DONALDSON Co INC

Previous wording

The U.S. imposed additional tariffs on a wide range of imports, with the potential for further tariff actions, which resulted in retaliatory tariffs. These trade measures, along with updates to export controls and sanctions regimes, pose ongoing risks to global supply chains, potentially increasing the cost of goods, straining procurement cycles and impacting customer demand. The Company is closely monitoring the evolving trade landscape, as well as its ability to mitigate the impact of tariffs and its analysis of the potential impact. While the ultimate impact of tariffs remains uncertain, the Company expects annual costs related to recently implemented or increased tariffs of approximately $25 million, down from $35 million previously, which represents less than 1% of the Company’s total sales and is expected to be largely offset by pricing increases. The Company will continue to utilize its global manufacturing footprint and supply chain to mitigate the cost impact of tariffs.

Current wording

The U.S. imposed tariffs on a wide range of imports, with the potential for further tariff actions, which resulted in retaliatory tariffs. These trade measures, along with updates to export controls and sanctions regimes, pose ongoing risks to global supply chains, potentially increasing the cost of goods, straining procurement cycles and impacting customer demand. On February 20, 2026, the United States Supreme Court issued a decision concluding that the International Emergency Economic Powers Act does not provide authority for the President to impose tariffs. Certain tariffs that affected us were imposed under this statute pursuant to presidential executive order. The extent and timing of any potential recoveries of tariffs previously paid remain subject to further legal interpretation and administrative processes. We will continue to monitor developments and will evaluate the effect of the ruling on future reporting periods as additional information becomes available. The Company is closely monitoring the evolving trade landscape, as well as its ability to mitigate the impact of tariffs and its analysis of the potential impact. The Company will continue to utilize its global manufacturing footprint and supply chain to mitigate the cost impact of tariffs.

Previous wording

Net sales for the three months ended October 31, 2025 increased $35.3 million, or 3.9%, from the three months ended October 31, 2024, reflecting higher sales in the Mobile Solutions segment of $25.9 million, or 4.5% growth, the Industrial Solutions segment of $0.2 million, or 0.1% growth, and the Life Sciences segment of $9.2 million, or 13.1% growth. Foreign currency translation increased net sales by $11.9 million compared to the three months ended October 31, 2024, reflecting an increase in the Mobile Solutions segment of $6.7 million, an increase in the Industrial Solutions segment of $3.0 million, and an increase in the Life Sciences segment of $2.2 million. During the three months ended October 31, 2025, the Company’s net sales increase was driven by pricing benefits, favorable foreign currency impacts and volume growth.

Current wording

Net sales for the three months ended January 31, 2026 increased $26.3 million, or 3.0%, from the three months ended January 31, 2025, reflecting higher sales in the Mobile Solutions segment of $9.1 million, or 1.6% growth, the Industrial Solutions segment of $6.0 million, or 2.4% growth, and the Life Sciences segment of $11.2 million, or 16.2% growth. Foreign currency translation increased net sales by $27.9 million compared to the three months ended January 31, 2025, reflecting an increase in the Mobile Solutions segment of $16.6 million, an increase in the Industrial Solutions segment of $6.9 million, and an increase in the Life Sciences segment of $4.4 million. During the three months ended January 31, 2026, the Company’s net sales increase was driven by favorable foreign currency impacts and pricing benefits, partially offset by volume decline.

Previous wording

Gross margin as a percentage of net sales for the three months ended October 31, 2025 was 35.2% compared with 35.5% for the three months ended October 31, 2024. The decrease in gross margin as a percentage of net sales was driven primarily by higher operational costs, partially offset by benefits from pricing actions.

Current wording

Gross margin as a percentage of net sales for the three months ended January 31, 2026 was 33.5% compared with 35.2% for the three months ended January 31, 2025. The decrease in gross margin as a percentage of net sales was driven primarily by operational inefficiencies related to shifting Power Generation equipment production to a new point of manufacturing to support higher customer demand in Industrial Solutions and costs associated with footprint optimization efforts, partially offset by benefits from pricing actions.

Previous wording

Research and development expenses for the three months ended October 31, 2025 were $19.2 million, or 2.1% of net sales, compared with $22.7 million, or 2.5% of net sales, for the three months ended October 31, 2024, a decrease of $3.5 million, or 15.5%, driven by focused project prioritization.

Current wording

Research and development expenses for the three months ended January 31, 2026 were $18.6 million, or 2.2% of net sales, compared with $21.2 million, or 2.4% of net sales, for the three months ended January 31, 2025, a decrease of $2.6 million, or 11.7%, driven by focused project prioritization.

Previous wording

Interest expense for the three months ended October 31, 2025 was $7.1 million, compared with $5.5 million for the three months ended October 31, 2024, an increase of $1.6 million, or 29.1%. The increase reflected a higher proportion of variable interest rate debt and higher overall level of debt.

Current wording

Interest expense for the three months ended January 31, 2026 was $7.7 million, compared with $5.9 million for the three months ended January 31, 2025, an increase of $1.8 million, or 29.0%. The increase reflected a combination of higher proportion of variable interest rate debt and higher overall level of debt.

Previous wording

Other income, net for the three months ended October 31, 2025 was $5.3 million, compared with other income, net of $5.2 million for the three months ended October 31, 2024, an increase of $0.1 million, which was relatively consistent with the prior year.

Current wording

Other income, net for the three months ended January 31, 2026 was $5.6 million, compared with other income, net of $5.4 million for the three months ended January 31, 2025, an increase of $0.2 million, which was relatively consistent with the prior year.

Previous wording

The effective tax rate was 22.8% and 24.2% for the three months ended October 31, 2025 and 2024, respectively. The lower effective tax rate was primarily due to an increase in discrete tax benefits.

Current wording

The effective tax rate was 20.7% and 23.2% for the three months ended January 31, 2026 and 2025, respectively. The lower effective tax rate was primarily due to an increase in excess tax benefits on stock-based compensation.

Previous wording

Selling, general and administrative expenses for the three months ended October 31, 2025 were $169.6 million, or 18.1% of net sales, compared with $166.1 million, or 18.5% of net sales, for the three months ended October 31, 2024, an increase of $3.5 million, or 2.1%. The decrease in selling, general and administrative expenses as a percentage of net sales was primarily due to leverage on higher sales, benefits from cost optimization initiatives, and ongoing disciplined expense management.

Current wording

Selling, general and administrative expenses for the six months ended January 31, 2026 were $332.1 million, or 18.1% of net sales, compared with $325.3 million, or 18.4% of net sales, for the six months ended January 31, 2025, an increase of $6.8 million, or 2.1%. The decrease in selling, general and administrative expenses as a percentage of net sales was primarily due to ongoing disciplined expense management and leverage on higher sales.

Previous wording

Gain on sale of fixed assets for the three months ended October 31, 2025 was $9.3 million, or 1.0% of net sales, compared to no gain on sale of fixed assets for the three months ended October 31, 2024. The gain on sale of fixed assets was driven by the sale of land and a building associated with footprint optimization initiatives.

Current wording

Gain on sale of fixed assets for the six months ended January 31, 2026 was $9.3 million, or 0.5% of net sales, compared to no gain on sale of fixed assets for the six months ended January 31, 2025. The gain on sale of fixed assets was driven by the sale of land and a building associated with footprint optimization initiatives.

Previous wording

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

Current wording

(1)Corporate and unallocated includes interest expense and certain corporate expenses determined to be non-allocable to the segments, such as a gain on the sale of fixed assets, restructuring and related charges, business development charges and portions of incentive compensation.

Previous wording

Net sales of Aftermarket increased $29.1 million primarily due to market share gains. Net sales of Off-Road increased $5.5 million as supportive construction market conditions offset continued headwinds in agriculture. Net sales of On-Road decreased $8.7 million, primarily due to a decline in global truck production.

Current wording

Net sales of Aftermarket increased $34.2 million due to market share gains and higher vehicle utilization rates, primarily in EMEA and APAC. Net sales of Off-Road increased $11.8 million, reflecting a modest rebound following declines in the prior year. Net sales of On-Road decreased $11.0 million primarily due to a continuing decline in global truck production.

Previous wording

Net sales for the Life Sciences segment for the three months ended October 31, 2025 were $79.3 million, compared with $70.1 million for the three months ended October 31, 2024, an increase of $9.2 million, or 13.1%. Foreign currency translation favorably impacted net sales for the Life Sciences segment by 2.8%. The increase in net sales was driven by strong new sales in Food and Beverage and Disk Drive.

Current wording

Net sales for the Life Sciences segment for the three months ended January 31, 2026 were $80.0 million, compared with $68.8 million for the three months ended January 31, 2025, an increase of $11.2 million, or 16.2%. Foreign currency translation favorably impacted net sales for the Life Sciences segment by 6.4%. The increase in net sales was driven by strong global sales in Food and Beverage and Disk Drive.

Previous wording

Earnings before income taxes for the Life Sciences segment for the three months ended October 31, 2025 were $7.3 million, or 9.2% of net sales, an increase from losses before income taxes of 7.6% of net sales for the three months ended October 31, 2024. The improvement was driven by benefits from restructuring activities that occurred during fiscal 2025 and leverage from higher volume.

Current wording

Earnings before income taxes for the Life Sciences segment for the six months ended January 31, 2026 were $14.7 million, or 9.2% of net sales, an improvement from losses before income taxes of $5.8 million, or 4.2% of net sales, for the six months ended January 31, 2025. The improvement was driven by leverage on higher volume and benefits from restructuring activities that occurred during fiscal 2025.

Previous wording

Cash provided by operating activities for the three months ended October 31, 2025 was $125.4 million, compared with $72.9 million for the three months ended October 31, 2024, an increase of $52.5 million. The increase in cash provided by operating activities was primarily driven by a decrease in working capital requirements.

Current wording

Cash provided by operating activities for the six months ended January 31, 2026 was $158.4 million, compared with $163.3 million for the six months ended January 31, 2025, a decrease of $4.9 million. The decrease in cash provided by operating activities was primarily driven by higher income taxes paid in the current fiscal year, partially offset by higher earnings.

Previous wording

Cash used in investing activities for the three months ended October 31, 2025 was $3.4 million, compared with $96.0 million for the three months ended October 31, 2024, a decrease of $92.6 million. The decrease in cash used in investing activities was primarily due to the equity method investment in Medica during the three months ended October 31, 2024.

Current wording

Cash used in investing activities for the six months ended January 31, 2026 was $18.4 million, compared with $115.1 million for the six months ended January 31, 2025, a decrease of $96.7 million. The decrease in cash used in investing activities was primarily due to the $71.2 million equity method investment in Medica during the six months ended January 31, 2025, as well as $10.8 million received from the sale of property, plant and equipment in the first six months ended January 31, 2026.

Previous wording

Cash used in financing activities generally relates to the use of cash for payment of dividends and repurchases of the Company’s common stock, net of borrowing activity and proceeds from the exercise of stock options. Cash used in financing activities for the three months ended October 31, 2025 was $93.1 million, compared with cash provided by financing activities of $9.8 million for the three months ended October 31, 2024, a decrease of $102.9 million. The decrease in cash provided by financing activities was primarily driven by a decrease in short-term borrowings of $78.6 million and an increase in the repurchases of the Company’s common stock of $17.0 million.

Current wording

Cash used in financing activities generally relates to the use of cash for payment of dividends and repurchases of the Company’s common stock, net of borrowing activity and proceeds from the exercise of stock options. Cash used in financing activities for the six months ended January 31, 2026 was $131.5 million, compared with cash used in financing activities of $88.5 million for the six months ended January 31, 2025, an increase of $43.0 million. The increase in cash used in financing activities was primarily driven by a decrease in short-term borrowings of $41.8 million and an increase in the repurchases of the Company’s common stock of $29.6 million, partially offset by an increase of $26.3 million in exercise of stock options.

Previous wording

To determine the level of dividend and share repurchases, the Company considers recent and projected performance across key financial metrics, including earnings, cash flow from operations and total debt. Dividends paid for the three months ended October 31, 2025 and 2024 were $34.7 million and $32.4 million, respectively. Share repurchases for the three months ended October 31, 2025 and 2024 were $91.5 million and $74.4 million, respectively.

Current wording

To determine the level of dividend and share repurchases, the Company considers recent and projected performance across key financial metrics, including earnings, cash flow from operations and total debt. Dividends paid for the six months ended January 31, 2026 and 2025 were $69.3 million and $64.6 million, respectively. Share repurchases for the six months ended January 31, 2026 and 2025 were $111.2 million and $81.6 million, respectively.

Previous wording

Additional sources of liquidity are existing cash and available credit facilities. Cash and cash equivalents as of October 31, 2025 was $210.7 million, compared with $180.4 million as of July 31, 2025. The Company has capacity of $748.6 million available for further borrowing under existing credit facilities as of October 31, 2025, which includes $491.6 million available on the Company’s $600.0 million unsecured revolving credit facility that expires on June 12, 2030.

Current wording

Additional sources of liquidity are existing cash and available credit facilities. Cash and cash equivalents as of January 31, 2026 was $194.4 million, compared with $180.4 million as of July 31, 2025. The Company has capacity of $755.3 million available for further borrowing under existing credit facilities as of January 31, 2026.

Previous wording

The Company believes the liquidity available from the combination of expected cash generated by operating activities, existing cash and available credit under existing credit facilities will be sufficient to meet its cash requirements for the next 12 months and beyond, including working capital needs, debt service obligations, capital expenditures, payment of dividends, share repurchase activity and potential acquisitions.

Current wording

The Company believes the liquidity available from the combination of expected cash generated by operating activities, existing cash and available credit under existing credit facilities will be sufficient to meet its cash requirements for the next 12 months and beyond, including working capital needs, debt service obligations, capital expenditures, payment of dividends, share repurchase activity and potential acquisitions, including the additional debt we expect to incur to fund the Facet acquisition.

Previous wording

As of October 31, 2025, total debt, including short-term borrowings and long-term debt, represented 31.0% of total capitalization, defined as total debt plus total stockholders’ equity, compared with 31.5% as of July 31, 2025. As of October 31, 2025, the Company was in compliance with its financial covenants.

Current wording

As of January 31, 2026, total debt, including short-term borrowings and long-term debt, represented 30.2% of total capitalization, defined as total debt plus total stockholders’ equity, compared with 31.5% as of July 31, 2025. As of January 31, 2026, the Company was in compliance with its financial covenants.

Previous wording

Long-term debt outstanding was $678.0 million as of October 31, 2025, compared with $637.1 million as of July 31, 2025, an increase of $40.9 million, primarily due to share repurchases during the three months ended October 31, 2025. As of October 31, 2025, there was $491.6 million available and $100.0 million outstanding on the Company’s $600.0 million unsecured revolving credit facility that expires on June 12, 2030.

Current wording

Long-term debt outstanding was $680.8 million as of January 31, 2026, compared with $637.1 million as of July 31, 2025, an increase of $43.7 million, primarily due to share repurchases during the six months ended January 31, 2026. As of January 31, 2026, there was $491.6 million available and $100.0 million outstanding on the Company’s $600.0 million unsecured revolving credit facility that expires on June 12, 2030. We expect to finance the Facet acquisition with a combination of cash on hand and proceeds from new debt.