May 27--Donaldson Co. late Tuesday lowered its earnings and sales targets for its 2009 fiscal year that ends in July, noting that the global recession will continue at least until then.

The Bloomington-based company, which makes filtration products, cut 850 more jobs in its most recent quarter, 55 of them in Minnesota. Since August, it has slashed 20 percent of its workforce -- about 2,700 positions. Donaldson spokesman Richard Sheffer said 210 of those jobs were in Minnesota: 150 employees and 60 temporary workers or contractors.

The company said in a news release Tuesday that it is "considering additional restructuring actions," and Sheffer said further job cuts are an option.

Donaldson said it now expects sales for fiscal 2009 of $1.8 billion to $1.9 billion, which would be a 15 to 20 percent decrease from fiscal 2008. Last quarter, it estimated annual sales would reach $1.9 billion to $2 billion.

Annual earnings per share are expected to be in the $1.55 to $1.70 a share range, down from the $1.70 to $1.90 earnings guidance released in February.

For the third quarter, ended in April, sales were $413.4 million -- almost a third less than a year earlier. Net income fell by 42.2 percent to $26.6 million.

Bill Cook, Donaldson's CEO, emphasized that the company generated $100 million of free cash flow, which he said allowed Donaldson to reduce its debt by $39 million and to increase its cash reserves. "Our operating margin improved in the third quarter to 9.1 percent, compared to 6 percent in our second quarter, despite these sudden and sharp sales declines in many of our businesses," Cook said in a written statement.

Donaldson's report provided several insights into how various industries are performing in the current economy.

In its engine-products business, Donaldson is expecting a full-year sales decrease of 16 to 21 percent.

In North America, the company said, "we believe that build rates for heavy- and medium-duty trucks will be down 25 to 35 percent from last year." In addition, Donaldson said it anticipates a "comparable" drop in truck build rates in Europe and Japan.

"We expect the global construction and mining markets to remain weak," the company said. "Based on recent customer announcements, we also project that the global farm-equipment market will continue to decline."

In February, Donaldson estimated that full-year sales in its industrial products segment would decrease by 10 to 15 percent. But Tuesday, that estimate was widened to 12 to 17 percent.

"We expect the global manufacturing environment to further weaken, but at a slower pace than the last two quarters," the company said.

Excluding foreign exchange rates, Donaldson's sales for the third fiscal quarter were down 24 percent.

Donaldson stressed that its expense-reduction programs remain in force, including a hiring freeze, salary freeze and reduced compensation for top executives.

Liz Fedor --612-673-7709

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