Donaldson Company, Inc. (NYSE: DCI) is one of the largest and most successful filtration manufacturers in the world. Consistent with FASB guidance related to segment reporting, the company has identified two reportable segments: Engine Products and Industrial Products. Segment selection was based on the internal organizational structure, management of operations, and performance evaluation by management and the Company’s Board of Directors. 2012 10-K data (in thousands of US dollars) for the segments appear in the table below.

The Engine Products segment sells to original equipment manufacturers (OEMs)

in the construction, mining, agriculture, aerospace, defense, and truck markets and to independent distributors, OEM dealer networks, private label accounts, and large equipment fleets. Products include air filtration systems, exhaust and emission systems, liquid filtration systems including hydraulics, fuel, and lube, and replacement filters.

The Industrial Products segment sells to various industrial end-users, OEMs of gas-fired turbines, and OEMs and end-users requiring clean air. Products include dust, fume, and mist collectors, compressed air purification systems, air filtration systems for gas turbines, membrane-based products, and specialized air and gas filtration systems for applications including computer hard disk drives and other electronic equipment.

i. Why might an analyst use a sum-of-the-parts approach to value Donaldson’s?

ii. How might an analyst use the provided information in an analysis and valuation?

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Engine Products Industrial Products Total Company* 2012 Net sales $1,570,140 $923,108 $2,493,248 Earnings before income taxes 227,941 149,249 370,780 Total assets 845,176 520,739 1,730,082 Capital expenditures** 46,816 24,083 78,139 2011 Net sales $1,440,495 $853,534 $2,294,029 Earnings before income taxes 211,255 123,871 312,263 Total assets 888,080 519,730 1,726,093 Capital expenditures 36,423 19,442 60,633 2010 Net sales $1,126,007 $751,057 $1,877,064 Earnings before income taxes 155,833 91,084 230,176 Total assets 702,300 477,154 1,499,506 Capital expenditures 24,355 15,250 43,149 *Total company results differ from the sum of the two divisions by allocated corporate and unal- located amounts. **Capital expenditures are reported net of acquired businesses.