(Thousands of dollars except per share amounts) 1994 1993 1992 1991 1990
----------- ---------- ----------- ----------- -----------
OPERATING RESULTS
Net sales $ 593,503 $ 533,327 $ 482,104 $ 457,692 $ 422,885
Gross margin $ 166,599 152,236 133,574 129,858 121,454
Gross margin percentage 28.1% 28.5% 27.7% 28.4% 28.7%
Operating income $ 52,079 45,246 41,249 41,304 44,354
Operating income percentage 8.8% 8.5% 8.6% 9.0% 10.5%
Interest expense $ 3,362 2,723 2,681 3,526 3,731
Earnings before income taxes $ 50,193 44,682 41,721 39,385 34,875
Income taxes $ 18,244 16,468 15,952 15,337 13,849
Effective income tax rate 36.3% 36.9% 38.2% 38.9% 39.7%
Net earnings $ 31,949(1) 28,214 25,769 24,048 21,026
Return on sales 5.4% 5.3% 5.3% 5.3% 5.0%
Return on equity 17.6% 16.9% 17.2% 18.0% 17.8%
Return on investment 16.0% 15.0% 14.8% 14.9% 14.2%
FINANCIAL POSITION
Total assets $ 337,360 300,217 286,348 253,194 245,947
Current assets $ 220,308 196,014 187,360 169,398 168,522
Current liabilities $ 115,757 93,666 89,956 77,537 79,917
Working capital $ 104,551 102,348 97,404 91,861 88,605
Current ratio 1.9 2.1 2.1 2.2 2.1
Current debt $ 16,956 7,595 11,425 6,380 11,384
Long-term debt $ 16,028 18,920 23,482 25,673 28,320
Total debt $ 32,984 26,515 34,907 32,053 39,704
Shareholders' equity $ 189,697 174,008 160,303 138,947 128,787
Capitalization ratio 14.8% 13.2% 17.9% 18.7% 23.6%
Property, plant and
equipment, net $ 99,559 90,515 84,899 72,863 68,290
Net expenditures on
property, plant and equipment $ 24,642 15,005 15,538 16,208 16,055
Depreciation and amortization $ 16,365 14,752 14,047 12,187 10,857
SHAREHOLDER INFORMATION
Net earnings per share $ 1.17(1) 1.01 .92 .84 .73
Dividends per share $ .25 .20 .19 .14 .13
Shareholders' equity per share $ 7.16 6.38 5.81 5.01 4.46
Shares outstanding (000s) 26,510 27,282 27,569 27,739 28,864
Common stock price
range, per share
High $ 26 1/8 20 1/8 15 7/8 13 3/8 11 5/8
Low $ 18 1/4 14 11 5/8 8 1/8 5 5/8
Amounts are adjusted for all stock splits.
Operating income is gross margin less selling, general and administrative, and
research and development expense.
Return on investment is net earnings divided by average long-term debt plus
average shareholders' equity.
Capitalization ratio is total debt divided by total debt plus shareholders'
equity.
(1) Excludes the cumulative effect of an accounting change of $2,206, or $.08
per share, in 1994 and extraordinary credits of $1,384, or $.05 per share, in
1988 and $1,375, or $.04 per share, in 1987.
MANAGEMENT'S DISCUSSION AND ANALYSIS
FINANCIAL OBJECTIVES
Donaldson Company's primary financial objective is to provide shareholders with
a superior return on investment through a combination of price appreciation and
dividend income. To provide a framework to achieve this objective, management
has established the following internal performance goals:
* Provide consistent sales and earnings per share growth of at least 12 percent
per annum.
* Maintain a dividend payout ratio in line with the long-term, sustainable
growth of net earnings.
* Through effective utilization of resources, earn a return on investment that
exceeds the Company's cost of capital.
* Maintain a rating of at least "A" on the Company's long-term, senior debt.
Compared to these goals, recent performance has been as follows:
1994 1993 5 Years
----- ----- -----
Net Sales 11.3% 10.6% 8.3%
Earnings Per Share(1) 15.8% 9.8% 16.7%
Return on Investment(1) 16.0% 15.0% 15.0%
Dividends Per Share 25.0% 5.3% 15.8%
Long-Term Debt Rating A A A
(1) Excludes cumulative effect of an accounting change.
Sales growth over the last two years has begun to approach the Company's
goal. This growth is primarily unit volume driven, since the Company has not
been able to significantly raise prices on its products during this period.
Acquisitions since 1991 have accounted for about 1 percent of the growth over
the past two years. Earnings per share growth has been above goal over the five
year period, and return on investment has exceeded the Company's cost of
capital, which is currently estimated to be less than 10 percent.
DIVIDENDS
The Company's dividend policy is to maintain a payout ratio which allows
dividends to increase with the long-term growth of earnings per share, while
sustaining dividends in down years. The Company's dividend payout ratio target
is 20 to 25 percent of the average earnings per share of the last three years.
The current quarterly dividend of 7 cents per share equates to 27 percent of the
average of the 1992 through 1994 earnings per share.
Effective with the March payment, the Company announced a 27 percent increase
in its regular quarterly cash dividend to 7 cents per share. This dividend
increase was the fifth since the end of 1989. The dividend has increased 17.2
percent per year during this five year period, slightly in excess of earnings
per share growth.
CAPITAL STRUCTURE
The Company's basic philosophy with regard to leverage is that the proper use of
debt enhances shareholder value. Therefore, the Company will utilize debt as
long as it does not incur undue financial risk or impair its ability to finance
future growth opportunities.
To maintain at least an "A" rating on its long-term, senior debt, the Company
has a targeted capitalization ratio of 20 to 30 percent. As of July 31, 1994,
the Company's capitalization ratio was 14.8 percent compared to 13.2 percent as
of July 31, 1993 and 17.9 percent as of July 31, 1992. In 1994, short-term debt
increased $9.8 million primarily due to the short-term borrowings in the
Company's Belgian Coordination Center. The additional debt was incurred to
provide hedging protection for that entity's foreign exchange denominated
receivables.
Currently, Fitch's maintains "A" ratings for certain of the Company's
long-term debt issues and an "F-1" rating for the Company's commercial paper.
FINANCIAL RESOURCES
The Company has financed most of its growth over the years with internally
generated funds. This trend should continue.
The Company currently has $10.0 million of domestic confirmed lines of
credit. The Company can also borrow domestically under various uncommitted bank
lines of credit. Overseas subsidiaries may borrow under various foreign currency
denominated bank facilities.
As of July 31, 1994, the Company had no outstanding domestic short-term
debt. In 1994, the Company borrowed up to $8.0 million. In 1993 and 1992, the
Company did not borrow. Overseas subsidiary borrowings were as high as $14.1
million in 1994, $6.9 million in 1993 and $6.4 million in 1992.
CASH FLOWS
In 1994, the Company's cash position declined $9.2 million
compared to a $1.0 million increase in 1993 and a $4.0 million decrease in 1992.
Cash flows in 1994 were impacted by a $9.6 million increase in capital
expenditures (See Capital Expenditures), a $14.8 million increase in working
capital and a $7.4 million increase in the Company's stock repurchase program.
These increases were somewhat offset by a $9.1 million increase in the Company's
short-term debt (See Capital Structure).
Excluding cash, working capital increased $14.8 million in 1994. This
compares to a $2.8 million decline in 1993 and a $5.7 million increase in 1992.
The increase in 1994 primarily relates to increased accounts receivable and
inventories offset by increased accounts payable, accrued employee compensation
and accrued diesel particulate trap warranty reserves. The decline in 1993
relates to improved accounts receivable and inventory management; the increase
in 1992 primarily reflects the Company's sales activity during the year.
In 1994, accounts receivable and inventories increased $15.4 million and
$10.0 million, respectively. Days Sales Outstanding (DSO) rose by five days from
65 days to 70 days. The increase in DSO primarily relates to extended terms on
gas turbine filtration sales in Europe and on engine product sales in the Far
East. Inventory turns improved from 5.6 to 6.6 turns during the year.
In 1994, the Company repurchased 835,200 shares of common stock in the open
market at a cost of $17.5 million, or an average cost of $20.90 per share. The
Company repurchased $10.0 million and $7.6 million of its shares in 1993 and
1992, respectively.
In March of this year, the Company's Board of Directors approved an increase
in the existing stock repurchase authorization of 600,000 shares to 1,600,000
shares. Since year end, the Company has not been active in the market and still
has authorization to repurchase an additional 864,400 shares.
CAPITAL EXPENDITURES
Net capital expenditures totaled $24.6 million, $15.0 million and $15.5 million
in 1994, 1993 and 1992, respectively. The increase in 1994 over the planned
expenditures of $19.0 million includes the building of the Rensselaer
distribution center and initial purchases related to the implementation of a new
integrated business information system.
Capital spending in 1995 is planned to be $25.0 million. Significant
expenditures include the expansion of the Company's Stevens Point facility, the
addition of a new production line at the Cresco facility and continued purchases
related to the new integrated business information system. It is anticipated
that the total expenditures will be funded from internal cash flow.
FOREIGN CURRENCY EXPOSURE
To protect the Company's overseas profits from foreign exchange fluctuations,
the Company utilizes flexible pricing, local sourcing and, when appropriate,
hedging. The Company's hedging policy is to cover all material foreign currency
transaction exposures, including sales and purchase commitments. As appropriate,
the Company hedges its current year overseas subsidiary dividends and royalty
payments. The Company has a policy not to hedge its translation, or balance
sheet, exposures.
In 1994, the Company's overseas sales and net earnings were negatively
impacted by foreign exchange fluctuations, and the Company reported $1.3 million
of foreign exchange transaction losses. The losses were almost entirely
attributable to the Company's Brazilian operations for which relevant hedging
strategies were too expensive.
In 1993, the Company's overseas sales and net earnings were favorably
impacted by foreign exchange fluctuations. The Company did, however, report
foreign exchange transaction losses of $1.8 million. These losses primarily
relate to intercompany transactions. For the year, these losses were offset by
favorable purchase price variances in Europe and increased factoring fees in the
Company's Belgian Coordination Center.
FASB ACCOUNTING RULE CHANGE
Effective August 1, 1993, the Company adopted Financial Accounting Standards
Board Statement No. 109, "Accounting for Income Taxes" (FAS 109), which requires
adoption of a liability approach to account for the effects of income taxes. The
cumulative effect of adopting FAS 109 was to increase net earnings by $2.2
million, or 8 cents per share.
When the Company adopted FAS 109, it also changed its accounting for taxes
on the undistributed earnings of its overseas subsidiaries. Beginning in 1994,
the Company no longer accrues U.S. taxes on its overseas undistributed earnings
which are deemed to be indefinitely reinvested. Therefore, the Company's
effective income tax rate reflects the difference between the effective overseas
tax rate compared to the domestic statutory tax rate.
Worldwide Sales By Market
(In millions) 1994 1993 1992
---- ---- ----
Construction $140.0 $120.3 $113.4
Transportation 110.9 92.8 78.6
Agriculture 37.0 31.5 28.6
Aftermarket 84.0 75.0 68.8
Defense 13.7 20.2 25.6
Exhaust Filtration 6.0 12.2 3.7
--- ---- ---
Engine Products $391.6 $352.0 $318.7
====== ====== ======
Dust Collection $ 87.5 $ 84.5 $ 75.3
Gas Turbine Systems 67.5 52.3 41.1
High Purity Products 46.9 44.5 47.0
---- ---- ----
Industrial Products $201.9 $181.3 $163.4
====== ====== ======
Consolidated Net Sales $593.5 $533.3 $482.1
====== ====== ======
1994 COMPARED TO 1993
Consolidated net sales of $593.5 million were up 11 percent from prior year
sales of $533.3 million. For the year, both Engine Products and Industrial
Products sales were up 11 percent.
Domestic sales were up 14 percent, the same as the prior year, with both
Engine and Industrial Products up the same percentage. Diesel engine original
equipment manufacturers (OEM) sales were up 24 percent, with strong growth in
both the construction, industrial, mining and agriculture (CIMA) and
transportation markets. Diesel engine aftermarket sales were up l8 percent.
Defense sales declined 32 percent but have been flat throughout the year.
Exhaust filtration sales reflect the final shipments of diesel particulate traps
in the first half of the year. Industrial Products sales growth was led by gas
turbine filtration sales, up 33 percent. Dust collection sales were up 11
percent. Including the additional sales from ENV Services, Inc., high purity
products sales were up 6 percent year over year.
Overseas sales in 1994 were up 7 percent -- 6 percent in local currencies --
with Engine Products sales up 6 percent and Industrial Products sales up 9
percent. Overseas sales growth was led by a 29 percent increase in gas turbine
filtration sales and a 12 percent increase in diesel engine aftermarket sales.
High purity products sales were up 4 percent, led by a 14 percent increase in
disk drive sales. Due to the continuing economic slowdown in Germany and Japan,
dust collection sales were down 11 percent year over year.
In the year, the Company wrote down certain of its Brazilian capital assets
by $3.2 million. The write down relates to the continuing economic and political
uncertainties in Brazil and the resulting losses being incurred by the Company's
Brazilian operations. The asset impairment was charged to cost of sales.
Total backlogs of $158.4 million were up 21 percent from the prior year end.
Strong increases were reported for diesel engine OEM and dust collection
businesses, both domestic and overseas. After several years of significant
growth, domestic gas turbine systems backlogs declined in 1994. Continuing prior
year trends, defense backlogs again declined in 1994. Hard order backlogs, goods
scheduled for delivery within 90 days, of $106.1 million were up 20 percent
compared to the prior year.
For the year, gross margins declined from 28.5 percent in 1993 to 28.1
percent in 1994. However, excluding the Brazilian capital asset write down,
which was charged to cost of sales, gross margins improved slightly to 28.6
percent. Margins significantly improved in both domestic diesel engine OEM and
aftermarket, with domestic OEM margins up almost 2 percentage points. These
increases were offset by a 2 percentage point decline in gas turbine filtration
margins, which reflects a significant increase in lower margin first fit
production sales.
Operating expenses increased $7.5 million year over year, or 7 percent,
declining from 20.1 percent of sales in 1993 to 19.3 percent of sales in 1994.
For the year, warranty expenses related to the diesel particulate trap increased
$1.3 million to $6.2 million. Excluding the trap warranty expenses, operating
expenses would have been 18.3 percent of sales in 1994 compared to 19.2 percent
in 1993.
Interest expense increased in the year, primarily due to increased borrowings
by the Company's Belgian Coordination Center (See Capital Structure). Other
income of $1.5 million declined $.7 million as the improvement in interest
income was more than offset by an increase in other expense in the overseas
entities. The increase overseas included retirement-related expenses in Japan
and Belgium.
With the adoption of FAS 109 in 1994, comparison of the current year
effective income tax rate of 36.3 percent to prior years is not relevant (See
FASB Accounting Rule Change). The 1994 effective rate is equal to the U.S.
statutory rate plus state income taxes less the tax benefit derived from the
Company's Foreign Sales Corporation. The effective overseas tax rate
approximated the U.S. statutory rate.
In 1994, overseas sales totaled 34 percent of consolidated net sales,
slightly down from 36 percent the prior year. Overseas operating income totaled
50 percent of consolidated operating income, up slightly from 47 percent the
prior year. 1994 overseas results were impacted by $1.7 million of operating
losses in Brazil, while domestic results were negatively impacted by the
recognition of additional accrued warranty expense related to the diesel
particulate trap.
1993 COMPARED TO 1992
Consolidated net sales of $533.3 million were up 11 percent from the prior
year's sales of $482.1 million. For the year, Engine Product sales were up 10
percent and Industrial Products sales were up 11 percent.
Domestic sales were up 14 percent with Engine Products sales up 13 percent.
The Company's sales to diesel engine OEMs rose 16 percent, led by a 27 percent
increase in the transportation market. Defense sales were down 21 percent as
defense procurements have continued to decline since Desert Storm and subsequent
reductions in the defense budget. Industrial Products sales increased 17
percent. Gas turbine filtration sales were up 26 percent and dust collection
sales were up 16 percent. Excluding acquisitions, high purity products sales
were flat year over year.
Overseas sales were up 5 percent in the year -- 2 percent in local currencies
- - -- with Engine Products sales up 6 percent and Industrial Product sales up 2
percent. Gas turbine filtration sales increased 28 percent, diesel engine
aftermarket sales 13 percent, dust collection sales 5 percent and diesel engine
OEM sales 4 percent. High purity products sales declined 28 percent as disk
drive filter sales declined almost 40 percent year over year.
In September 1993, the Company announced it was no longer accepting new
orders for diesel particulate traps. The Company will meet all current order
commitments and warranty obligations.
Total backlogs of $130.9 million were up 1 percent from the prior year. Gas
turbine filtration backlogs were up significantly with strong order flows both
domestically and overseas. Defense and diesel engine OEM backlogs were down year
over year. Hard-order backlogs of $88.2 million were down 1 percent compared to
the prior year.
For the year, gross margins improved to 28.5 percent in 1993 from 27.7
percent in 1992. Year over year, Industrial Products gross margins improved 1.6
percentage points as high purity products margins improved 4.3 percentage points
and gas turbine filtration margins improved 1.6 percentage points. Engine
Products margins declined .4 percentage points. Increases in defense and exhaust
filtration gross margins did not offset a 2.9 percentage point decline in
aftermarket margins as the Company reported significantly lower diesel engine
aftermarket gross margins overseas.
Operating expenses increased $14.7 million year over year, or 16 percent,
increasing from 19.2 percent of sales in 1992 to 20.1 percent of sales in 1993.
The increases were primarily related to increased marketing and warranty
expenses for the diesel particulate trap. For the year, trap warranty expenses
of $4.8 million were $2.8 million more than in 1992. Excluding the warranty
expenses, operating expenses would have been 19.2 percent of sales in 1993 and
18.7 percent of sales in 1992.
Other income declined to $2.2 million in 1993 from $3.2 million in 1992.
Profitability improvement at AFSI was offset by foreign exchange losses and
lower interest income due to declining interest rates. Interest expense was
unchanged year over year.
The Company's effective income tax rate declined from 38.2 percent in 1992
to 36.9 percent in 1993. The decline related to continued profit improvement at
AFSI, whose income is basically untaxed due to tax loss carryforwards, and
reduced profitability in Germany and Japan, the Company's two highest tax rate
subsidiaries.
In 1993, overseas sales totaled 36 percent of consolidated net sales,
slightly down from 38 percent the prior year. Overseas operating income totaled
47 percent of consolidated operating income, down significantly from 58 percent
the prior year. Results in 1993 were impacted by recessions in Europe and Japan
and $1.9 million of operating losses reported in Brazil.
Consolidated Statements of Earnings
Donaldson Company, Inc. and Subsidiaries
Year ended July 31
(Thousands of dollars except per share amounts) 1994 1993 1992
----------- ----------- -----------
Net sales $ 593,503 $ 533,327 $ 482,104
Cost of sales 426,904 381,091 348,530
------- ------- -------
Gross Margin 166,599 152,236 133,574
Selling, general and administrative 103,647 95,626 82,002
Research and development 10,873 11,364 10,323
Interest expense 3,362 2,723 2,681
Other (income) (1,476) (2,159) (3,153)
------ ------ ------
Total Expenses 116,406 107,554 91,853
------- ------- ------
Earnings Before Income Taxes 50,193 44,682 41,721
Income taxes 18,244 16,468 15,952
------ ------ ------
Earnings Before Cumulative Effect
of Accounting Change 31,949 28,214 25,769
Cumulative effect of accounting change 2,206 -- --
------ ------ ------
Net Earnings $ 34,155 $ 28,214 $ 25,769
=========== =========== ===========
Earnings per share
Earnings before cumulative effect of accounting change $ 1.17 $ 1.01 $ .92
Cumulative effect of accounting change .08 -- --
------ ------ ------
Net Earnings Per Share $ 1.25 $ 1.01 $ .92
=========== =========== ===========
See notes to consolidated financial statements.
Consolidated Statements of Financial Position
Donaldson Company, Inc. and Subsidiaries
July 31
(Thousands of dollars) 1994 1993
----------- -----------
Assets
Current Assets
Cash and cash equivalents $ 22,945 $ 32,110
Accounts receivable, net 122,167 103,320
Inventories
Materials 27,430 23,248
Work in process 8,521 7,615
Finished products 24,294 18,062
------ ------
Total Inventories 60,245 48,925
Prepaids and other 14,951 11,659
------ ------
Total Current Assets 220,308 196,014
Property, Plant and Equipment
Land 6,298 5,962
Buildings 81,683 74,742
Machinery and equipment 166,666 148,790
Construction in progress 4,276 4,353
----- -----
Property, Plant and Equipment, at Cost 258,923 233,847
Less accumulated depreciation 159,364 143,332
------- -------
Property, Plant and Equipment, Net 99,559 90,515
Other Assets 17,493 13,688
------ ------
Total Assets $ 337,360 $ 300,217
=========== ===========
Liabilities and Shareholders' Equity
Current Liabilities
Short-term debt $ 14,073 $ 4,238
Current maturities of long-term debt 2,883 3,357
Trade accounts payable 44,541 38,235
Accrued employee compensation and related taxes 19,755 16,799
Income taxes payable 3,195 4,983
Other current liabilities 31,310 26,054
------ ------
Total Current Liabilities 115,757 93,666
Long-Term Debt 16,028 18,920
Deferred Income Taxes 2,248 2,060
Other Long-Term Liabilities 13,630 11,563
Shareholders' Equity
Preferred stock, $1.00 par value,
1,000,000 shares authorized, no shares issued -- --
Common stock, $5.00 par value, 40,000,000 shares
authorized, 27,063,407 and 13,927,274 issued in 1994 and 1993 135,317 69,636
Capital surplus -- 1,284
Retained earnings 65,654 117,293
Cumulative translation adjustments 8,244 5,646
Treasury common stock--552,951 and 286,205
shares in 1994 and 1993, at cost (11,853) (9,876)
Receivable from ESOP (7,665) (9,975)
------ ------
Total Shareholders' Equity 189,697 174,008
------- -------
Total Liabilities and Shareholders' Equity $ 337,360 $ 300,217
=========== ===========
See notes to consolidated financial statements.
Consolidated Statements of Cash Flows
Donaldson Company, Inc. and Subsidiaries
Year ended July 31
(Thousands of dollars) 1994 1993 1992
Operating Activities
Net earnings $ 34,155 $ 28,214 $ 25,769
Adjustments to reconcile net earnings to
net cash provided by operating activities
Depreciation and amortization 16,365 14,752 14,047
Cumulative effect of accounting change (2,206) -- --
Brazilian asset write down 3,200 -- --
Equity in earnings of affiliates (3,743) (3,498) (1,880)
Deferred taxes (2,844) 657 (446)
Other 1,235 (309) (770)
Changes in operating assets and liabilities
Accounts receivable (15,380) (2,687) (7,249)
Inventories (10,029) (4,337) (3,391)
Prepaids and other current assets (1,315) (1,365) 2,524
Accounts payable, accruals
and income taxes payable 11,945 11,155 2,425
------ ------ -----
Net Cash Provided by Operating Activities 31,383 42,582 31,029
Investing Activities
Net expenditures on property, plant and equipment (24,642) (15,005) (15,538)
Acquisitions and investments in affiliates (6,437) (10,451) (6,607)
Proceeds from disposition of Envirco -- 2,782 --
Dividends from affiliate 3,550 4,250 --
------ ------ -----
Net Cash Used in
Investing Activities (27,529) (18,424) (22,145)
Financing Activities
Repayment of long-term debt (3,416) (5,681) (2,829)
Net change in short-term debt 9,098 (1,766) 1,033
Payment received from ESOP 2,310 2,100 1,995
Purchase of common stock (17,471) (10,044) (7,635)
Dividends paid (6,745) (5,666) (5,230)
Exercise of stock options (148) (3,143) (1,631)
---- ------ ------
Net Cash Used in
Financing Activities (16,372) (24,200) (14,297)
Effect of exchange rate changes on cash 3,353 1,056 1,416
----- ----- -----
(Decrease) Increase in Cash and
Cash Equivalents (9,165) 1,014 (3,997)
Cash and cash equivalents at beginning of year 32,110 31,096 35,093
------ ------ ------
Cash and Cash Equivalents at
End of Year $ 22,945 $ 32,110 $ 31,096
=========== =========== ===========
See notes to consolidated financial statements.
Consolidated Statements of Changes in Shareholders' Equity
Donaldson Company, Inc. and Subsidiaries
Cumulative Treasury Total
(Thousands of dollars Common Capital Retained Translation Common Receivable Shareholders'
except per share amounts) Stock Surplus Earnings Adjustments Stock from ESOP Equity
Balance July 31, 1991 $ 48,205 $ 1,849 $ 114,547 $ 1,114 $ (12,698) $ (14,070) $ 138,947
--------- --------- --------- --------- --------- --------- ---------
Treasury stock acquired (7,635) (7,635)
Stock options exercised 281 (416) (3,779) 2,283 (1,631)
Payment received from ESOP 1,995 1,995
Performance awards (1,285) 223 1,106 44
Tax reduction--employee plans 2,349 2,349
Net earnings 25,769 25,769
Translation adjustments 5,709 5,709
Three-for-two stock split 20,436 (674) (36,720) 16,944 (14)
Dividends paid--$.19 per share (5,230) (5,230)
--------- --------- --------- --------- --------- --------- ---------
Balance July 31, 1992 68,922 1,823 94,810 6,823 -- (12,075) 160,303
--------- --------- --------- --------- --------- --------- ---------
Treasury stock acquired (10,044) (10,044)
Stock options exercised 714 (3,951) (67) 161 (3,143)
Payment received from ESOP 2,100 2,100
Performance awards 2 7 9
Tax reduction--employee plans 3,412 3,412
Net earnings 28,214 28,214
Translation adjustments (1,177) (1,177)
Dividends paid--$.20 per share (5,666) (5,666)
--------- --------- --------- --------- --------- --------- ---------
Balance July 31, 1993 69,636 1,284 117,293 5,646 (9,876) (9,975) 174,008
--------- --------- --------- --------- --------- --------- ---------
Treasury stock acquired (17,471) (17,471)
Stock options exercised 10 176 (1,429) 1,095 (148)
Payment received from ESOP 2,310 2,310
Performance awards 28 2 14 44
Tax reduction--employee plans 946 946
Net earnings 34,155 34,155
Translation adjustments 2,598 2,598
Two-for-one stock split 65,671 (2,434) (77,622) 14,385 --
Dividends paid--$.25 per share (6,745) (6,745)
--------- --------- --------- --------- --------- --------- ---------
Balance July 31, 1994 $ 135,317 $ -- $ 65,654 $ 8,244 $ (11,853) $ (7,665) $ 189,697
=== ==== ========= ========= ========= ========= ========= ========= =========
See notes to consolidated financial statements.
NOTE A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation: The consolidated financial statements include the
accounts of Donaldson Company, Inc. and all majority-owned subsidiaries. All
significant intercompany accounts and transactions have been eliminated. The
accounts of overseas subsidiaries are included for fiscal years ended June 30.
Certain amounts in prior periods have been reclassified to conform to the
current presentation.
Foreign Currency Translation: Foreign assets and liabilities are generally
translated using the year-end rates of exchange. Results of operations are
translated using the average rates prevailing throughout the period. Translation
gains or losses, net of applicable deferred taxes, are accumulated as a separate
component of shareholders' equity. Foreign currency transaction (losses)/gains
of $(1,337,000), $(1,790,000) and $918,000, in 1994, 1993 and 1992,
respectively, are included in earnings before income taxes.
Cash Equivalents: The Company considers all highly liquid investments with a
maturity of 90 days or less when purchased to be cash equivalents. Cash
equivalents are carried at cost which approximates market value.
Inventories: Inventories are stated at the lower of cost or market, determined
by the last-in, first-out (LIFO) method, except for certain of the Company's
overseas subsidiaries which use the first-in, first-out (FIFO) method.
Inventories valued at LIFO were 60 and 63 percent of total inventories at July
31, 1994 and 1993, respectively.
The current cost of inventories valued under the LIFO method exceeded their
LIFO carrying values by $18,635,000 and $18,172,000 at July 31, 1994 and 1993,
respectively.
Property, Plant and Equipment: Property, plant and equipment is stated at cost.
Depreciation is computed principally by use of declining balance methods on
facilities and equipment acquired on or prior to July 31, 1992. For financial
reporting purposes, the Company adopted the straight line depreciation method
for all property acquired after July 31, 1992. The effect of the change was not
material to the 1993 financial results. Depreciation expense includes the
amortization of capital lease assets.
The estimated useful lives of property, plant and equipment are as follows:
Buildings 10 to 40 years
Machinery and Equipment 3 to 10 years
Income Taxes: Income taxes are provided based on earnings reported for financial
statement purposes. The provision for income taxes differs from the amounts
currently payable because of temporary differences in the recognition of certain
assets and liabilities for financial reporting and tax reporting purposes.
Deferred taxes are recorded based on enacted tax laws and tax rates. Changes in
enacted tax rates are reflected in the income tax provision as they occur.
Effective August 1, 1993, the Company adopted Financial Accounting Standards
Board Statement No. 109, "Accounting for Income Taxes" (FAS 109). As permitted
under the new Statement, prior years' financial statements have not been
restated. Income taxes in 1993 and 1992 were computed using the deferred method.
Net Earnings Per Share: Net earnings per common share is based on the weighted
average number of common shares and share equivalents outstanding during the
respective years.
Treasury Common Stock: Repurchased Common Stock is
stated at cost and is presented as a separate reduction of shareholders' equity.
NOTE B ACQUISITIONS AND INVESTMENTS
During 1994, the Company increased its investment in Donaldson Micro Pore
Mexico, S.A. de C.V. from 40 percent to 50 percent, obtained a 40 percent
interest in an Australian dust collection distributor, invested in a gas turbine
system joint venture in India, created a dust collection subsidiary in Mexico
and completed an acquisition of a high purity products materials supplier
located in the United States.
During 1993, the Company completed two acquisitions. On September 24, 1992,
Donaldson do Brasil, Ltda., acquired all of the common stock of Filtrobras-Roma
Filtros Automotivos Ltda. (Roma), a liquid filtration manufacturer located in
Sao Paulo, Brazil. On December 28, 1992, the Company purchased all of the common
stock of ENV Services, Inc. (ENV), an air quality testing and monitoring service
firm located in Philadelphia, Pennsylvania. In connection with the ENV
acquisition, the Company also purchased the Envirco Division of Environmental
Air Control, Inc. with the intent to sell the business. On February 12, 1993,
the divestiture was completed.
During 1992, the Company completed two acquisitions. On November 25, 1991,
Donaldson Europe, N.V., acquired all of the common stock of Gimetal N.V., a
sheet metal vendor located in Gistel, Belgium. On May 19, 1992, Donaldson Italia
s.r.l. acquired all of the common stock of FBO s.r.l., a hydraulic filter
manufacturer located in Ostiglia, Italy.
All acquisitions have been accounted for as purchases and, accordingly, their
net assets and operating results are included in the Company's financial
statements from the respective dates of acquisition. The pro forma impact of the
acquisitions on the Company's results of operations for all years presented was
not material.
NOTE C SHORT-TERM DEBT
The Company has domestic lines of credit at July 31, 1994 of $10,000,000 which
provide for borrowing amounts at or below the prime rate. Commitment fees of 20
basis points per annum are payable on the unused amounts. There were no amounts
outstanding under these lines of credit at July 31, 1994 or 1993.
Overseas subsidiaries may borrow under various uncommitted facilities. As of
July 31, 1994 and 1993, borrowings under these facilities were $14,073,000 and
$4,238,000, respectively.
NOTE D LONG-TERM DEBT
Long-term debt consists of the following:
(Thousands of dollars) 1994 1993
---- ----
ESOP promissory note due in increasing
annual installments through 1997. Interest
rate is either 82 percent of prime or
91 percent of the adjusted CD rate $ 7,665 $ 9,975
6 3/8 percent mortgage due 2002 1,000 1,000
7 percent note due in 2008 500 1,000
11 1/8 percent note due
in five annual installments
of $670 beginning 2008 3,350 3,350
Other 519 650
--- ---
Total Notes 13,034 15,975
Capitalized leases 5,877 6,302
----- -----
Total 18,911 22,277
Less current maturities 2,883 3,357
----- -----
Total Long-Term Debt $16,028 $18,920
======= =======
Annual maturities of long-term debt for the next five years are $2,883 in 1995,
$2,988 in 1996, $3,213 in 1997, $516 in 1998 and $492 in 1999.
Total interest paid relating to all debt was $2,906,000, $2,577,000 and
$2,616,000 in 1994, 1993 and 1992, respectively.
Certain note agreements contain debt covenants related to working capital
levels and limitation on indebtedness. Further, the Company is restricted from
paying dividends or repurchasing Common Stock if its tangible net worth (as
defined) does not exceed certain minimum levels. At July 31, 1994, under the
most restrictive agreement, tangible net worth exceeded the minimum by
$66,790,000.
NOTE E CAPITALIZED LEASES
The Company leases several production facilities under long-term leases and has
the option to purchase the facilities for a nominal cost at the termination of
the lease.
Included in property, plant and equipment are the following assets held under
capital leases:
(Thousands of dollars) 1994 1993
---- ----
Land $ 242 $ 242
Buildings 11,081 11,081
Machinery and equipment 2,356 2,356
----- -----
Subtotal 13,679 13,679
Less accumulated amortization 7,283 7,034
----- -----
Total $ 6,396 $6,645
======= ======
Future minimum lease payments for assets under capital leases at July 31, 1994
are as follows:
(Thousands of dollars)
1995 $ 844
1996 838
1997 839
1998 839
1999 790
Thereafter 4,900
-----
Total minimum lease payments 9,050
Less amount representing interest 3,173
-----
Present value of net minimum lease payments 5,877
Less current maturities 347
---
Long-Term Obligation $5,530
======
NOTE F EMPLOYEE BENEFIT PLANS
Pension Plans: Donaldson Company, Inc. and certain of its subsidiaries have
defined benefit pension plans for substantially all hourly and salaried
employees. The domestic plans provide benefits based on the employee's years of
service and compensation during the years immediately preceding retirement. The
overseas plans generally provide similar types of benefits.
The Company's general funding policy is to make contributions as required by
applicable regulations. The assets are primarily invested in diversified
portfolios comprised of equity and debt securities.
Cost for the Company's pension plans includes the following components:
(Thousands of dollars) 1994 1993 1992
---- ---- ----
Service cost $ 4,187 $ 3,769 $ 3,371
Interest cost on projected
benefit obligation 5,504 5,050 4,624
Actual return on plan assets (3,608) (7,310) (5,160)
Net amortization and deferral (3,015) 1,178 (680)
------ ----- ----
Net Periodic Pension Expense $ 3,068 $ 2,687 $ 2,155
======= ======= =======
The funded status of the Company's pension plans as of July 31, 1994 and 1993,
is as follows:
(Thousands of dollars) 1994 1993
---- ----
Plan assets at fair value $ 69,313 $ 65,414
Accumulated benefit obligation:
Vested (55,710) (50,262)
Nonvested (2,201) (1,976)
Provision for future salary increases (15,206) (13,382)
------- -------
Plan assets less than projected
benefit obligation (3,804) (206)
Unrecognized net loss 5,684 3,718
Unrecognized prior service cost 1,721 3,616
Unrecognized net transition asset (7,133) (11,446)
------ -------
Accrued Pension Liability $ (3,532) $ (4,318)
======== ========
Assumptions used to develop pension data were:
1994 1993 1992
---- ---- ----
Discount rate 8.0% 8.0% 8.5%
Rate of compensation increases 5.5% 5.5% 6.5%
Expected long-term rate of return 9.0% 9.0% 9.0%
Employee Stock Ownership Plan: In 1987, the Company established an Employee
Stock Ownership Plan (ESOP) for eligible U.S. employees. The ESOP borrowed $21
million from the Company to purchase newly issued shares of Common Stock. The
loan obligation of the ESOP is considered unearned employee benefit expense and,
as such, is recorded as a reduction of the Company's shareholders' equity. The
Company's contributions to the ESOP, plus dividends paid on unallocated Common
Stock held by the ESOP, are used to repay the loan principal and interest. Both
the loan obligation and the unearned benefit expense are reduced by the amount
of loan principal repayments made by the ESOP. The ESOP contribution expense
totaled $2,020,000, $1,745,000 and $1,590,000 in 1994, 1993 and 1992,
respectively.
NOTE G EMPLOYEE INCENTIVE PLANS
In November 1991, shareholders approved the 1991 Master Stock Compensation Plan.
The Plan extends through December 2001 and allows for the granting of
nonqualified stock options, incentive stock options, restricted stock, stock
appreciation rights (SARs), dividend equivalents, dollar-denominated awards and
other stock-based awards.
The 1980 Master Stock Compensation Plan allows for the granting of
nonqualified stock options and incentive stock options.
Both plans allow for the granting of performance awards to a limited number
of key executives. The awards are payable in Common Stock and are based on a
formula which measures performance of the Company over a three year period.
Performance award expense totaled $57,000, $19,000 and $14,000 in 1994, 1993 and
1992, respectively.
Options under both Plans are granted to key employees at or above 100 percent
of the market price at the date of grant. Options are exercisable for up to 10
years from the date of grant.
The number and option price of options granted under these plans were as
follows:
Options Option Price
Outstanding Per Share
----------- ----------------
Outstanding at July 31, 1992 1,595,738 $ 4.62 / $14.56
Exercised (922,812) 4.62 / 12.54
Granted 784,786 17.81 / 18.56
------- ----- -----
Outstanding at July 31, 1993 1,457,712 4.62 / 18.56
Cancelled (750) 12.54
Exercised (212,446) 4.62 / 18.06
Granted 330,330 18.87 / 23.56
------- ----- -----
Outstanding at July 31, 1994 1,574,846 $ 4.62 / $23.56
========= ======= ======
At July 31, 1994 and 1993 there were 1,459,910 and 1,319,224 options
exercisable, respectively. Shares reserved for future grants at July 31, 1994
were 1,072,144.
NOTE H INCOME TAXES
Effective August 1, 1993, the Company changed its method of accounting for
income taxes to comply with Financial Accounting Standards Board Statement No.
109, "Accounting for Income Taxes" (FAS 109). The new Statement requires a
liability approach for computing income taxes. As permitted under the new
Statement, prior years' financial statements have not been restated. The
cumulative effect of adopting FAS 109 was to increase net earnings by $2,206,000
($.08 per share).
The components of earnings before income taxes are as follows:
(Thousands of dollars) 1994 1993 1992
---- ---- ----
United States $37,781 $33,474 $25,110
Overseas 12,412 11,208 16,611
------ ------ ------
Total $50,193 $44,682 $41,721
======= ======= =======
The components of the provision for income taxes are as follows:
(Thousands of dollars) 1994 1993 1992
---- ---- ----
Current:
Federal $12,897 $ 9,271 $ 8,191
State 1,536 1,438 1,267
Overseas 6,655 5,102 6,940
----- ----- -----
Total Current 21,088 15,811 16,398
------ ------ ------
Deferred:
Federal (2,353) 95 (816)
State (202) -- --
Overseas (289) 562 370
---- --- ---
Total Deferred (2,844) 657 (446)
------ --- ----
Total Income Taxes $18,244 $16,468 $15,952
======= ======= =======
Significant components of deferred tax assets and liabilities at July 31, 1994
are as follows:
(Thousands of dollars)
Deferred Tax Assets:
Compensation and retirement plans $ 5,417
Accrued expenses 5,372
Brazilian asset write down 1,216
Tax loss and tax credit carryforwards 273
Other 5,449
-----
Gross Deferred Tax Assets 17,727
------
Deferred Tax Liabilities:
Depreciation and amortization (4,895)
Cumulative translation adjustment (4,440)
Other (2,262)
------
Gross Deferred Tax Liabilities (11,597)
-------
Net Deferred Tax Assets $ 6,130
=========
The components of the provision for deferred income taxes for 1993 and 1992 are
as follows:
(Thousands of dollars) 1993 1992
---- ----
Accrued expenses $ 220 $(693)
Depreciation and amortization 1,049 122
Compensation and retirement plans (509) (352)
Other (103) 477
---- ---
Deferred Income Tax Expense $ 657 $(446)
====== =====
A reconciliation of the statutory U.S. federal income tax rate to the effective
income tax rate is as follows:
1994 1993 1992
---- ---- ----
Statutory U.S. federal rate 35.0% 34.0% 34.0%
State income taxes 2.0 2.1 2.0
Effect of overseas operations (.2) 1.7 3.7
Earnings of affiliates (.7) (2.0) (1.6)
Tax credits -- (.4) (.4)
Other .2 1.5 .5
-- -- --
Effective Income Tax Rate 36.3% 36.9% 38.2%
==== ==== ====
At July 31, 1994, certain overseas subsidiaries had available net operating loss
carryforwards of approximately $662,000, which may be used indefinitely to
offset future taxable income. Unremitted earnings of overseas subsidiaries
amounted to approximately $51,100,000 at July 31, 1994. Those earnings are
intended to be indefinitely reinvested and, accordingly, no income taxes have
been provided. If a portion were to be remitted, income tax credits would
substantially offset any resulting tax liability. It is not practicable to
estimate the amount of unrecognized taxes on these undistributed earnings due to
the complexity of the computation.
The Company made cash payments for income taxes of $20,557,000, $6,875,000,
and $16,233,000 in 1994, 1993 and 1992, respectively.
NOTE I SHAREHOLDERS' EQUITY
On January 21, 1994, the Company's Board of Directors authorized a two-for-one
stock split effected in the form of a 100 percent stock dividend, payable April
6, 1994 to shareholders of record March 16. The split resulted in the issuance
of 13,134,162 new shares of Common Stock and the reissuance of 396,556 shares of
Common Stock held in treasury. On May 20, 1992, the Company's Board of Directors
authorized a three-for-two stock split effected in the form of a stock dividend,
payable July 10, 1992 to shareholders of record June 19. The split resulted in
the issuance of 8,174,294 new shares of Common Stock and the reissuance of
979,644 shares of Common Stock held in treasury. All references in the financial
statements to average numbers of shares outstanding and related prices, per
share amounts, and Stock Option Plan data have been restated to reflect the
splits.
Non-voting rights, authorized by the Board of Directors, were distributed as
a dividend to stockholders of record as of March 4, 1986 at the rate of one
right for each outstanding share of Common Stock. As a result of the two-for-one
stock split of the Company's Common Stock, effective May 2, 1988, and the
three-for-two and the two-for-one stock splits discussed above, the rights
associated with each share of Common Stock have been proportionately adjusted so
that each share of Common Stock is now accompanied by one-sixth of a right
instead of a full right. Under certain conditions, each full right may be
exercised to purchase one one-hundredth of a newly issued share of Series A
Junior Participating Preferred Stock at an exercise price of $85.
Generally, except for acquisitions of Common Stock pursuant to a tender or
exchange offer found to be fair to shareholders by the Company's independent
directors, the rights become exercisable if a person or group acquires
beneficial ownership of 15 percent or more of the Common Stock or commences a
tender or exchange offer the consummation of which would result in such person
or group beneficially owning 15 percent or more of the Common Stock.
If any person becomes the beneficial owner of 15 percent or more of the
Common Stock, or the Company is the surviving corporation in a merger with a 15
percent-or-more stockholder and its Common Stock is not changed, or a 15
percent-or-more stockholder engages in certain self-dealing transactions with
the Company, each right not held by such person or related parties will entitle
its holder to purchase shares of Company Common Stock having a value of twice
the right's then current exercise price. If after a person or group acquires
beneficial ownership of 15 percent or more of the Common Stock or the Company is
acquired in a merger or business combination, each right may be exercised to
purchase common stock of the surviving company having a value of twice the
right's then current exercise price.
The rights, which expire March 4, 1996, may be redeemed by the Company at 10
cents per right at any time until 15 days following a public announcement that a
15 percent position has been acquired.
NOTE J SEGMENT INFORMATION
The Company has one business segment which consists of the design,
manufacture and sale of filtration products. The table below sets forth
information about operations in different geographic areas:
United Other
(Thousands of dollars) States Europe Japan Countries Eliminations Consolidated
1994
Sales to customers $391,234 $ 87,945 $70,981 $43,343 $ -- $593,503
Sales between geographic areas 21,839 496 1,911 1,502 (25,748) --
-------- -------- ------- ------- -------- --------
Net Sales $413,073 $ 88,441 $72,892 $44,845 $(25,748) $593,503
======== ======== ======= ======= ======== ========
Operating Income $ 26,112 $ 11,510 $ 8,175 $ 6,446 $ (164) $ 52,079
======== ======== ======= ======= ======== ========
Identifiable Assets
Accounts receivable, net $ 60,179 $ 26,408 $27,768 $ 7,462 $ 350 $122,167
Other 88,858 84,280 29,173 17,978 (37,793) 182,496
-------- -------- ------- ------- -------- --------
Total identifiable assets $149,037 $110,688 $56,941 $25,440 $(37,443) $304,663
General corporate assets 32,697
-------- -------- ------- ------- -------- --------
Total Assets $337,360
======== ======== ======= ======= ======== ========
1993
Sales to customers $342,890 $ 81,305 $64,378 $44,754 $ -- $533,327
Sales between geographic areas 18,909 567 1,453 366 (21,295) --
-------- -------- ------- ------- -------- --------
Net Sales $361,799 $ 81,872 $65,831 $45,120 $(21,295) $533,327
======== ======== ======= ======= ======== ========
Operating Income $ 23,754 $ 7,659 $ 7,352 $ 6,427 $ 54 $ 45,246
======== ======== ======= ======= ======== ========
Identifiable Assets
Accounts receivable, net $ 45,244 $ 22,878 $24,920 $ 9,969 $ 309 $103,320
Other 77,341 62,646 29,095 19,922 (36,302) 152,702
-------- -------- ------- ------- -------- --------
Total identifiable assets $122,585 $ 85,524 $54,015 $29,891 $(35,993) $256,022
General corporate assets 44,195
-------- -------- ------- ------- -------- --------
Total Assets $300,217
======== ======== ======= ======= ======== ========
1992
Sales to customers $300,359 $ 74,959 $65,785 $41,001 $ -- $482,104
Sales between geographic areas 18,430 987 985 447 (20,849) --
-------- -------- ------- ------- -------- --------
Net Sales $318,789 $ 75,946 $66,770 $41,448 $(20,849) $482,104
======== ======== ======= ======= ======== ========
Operating Income $ 17,151 $ 9,031 $ 7,834 $ 7,245 $ (12) $ 41,249
======== ======== ======= ======= ======== ========
Identifiable Assets
Accounts receivable, net $ 44,296 $ 22,405 $24,320 $ 8,118 $ -- $ 99,139
Other 73,763 62,606 27,266 16,305 (26,692) 153,248
-------- -------- ------- ------- -------- --------
Total identifiable assets $118,059 $ 85,011 $51,586 $24,423 $(26,692) $252,387
General corporate assets 33,961
-------- -------- ------- ------- -------- --------
Total Assets $286,348
======== ======== ======= ======= ======== ========
Sales between geographic areas are made at cost plus a proportionate share of
operating profit. General corporate assets include corporate cash and cash
equivalents and buildings and equipment used for corporate purposes. Sales to
one customer amounted to $69,107,000, $55,616,000 and $49,337,000 in 1994, 1993
and 1992, respectively.
Report of Independent Auditors
Shareholders and Board of Directors
Donaldson Company, Inc.
We have audited the accompanying consolidated statements of financial position
of Donaldson Company, Inc. and subsidiaries as of July 31, 1994 and 1993, and
the related consolidated statements of earnings, changes in shareholders' equity
and cash flows for each of the three years in the period ended July 31, 1994.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Donaldson Company,
Inc. and subsidiaries at July 31, 1994 and 1993, and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended July 31, 1994, in conformity with generally accepted accounting
principles.
As discussed in Note H, in 1994 the Company changed its method of accounting
for income taxes.
/s/ Ernst & Young LLP
Minneapolis, Minnesota
September 9, 1994
Shareholder Information
Donaldson Company, Inc. and Subsidiaries
Quarterly Financial Information (Unaudited)
(Thousands of dollars Net Gross Net Earnings Dividends
except per share amounts) Sales Margin Earnings Per Share Per Share
1994
First Quarter $142,51 8 $ 40,536 $ 7,561 $ .27 $ .05
9,767(1) .35(1)
Second Quarter 135,577 37,904 6,238 .23 .06
Third Quarter 153,930 42,137 9,709 .36 .07
Fourth Quarter 161,478 46,022 8,441 .31 .07
1993
First Quarter $125,678 $ 36,200 $ 6,295 $ .23 $ .05
Second Quarter 125,047 33,532 5,222 .18 .05
Third Quarter 133,411 37,462 7,684 .28 .05
Fourth Quarter 149,191 45,042 9,013 .32 .05
(1) Includes cumulative effect of an accounting change of $2,206 or $.08 per
share.
All 1994 and 1993 per share amounts have been adjusted for the two-for-one
stock split, effected in the form of a 100% stock dividend.
NYSE LISTING
The common shares of Donaldson Company, Inc. are traded on the New York
Stock Exchange, under the symbol DCI.
SHAREHOLDER INFORMATION
For any concerns relating to your current or prospective shareholdings, please
contact Shareholder Services at (800) 468-9716 or (612) 450-4064.
DIVIDEND REINVESTMENT PLAN
As of July 31, 1994, more than 700 of Donaldson Company's approximately 1,485
shareholders of record were participating in the Dividend Reinvestment Plan.
Under the plan, shareholders can invest Donaldson Company dividends in
additional shares of Company stock. They may also make periodic voluntary cash
investments for the purchase of Company stock.
Both alternatives are provided without service charges or brokerage
commissions. Shareholders may obtain a brochure giving further details by
writing Shareholder Services, Donaldson Company, Inc., M.S. 101, P.O. Box 1299,
Minneapolis, MN 55440.
CORPORATE INFORMATION
ANNUAL MEETING
The annual meeting of shareholders will be held at 10 a.m. on Friday, November
18, in the first floor auditorium of the Lutheran Brotherhood Building, 625
Fourth Avenue South, Minneapolis, Minnesota. You are urged to attend.
10-K REPORTS
Copies of the Report 10-K, filed with the Securities and Exchange Commission,
are available on request from Shareholder Services, Donaldson Company, Inc.,
M.S. 101, P.O. Box 1299, Minneapolis, Minnesota 55440.
AUDITORS Ernst & Young LLP, Minneapolis, Minnesota
GENERAL COUNSEL Dorsey & Whitney, Minneapolis, Minnesota
PATENT COUNSEL Merchant, Gould, Smith, Edell, Welter & Schmidt, Minneapolis,
Minnesota
PUBLIC RELATIONS COUNSEL Padilla Speer Beardsley Inc., Minneapolis, Minnesota
TRANSFER AGENT AND REGISTRAR Norwest Bank Minnesota, N.A., South St. Paul,
Minnesota
WORLD WIDE OPERATIONS
ADMINISTRATION
Donaldson Company, Inc.
Minneapolis, Minnesota
U.S. PLANTS
Cresco, Iowa
Frankfort, Indiana
Oelwein, Iowa
Chillicothe, Missouri
Grinnell, Iowa
Stevens Point, Wisconsin
Nicholasville, Kentucky
Baldwin, Wisconsin
Dixon, Illinois
Philadelphia, Pennsylvania
DISTRIBUTION CENTERS
Rensselaer, Indiana
Ontario, California
Antwerp, Belgium
JOINT VENTURES
Advanced Filtration Systems Inc.,
Champaign, Illinois
Donaldson Micro Pore Mexico,
S.A. de C.V.,
Aguascalientes, Mexico
D.I. Filter Systems Pvt. Ltd.,
New Delhi, India
WHOLLY OWNED SUBSIDIARIES
ENV Services, Inc.,
Philadelphia, Pennsylvania
Donaldson Europe, N.V.,
Leuven, Belgium
Donaldson Coordination Center, N.V.,
Leuven, Belgium
Donaldson Gesellschaft m.b.H.,
Dulmen, Germany
Donaldson Filter Components, Ltd.,
Hull, England
Donaldson Torit, B.V.,
Haarlem, Netherlands
Donaldson France, S.A.,
Bron, France
Donaldson Italia s.r.l.,
Ostiglia, Italy
Nippon Donaldson, Ltd.,
Tokyo, Japan
Donaldson Far East Limited,
Kowloon, Hong Kong
Donaldson Australasia (Pty.) Ltd.,
Wyong, Australia
Donaldson Filtration Systems (Pty.) Ltd.,
Cape Town, South Africa
Donaldson do Brasil, Ltda.,
Sao Paulo, Brazil