DONALDSON Co INC SEC 10-K Report

Donaldson Co Inc, a global leader in filtration solutions, has released its Form 10-K report for fiscal year 2025. The report provides a comprehensive overview of the company's financial performance, business operations, strategic initiatives, and the challenges it faces in the current market environment.

Financial Highlights

Donaldson Co Inc reported a solid financial performance for fiscal 2025, with key metrics reflecting both growth and challenges:

• Net Sales: $3,690.9 million, reflecting a 2.9% increase from fiscal 2024, driven by higher sales volume and pricing actions.
• Gross Profit: $1,286.2 million, representing 34.8% of net sales, a decrease from 35.5% in fiscal 2024 due to higher manufacturing costs and tariff-related inflation.
• Operating Income: $495.4 million, or 13.4% of net sales, down from 15.2% in fiscal 2024, impacted by a $62.0 million loss on impairment of intangible assets.
• Net Earnings: $367.0 million, a decrease of 11.3% from fiscal 2024, affected by higher working capital requirements and impairment charges.
• Net Earnings Per Share (EPS) – Diluted: $3.05, compared to $3.38 in fiscal 2024, reflecting the decrease in net earnings.

Business Highlights

Donaldson Co Inc's business performance in fiscal 2025 showcased growth across various segments and regions:

• Revenue Segments: The Mobile Solutions segment saw an increase in net sales by $40.2 million, or 1.8%, driven by a $14.7 million volume increase and a $27.1 million increase from pricing benefits. The Industrial Solutions segment experienced a $37.9 million increase, or 3.6%, due to a $22.4 million volume increase and a $10.8 million increase from pricing benefits. The Life Sciences segment reported a $26.5 million increase, or 9.8%, primarily driven by a $22.9 million volume increase.
• Geographical Performance: Net sales in the U.S. and Canada increased to $1,632.3 million, representing 44.2% of total net sales. The EMEA region saw net sales of $1,027.2 million, accounting for 27.8% of total net sales. The APAC region reported net sales of $635.7 million, while Latin America contributed $395.7 million to total net sales.
• Sales Units: The Aftermarket business unit within the Mobile Solutions segment increased net sales by $90.7 million due to volume increases driven by solid market demand and market share gains.
• Future Outlook: The company expects its cash paid for capital expenditures in fiscal 2026 to be between $65 million and $85 million, primarily associated with capacity expansion, new products and technologies, and maintaining existing assets. The company is also monitoring the evolving trade landscape and its ability to mitigate the impact of tariffs.

Strategic Initiatives

Donaldson Co Inc has undertaken several strategic initiatives to strengthen its market position and financial health:

• Global Footprint and Cost Optimization: The company continued its global footprint and cost optimization actions to improve its operating and manufacturing cost structure, which began in fiscal 2024. These activities resulted in restructuring expenses primarily related to severance. Additionally, the company announced a company-wide organizational redesign to support growth strategies and better serve customers, which included severance charges and costs associated with exiting lower-margin programs.
• Capital Management: The company increased its revolving credit facility from $500 million to $600 million and added a new $200 million term loan facility. It also repurchased $331.5 million of its common stock and paid dividends totaling $131.9 million. The company maintained a strong liquidity position with $180.4 million in cash and cash equivalents and $759.6 million available for further borrowing under existing credit facilities.
• Future Outlook: The company expects its cash paid for capital expenditures in fiscal 2026 to be between $65 million and $85 million, focusing on capacity expansion, new products, and maintaining existing assets. It plans to continue its debt reduction strategy and explore strategic acquisitions, supported by its strong liquidity position and available credit facilities.

Challenges and Risks

Donaldson Co Inc faces several challenges and risks that could impact its operations and financial performance:

• Macroeconomic and Geopolitical Risks: The company faces significant macroeconomic and geopolitical risks due to its global operations. These include political and military events, tariffs, trade barriers, legal and regulatory requirements, and local economic conditions. Compliance with a complex system of international laws and regulations, including data privacy and anti-corruption laws, poses additional challenges. The potential for new or incremental tariffs could disrupt supply chains and increase costs, impacting competitiveness. Unexpected events such as natural disasters or pandemics could disrupt operations and increase costs.
• Operational Risks: Operational risks include supply chain disruptions due to unavailable raw materials, demand fluctuations, and cost changes. The company also faces challenges in attracting and retaining qualified personnel, which could impact its ability to compete effectively. The complexity of manufacturing operations could lead to an inability to meet demand, resulting in customer loss. Maintaining a competitive advantage requires consistent investment in R&D, with uncertain returns. Disruptive technologies, such as electrification, may threaten growth in certain industries.
• Market Risks: The company is exposed to market risks from foreign currency exchange rate fluctuations, interest rates, and commodity prices. The weaker U.S. dollar in fiscal 2025 had a positive impact on international net sales but a negative impact on net earnings. The company uses foreign currency forward contracts and net investment hedges to manage these risks. Interest rate changes could affect the fair market value of fixed-rate debt and the funded status of pension plans. Fluctuating commodity prices could impact gross profit, although the company seeks to mitigate this through supply arrangements and cost reduction initiatives.

SEC Filing: DONALDSON Co INC [ DCI ] - 10-K - Sep. 26, 2025