Donaldson Company, Inc. (NYSE:DCI) Q1 2019 Earnings Conference Call Transcript
Dec 04, 2018 • 10:00 am ET
Good morning. My name is Kim and I will be your conference operator today. At this time, I would like to welcome everyone to the Donaldson Q1 2019 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions) Thank you.
Brad Pogalz, Director of IR, you may begin your conference.
Thanks, Kim. Good morning, everyone. Thank you for joining Donaldson's First Quarter 2019 Earnings Conference Call. With me today are Tod Carpenter, Chairman, CEO and President of Donaldson; and Scott Robinson, CFO. Tod and Scott will provide a summary of our first quarter performance and an update on our 2019 plans.
(Forward-Looking Cautionary Statements)
Now I'll turn the call over to Tod Carpenter. Tod?
Thanks, Brad. Good morning, everyone. I want to start by welcoming the BOFA team and their valued customers to Donaldson Company. We are excited about the opportunities with BOFA, which is an excellent example of our strategic and selective acquisition process. BOFA complements our portfolio of solutions for industrial air filtration and their strong OE relationships in growing markets will benefit from our technology and global footprint. With about $40 million of annualized revenue and margins above corporate average, we expect BOFA will make solid financial contributions to our Company.
In terms of the quarter, we are pleased with the results. We delivered record first quarter sales of $701 million and EPS grew almost 22% to a first quarter record of $0.56. Our margin is still being impacted by inflationary pressure, however, benefits from pricing and significant expense leverage resulted in year-over-year growth in operating margin.
Scott will provide more details later in the call. So I'll turn now to an overview of our first quarter sales. Total sales grew 8.8%, including a 2% headwind from currency. The revenue recognition accounting change and a partial month of BOFA added about 1% and pricing gave us more than 1%. Sales of Engine were up 8.8% last quarter or about 10% without currency and revenue recognition. On-Road grew the fastest with the first quarter sales up 38% as we continue to have strength in the US and China.
Class A truck production and benefit from past program wins are driving the US business and China is all about share gains. Sales there were up significantly last quarter and On-Road in China now represents 9% of total On-Road, up from 3% a year ago. As Chinese manufacturers enhance their equipment performance, they need higher technology filters like ours. Given our low share in China, we are somewhat insulated from the volatility of their truck market and we see tremendous long-term opportunity.
The pace of growth in Off-Road moderated to 2% last quarter, due in large part to the strong comparison last year. When we look at it on a two-year basis, the results look more consistent with recent trends. The one exception was our US Off-Road business. Sales were down 9%, primarily due