8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

Current Report Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): May 18, 2012

DONALDSON COMPANY, INC.

(Exact name of registrant as specified in its charter)

Delaware	1-7891	41-0222640
(State or other jurisdiction of incorporation)	(Commission file number)	(I.R.S. Employer Identification No.)
1400 West 94th Street
Minneapolis, MN 55431
(Address of principal executive offices)
(952) 887-3131
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02. Results of Operations and Financial Condition.

          On May 18, 2012, Donaldson Company, Inc. issued a press release announcing its results of operation for the third quarter ended April 30, 2012. A copy of the press release is furnished herewith as Exhibit 99.1.

          The information in the Form 8-K and the Exhibit attached hereto shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed to be incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.

Item 9.01. Financial Statements and Exhibits.

(c) Exhibits.

99.1 Press Release dated May 18, 2012 announcing results of operation for the third quarter ended April 30, 2012 of Donaldson Company, Inc.

EXHIBIT INDEX

Exhibit No.	Description
99.1	Press Release dated May 18, 2012 announcing results of operation for the third quarter ended April 30, 2012 of Donaldson Company, Inc.

SIGNATURE

          Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.

Date: May 18, 2012

DONALDSON COMPANY, INC.
By:	/s/ James F. Shaw
	Name: James F. Shaw
	Title: Vice President, and Chief Financial Officer

EX-99.1

Exhibit 99.1

FOR IMMEDIATE RELEASE:	FOR FURTHER INFORMATION:
Friday, May 18, 2012	Rich Sheffer (952) 887-3753

DONALDSON REPORTS RECORD THIRD QUARTER RESULTS

MINNEAPOLIS (May 18, 2012) — Donaldson Company, Inc. (NYSE: DCI) announced its financial results for its fiscal 2012 third quarter. Summarized financial results are as follows (dollars in millions, except per share data):

	Three Months Ended April 30							Nine Months Ended April 30
	2012		2011		Change			2012		2011		Change
Net sales	$	647	$	595		9	%	$	1,836	$	1,669		10	%
Operating income		98		83		18	%		264		225		17	%
Net earnings		71		62		15	%		193		160		21	%
Diluted EPS (*)	$	0.46	$	0.39		18	%	$	1.26	$	1.01		25	%

(*) The current and prior year EPS amounts reflect the impact of the two-for-one stock split that occurred on March 23, 2012.

“The continued strength in many of our mid-cycle businesses and the beginning of the recovery of our late-cycle Gas Turbine Systems products, combined with ongoing solid execution across our Company, helped us set new quarterly records in sales, operating margin, and EPS,” said Bill Cook, Chairman, President and CEO. “Led by a 15 percent increase in Gas Turbine Products, sales growth was strong across all three of the product groups within our Industrial Products segment, with overall sales up 11 percent. Sales in our Engine Products segment grew 8 percent as new equipment build rates at our Off-Road and On-Road OEM Customers remained healthy.”

“We achieved a record operating margin of 15.2 percent due to the combination of operating leverage in our plants and distribution centers, our focus on effective execution in support of our Customers and the benefits of the many Continuous Improvement initiatives across our Company.”

“We are forecasting continued growth through our fourth quarter with full year sales expected to be up approximately 9 percent over last year. Forecasted business conditions in our end markets remain consistent with last quarter’s outlook through the end of our fiscal year: strong in the Americas, stable in Europe, and slowly improving in China. As a result of our continued strong operating performance, we have increased our FY12 EPS forecast to be between $1.66 and $1.76, which has been adjusted up from our previous guidance of $1.63 to $1.73. All of these EPS numbers have been adjusted for the two-for-one stock split we executed in March. Our new EPS guidance represents a new record and is up 16 percent to 23 percent over last year.”

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Donaldson Company, Inc.
May 18, 2012
Page 2

Financial Statement Discussion

The impact of foreign currency translation decreased sales by $11.6 million, or 2.0 percent, during the third quarter and decreased sales by $2.4 million, or 0.1 percent, year-to-date, compared to the same periods last year. The impact of foreign currency translation decreased reported net earnings by $0.9 million, or 1.5 percent, during the third quarter and decreased reported net earnings by $0.2 million, or 0.1 percent, for the year.

Gross margin was 35.3 percent for the quarter and 35.1 percent year-to-date, compared to prior year margins of 35.2 percent for the quarter and year-to-date. We continue to benefit from our ongoing Continuous Improvement initiatives as well as improved absorption of fixed costs compared to last year’s third quarter. These were partially offset by a slightly less favorable sales mix.

Operating expenses for the quarter were $129.8 million, up 3.2 percent from $125.8 million last year primarily due to the increased sales volume. As a percent of sales, operating expenses were 20.1 percent in the third quarter compared to last year’s 21.2 percent. Operating expenses year-to-date were $380.4 million, or 20.7 percent of sales, compared to $361.5 million, or 21.7 percent of sales, last year.

The effective tax rate for the quarter was 29.0 percent, compared to a prior year rate of 24.5 percent. The current year quarter included $1.8 million of tax benefits primarily from a statute of limitation expiration, while last year’s quarter included $3.5 million of tax benefits from the expiration of some statutes of limitations and the favorable conclusion of two international tax audits. The year-to-date effective tax rate was 28.0 percent compared to a prior year rate of 28.1 percent.

As part of our ongoing share repurchase program we repurchased 261,000 shares, or 0.2 percent of our diluted outstanding shares, for $9.0 million during the quarter. Year-to-date we have repurchased 3,012,000 shares, or 2.0 percent of our diluted outstanding shares, for $82.6 million.

FY12 Outlook

We expect to achieve full year sales, operating margin, and EPS records.

• We forecast our FY12 sales to be approximately $2.5 billion, or up about 9 percent from the prior year. Our current forecast is based on the Euro at US$1.28 and 80 Yen to the US$. With the recent depreciation of the Euro against the US$, we do see foreign currency translation to be a headwind for the balance of our fiscal year.

• Our full year operating margin is forecast to be 14.2 to 14.8 percent.

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Donaldson Company, Inc.
May 18, 2012
Page 3

• Our full year FY12 tax rate is anticipated to be between 28 and 29 percent.

• Cash generated by operating activities is projected to be between $260 and $280 million. Capital spending is now estimated to be between $75 and $80 million.

Engine Products: We expect full year sales to increase 8 to 10 percent, including the impact of foreign currency translation.

• We anticipate sales to both our Off-Road and On-Road OEM Customers will remain strong through the remainder of FY12. We will continue to benefit from increased market share on our Customers’ new Tier IV equipment platforms.

• Sales of our Aftermarket Products are expected to increase moderately based on current utilization rates for both off-road equipment and on-road heavy trucks. We should also benefit from our continued expansion into the emerging economies and from the increasing number of systems installed in the field with our proprietary filtration systems, such as our PowerCore® products.

• We forecast Aerospace and Defense Products’ sales to be level with the prior year as the continued slowdown in military spending is anticipated to be offset by increased commercial aerospace sales.

Industrial Products: We forecast full year sales to increase 8 to 10 percent, including the impact of foreign currency translation.

• Our Industrial Filtration Solutions’ sales are projected to increase 7 to 10 percent and assume a continuing improvement in general manufacturing activity in the U.S., slowly improving conditions in Asia, and forecasted strong fourth quarter project shipments in Europe.

• We anticipate our Gas Turbine Products’ sales to be up 17 to 20 percent due to the recent improvement in the large turbine power generation market and ongoing strength in the oil and gas market segment. We have a very strong schedule for fourth quarter project shipments to our Customers.

• Special Applications Products’ sales are forecast to be level with the prior year as growth in our membrane and venting product sales should offset the reduction in our disk drive filter sales related to the Thai floods last fall.

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Donaldson Company, Inc.
May 18, 2012
Page 4

About Donaldson Company

Donaldson is a leading worldwide provider of filtration systems that improve people’s lives, enhance our Customers’ equipment performance, and protect our environment. We are a technology-driven Company committed to satisfying our Customers’ needs for filtration solutions through innovative research and development, application expertise, and global presence. Our approximately 13,300 employees contribute to the Company’s success by supporting our Customers at our more than 100 sales, manufacturing, and distribution locations around the world.

Donaldson is a member of the S&P MidCap 400 and Russell 1000 indices, and our shares trade on the NYSE under the symbol DCI. Additional information is available at www.donaldson.com.

SAFE HARBOR STATEMENT UNDER THE SECURITIES REFORM ACT OF 1995

The Company desires to take advantage of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 (the “Act”) and is making this cautionary statement in connection with such safe harbor legislation. This announcement contains forward-looking statements, including forecasts, plans, and projections relating to our business and financial performance and global economic conditions, which involve uncertainties that could materially impact results.

The Company wishes to caution investors that any forward-looking statements are subject to uncertainties and other risk factors that could cause actual results to differ materially from such statements, including but not limited to risks associated with: world economic factors and the ongoing economic uncertainty, reduced demand for hard disk drive products with the increased use of flash memory, the potential for some Customers to increase their reliance on their own filtration capabilities, currency fluctuations, commodity prices, political factors, the Company’s international operations, highly competitive markets, governmental laws and regulations, including the impact of various economic stimulus and financial reform measures, the implementation of our new information technology systems, potential global events resulting in market instability including financial bailouts and defaults of sovereign nations, military and terrorist activities, health outbreaks, natural disasters, and other factors included in our Annual and Quarterly Reports. We undertake no obligation to publicly update or revise any forward-looking statements.

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Donaldson Company, Inc.
May 18, 2012
Page 5

CONDENSED STATEMENTS OF CONSOLIDATED EARNINGS
DONALDSON COMPANY, INC. AND SUBSIDIARIES
(Thousands of dollars, except share and per share amounts)
(Unaudited)

	Three Months Ended April 30						Nine Months Ended April 30
	2012			2011			2012			2011
Net sales	$	647,237		$	594,565		$	1,836,415		$	1,668,579
Cost of sales		419,008			385,407			1,192,435			1,081,788
Gross margin		228,229			209,158			643,980			586,791
Operating expenses		129,792			125,826			380,448			361,515
Operating income		98,437			83,332			263,532			225,276
Other income, net		(4,340	)		(1,381	)		(13,750	)		(5,990	)
Interest expense		2,787			2,897			8,856			9,486
Earnings before income taxes		99,990			81,816			268,426			221,780
Income taxes		29,044			20,005			75,106			62,256
Net earnings	$	70,946		$	61,811		$	193,320		$	159,524
Weighted average shares Outstanding (*)		150,536,631			154,651,222			150,385,389			154,716,918
Diluted shares outstanding (*)		153,207,471			157,408,094			153,067,148			157,524,628
Net earnings per share (*)	$	0.47		$	0.40		$	1.29		$	1.03
Net earnings per share assuming dilution (*)	$	0.46		$	0.39		$	1.26		$	1.01
Dividends paid per share (*)	$	0.080		$	0.065		$	0.230		$	0.193

(*) Current and prior year shares and per share amounts reflect the impact of the Company’s two-for-one stock split that occurred March 23, 2012.

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Donaldson Company, Inc.
May 18, 2012
Page 6

DONALDSON COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Thousands of dollars)
(Unaudited)

	April 30 2012		July 31 2011
ASSETS
Cash, cash equivalents and short-term investments	$	308,046	$	273,494
Accounts receivable – net		453,488		445,700
Inventories – net		265,461		271,476
Prepaids and other current assets		72,781		75,912
Total current assets		1,099,776		1,066,582
Other assets and deferred taxes		263,712		268,009
Property, plant and equipment – net		390,785		391,502
Total assets	$	1,754,273	$	1,726,093
LIABILITIES AND SHAREHOLDERS’ EQUITY
Trade accounts payable	$	204,491	$	215,918
Employee compensation and other liabilities		185,228		219,326
Short-term borrowings		83,623		13,129
Current maturity long-term debt		2,311		47,871
Total current liabilities		475,653		496,244
Long-term debt		203,646		205,748
Other long-term liabilities		77,062		89,390
Total liabilities		756,361		791,382
Equity		997,912		934,711
Total liabilities and equity	$	1,754,273	$	1,726,093

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Donaldson Company, Inc.
May 18, 2012
Page 7

DONALDSON COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of dollars)
(Unaudited)

	Nine Months Ended April 30
	2012			2011
OPERATING ACTIVITIES
Net earnings	$	193,320		$	159,524
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		46,214			45,276
Changes in operating assets and liabilities		(43,836	)		(23,958	)
Tax benefit of equity plans		(9,698	)		(8,272	)
Stock compensation plan expense		8,624			7,560
Other, net		(12,223	)		(11,587	)
Net cash provided by operating activities		182,401			168,543
INVESTING ACTIVITIES
Net expenditures on property and equipment		(57,987	)		(42,400	)
Purchases of short-term investments		(119,930	)		(67,985	)
Acquisitions and divestitures, net		—			3,493
Net cash used in investing activities		(177,917	)		(106,892	)
FINANCING ACTIVITIES
Purchase of treasury stock		(82,573	)		(43,101	)
Net change in debt and short-term borrowings		24,435			(1,516	)
Dividends paid		(34,277	)		(29,547	)
Tax benefit of equity plans		9,698			8,272
Exercise of stock options		12,345			13,535
Net cash used in financing activities		(70,372	)		(52,357	)
Effect of exchange rate changes on cash		(18,586	)		22,199
Increase/(Decrease) in cash and cash equivalents		(84,474	)		31,493
Cash and cash equivalents – beginning of year		273,494			232,000
Cash and cash equivalents – end of period	$	189,020		$	263,493

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Donaldson Company, Inc.
May 18, 2012
Page 8

SEGMENT DETAIL
(Thousands of dollars)
(Unaudited)

	Engine Products		Industrial Products		Corporate & Unallocated			Total Company
3 Months Ended April 30, 2012:
Net sales	$	407,041	$	240,196		—		$	647,237
Earnings before income taxes		62,136		38,792		(938	)		99,990
3 Months Ended April 30, 2011:
Net sales	$	377,609	$	216,956		—		$	594,565
Earnings before income taxes		56,469		33,074		(7,727	)		81,816
9 Months Ended April 30, 2012:
Net sales	$	1,171,600	$	664,815		—		$	1,836,415
Earnings before income taxes		170,432		103,688		(5,694	)		268,426
9 Months Ended April 30, 2011:
Net sales	$	1,042,500	$	626,079		—		$	1,668,579
Earnings before income taxes		149,123		92,236		(19,579	)		221,780
NET SALES BY PRODUCT
(Thousands of dollars)
(Unaudited)
	Three Months Ended April 30				Nine Months Ended April 30
	2012		2011		2012			2011
Engine Products segment:
Off-Road Products	$	100,307	$	90,174	$	281,450		$	236,672
On-Road Products		42,133		30,924		124,134			88,726
Aftermarket Products		231,298		223,284		672,265			625,042
Retrofit Emissions Products		4,038		6,033		13,326			14,288
Aerospace and Defense Products		29,265		27,194		80,425			77,772
Total Engine Products segment	$	407,041	$	377,609	$	1,171,600		$	1,042,500
Industrial Products segment:
Industrial Filtration Solutions Products	$	136,082	$	126,226	$	401,522		$	369,009
Gas Turbine Products		51,036		44,231		123,628			114,607
Special Applications Products		53,078		46,499		139,665			142,463
Total Industrial Products segment	$	240,196	$	216,956	$	664,815		$	626,079
Total Company	$	647,237	$	594,565	$	1,836,415		$	1,668,579

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Donaldson Company, Inc.
May 18, 2012
Page 9

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Thousands of dollars, except per share amounts)
(Unaudited)

	Three Months Ended April 30						Nine Months Ended April 30
	2012			2011			2012			2011
Free cash flow	$	58,565		$	57,134		$	124,414		$	126,143
Net capital expenditures		21,638			18,349			57,987			42,400
Net cash provided by operating activities	$	80,203		$	75,483		$	182,401		$	168,543
EBITDA	$	116,861		$	98,667		$	320,353		$	274,586
Income taxes		(29,044	)		(20,005	)		(75,106	)		(62,256	)
Interest expense (net)		(1,553	)		(2,053	)		(5,713	)		(7,530	)
Depreciation and amortization		(15,318	)		(14,798	)		(46,214	)		(45,276	)
Net earnings	$	70,946		$	61,811		$	193,320		$	159,524
Net sales, excluding foreign currency translation	$	658,886		$	577,858		$	1,838,846		$	1,659,088
Foreign currency translation		(11,649	)		16,707			(2,431	)		9,491
Net sales	$	647,237		$	594,565		$	1,836,415		$	1,668,579
Net earnings, excluding foreign currency translation	$	71,844		$	59,991		$	193,474		$	157,423
Foreign currency translation		(898	)		1,820			(154	)		2,101
Net earnings	$	70,946		$	61,811		$	193,320		$	159,524

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Donaldson Company, Inc.
May 18, 2012
Page 10

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (CONTINUED)
(Thousands of dollars, except per share amounts)
(Unaudited)

	Three Months Ended April 30				Nine Months Ended April 30
	2012		2011		2012		2011
Net earnings, excluding special items	$	70,946	$	61,811	$	193,320	$	160,090
Restructuring charges, net of tax		—		—		—		(566	)
Net earnings	$	70,946	$	61,811	$	193,320	$	159,524
Net earnings per share assuming dilution, excluding special items (*)	$	0.46	$	0.39	$	1.26	$	1.01
Restructuring charges per share, net of tax (*)		—		—		—		—
Net earnings per share assuming dilution (*)	$	0.46	$	0.39	$	1.26	$	1.01

(*) Current and prior year per share amounts reflect the impact of the Company’s two-for-one stock split that occurred March 23, 2012.

Although free cash flow, EBITDA, net sales excluding foreign currency translation, net earnings excluding foreign currency translation, net earnings excluding restructuring charges and net earnings per share assuming dilution excluding restructuring charges are not measures of financial performance under GAAP, the Company believes they are useful in understanding its financial results. Free cash flow is a commonly used measure of a company’s ability to generate cash in excess of its operating needs. EBITDA is a commonly used measure of operating earnings less non-cash expenses. Both net sales and net earnings excluding foreign currency translation provide a comparable measure for understanding the operating results of the company’s foreign entities excluding the impact of foreign exchange. Both net earnings excluding restructuring charges and earnings per share excluding restructuring charges provide a comparable measure for understanding the results of the Company as compared to prior periods. A shortcoming of these financial measures is that they do not reflect the company’s actual results under GAAP. Management does not intend these items to be considered in isolation or as a substitute for the related GAAP measures.

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