William Blair2017 Growth Stock Conference
Tod CarpenterPresident and CEO
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.
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Overview of Donaldson
Donaldson Company
• Technology leader in our markets
• Diversified portfolio of global businesses
We are a filtration company
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Value Proposition To Our Customers
Technology Advantages• Higher efficiency
• Small system size
• Longer filter life
• Reduced operating and maintenance costs
Better Aftermarket Retention
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Value Proposition To Our Shareholders
• Diversified portfolio of technology, products
• Deeply integrated into global economy
• Committed to growth & financial performance
• Disciplined capital deployment
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Diversified Product Assortment: Engine
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Diversified Product Assortment: Industrial
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Revenue Highlights
Segment Composition and Performance
*Nine Months ended April 30, 2017
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Year-to-date* sales of $1.7 billion; +5.2% over last year
Engine66%
Industrial34%
Revenue Composition
70%
16%
7% 7%
Engine: +9.4% YTD*
Aftermarket
Off‐Road
On‐Road
A&D
65%
21%
14%
Industrial: (1.9)% YTD*
Ind. Filtration
Spec. Apps
Gas Turbine
Fiscal 2017 Expectations*
At the beginning of the year, we forecast:• Sales: +/‐ 2%
• Both segments had the same guidance range
• EPS: $1.50 ‐ $1.66; ~4% above PY*
Based on Q3 results and current trends, we now expect:• Sales: +6%
• Engine sales up 10% ‐ 11% • Industrial sales down 3% to 2%
• Adjusted EPS: $1.67 ‐ $1.71; ~11% above PY *
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*Guidance as of June 1, 2017; adjusted metrics, which are non-GAAP, exclude certain one-time charges
Operating Environment
At the beginning of FY17:Production expected to decline
Strength in replacement parts
Limited global capital spending
Geopolitical uncertainty
As of Q3’17 earnings:Off‐road production increasing
Stronger‐than‐expected aftermarket
Limited global capital spending
Geopolitical uncertainty
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Increased guidance driven entirely by Engine; Industrial markets still uncertain
FY17 Revenue Guidance* vs. Prior Year
$2,220
$2,373 $2,357 $2,353 +6%
+Low Teens
+Low Teens +LSD +MSD ‐~20% ‐LDD ‐LSD
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*Guidance as of June 1, 2017
Strategic Growth Plans
Strategic Growth Plans
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Acquisitions
Geography
ExpandCoreDONALDSON
CORE
Expand core products & technologies
Expand geographies
Execute acquisitions
Sales Growth Model
CreateHoles
Sell Replacements
Reinvest
Growth
Use Innovative Technology
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Innovative Product to Improve Retention
0%
20%
40%
60%
80%
100%
Yr 0 Yr 2 Yr 5 Yr 8 Yr 10 Yr 15
LegacyProducts
Innovative Products
Aftermarket retention rate of innovative products is higher than legacy products over time
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Innovative Air Filtration
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PowerCore DownFlo Evolution
Innovative Liquid Filtration
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• Designed for new diesel fuels, higher fuel injector pressure
• Higher efficiency and extended filter life
Capital Deployment
Capital Deployment Priorities
• Invest in our company
• Pay a dividend
• Repurchase our shares
Reinvesting in the Business
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• 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 2 ½ years
Consistent Dividend Growth
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$0.02
$0.70
$0.00
$0.10
$0.20
$0.30
$0.40
$0.50
$0.60
$0.70
$0.80
1990 2017
Per Share
16% CAGR
• Paid quarterly dividend for 60+ years• Increased annually for 20+ years
Consistent Share Repurchase
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0
50
100
150
200
250
1990 2017
Shares Outstandingin Millions
-2% CAGR
• Goal is to at least offset annual dilution of ~1%
Value Proposition To Our Shareholders
• Diversified portfolio of technology, products
• Deeply integrated into global economy
• Committed to growth & financial performance
• Disciplined capital deployment
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A Measure of Performance
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26%
6%
11%
17%16%
7%
1 Year 5 Years 10 Years
Annualized Total Return to Shareholders*
DCI S&P 500*As of 6/7/2017.
Thank You