CONSTRUCTION

FINANCIALS

COMPANY NEWS

Many projects, mergers and acquisitions are detailed in monthly updates in the Market Report’s Chapters under Industry Analysis. Click on the links below to view current updates for each industry.

The Commerce Department released monthly data saying building permits for privately owned housing units authorized in February were up 5.1 percent from January, to a seasonally adjusted 717,000 units. This is 34.3 percent higher than the number of permits issued in February last year and the strongest pace since October 2008. This gain was reflected across both sectors of the market, with single-family permits up 4.9 percent to 472,000 units (best pace since April of 2010) and multifamily permits up 5.6 percent to 245,000 units (best pace since October 2008).

Permit issuance was also up in three out of four regions of the country in February, with the Northeast posting a 14.3 percent gain, the Midwest a 14.7 percent gain and the West a 12.8 percent gain. Meanwhile, the South posted a 1.9 percent decline in permit issuance following a significant gain in the previous month.

Groundbreaking did slow in February, with housing starts at an annual rate of 698,000, down 1.1 percent from January. New construction was still 34.7 percent higher than it was a year ago, and January’s housing starts numbers were revised higher, to the highest level in three years.

Housing starts were up 3 percent in the Midwest and 1.5 percent in the South, and the Northeast and West posting respective declines of 12.3 percent and 5.9 percent.

On the heels of consecutive months of strengthening business conditions, the Architecture Billings Index (ABI) has now reached positive territory three months in a row. As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lag time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the January ABI score was 50.9, which reflects a slight increase in demand for design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 61.2, down just a notch from a reading of 61.5 the previous month.

"Even though we had a similar upturn in design billings in late 2010 and early 2011, this recent showing is encouraging because it is being reflected across most regions of the country and across the major construction sectors," said AIA Chief Economist, Kermit Baker, PhD, Hon. AIA. "But because we still continue to hear about struggling firms and some continued uncertainty in the market, we expect overall economic improvements in the design and construction sector to be modest in the coming months."

Key January ABI highlights:

• Regional averages: Midwest (53.7), South (51.6), Northeast (50.7), West (45.6)
• Sector index breakdown: multi-family residential (52.6), commercial / industrial (52.2),
• institutional (51.1), mixed practice (46.1)
• Project inquiries index: 61.2

The regional and sector categories are calculated as a 3-month moving average, whereas the index and inquiries are monthly numbers.

Highlights

• A year of strategic transformation with the sale of the majority of the Group’s hygiene nonwovens business to Petropar
• Significantly strengthened balance sheet with net cash of £22.0 million (before settlement of transaction costs and related restructuring estimated at £10 million) following disposal of the Hygiene business (2010: £151.2 million net debt)

Chairman’s Statement

The most significant event of the year was the transformational sale of the majority of the

Group’s hygiene nonwovens business to Petropar S.A. for an enterprise value of £229 million

representing an exit multiple of 6.2x underlying 2010 EBITDA. The sale of around 40% of the

Group, including six manufacturing sites in five countries with around 600 employees,… and, with this disposal, have exited a commoditised and capital-intensive sector at an excellent price, leaving the Group debt-free.

This transaction re-creates Fiberweb as a smaller, more tightly-focused specialty industrial and construction materials business, with particular competitive strengths in products for filtration, industrial processing, soil and construction engineering, drier sheets and several medical areas.

Donaldson Company, Inc. (NYSE: DCI) announced its financial results for its fiscal 2012 second quarter. Summarized financial results are as follows:

($ millions)

"We are very pleased to reach the midpoint of our year with another strong performance as we established second quarter records in sales, operating margin, and EPS," said Bill Cook, Chairman, President and CEO. "Sales in our Engine Products segment increased 12 percent as new equipment build rates at our global Off-Road and On-Road OEM Customers remained healthy. Within our Industrial Products segment, sales of our Torit® dust collectors were strong this quarter."

"Our operating margin performance was very good at 12.9 percent. Our ongoing Continuous Improvement initiatives helped us again. We also continue to leverage our fixed cost base as our sales grow. The combination of our solid revenue growth, our strong margin performance, and a lower tax rate drove second quarter net income and EPS up 21 percent and 25 percent, respectively."

"We now forecast our full year sales to grow between 7 and 12 percent over last year. Forecasted business conditions in our end markets vary: strong in the Americas, stable in Europe, and improving in China.

Gross margin was 34.6 percent for the quarter and 35.0 percent year-to-date, compared to prior year margins of 35.3 percent and 35.2 percent, respectively. The decrease in the quarter was due to lower absorption of fixed costs resulting from the Thai floods and from fewer shipping days compared to last year's second quarter. These were partially offset by cost reductions from our ongoing Continuous Improvement initiatives.

Operating expenses for the quarter were $126.0 million, up 3.2 percent from $122.1 million last year primarily due to the increased sales volume. As a percent of sales, operating expenses were 21.7 percent compared to last year's 22.7 percent for the second quarter. Operating expenses year-to-date were $250.7 million, or 21.1 percent of sales, compared to $235.7 million, or 21.9 percent of sales, last year.

FY12 Outlook

We forecast our FY12 sales to be between $2.45 and $2.55 billion, or up about 7 to 12 percent from the prior year. Our full year operating margin is forecast to be 13.7 to 14.5 percent. Our full year FY12 tax rate is anticipated to be between 27 and 30 percent. Cash generated by operating activities is projected to be between $250 and $280 million. Capital spending is now estimated to be approximately $85 million.

Engine Products

We expect full year sales to increase 8 to 12 percent, including the impact of foreign currency translation.

We anticipate sales to both our Off-Road and On-Road OEM Customers will remain strong in the second half of FY12. We will continue to benefit from increased market share on our Customers' new Tier IV equipment platforms.

Sales of our Aftermarket Products are expected to increase moderately based on current utilization rates for both off-road equipment and on-road heavy trucks. We should also benefit from our continued expansion into the emerging economies and from the increasing number of systems installed in the field with our proprietary filtration systems, such as our PowerCore® products.

We forecast Aerospace and Defense Products' sales to be level with the prior year as the continued slowdown in military spending is anticipated to be offset by increased commercial aerospace sales.

Industrial Products

We forecast full year sales to increase 7 to 11 percent, including the impact of foreign currency translation.

Our Industrial Filtration Solutions' sales are projected to increase 7 to 11 percent and assume a continuing improvement in general manufacturing activity in the U.S., stable conditions in Europe, and improving conditions in Asia.

We anticipate our Gas Turbine Products' sales to be up 18 to 22 percent due to the recent strengthening in the large turbine power generation market and ongoing strength in the oil and gas market segment.

Special Applications Products' sales are forecast to be level with the prior year as growth in our membrane and venting product sales should offset the reduction in our disk drive filter sales related to the Thai floods last fall.

Universal Air Filter (UAF), a portfolio company of Thompson Street Capital Partners (Thompson Street), has been acquired by strategic buyer Filtration Group. Harris Williams & Co. acted as the exclusive advisor to UAF. The transaction closed on February 29, 2012.

UAF is the leading designer and manufacturer of engineered air filtration products used to protect electronic equipment enclosures in the communications, computer networking, medical, power generation and industrial machinery end markets. The company provides products engineered to address the challenges of heat dissipation, dust contamination, airflow control, fire retardation, electromagnetic interference (EMI), radio frequency interference (RFI), and size limitations in crowded electronic enclosures.

Thompson Street is a St. Louis, MO private equity firm that invests in service, manufacturing and distribution businesses.

Chicago-based Filtration Group is a developer, designer and manufacturer of air, liquid and fluid filtration solutions. With $400 million in filtration revenues globally, Filtration Group is an affiliate of Chicago-based Madison Capital Partners.

Freudenberg Filtration Technologies India Private Limited has signed an agreement to acquire the business of Pyramid Filters Private Limited, Pune, India, with effect from 1st April, 2012.

Pyramid Filters develops and produces air filter elements and systems for cleanroom applications in the pharmaceutical, medical, food and chemical industries. In 2010 Pyramid Filters generated sales of several million Euros. The company employs around 60 people in their manufacturing site at Pune, Maharashtra.

Based in Pune, Freudenberg Filtration Technologies India provides high-efficient industrial and automotive filter elements and systems, as well as globally patented system solutions for capacity and efficiency enhancement in gas turbines and compressors. Dr. Andreas Kreuter, Managing Director of the global Freudenberg Filtration Technologies Group explains: "Founded in 1998, Pyramid Filters enjoys an excellent reputation in India, thanks to a comprehensive HEPA filter range and renowned services. Based on Pyramid’s strong market position, we will be able to add new products to our already broad portfolio and offer our customers further services."

Dr. Kirti Kelkar, Founder and Director of Pyramid Filters India Pvt. Ltd., commented: "We are glad to have found in Freudenberg Filtration Technologies a partner with whom we can jointly develop world class cleanroom filtration solutions. Our existing customers will benefit from Freudenberg Filtration Technologies’ expertise in application engineering and their position as one of the global technological leaders in filtration."

Along with Freudenberg Filtration Technologies' Regional Business Director Gnanasekharan Ramesh and Managing Director Rakesh Nathwani, Dr. Kelkar will join the management team of Freudenberg Filtration Technologies India Pvt. Ltd., and will continue to be responsible for the Cleanroom Division. "Together, we look forward to providing value to our customers through the combined global and local expertise offered by the new team", Ramesh concludes.

Freudenberg Far Eastern Spunweb is investing in a new production line for PET spunlaid nonwovens. Construction will start in 2013.

The new production line for spunlaid nonwovens in Tayuan, Taiwan will mainly serve the markets for carpet tiles, automotive interiors, filters and construction. With the new investment, the Freudenberg Group is confirming its strong commitment to its global spunlaid business and reinforcing its position as market leader on the Asian market.

Established in 1987 as a joint venture between the Freudenberg Group, the Far Eastern New Century Group and Japan Vilene Co., Freudenberg Far Eastern Spunweb Co. has been continuously expanding its production facilities after start up of its first line in 1990. Its most recent investment was in 2007 when the company added a second production line with state-of-the-art technology to further strengthen capacity to serve the steady growing Asian market demand.

"Apart from strong economic development in Asia, the construction and automotive industries in particular are growth drivers," says Lin Gowming, site executive officer in Taiwan. The new production line will increase capacity in Taiwan by more than 10,000 tons per year.

Freudenberg Far Eastern Spunweb Company has 136 employees including Freudenberg Spunweb Japan Company in Japan, Freudenberg Spunweb Shanghai Trading Company in China, Trading office in Guangzhou China, and Trading office in Chennai India. The manufacturing site in Taiwan has been certified with TS16949, ISO 14000, ISO 18000, and Carbon Emission for over a decade. Product innovation proves the leading position in environmental protection and sustainability. Strong sales team and diligent agents are reliable to serve Asian customers with speedy service and delivery level throughout Asian countries. The product brand name of Lutradurand Vildonaare well known in the Asian Nonwovens market.

Franklin Adhesives & Polymers has developed FilterFAB 150, part of the company’s FilterFAB line of filter assembly adhesives.

FilterFAB 150 from Franklin Adhesives & Polymers is a sealant designed to instantly bond pleated glass or paper media to a range of framing substrates used in framed air intake panel filters.

FilterFAB 150 is a fibre-filled, vinyl acrylic copolymer and can blend high viscosity and high solids into a thick formula that dries quickly and remains flexible. It has an instant set time so there is no need for clamping.

The filter assembly adhesive can adhere to frames made of steel, wood, plastic and aluminium. Although its primary purpose is to bond the media to the frames – the sealant typically is applied to the trough of the frame, and the assembly then wrapped around the pleated media – it can also seal joints in indoor and outdoor HVAC duct systems.

FilterFAB 150 is water-based, non-flammable, produces no harmful fumes and contains no added formaldehyde. It has antimicrobial agents that help the sealant stay bacteria-free, reducing the risk of air contamination. The sealant also is UL-listed, passing 181 A-M and 181 B-M testing for safety.

Web site:  www.mcilvainecompany.com