robert w. baird 2015 industrials conference annual revenue to $5 billion current environment recent...

Robert W. Baird 2015 Industrials Conference

Pre-Conference Analyst Meeting

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.

Agenda

• Business and Strategy Overview

• Engine Products Strategy

• Industrial Products Strategy

• Summary

Donaldson Company

•Technology leader in our markets

•Diversified portfolio of global businesses

We are a filtration company

Why Customers Want Our Technology

• Technology Advantages•Higher efficiency

•Small system size

•Longer filter life

•Reduced operating and maintenance costs

• Better Aftermarket Retention

Fiscal 2015 Sales Breakdown

Engine63%

Industrial37%

Sales by Segment

Total Sales of $2.4 billion

Americas50%

EMEA30%

APAC20%

Sales by Region

Sales Growth Model

CreateHoles

Sell Replacements

Re-Invest

Growth

Use Innovative Technology

Donaldson Core

Future Growth Plans

Geography

ExpandCore

Acquisitions

Donaldson Core

• Expand core products

& technologies

• Expand geographies

• Execute acquisitions

Grow annual revenue to $5 billion

Current Environment

Recent challenges• Challenging end markets

• Soft global GDP growth is limiting capital investment

• Significant currency headwinds

Tactics to address challenges• Strategic Growth Plans

• Continued investment in our business

Engine Products Strategy

Tom ScalfSenior Vice President, Engine Products

Equipment Content

The broadest filtration coveragefor engines and equipment.

Engine Markets

Aerospace

Mining

Construction Agriculture

Truck and Bus

Defense

Global Customers

Engine Products

Air Filters

Liquid Filters

Exhaust & Emission Products

Engine Growth Strategy

OE First Fit Solutions

ReplacementFilters/PartsReplacementFilters/Parts

Engine Growth Strategy

OE First Fit Solutions

ReplacementFilters/Parts

Innovative First-Fit Improves Aftermarket Retention

0%

20%

40%

60%

80%

100%

Yr 0 Yr 2 Yr 5 Yr 8 Yr 10 Yr 15

Legacy Innovative

Addressable Engine Mobile Market

DCI12%

$10 Billion Market

Other

Engine Growth Plans

Donaldson Core

Geography

ExpandCore

Acquisitions

Donaldson Core

• Lead in air

• Grow liquid

• Grow replacement

parts

Engine Liquid Market

$4 Billion Market

DCI5%

Other

Critical Aspects of Fuel Filtration

Stricter emissions regulations

High Pressure

fuel system

Newfuels Improved

filtration technology

required


High Pressure

fuel system

Newfuels Improved


required

Critical Aspects of Fuel FiltrationSynteq® XP Fuel Media



High Pressure

fuel system

Newfuels Improved


required


Synteq® XP Fuel Media


High Pressure

fuel system

Newfuels Improved


required

Cleaner Fuel with Technology

Cellulose Meltblown Synteq XP

50xCleaner Fuel

Fuel Filtration Medias

Amount of Contamination

Clean Fuel Over Filter Life with Technology

0 200 400 600 800 1000

OEM Customer Engine Testing

OE Spec

Competitor

Donaldson

Hours on Engine

Amount of Contamination

Liquid Products Growth

FY10 FY15

CAGR 8%

$325

$480

Liquid Sales ($ in millions)

Engine Growth Plans

Donaldson Core

Geography

ExpandCore

Acquisitions

Donaldson Core

• Lead in air

• Grow liquid


parts

Engineered Products Company (EPC)

• Indicators, electrical switches and sensors

• $9 million in annual revenue

Product Shift Enabling Connectivity

Electronic Sensors Enable Connected Vehicle

Remote System

Connected Vehicle

ElectronicSensors

Engine Growth Plans

Donaldson Core

Geography

ExpandCore

Acquisitions

Donaldson Core

• Lead in air

• Grow liquid


parts

Industrial Products Strategy

Jay WardSenior Vice President, Industrial Products

Industrial Markets

Dust + Fume + Mist

On-Compressor

Gas Turbine Systems

Disk Drive

Semiconductor

Process Filtration

Venting

Production Printers

Industrial Group

A Portfolio of Filtration Businesses Serving

Infrastructure Technology

Infrastructure Markets


62%IFS

Dust Collection Compressed Air

On-Compressor

Infrastructure Markets


Dust Collection Compressed Air

On-Compressor

18%GTS

18%GTS

Gas Turbine

Technology Markets


DISK DRIVE

INTEGRATED VENTING

SOLUTIONS

MEMBRANES

20%Special Apps

Addressable Diversified Filtration Market

$6 Billion Market

DCI15%

Other

Industrial Growth Strategy

Donaldson Core

Geography

ExpandCore

Acquisitions

Donaldson Core

• Innovative technology

drives first-fit


parts

• Strategic acquisitions

Industrial Air Filtration Growth Strategy

• Improve people’s lives

• Protect the environment

• Enhance equipment performance

Industrial Air Filtration

$2.5 Billion Market

Bags Cartridge


Bags Cartridge

PowerCore®

DonaldsonAddressable

Market


Bags Cartridge

PowerCore®

Existing Technology vs. DownFlo® Evolution

New - 30 FiltersExisting - 48 Filters

DownFlo® Evolution Competitive Advantage

Customer Value• 40% smaller footprint

• Lower cost of ownership

Shareholder Value• Innovative technology drives replacement part sales

• Increased global market share


DonaldsonAddressable

Market

Bags Cartridge

PowerCore®


Bags CartridgeDownFlo®

PowerCore®

Bolt-On Acquisition

• Best-in-class patented product

• Rapidly growing segment

• Extensive customer synergy

Expand and Penetrate Global Market

Bags CartridgeEvolution

Bags CartridgeDownFlo®

PowerCore®

Summary

• Portfolio businesses are market leaders

• Focus on innovative solutions that drive replacement part sales

• Organic growth supplemented by strategic acquisitions

Investment Thesis

Tod CarpenterPresident and CEO

High Share Ownership Requirements

• Executive Officers: 3x to 10x base salary

• Directors: 5x retainer

•Capacity•Production facility in Poland•Additional distribution in Peru, Slovakia, Colombia

•Technology•$10 million R&D lab upgrade•Global ERP

•Bolt-On Acquisitions•Northern Technical•IFIL•Engineered Products Company•Partmo*

Investing for Growth

* Expected to close in second quarter of fiscal 2016 following standard regulatory approval

High After-Tax Return on Investment

15%

0%

10%

20%

30%

1990 2015

Consistent Dividend Growth

$0.02

$0.67

$0.00

$0.10

$0.20

$0.30

$0.40

$0.50

$0.60

$0.70

1990 2015

Per Share

17% CAGR

Consistent Share Repurchases

0

50

100

150

200

250

1990 2015

Shares Outstandingin Millions

-2% CAGR

Investment Conclusion

•Diversified product lines

•Deeply integrated into global economy

•Committed to growth & financial performance

•Disciplined capital deployment

A Measure of Success:Return to Shareholders

$6,203

$100$2,055

FY89 FY15

DCI S&P 400

robert w. baird 2015 industrials conference annual revenue to $5 billion current environment recent...

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