Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. DONALDSON CO INC (29644) 10-Q published on Jun 07, 2019 at 2:00 pm
Reporting Period: Apr 29, 2019
In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments (ASU 2016-13). In November 2018, the FASB issued update ASU 2018-19 that clarifies the scope of the standard in the amendments in ASU 2016-13. This guidance introduces a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses. Financial instruments impacted include accounts receivable, trade receivables, other financial assets measured at amortized cost and other off-balance sheet credit exposures. The new guidance is effective for the Company beginning in the first quarter of fiscal 2021, with early adoption permitted. The Company is evaluating the impact of the adoption of ASU 2016-13 on its Consolidated Financial Statements.
In April 2019, the FASB issues ASU 2019-04, Codification Improvements to Topics 326, Financial Instruments - Credit Losses, Topic 815 Derivatives and Hedging and Topic 825, Financial Instruments (ASU 2019-04). This guidance clarifies areas of guidance related to the recently issued standards on credit losses (Topic 326), derivatives and hedging (Topic 815), and recognition and measurement of financial instruments (Topic 825). The new guidance is effective for the Company beginning in the first quarter of fiscal 2021. The Company is evaluating the impact of the adoption of ASU 2019-04 on its Consolidated Financial Statements.
Goodwill is assessed for impairment annually, or more frequently if events or changes in circumstances indicate that the asset may be impaired. The Company performed its annual impairment assessment during the third quarter of fiscal 2019 and did not record any impairment as a result of this assessment.
As of April 30, 2019, the carrying values of cash and cash equivalents, accounts receivables, short-term borrowings and trade accounts payable approximate fair value because of the short-term nature of these instruments. As of April 30, 2019, the estimated fair value of long-term debt with fixed interest rates was $274.0 million compared to its carrying value of $275.0 million. The fair value is estimated by discounting the projected cash flows using the rate at which similar amounts of debt could currently be borrowed. Long-term debt is classified as Level 2 in the fair value hierarchy. The carrying values of long-term debt with variable interest rates of $369.4 million approximate fair value.
Net sales for the Engine Products segment for the three months ended April 30, 2019 were $489.4 million, compared with $472.3 million for the three months ended April 30, 2018, an increase of $17.1 million, or 3.6%. Net sales for the Engine Products
segment were negatively impacted by foreign currency translation, which decreased net sales by $19.3 million compared with the prior fiscal quarter. The increase in Engine Products sales was driven by increases in Aftermarket of 4.0%, Aerospace and Defense of 19.9% and On-Road of 11.1%, partially offset by a decrease in Off-Road of 5.6%. Within Aftermarket, sales benefited from growth in innovative product categories, including both air and liquid filtration products and increasing equipment utilization. The increase in On-Road sales was driven by favorable conditions for heavy-duty truck production and new program wins in the U.S. The sales increase within Aerospace and Defense was due to strong sales of both new equipment and replacement parts, due in part to order timing from commercial aerospace and defense customers. Market conditions for Off-Road heavy-duty equipment were mixed across the Company’s primary end markets and geographies, reflected in volatility within customer ordering patterns, while sales of innovative products remained strong, particularly in fuel filtration.