Donaldson Company, Inc. (NYSE:DCI) Q4 2020 Earnings Conference Call - Final Transcript
Sep 03, 2020 • 10:00 am ET
Ladies and gentlemen thank you for standing by, and welcome to the Donaldson's Fourth Quarter and Full Year 2020 Earnings Conference Call. [Operator Instructions]
I would now like to hand the conference over to your speaker today, Brad Pogalz, Director of Investor Relations. Thank you. Please go ahead.
Thank you. Good morning, everyone. Thank you, for joining Donaldson's fourth quarter and full year 2020 earnings conference call. With me today are Tod Carpenter, Chairman, CEO and President of Donaldson; and Scott Robinson, Chief Financial Officer. This morning, Tod and Scott will provide a summary of our 2020 performance along with an update on key considerations for 2021. I want to remind everyone that we issued a business update press release on August 6, which included some details that we will reference on this morning's call. During today's call, we will also reference non-GAAP metrics. We included a reconciliation of GAAP to non-GAAP metrics within the schedules attached to this morning's press release. Finally, please keep in mind that any forward-looking statements made during this call are subject to risks and uncertainties which are described in our press release and SEC filings.
With that, I'll now turn the call over to Tod Carpenter. Tod?
Tod E. Carpenter
Thanks, Brad, and good morning, everyone. I want to start today by thanking our employees for their resilience, flexibility and commitment in fiscal 2020. I greatly appreciate the work they do every day to keep us moving forward. As always, we remain focused on those things under our control. Despite a significant shift in the economic environment during fiscal '20, there were several things that went as planned including: sales of replacement parts performed better than new equipment and first-fit products, gross margin increased from the prior year, we reduced our discretionary expenses while investing in growth businesses, and we maintained a strong financial position while returning cash to shareholders through dividends and share repurchase.
We are entering fiscal '21 with clear priorities and engaged employees. We do not anticipate strong market conditions overall this year but our diverse business model and robust operational capabilities give me confidence that we can make progress on our strategic initiatives in any economic environment. We will talk more about our longer term opportunities later in the call. So I'll now turn to a brief overview of fourth quarter sales. Total sales were $617 million in the quarter with sequential increases in June and July. Compared with the prior year, sales were down 15%, which is consistent with the forecast we provided in early August. Both segments experienced a similar decline. However, there was quite a bit of variability within the results. In the Engine segment our first-fit businesses remain under the most pressure. Fourth quarter On-Road sales were down 44% from the prior year.
The U.S. is the largest portion of On-Road and it accounted for much of the decline as the cyclical slowdown in Class 8 truck production was magnified by the pandemic. As a reminder, On-Road first-fit in the