance Fiscal 2017 sales of $2.37 billion; 6.8% over last year Engine Segment: 11.6% * Industrial Segment: (1.2)% * 16.4% 14.2% 8.7% 3.0% 0.6% 13.0% Off Road Aftermarket A&D On Road Ind. Filtration 17.9% Special Apps Gas Turbine *Fiscal year ended July 31,

12 Fiscal 2018 Sales Outlook * Sales guidance for all businesses except GTS increased; total sales now expected to increase from prior by 10% to 14%. Fiscal 2018 Guidance Actual Results Current Prior FY2017 Engine Segment 13% 17% 6% 10% 11.6% Off Road +Mid teens +MSD/HSD 16.4% On Road +Mid teens +MSD/HSD (13.0)% Aftermarket +Mid teens +LDD 14.2% Aerospace & Defense +LSD LSD 8.7% Industrial Segment 4% 8% Flat to +4% (1.2)% Industrial Filtration Solutions (IFS) +HSD/LDD +MSD 3.0% Gas Turbine Systems (GTS) HSD HSD (17.9)% Special Applications +LSD ~Flat 0.6% Total Sales 10% 14% 4% 8% 6.8% *Current guidance as of November 30,

13 Fiscal 2017 Profit Performance * 0.4% 0.1% 13.9% 0.9% 12.3% FY16 Operating Margin Add Back FY'16 Restructuring Charges FY17 Gross Margin Chg. FY17 Expense Rate Chg. FY17 Operating Margin *Fiscal year ended July 31,

14 Fiscal 2018 Key Metrics Forecast * Full-year operating margin, EPS guidance increased. Fiscal 2018 Guidance Actual Results Current Prior FY2017 GAAP EPS $1.90 $2.04 $1.79 $1.93 $1.74 ** Operating Margin 14.1% 14.5% 14.0% 14.4% 13.9% Net Other Income/(Expense) $3 million $7 million $5 million $9 million $12.9 million ** Interest Expense ~$21 million No change $19.5 million Effective Tax Rate 27.4% 29.4% No change 27.7% Other Metrics Capital Expenditures $80 million to $100 million No change $63.5 million Cash Conversion 75% 90% No change 106% Share Repurchase ~2% No change 2.5% *Current guidance as of November 30, 2017 **Includes a one-time gain of $6.8 million, or 5 cents per share. Refer to the companies SEC filings for more information. 14

15 Strategic Growth Plans

16 Strategic Growth Plans Geography Expand core products & technologies DONALDSON CORE Expand Core Expand geographies Execute acquisitions Acquisitions 16

17 Sales Growth Model Use Innovative Technology Reinvest Create Holes Sell Replacements Growth 17

18 Innovative Product to Improve Retention 100% 80% Aftermarket retention rate of innovative products is higher than legacy products over time 60% 40% Innovative Products 20% Legacy Products 0% Yr 0 Yr 2 Yr 5 Yr 8 Yr 10 Yr 15 18

19 Innovative Air Filtration PowerCore DownFlo Evolution 19

20 Innovative Liquid Filtration Designed for new diesel fuels, higher fuel injector pressure Higher efficiency and extended filter life 20

21 Capital Deployment

22 Capital Deployment Priorities Invest in our company Pay a dividend Repurchase our shares

23 Fiscal 2018 Strategic Investment Priorities Technology development Grow our capabilities with new filtration technologies to further expand into adjacent markets. Capacity expansion Increase our manufacturing capacity for innovative air and liquid products, and add distribution capacity to better serve our customers while enhancing productivity. Customer engagement Launch our e commerce platform to make it easier for new and existing customers to buy from Donaldson.

24 Reinvesting in the Business Over Time Organic Growth Investments Development of new and innovative products Lab upgrades and IT investments Production capacity and distribution expansion Acquisitions Completed five bolt on acquisitions in three years 24

25 Consistent Dividend Growth Per Share $0.80 $0.70 $0.60 $0.50 Paid quarterly dividend for 60+ years Increased annually for 20+ years 16% CAGR $0.70 $0.40 $0.30 $0.20 $0.10 $0.00 $

26 Consistent Share Repurchase Shares Outstanding in Millions 250 Goal is to at least offset annual dilution of ~1% -2% CAGR

27 Value Proposition To Our Shareholders Diversified portfolio of technology and products Global sales, production and distribution footprint Committed to growth & financial performance Disciplined capital deployment 27

28 A Measure of Performance Annualized Total Return to Shareholders * 34% 25% 15% 9% 10% 8% 1 Year 5 Years 10 Years DCI S&P 500 *As of 11/1/

29 Thank You