Donaldson Company, Inc. Fiscal 2026 Form 10-K Summary
Business Context and Reporting Period
Donaldson Company, Inc. is a global filtration technology company serving mobile, industrial, aerospace and defense, power generation, food and beverage, disk drive, microelectronics and bioprocessing markets. The report covers the fiscal year ended July 31, 2026. Donaldson operated at more than 150 locations across six continents, including 79 manufacturing and distribution centers, with approximately 15,500 full-time employees.
- Mobile Solutions represented 62.3% of fiscal 2026 net sales.
- Industrial Solutions represented 29.1% of net sales.
- Life Sciences represented 8.6% of net sales.
- Regional sales mix: U.S. and Canada 42.5%, EMEA 29.2%, APAC 17.7% and LATAM 10.6%.
Financial Performance and Key Metrics
| Metric | Fiscal 2026 | Fiscal 2025 | Change |
|---|---|---|---|
| Net sales | $3,885.6 million | $3,690.9 million | +5.3% |
| Gross profit | $1,345.9 million | $1,286.2 million | +4.6% |
| Gross margin | 34.6% | 34.8% | -0.2 percentage points |
| Operating income | $599.9 million | $495.4 million | +21.1% |
| Operating margin | 15.4% | 13.4% | +2.0 percentage points |
| Net earnings | $453.8 million | $367.0 million | +23.7% |
| Diluted EPS | $3.85 | $3.05 | +26.2% |
| Cash flow from operations | $493.7 million | $418.8 million | +$74.9 million |
Net sales benefited from favorable foreign-currency translation of $67.6 million, net pricing benefits of $67.3 million, higher volume of $29.5 million and $30.3 million from acquisitions. Foreign-currency translation increased reported net earnings by $1.8 million.
- Mobile Solutions sales increased 5.6% to $2,419.7 million, with segment pretax margin improving to 19.3% from 18.2%. Aftermarket sales were the primary growth driver.
- Industrial Solutions sales increased 2.6% to $1,132.7 million, but segment pretax margin declined to 13.7% from 17.9% due primarily to production-transition inefficiencies, footprint optimization costs and unfavorable mix.
- Life Sciences sales increased 12.8% to $333.2 million, while segment pretax margin improved to 9.7% from 1.5%, driven by volume and product mix.
- Research and development expense declined to $76.1 million, or 2.0% of sales, from $87.8 million, or 2.4% of sales.
- Interest expense rose to $36.0 million from $24.2 million due to higher debt associated with the Facet acquisition.
- The effective tax rate declined to 22.5% from 25.4%, partly due to the absence of the prior-year impairment charge and higher stock-based compensation tax benefits.
Liquidity, Debt and Capital Allocation
- Cash and cash equivalents were $250.4 million at July 31, 2026, compared with $180.4 million a year earlier.
- Total debt increased to $1,324.8 million from $668.3 million, and debt as a percentage of total capitalization increased to 42.9% from 31.5%.
- Long-term debt was $1,280.0 million, including $310.0 million outstanding under the revolving credit facility and $600.0 million of variable-rate term loans.
- Remaining borrowing capacity was $212.9 million under short-term facilities and $281.6 million under the long-term revolving credit facility.
- All applicable financial covenants were satisfied at July 31, 2026.
- Fiscal 2026 investing cash outflow was $879.5 million, including $822.6 million for acquisitions, principally Facet.
- Capital expenditures were $67.4 million. Fiscal 2027 capital expenditures are expected to be $70 million to $90 million.
- Dividends paid were $141.2 million, and share repurchases totaled $111.2 million in cash. The company had authorization to repurchase 4.5 million additional shares.
Material Changes Versus the Prior Comparable Period
- On May 4, 2026, Donaldson acquired Facet Filtration from Filtration Group for cash consideration of $830.2 million, or $822.6 million net of acquired cash. Facet contributed $30.3 million of sales and $0.1 million of pretax earnings, including $8.9 million of amortization, for the post-acquisition period.
- The acquisition added $587.4 million of goodwill and $225.6 million of intangible assets, including $191.3 million of customer-relationship assets. The purchase-price allocation remains preliminary.
- Fiscal 2026 included no intangible-asset impairment charge, compared with a $62.0 million impairment charge in fiscal 2025 related primarily to bioprocessing businesses.
- Restructuring and footprint-optimization charges increased to $18.3 million from $16.8 million. The company stated that these activities are largely complete and that material future charges are not expected.
- Backlog expected to be delivered within 90 days increased to $684.2 million from $552.2 million.
- Accounts receivable increased to $758.1 million, inventories to $538.7 million and the net cash cycle to 87 days from 85 days.
Guidance, Outlook, Commentary and Risks
The filing does not provide a full fiscal 2027 revenue or earnings outlook. Management expects fiscal 2027 capital expenditures of $70 million to $90 million and believes operating cash flow, cash on hand and available credit will be sufficient for expected requirements, including debt service, dividends, share repurchases and potential acquisitions.
- Management is pursuing three strategic priorities: extending market access, expanding technologies and solutions, and pursuing strategic acquisitions in higher-margin areas.
- Tariff exposure remains a significant uncertainty. Donaldson expects to recover a portion of previously paid IEEPA tariffs, but the expected net recovery was not material and the timing and ultimate availability of refunds remain uncertain.
- The company is exposed to geopolitical conflict, global economic conditions, foreign exchange, interest rates, commodity prices, tariffs and supply-chain disruption.
- Production-transition inefficiencies affected Industrial Solutions profitability and require monitoring for execution and margin recovery.
- Facet integration, valuation assumptions and the substantial goodwill and intangible assets recorded create impairment and execution risks.
- Demand is exposed to cyclical end markets including construction, agriculture, mining, transportation, oil and gas, power generation and disk drives. Electrification and other alternative power technologies could disrupt portions of the Mobile Solutions business.
- Cybersecurity, data privacy, environmental compliance, intellectual-property, product-liability and regulatory risks could result in additional costs or operational disruption. The company reported no cybersecurity incident that materially affected, or was reasonably likely to materially affect, its business or financial condition.
- The company guaranteed half of certain Advanced Filtration Systems Inc. debt and banking obligations; the guaranteed share of outstanding AFSI debt was approximately $16.0 million at July 31, 2026. Management does not expect the guarantee to have a material effect on liquidity or financial condition.
Most Important Facts for Investors to Verify
- Whether Facet integration delivers expected growth and margins, and whether the preliminary purchase-price allocation changes.
- Whether Industrial Solutions margins recover after the Power Generation production transition and footprint optimization activities.
- The effect of increased variable-rate debt on interest expense, leverage and future capital allocation.
- The sustainability of sales growth excluding foreign-currency translation, particularly in Aftermarket, Life Sciences and aerospace and defense.
- Whether tariff refunds are received and how future tariffs affect costs, pricing and supply chains.
- Future impairment risk associated with Facet goodwill and intangible assets and the Life Sciences portfolio.
- Fiscal 2027 capital expenditures, cash flow conversion, net cash cycle and the pace of share repurchases.
- Key assumptions underlying revenue estimates, goodwill valuations, acquired customer relationships, tax reserves and pension obligations.