Donaldson(DCI) - 2025 Q3 - Quarterly Report

Financial Performance - Net sales for the three months ended April 30, 2025, were $940.1 million, a 1.3$927.9 million in the same period of 2024[106]. - Net sales for the nine months ended April 30, 2025, were $2,710.2 million, an increase of$59.3 million, or 2.2%, compared to $2,650.9 million for the same period in 2024[122]. - Net earnings for the three months ended April 30, 2025, were$57.8 million, a decrease of $55.7 million, or 49.1$113.5 million in the same period of 2024[117]. - Net earnings for the nine months ended April 30, 2025, were $252.7 million, a decrease of$51.6 million, or 16.9%, compared to $304.3 million in 2024[130]. - Diluted earnings per share (EPS) decreased to$0.48 for the three months ended April 30, 2025, down from $0.92 in the prior year, a decline of 48.0$14.2 million, or 5.3% growth, while the Mobile Solutions segment experienced a decline of $2.6 million, or 0.4$1,702.6 million for the nine months ended April 30, 2025, an increase of $27.1 million, or 1.6$1,675.5 million in 2024[140]. - Net sales for the Industrial Solutions segment for the three months ended April 30, 2025, were $283.3 million, an increase of$14.2 million, or 5.3%, compared to $269.1 million for the same period in 2024[146]. - Aerospace and Defense net sales increased by$11.0 million due to ongoing strength in the end markets, while Industrial Filtration Solutions (IFS) net sales increased by $3.2 million driven by replacement part sales[147]. - Net sales for the Life Sciences segment for the three months ended April 30, 2025, were$74.2 million, an increase of $0.6 million, or 0.7$73.6 million for the same period in 2024[160]. Expenses and Costs - Gross margin as a percentage of net sales decreased to 34.2% for the three months ended April 30, 2025, down from 35.6% in the prior year, primarily due to higher manufacturing costs[109]. - Selling, general and administrative expenses decreased by $10.6 million, or 6.5$151.1 million, representing 16.1% of net sales[110]. - Research and development expenses decreased by $3.4 million, or 14.0$21.4 million, representing 2.3% of net sales[112]. - Selling, general and administrative expenses were $476.4 million, or 17.6$473.5 million, or 17.9% in 2024[124]. - Research and development expenses decreased by $2.9 million, or 4.4$65.3 million, representing 2.4% of net sales for the nine months ended April 30, 2025[126]. Impairment and Tax - The company reported a loss on impairment of intangible assets of $62.0 million, or 6.6$62.0 million, or 2.3% of net sales, for the nine months ended April 30, 2025, compared to no expense in 2024[125]. - The effective tax rate increased to 33.6% for the three months ended April 30, 2025, compared to 21.2% in the same period of 2024, primarily due to the impairment loss[115]. - The effective tax rate increased to 26.2% for the nine months ended April 30, 2025, compared to 23.1% in 2024, primarily due to the impairment loss[129]. Cash Flow and Debt - Cash provided by operating activities for the nine months ended April 30, 2025, was $251.0 million, a decrease of$115.5 million compared to $366.5 million for the same period in 2024[170]. - Cash used in investing activities for the nine months ended April 30, 2025, was$129.8 million, an increase of $62.0 million compared to$67.8 million for the same period in 2024[171]. - Total debt as of April 30, 2025, was $638.8 million, an increase of$130.4 million from $508.4 million as of July 31, 2024[177]. - Cash and cash equivalents as of April 30, 2025, were$178.5 million, down from $232.7 million as of July 31, 2024[174]. - Dividends paid for the nine months ended April 30, 2025, were$96.9 million, compared to $90.3 million for the same period in 2024[173]. Foreign Currency and Interest Rates - The estimated impact of foreign currency translation for the nine months ended April 30, 2025, resulted in a decrease in reported net sales of$10.1 million and a decrease in reported net earnings of $3.4 million[187]. - The overall stronger U.S. dollar negatively impacted the Company's international net sales and net earnings due to foreign-denominated revenues translating into less U.S. dollars[187]. - As of April 30, 2025, the total notional amount of foreign currency forward contracts designated as hedges was$32.4 million, while those not designated as hedges amounted to $194.3 million[189]. - The total notional amount of net investment hedges as of April 30, 2025, was €80 million, or$88.8 million, with maturity dates ranging from 2027 to 2029[190]. - Assuming a hypothetical 0.5 percentage point increase in short-term interest rates, interest expense would have increased approximately $1.7 million in the nine months ended April 30, 2025[192].