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to $195 million. Special recognition and thanks go to the Donaldson people who ramped up output and made it happen. Donaldson’s leading, world- wide market share derives from our unique, proven ability to deliver the best gas turbine air inlet systems in the industry at the required cost and quality, and do it on time – over and over. But this year was more than just a gas turbine story. Gas turbine offset transportation, while other markets, such as the engine aftermarket and special applications, provided modest growth. And most of our businesses maintained or improved their margins. 

Another part of the story this year came from over- seas as both Europe and Asia-Pacific turned in great local currency results. Europe participated in the gas turbine upswing, completed the DCE integration and showed improved results in almost every market, driving a 16 percent increase in operating income. Asia-Pacific operating income increased 44 percent, derived from a strong disk drive business and Nippon-Donaldson’s ROI improvement project, which produced Japan’s best results and highest returns in a decade. 

Plant rationalization has emerged as the major initiative in managing our cost structure. This work 

## LONG-TERM PERFORMANCE 

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engages almost every area of our operation, e.g., plant rationalization can’t succeed without aggressive product line rationalization. Despite the difficult business conditions this past year, we funneled resources to this work – closing five manufacturing and assembly facilities. This invest- ment in cleaning up our infrastructure cost us 17 cents per share, about two-thirds of this coming in the first half. We started to see the benefits of those expenditures in the fourth quarter, reener- gizing the work that’s in front of us. 

Donaldson takes a pay-as-you-go approach to plant rationalization costs, absorbing them into the operating earnings of the year – no “special charges.” This may explain the pride we take in our numbers. We made our 12th consecutive double-digit earnings growth year – up 15 cents per share – after absorbing 17 cents in plant rationalization costs – investments in our future. Effectively, we spent the year to secure our future – then we made the year. 

Plant rationalization also includes opening new facilities to gain scale and cost advantages. We have four new facilities coming on stream this year. A new plant near Philadelphia for our Tetratec ™ PTFE membrane business will allow us to close 

