Donaldson Company reported first quarter 2016 net earnings of $38.5 million, or 29 cents per share.
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In addition to a negative impact from foreign currency translation of $3 million, or 5.4 percent, GAAP EPS reflects restructuring charges of $7.5 million, or 4 cents per share, and investigation-related costs of $2.6 million, or 1 cent per share.
First quarter 2016 sales declined 9.8 percent to $538.0 million from $596.5 million in 2015, which includes a negative impact from foreign currency translation of 6.3 percent, or $37.4 million. Excluding the impact of currency translation, first quarter sales decreased 3.6 percent, primarily due to a 5.4 percent decline in Engine Products.
First quarter operating margin was 10.3 percent, which includes an impact from restructuring charges and investigation-related costs of 1.4 percentage points and 0.5 percentage points, respectively. Excluding these impacts, first quarter adjusted operating margin was 12.2 percent, compared with 12.9 percent in first quarter 2015.
Gross margin decreased 1.9 percentage points in first quarter to 33.1 percent from 35.0 percent last year, reflecting an impact of 0.6 percentage points related to restructuring charges and a 0.6 percentage point transactional impact from foreign currency exchange rates. Other gross margin pressures, including lower fixed-cost absorption, were partially offset by Donaldson's Continuous Improvement initiatives.
First quarter operating expense rate increased to 22.8 percent from 22.1 percent last year. Restructuring charges and investigation-related costs increased the expense rate by 0.8 percentage points and 0.5 percentage points, respectively.
Additionally, Donaldson recorded product warranty charges in first quarter that increased the rate by 0.6 percentage points. These impacts were partially offset by the benefit of restructuring actions taken in fiscal 2015, combined with disciplined expense control across the organization.
Interest expense increased to $5.0 million in first quarter from $3.5 million last year, reflecting a higher level of debt.
The company's first quarter 2016 effective income tax rate increased 0.3 percentage points to 27.9 percent from 27.6 percent in 2015, primarily due to non-recurring discrete tax benefits recorded last year. ■