DONALDSON Co INC

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(In millions, except per share amounts)

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except share and per share amounts)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(In millions, except per share amounts)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 1. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements of Donaldson Company, Inc. and its subsidiaries (the Company) have been prepared in accordance with generally accepted accounting prin ciples (GAAP) in the United States (U.S.) and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and notes required for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair statement of earnings, comprehensive income, financial position, cash flows and changes in stockholders’ equity have been included and are of a normal recurring nature. Operating results for the three and nine months ended April 30, 2025 are not necessarily indicative of the results that may be expected for future periods. The year-end Condensed Consolidated Balance Sheet information was derived from the Company’s Audited Consolidated Financial Statements but does not include all disclosures required by GAAP. For further information, refer to the Audited Consolidated Financial Statements and Notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended July 31, 2024.

Principles of Consolidation

The Condensed Consolidated Financial Statements include the accounts of the Company and all its majority-owned subsidiaries. All intercompany accounts and transactions have been eliminated. The Company’s joint ventures are not majority-owned and are accounted for under the equity method.

Use of Estimates

The preparation of the Company’s financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amount of assets and liabilities and the disclosures regarding contingent assets and liabilities at period end and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

New Significant Accounting Standard Recently Adopted

In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement (Topic 820), “Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions,”which clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair values; it also requires additional disclosures, including the nature and remaining duration of such restrictions. The guidance is effective for fiscal years beginning after December 15, 2023, with early application permitted. The Company adopted ASU 2022-03 in the first quarter of fiscal 2025. The adoption did not have an impact on its Condensed Consolidated Financial Statements.

New Significant Accounting Standards Not Yet Adopted

The Company considers the applicability and impact of the FASB’s ASUs issued but not yet adopted.

In November 2024, FASB issued ASU No. 2024-03, Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40),“Disaggregation of Income Statement Expenses,”which improves disclosures about a company’s expenses and provides more detailed information about the types of expenses in commonly presented expense captions. The guidance is effective for fiscal years beginning after December 15, 2026, with early adoption permitted. This ASU is applicable to annual reporting for the Company’s fiscal 2028 and interim reporting for the first quarter of the Company’s fiscal 2029. The Company will adopt ASU 2024-03 for the annual reporting period ending July 31, 2028 and for interim reporting periods thereafter. The Company is in the process of evaluating the impact of the ASU on its related disclosures.

In December 2023, FASB issued ASU No. 2023-09, Income Taxes (Topic 740),“Improvements to Income Tax Disclosures,”which enhances the transparency and decision usefulness of income tax disclosures. The guidance is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. This ASU is applicable to annual reporting for the Company’s fiscal 2026 and interim reporting for the first quarter of the Company’s fiscal 2027. The Company will adopt ASU 2023-09 for the annual reporting period ending July 31, 2026 and for interim reporting periods thereafter. The Company does not expect adoption of this standard will have a material impact on the related disclosures within its financial statements.

In November 2023, FASB issued ASU No. 2023-07, Segment Reporting (Topic 280),“Improvements to Reportable Segment Disclosures,”which improves the segment disclosures to include reportable segment’s expenses. The guidance is effective for fiscal years beginning after December 15, 2023, with early adoption permitted. This ASU is applicable to annual reporting for the Company’s fiscal 2025 and interim reporting for the first quarter of the Company’s fiscal 2026. The Company will adopt ASU 2023-07 for the annual reporting period ending July 31, 2025 and for interim reporting periods thereafter. The Company is in the process of evaluating the impact that the adoption of ASU 2023-07 will have on its consolidated financial statements and disclosures.

In October 2023, FASB issued ASU No. 2023-06,"Disclosure Improvements: Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative,"which modifies the disclosure or presentation requirements of various FASB topics in the Codification. The effective date for each amendment will be the date on which the SEC's removal of that related disclosure from Regulation S-K becomes effective, with early adoption prohibited. The Company is in the process of evaluating the impact of the ASU on its related disclosures.

Note 2. Equity Method Investments

On August 9, 2024, the Company acquired a 49% non-controlling stake in Medica S.p.A. (Medica), headquartered in Medolla, Italy, for cash consideration of approximately €62.1 million, or $67.9 million, and capitalized transaction costs of approximately €5.1 million, or $5.8 million. Medica is a leader in hollow fiber membrane filtration technology for medical applications and water purification. The Company has the option to acquire the remaining 51% stake infour years. The investment is accounted for under the equity method of accounting. The earnings from the investment were not material for the three and nine months ended April 30, 2025.

The Company is party to joint ventures in Advanced Filtration Systems Inc. (AFSI) with a 50% ownership and PT Panata Jaya Mandiri (PTPJM) with a 30% ownership and also holds a 49% stake in Medica, all of which are considered related parties. The financial impact from the joint ventures and non-controlling interest are not material.

Note 3. Revenue

The Company recognizes revenue on a wide range of filtration solutions sold to customers in many industries around the globe. Most of the Company’s performance obligations within customer sales contracts are for manufactured filtration systems and replacement parts. The Company also performs limited services and installation. Customer contracts may include multiple performance obligations and the transaction price is allocated to each distinct performance obligation based on its relative standalone selling price.

Revenue Disaggregation

Net sales, generally disaggregated by location where the customer’s order was placed, were as follows (in millions):

See Note 18 for net sales disaggregated by segment and business unit.

Contract Assets and Liabilities

The satisfaction of performance obligations and the resulting recognition of revenue typically correspond with billing of the customer. In limited circumstances, the customer may be billed at a time later than when revenue is recognized, resulting in contract assets, which are reported in other current assets on the Condensed Consolidated Balance Sheets. Contract assets were $20.2 million and $15.9 million as of April 30, 2025 and July 31, 2024, respectively. In other limited circumstances, the customer may make a payment at a time earlier than when revenue is recognized and prior to the satisfaction of performance obligations, resulting in contract liabilities, which are reported in deferred revenue on the Condensed Consolidated Balance Sheets. Contract liabilities were $23.4 million and $19.7 million as of April 30, 2025 and July 31, 2024, respectively.

The Company will recognize revenue in future periods related to remaining performance obligations for certain open contracts. Generally, these contracts have terms of one year or less. The amount of revenue related to unsatisfied performance obligations in which the original duration of the contract is greater than one year is not significant. None of the Company’s contracts contained a significant financing component.

Note 4. Inventories, Net

The components of inventories, net were as follows (in millions):

Note 5. Property, Plant and Equipment, Net

The components of property, plant and equipment, net were as follows (in millions):

Note 6. Goodwill and Intangible Assets

Goodwill

The Company allocates goodwill to reporting units within its Mobile Solutions, Industrial Solutions and Life Sciences segments. There were no dispositions or impairment charges recorded during the three and nine months ended April 30, 2025 and 2024. Goodwill is assessed for impairment annually during the third quarter of the fiscal year, or more frequently if events or changes in circumstances indicate the asset may be impaired. The Company performed its annual impairment assessment during the third quarter of fiscal 2025 and did not record any impairment as a result of this assessment.

Goodwill by reportable segment was as follows (in millions):

Intangible Assets

Intangible asset classes were as follows (in millions):

In the third quarter of fiscal 2025, the Company identified a triggering event related to certain asset groups and performed a valuation of certain long-lived intangible assets in accordance with ASC 360, Impairment and Disposal of Long-Lived Assets. The Company used a discounted cash flow analysis to estimate the fair value of each long-lived asset group. As a result of the valuation, the Company recorded $62.0 million of impairment expense related to intangible assets in the Company’s bioprocessing businesses within the Life Sciences segment. The impairment expense was included in Loss on impairment of intangible assets in the Condensed Consolidated Statements of Earnings. Of the impairment expense, $46.6 million was related to Univercells Technologies, reflecting lower-than-anticipated bioprocessing capital spending, particularly for early-stage assets, while drug development timelines are longer than previously anticipated. The remaining $15.4 million of impairment expense was related to Solaris as market demand for industrial bioreactors had significantly declined.

Intangible asset amortization expense was $3.4 million and $11.3 million for the three and nine months ended April 30, 2025, respectively, and was $3.9 million and $11.7 million for the three and nine months ended April 30, 2024, respectively. Amortization expense is included in selling, general and administrative expenses in the Condensed Consolidated Statements of Earnings.

There was a foreign currency translation gain of $6.3 million and $3.1 million for the three and nine months ended April 30, 2025, respectively, and loss of $0.9 million and $2.6 million for the three and nine months ended April 30, 2024, respectively.

Note 7. Long-Term Debt

As of April 30, 2025, there was $232.0 million available and $260.0 million outstanding on the Company’s $500.0 million unsecured revolving credit facility that expires on May 21, 2026.

Certain debt agreements contain financial covenants related to interest coverage and leverage ratios, as well as other non-financial covenants. As of April 30, 2025, the Company was in compliance with all such covenants.

Note 8. Income Taxes

The Company’s effective tax rate was 33.6% and 21.2% for the three months ended April 30, 2025 and 2024, respectively, and 26.2% and 23.1% for the nine months ended April 30, 2025 and 2024, respectively. The higher effective tax rate was primarily due to the current quarter's loss on impairment of intangible assets, as the discrete tax benefit on the loss on impairment of intangible assets was reduced by an increase in valuation allowance.

Specifically, the $62.0 million loss on impairment of intangible assets recorded by the Company during the three months ended April 30, 2025 resulted in a corresponding reduction in a deferred tax liability of $16.0 million. This reduction was partially offset by an increase in valuation allowance of $12.3 million, resulting in a net deferred tax impact and corresponding tax benefit of $3.7 million related to the expense.

The Company files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. The U.S. Internal Revenue Service has completed examinations of the Company’s U.S. federal income tax returns through fiscal 2020. With few exceptions, the Company is no longer subject to state and foreign income tax examinations by tax authorities for years before fiscal 2019.

As of April 30, 2025, gross unrecognized tax benefits were $22.8 million and accrued interest and penalties on these unrecognized tax benefits were $2.9 million. The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income taxes in the Condensed Consolidated Statements of Earnings. The Company estimates within the next 12 months it is reasonably possible its uncertain tax positions could decrease by as much as $2.8 million due to lapses in statutes of limitation. The statutes of limitation periods for the Company’s various tax jurisdictions range from two years to 10 years.

The Company believes it is remote that any adjustment necessary to the reserve for income taxes over the next 12 months will be material. However, it is possible the ultimate resolution of audits or disputes may result in a material change to the reserve for income taxes, although the quantification of such potential adjustments cannot be made at this time.

Note 9. Earnings Per Share

Basic net earnings per share (EPS) is computed by dividing net earnings by the weighted average number of outstanding common shares. Diluted net EPS is computed by dividing net earnings by the weighted average number of outstanding common shares and common share equivalents relating to stock options and other stock incentive plans.

Basic and diluted net EPS calculations were as follows (in millions, except per share amounts):

Note 10. Stockholders’ Equity

Share Repurchases

In November 2023, the Board of Directors authorized the repurchase of up to 12.0 million shares of common stock under the Company’s stock repurchase plan, replacing the Company’s previous stock repurchase plan dated May 31, 2019. This repurchase authorization is effective until terminated by the Board of Directors. During the nine months ended April 30, 2025, the Company repurchased 4.0 million shares for $273.8 million. During the nine months ended April 30, 2024, the Company repurchased 1.8 million shares for $114.0 million. As of April 30, 2025, the Company had remaining authorization to repurchase 6.7 million shares under the November 2023 stock repurchase plan.

Dividends

Dividends paid were 27.0 cents and 81.0 cents per common share for thethree and nine months ended April 30, 2025, respectively, and were 25.0 cents and 75.0 centsper common share for the three and nine months ended April 30, 2024, respectively.

On May 30, 2025, the Company’s Board of Directors declared a cash dividend in the amount of 30.0 cents per common share, payable June 30, 2025, to stockholders of record as of June 16, 2025.

Note 11. Accumulated Other Comprehensive Loss

Changes in accumulated other comprehensive loss for the three months ended April 30, 2025 and 2024 were as follows (in millions):

(1)Amounts include foreign currency translation gain of $1.9 million and loss of $0.1 million, net amortization of prior service costs and actuarial losses of $0.6 million and $0.4 million and reclassifications due to settlement charges of $0.0 million and $3.1 million in fiscal 2025 and 2024, respectively, included in other income, net in the Condensed Consolidated Statements of Earnings, see Note 13.

(2)Relates to designated foreign currency forward contracts that were reclassified from accumulated other comprehensive loss on the Condensed Consolidated Balance Sheets to net sales, cost of sales and selling, general and administrative expenses or other income, net in the Condensed Consolidated Statements of Earnings, see Note 14.

Changes in accumulated other comprehensive loss for the nine months ended April 30, 2025 and 2024 were as follows (in millions):

(1)Amounts include foreign currency translation gain of $1.1 million and loss of $0.3 million, net amortization of prior service costs and actuarial losses of $1.8 million and $1.2 million and reclassifications due to settlement charges of $0.0 million and $3.1 million in fiscal 2025 and 2024, respectively, included in other income, net in the Condensed Consolidated Statements of Earnings, see Note 13.

(2)Relates to designated foreign currency forward contracts that were reclassified from accumulated other comprehensive loss on the Condensed Consolidated Balance Sheets to net sales, cost of sales and selling, general and administrative expenses or other income, net in the Condensed Consolidated Statements of Earnings, see Note 14.

Note 12. Stock-Based Compensation

The Company recognizes compensation expense for all stock-based awards based on the grant date fair value of the award. Stock-based awards consist primarily of non-qualified stock options, performance-based awards, restricted stock awards and restricted stock units. Grants related to restricted stock awards and restricted stock units are immaterial. The Company issues treasury shares for stock options and performance-based awards.

Stock Options

The exercise price of options granted is equal to the market price of the Company’s common stock at the date of the grant. Options are generally exercisable for up to 10 years from the date of grant and vest in equal annual increments over three years.

Pretax stock-based compensation expense associated with options was $2.2 million and $14.2 million for the three and nine months ended April 30, 2025, respectively, and was $1.8 million and $12.3 million for the three and nine months ended April 30, 2024, respectively.

Fair value is calculated using the Black-Scholes option pricing model. The weighted average fair value for options granted was $21.67 and $18.99 per share during the nine months ended April 30, 2025 and 2024, respectively.

Option activity was as follows:

Performance-Based Awards

Performance-based awards are payable in common stock and are based on a formula that measures Company performance over athree-year period. These awards are settled after three years with payouts ranging from 0% to 200% of the target award depending on achievement.

Pretax performance-based awards expense was $1.0 million and $4.2 million for the three and nine months ended April 30, 2025, respectively, and $1.4 million and $4.5 million for the three and nine months ended April 30, 2024, respectively.

Performance-based awards for non-vested activity were as follows:

Note 13. Employee Benefit Plans

The Company has defined benefit pension plans for certain hourly and salaried employees. They consist of plans in the U.S., Belgium, Germany, Mexico and the United Kingdom. These plans generally provide pension benefits based on years of service and compensation level. Components of net periodic pension costs other than the service cost component are included in other income, net in the Condensed Consolidated Statements of Earnings.

Net periodic pension costs for the Company’s pension plans were as follows (in millions):

In the third quarter of fiscal 2024, the Company recorded a pension settlement charge of $3.1 million as a result of lump sum distributions exceeding the service and interest cost components of the annual net periodic pension cost. The corresponding remeasurement did not result in a change to the Company’s pension asset, and therefore did not result in an adjustment to other comprehensive loss in the Condensed Consolidated Statements of Comprehensive Income. See Note 11.

The Company’s general funding policy is to make at least the minimum required contributions under applicable regulations, plus any additional amounts it determines to be appropriate. Future required pension plan contributions may change significantly depending on the actual rate of return on plan assets, discount rates and regulatory requirements.

Note 14. Derivative Instruments and Hedging

The Company enters into derivative instrument agreements, including foreign currency forward contracts and net investment hedges, to manage risk in connection with changes in foreign currency. The Company only enters into derivative instrument agreements with counterparties who have highly rated credit. There is risk the counterparties to derivative contracts will fail to meet their contractual obligations. In order to mitigate counterparty credit risk, the Company only enters into contracts with carefully selected financial institutions based upon their credit ratings and certain other financial factors.

Contract provisions may require the posting of collateral or settlement of the contracts for various reasons, including if the Company’s credit ratings are downgraded below its investment grade credit rating by any of the major credit agencies, or for cross default contractual provisions, if there is a failure under other financing arrangements related to payment terms or covenants. As of April 30, 2025 and July 31, 2024, no collateral was posted.

The Company does not enter into derivative instrument agreements for trading or speculative purposes. For discussion on the fair value of the Company’s derivatives, see Note 15.

Foreign Currency Forward Contracts - Cash Flow Hedges and Derivatives Not Designated as Hedging Instruments

The Company buys materials from foreign suppliers. Those transactions can be denominated in those suppliers’ local currency. The Company also sells to customers in foreign countries. Those transactions can be denominated in those customers’ local currency. Both of these transaction types can create volatility in the Company’s financial statements. The Company uses foreign currency forward contracts to manage those exposures and fluctuations. These contracts generally mature in 15 months or less, which is consistent with the forecasts of the related purchases and sales. Certain contracts are designated as cash flow hedges, whereas the remaining contracts, most of which are related to certain intercompany transactions which offset balance sheet exposure, are not designated as hedging instruments. The total notional amount of the foreign currency forward contracts designated as hedges was $32.4 million and $32.3 million as of April 30, 2025 and July 31, 2024, respectively. The total notional amount of the foreign currency forward contracts not designated as hedges was $194.3 million and $249.7 million as of April 30, 2025 and July 31, 2024, respectively.

Changes in the fair value of the Company’s designated hedges are reported inaccumulated other comprehensive loss on the Condensed Consolidated Balance Sheets until the related transaction occurs, see Note 11. Designated hedges are recognized as a component of either net sales, cost of sales, selling, general and administrative expenses orother income, net in the Condensed Consolidated Statements of Earnings upon occurrence of the related hedged transaction.

Hedges and subsequent changes in the fair value of hedges that are not designated are recognized in other income, net in the Condensed Consolidated Statements of Earnings along with the related hedged transactions.

Amounts related to foreign currency forward contracts designated as hedges are expected to be reclassified into earnings during the next 12 months based upon the timing of inventory purchases and sales.

Net Investment Hedges

The Company uses fixed-to-fixed cross-currency swap agreements to hedge its exposure to adverse foreign currency exchange rate movements for its operations in Europe. The Company has elected the spot method for designating these contracts as net investment hedges.

The total notional amount of net investment hedges as of April 30, 2025 and July 31, 2024 was €80 million, or $88.8 million. The maturity dates range from 2027 to 2029.

Gains and losses resulting from a change in fair value of the net investment hedge are offset by gains and losses on the underlying foreign currency exposure and are included inaccumulated other comprehensive loss on the Condensed Consolidated Balance Sheets. Amounts related to excluded components associated with the net investment hedge are expected to be reclassified into earnings in interest expense in the Condensed Consolidated Statements of Earnings through their maturity.

Cash Flows

Cash flows from derivative transactions are recorded in operating activities in the Condensed Consolidated Statements of Cash Flows.

Note 15. Fair Value Measurements

Fair value measurements of financial instruments are reported in one of three levels based on the lowest level of significant input used. For Level 1, inputs to the fair value measurement are quoted prices in active markets for identical assets or liabilities. For Level 2, inputs to the fair value measurement include quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active and inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. For Level 3, inputs to the fair value measurement are unobservable inputs or are based on valuation techniques.

Short-Term Financial Instruments

As of April 30, 2025 and July 31, 2024, the carrying values of cash and cash equivalents, accounts receivable, short-term borrowings and accounts payable approximate fair value because of the short-term nature of these instruments. Short-term financial instruments are classified as Level 1 in the fair value hierarchy.

Long-Term Debt

As of April 30, 2025, the estimated fair values of fixed interest rate long-term debt were $247.7 million compared to the carrying values of $275.0 million. As of July 31, 2024, the estimated fair values of fixed interest rate long-term debt were $267.7 million compared to the carrying values of $300.0 million. The fair values are estimated by discounting the projected cash flows using the interest rates at which similar amounts of debt could currently be borrowed. The carrying values of total variable interest rate long-term debt were $365.0 million and $209.9 million as of April 30, 2025 and July 31, 2024, respectively, and approximate their fair values. Long-term debt is classified as Level 2 in the fair value hierarchy.

Investment in Joint Ventures and a Non-Controlling Interest

The Company holds investments in joint ventures and a non-controlling interest, which are accounted for as equity method investments at fair value and are included in other long-term assets on the Consolidated Balance Sheets. The aggregate carrying amount of these investments was $102.0 million and $26.9 million as of April 30, 2025 and July 31, 2024, respectively. The increase is primarily driven by the $70.3 million equity method investment in Medica as of April 30, 2025. These equity method investments are measured at fair value on a non-recurring basis. The fair value of the Company’s equity method investments has not been adjusted as there have been no triggering events or changes in circumstance that would have had an adverse impact on the value of these investments. In the event these investments are required to be measured, they would fall within Level 3 of the fair value hierarchy due to the use of significant unobservable inputs to determine fair value, as the investments are in privately-held entities.

The fair values of the Company’s foreign currency forward contracts and net investment hedges reflect the amounts that would be received to sell the assets or paid to transfer the liabilities in an orderly transaction between market participants at the measurement date (exit price). The fair values are based on inputs other than quoted prices that are observable for the asset or liability and are determined by standard calculations and models that use readily observable market parameters. These inputs include foreign currency exchange rates. Industry standard data providers are the primary source for forward and spot rate information for foreign currency exchange rates. The fair values of the Company’s foreign currency forward contracts and net investment hedges are classified as Level 2 in the fair value hierarchy. For discussion of the Company’s derivatives and hedging, see Note 14.

Fair Value of Derivatives Contracts

The fair value of the Company’s derivative contracts, recorded on the Condensed Consolidated Balance Sheets, was as follows (in millions):

Amounts related to excluded components, such as forward points, are excluded from the assessment of hedge effectiveness of net investment hedges and are expected to be reclassified into earnings throughout their maturity dates. See Note 11 for additional information on accumulated other comprehensive loss.

Fair Value of Contingent Consideration

The fair value of the contingent consideration liability is determined using a probability-weighted discounted cash flow method. This fair value measurement is based on unobservable inputs in the market and thus, represents a Level 3 measurement within the fair value hierarchy. This analysis reflects the contractual terms of the purchase agreement (e.g., potential payment amounts, length of measurement periods, manner of calculating any amounts due) and utilizes assumptions with regard to future financial and operational milestones, probabilities of achieving such milestones and a discount rate. Depending on the contractual terms of the purchase agreement, the probability of achieving such milestones generally represents the only significant unobservable input. The contingent consideration liability is measured at fair value each reporting period and changes in estimates of fair value are recognized in earnings.

The fair value of the Company’s contingent consideration liability that uses unobservable inputs was $13.6 million as of April 30, 2025 and $21.8 million as of July 31, 2024. The decrease of the contingent consideration liability was driven by a reduction in the assessed probability of achieving certain milestones and$2.8 millionof total contingent consideration paid during the nine months ended April 30, 2025, including $1.0 million of total contingent consideration paid during the three months ended April 30, 2025. The maximum potential payout of the contingent consideration was $27.0 million and $29.8 million as of April 30, 2025 and July 31, 2024, respectively, see Note 17.

Note 16. Guarantees

Letters of Credit

The Company has letters of credit which guarantee payment to third parties in the event the Company is in breach of contract terms as detailed in each letter of credit. The outstanding contingent liability for standby letters of credit was as follows (in millions):

Advanced Filtration Systems Inc. (AFSI)

The Company has an unconsolidated joint venture, AFSI, established by the Company and Caterpillar Inc. (Caterpillar) in 1986. AFSI designs and manufactures high-efficiency fluid filters used in Caterpillar’s machinery worldwide. The Company and Caterpillar equally own the shares of AFSI and both companies guarantee certain debt and banking services, including credit and debit cards, merchant processing and treasury management services, of the joint venture. The Company accounts for AFSI as an equity method investment.

The outstanding debt relating to AFSI, which the Company guarantees half, was $45.5 million and $51.0 million as of April 30, 2025 and July 31, 2024, respectively. AFSI has a $63.0 million revolving credit facility, which expires July 31, 2027 and $17.0 million in an additional multi-currency revolving credit facility which terminates upon notification of either party.

Earnings from AFSI, which are recorded in other income, net in the Condensed Consolidated Statements of Earnings, were $3.9 million and $10.2 million for the three and nine months ended April 30, 2025, respectively, and were $4.3 million and $8.5 million for the three and nine months ended April 30, 2024, respectively.

Note 17. Commitments and Contingencies

The Company records provisions when it is probable a liability has been incurred and the amount of the loss can be reasonably estimated. Claims and litigation are reviewed quarterly and provisions are taken or adjusted to reflect the status of a particular matter. The Company believes the estimated liability in its Condensed Consolidated Financial Statements for claims or litigation is adequate and appropriate for the probable and estimable outcomes. Liabilities recorded were not material to the Company’s financial position, results of operations or liquidity. The Company believes it is remote that the settlement of any of the currently identified claims or litigation will be materially in excess of what is accrued.

The Company is party to agreements that include deferred payment provisions representing potential milestone payments for former owners of acquired businesses. The provisions are made up of two general types of arrangements, contingent compensation and contingent consideration. A contingent compensation arrangement is contingent on the former owner’s future employment with the Company and the related amounts are recognized over the required employment period. A contingent consideration agreement is contingent on the achievement of certain revenue and manufacturing milestones, regardless of the former owner's employment status. Contingent consideration was recorded as purchase consideration in both other current and other long-term liabilities on the Condensed Consolidated Balance Sheets at the time of the initial acquisition based on the fair value of the estimated liability. The Company primarily determines the contingent consideration liability based on the forecasted probability of achieving the certain milestones. The contingent consideration liability is measured at fair value each reporting period and changes in estimates of fair value are recognized in earnings.

The arrangement liabilities, recorded on the Condensed Consolidated Balance Sheets, were as follows (in millions):

(1)The maximum payout values are inclusive of the respective arrangement liability balance.

(2)The decrease in the Purilogics’ contingent consideration liability in fiscal 2025 was primarily driven by a $6.2 million reduction of the fair value during the three months ended April 30, 2025 based on the probability of achieving certain milestones. The total contingent consideration paid as of April 30, 2025 was $2.0 million, which was paid during fiscal 2024.

(3)The total contingent consideration paid as of April 30, 2025 was $2.8 million, of which $1.8 million was paid during the three months ended January 31, 2025 and $1.0 million was paid during the three months ended April 30, 2025.

For additional discussion regarding the fair value of the Company’s contingent consideration liability, see Note 15.

Note 18. Segment Reporting

The Company’s reportable segments are: Mobile Solutions, Industrial Solutions and Life Sciences. The organizational structure also includes Corporate and Unallocated, which includes interest expense and certain corporate expenses determined to be non-allocable to the segments, such as restructuring charges and business development expenses. The Company determines its operating segments consistent with the manner in which it manages its operations and evaluates performance for internal review and decision-making. For the three and nine months ended April 30, 2025, Corporate and Unallocated included charges of $65.8 million and $75.6 million, respectively, related primarily to impairment on intangible assets, restructuring, business development and gain on the sale of fixed assets.

The Mobile Solutions segment is organized based on a combination of customers and products and consists of the Off-Road, On-Road and Aftermarket business units. Within these business units, products consist of replacement filters for both air and liquid filtration applications and filtration housings for new equipment production and systems related to exhaust and emissions. Applications include air filtration systems, fuel, lube and hydraulic systems, emissions systems and sensors, indicators and monitoring systems. Mobile Solutions sells to original equipment manufacturers (OEMs) in the construction, mining, agriculture and transportation end markets and to independent distributors and OEM dealer networks.

The Industrial Solutions segment is organized based on product type and consists of Industrial Air Filtration, Industrial Gases, Industrial Hydraulics, Power Generation and Aerospace and Defense products. These products are further organized by the Industrial Filtration Solutions and Aerospace and Defense business units. Within our industrial portfolio, the Company provides a wide product offering in the market to industrial customers consisting of equipment, ancillary components, replacement parts, performance monitoring and service globally, that cost-effectively enhances productivity and manufacturing efficiency. Industrial Air Filtration, Industrial Gases and Industrial Hydraulics products consist of dust, fume andmist collectors, compressed air and industrial gases purification systems, hydraulic and lubricated rotating filtration applicationsas well as gas and liquid filtration for industrial processes. Power Generation products consist of air inlet systems and filtration sold to gas compression, power generation and natural gas liquification industries. Aerospace and Defense products consist of air, fuel, lubrication and hydraulic filtration for fixed-wing and rotorcraft aerospace applications and ground defense vehicle and naval platforms. Industrial Solutions businesses sell through multiple channels which include OEMs, distributors and direct-to-consumer in some markets.

The Life Sciences segment is organized by end market and consists of the Bioprocessing Equipment and Consumables, Food and Beverage, Vehicle Electrification and Medical Device, Microelectronics and Disk Drive markets. Within these markets, products consist of micro-environment gas and liquid filtration for food and beverage and industrial processes, bioprocessing equipment, including bioreactors and fermenters, bioprocessing consumables including chromatography devices, reagents and filters, polytetrafluoroethylene membrane-based products, as well as specialized air and gas filtration systems for applications including hard disk drives, semiconductor manufacturing, sensors, battery systems and powertrain components. Life Sciences primarily sells to large OEMs and directly to various end users requiring cell growth, separation, purification, high purity filtration and device protection.

The Company has manufacturing facilities that serve multiple reportable segments. As such, capital expenditure information by reportable segment has not been provided because the Company does not produce or utilize such information internally. In addition, although depreciation and amortization expense is a component of each reportable segment’s operating results, it is not discretely identifiable as a result of the shared manufacturing facilities.

The Company is an integrated enterprise, characterized by substantial intersegment cooperation, cost allocations and sharing of assets. Therefore, the Company does not represent that these segments, if operated independently, would report earnings before income taxes and other financial information as stated below.

Segment details were as follows (in millions):

(1)Corporate and unallocated includes interest expense and certain corporate expenses determined to be non-allocable to the segments, such as restructuring charges and portions of incentive compensation.

Assets by segment were as follows (in millions):

Net sales by business unit were as follows (in millions):

Concentrations

There were no customers that accounted for over 10% of net sales for the three and nine months ended April 30, 2025 or 2024. There were no customers that accounted for over 10% of gross accounts receivable as of April 30, 2025 or July 31, 2024.

Note 19. Restructuring and Other Charges

During the first three quarters of fiscal 2025, the Company continued the global footprint and cost optimization actions which began in fiscal 2024. These activities resulted in restructuring expense of $4.2 million and $9.6 million for the three and nine months ended April 30, 2025, respectively, primarily related to continued global footprint optimization and cost reduction actions. Charges of $2.6 million and $4.3 million were included in cost of sales and $1.6 million and $5.3 million were included in operating expense in the Condensed Consolidated Statement of Earnings for the three and nine months ended April 30, 2025, respectively.

During fiscal 2024, the Company initiated global footprint and cost optimization actions to further improve its operating and manufacturing cost structure, primarily in EMEA. These activities resulted in restructuring expenses, primarily related to severance, of $6.4 million. Charges of $3.8 million were included in cost of sales and $2.6 million were included in operating expenses in the Consolidated Statement of Earnings for the year ended July 31, 2024.

As of April 30, 2025 and July 31, 2024, respectively, $6.3 million and $6.4 million of accrued expenses were included in accrued employee compensation and related taxes in the Condensed Consolidated Balance Sheet. Estimated future costs associated with actions related to this restructuring initiative are not included due to the Company’s inability to reasonably quantify the anticipated restructuring charges.