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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended July 31, 1995
Commission File Number 1-7891
DONALDSON COMPANY, INC.
(Exact name of registrant as specified in its charter)
Delaware 41-0222640
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1400 West 94th Street, Minneapolis, Minnesota 55431
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (612) 887-3131
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
Common Stock, $5 Par Value New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days. Yes _X_ No ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in part III of this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of the close of business on September 29, 1995 was $604,955,750.
The shares of Common Stock outstanding as of September 29, 1995 were 25,954,964.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the 1995 Annual Report to Shareholders of the registrant: Parts I
and II.
Portions of the Proxy Statement for the 1995 annual shareholders meeting: Part
III.
PART I
Item 1. BUSINESS
GENERAL
Donaldson Company, Inc. ("Donaldson" or the "Company") was founded in 1915
and organized in its present corporate form under the laws of the State of
Delaware in 1936.
The Company is a worldwide manufacturer of air cleaners, liquid filters and
exhaust products and accessories for heavy duty mobile equipment; in-plant air
cleaning systems; air intake systems and exhaust products for industrial gas
turbines; and specialized filters for diverse applications. The Company has one
industry segment which consists of the design, manufacture and sale of products
to filter air, sound and liquid.
The Company's business is not considered to be seasonal. Its principal
products are distributed through multiple channels and primarily sold into these
channels through a direct sales force. Principal methods of competition are
price, geographic coverage, service and product performance. The Company
estimates it has more than 20 competitors in the sale of filtration products and
less than 10 competitors in the sale of acoustical products.
The table below shows the percentage of total net sales contributed by the
principal classes of similar products for each of the last three fiscal years:
Year Ended July 31
1995 1994 1993
Air cleaners, filtration
devices and accessories 67% 67% 68%
Acoustical products 11% 11% 11%
Other 22% 22% 21%
RAW MATERIALS
The Company experienced no significant or unusual problems in the purchase
of raw materials or commodities. Donaldson has more than one source of raw
materials essential to its business. The Company is not required to carry
significant amounts of inventory to meet rapid delivery demands or secure
supplier allotments.
PATENTS AND TRADEMARKS
The Company owns various patents and trademarks which it considers in the
aggregate to constitute a valuable asset. However, it does not regard the
validity of any one patent or trademark as being of material importance.
MAJOR CUSTOMER
Approximately 12.5 percent of the Company's 1995 sales were made to
Caterpillar Inc. and subsidiaries ("Caterpillar"). Caterpillar has been a
customer of the Company for many years and they purchase several models and
types of products for a variety of applications. Sales to the U.S. Government do
not constitute a material portion of the Company's business.
BACKLOG
At August 31, 1995, the backlog of orders expected to be delivered within
90 days was $135,038,000. The backlog at August 31, 1994 was $111,147,000.
RESEARCH AND DEVELOPMENT
During 1995 the Company spent $14,487,000 on research and development
activities relating to the development of new products or improvements of
existing products or manufacturing processes. The Company spent $10,873,000 in
1994 and $11,364,000 in 1993 on research and development activities. Essentially
all commercial research and development is Company sponsored.
ENVIRONMENTAL MATTERS
The Company does not anticipate any material effect on its capital
expenditures, earnings or competitive position due to compliance with government
regulations involving environmental matters.
EMPLOYEES
The Company employed 5,038 persons in worldwide operations as of July 31,
1995.
GEOGRAPHIC AREAS
Note J of the Notes to Consolidated Financial Statements on page 29 in the
1995 Annual Report to Shareholders contains information regarding the Company's
geographic areas and is incorporated herein by reference.
Item 2. PROPERTIES
The Company's principal office and research facilities are located in
Bloomington, a suburb of Minneapolis, Minnesota. European administrative and
engineering offices are located in Leuven, Belgium.
Manufacturing activities are carried on in ten plants in the United States,
two in Japan and one each in Australia, Brazil, United Kingdom, Hong Kong, South
Africa, Italy, Belgium, Mexico, India and Germany. The inside back cover of the
1995 Annual Report to Shareholders lists U.S. plant locations and is
incorporated herein by reference. Note J on page 29 of the 1995 Annual Report to
Shareholders presents identifiable assets by geographic area and is incorporated
herein by reference.
The Company is a lessee under several long-term leases. These leases
provide for options to purchase the facilities at the end of the lease term and
have been capitalized.
The Company's properties are considered to be suitable for their present
purposes, well maintained and in good operating condition.
Item 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings, other than ordinary
routine litigation incidental to the Company's business.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - Not applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT
Current information regarding executive officers is presented below. All
terms of office are for one year. There are no arrangements or understandings
between individual officers and any other person pursuant to which he was
selected as an officer.
First Year Elected
or Appointed as
Name Age Positions and Offices Held an Officer
William A. Hodder 64 Chairman, Chief Executive 1973
Officer and Director
William G. Van Dyke 50 President, Chief Operating 1979
Officer and Director
Erland D. Anderson 54 Vice President, Corporate 1978
Technology
William M. Cook 42 Vice President, Commercial 1994
and Industrial
Edmund C. Craft 55 Vice President, Engine 1985
Aftermarket
James R. Giertz 38 Vice President and Chief 1994
Financial Officer
Nickolas Priadka 49 Vice President, OE Engine 1989
Lowell F. Schwab 47 Vice President, Operations 1994
John E. Thames 45 Vice President, Human Resources 1989
Thomas A. Windfeldt 46 Vice President and Controller 1985
All of the above-named executive officers have held executive or management
positions with Registrant for more than the past five years except Mr. Giertz
who was previously Assistant Treasurer Corporate Finance for General Motors
Corporation (1992) and Treasurer of various subsidiaries of General Motors
Corporation and Mr.Schwab who was previously Vice President and General Manager
of the Machinery Division of Washington Scientific, Inc.
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The information in the sections "NYSE Listing," and "Quarterly Financial
Information (Unaudited)" on page 31, and restrictions on payment of dividends in
Note D, page 25 of the 1995 Annual Report to Shareholders is incorporated herein
by reference. As of September 29, 1995, there were approximately 1,500
shareholders of record of Common Stock.
The high and low sales prices for registrant's common stock for each full
quarterly period during 1995 and 1994 are as follows:
First Second Third Fourth
Quarter Quarter Quarter Quarter
1995 $20 7/8- 26 $20 7/8-24 1/4 $22 1/2-25 3/4 $24 1/8-28
1994 $18 1/4-21 5/8 $20 - 23 3/4 $21 7/8-25 1/4 $20-26 1/8
Item 6. SELECTED FINANCIAL DATA
The information for the years 1991 through 1995 on pages 32 and 33 of the
1995 Annual Report to Shareholders is incorporated herein by reference.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information set forth in the section "Management's Discussion and
Analysis" on pages 17 through 19 of the 1995 Annual Report to Shareholders is
incorporated herein by reference.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements and Notes to Consolidated Financial
Statements on pages 20 through 29, and the Quarterly Financial Information
(Unaudited) on page 31 of the 1995 Annual Report to Shareholders is incorporated
herein by reference.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE - Not applicable.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information under the captions "Nominees For Election" and "Directors
Continuing In Office" on pages 3 and 4 and under the heading "Compliance With
Section 16 (a) of the Securities Exchange Act of 1934" on page 10 of the
Company's definitive proxy statement dated October 16, 1995 is incorporated
herein by reference. Information about the executive officers of the Company is
set forth in Part I of this report.
Item 11. EXECUTIVE COMPENSATION
The information under "Director Compensation" on page 4 and in the section
"Executive Compensation" on pages 5 through 9, the "Pension Plan Table" on page
10 and under the caption "Change-in-Control Arrangements" on page 11 of the
Company's definitive proxy statement dated October 16, 1995, is incorporated
herein by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information in the section "Security Ownership" on pages 1 and 2 of the
Company's definitive proxy statement dated October 16, 1995, is incorporated
herein by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS - Not applicable.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Documents filed with this report:
(1) Financial Statements -
Consolidated Statements of Financial Position--July 31, 1995 and
1994 (incorporated by reference from page 21 of the 1995 Annual
Report to Shareholders)
Consolidated Statements of Earnings--years ended July 31, 1995,
1994 and 1993 (incorporated by reference from page 20 of the 1995
Annual Report to Shareholders)
Consolidated Statements of Cash Flows--years ended July 31, 1995,
1994 and 1993 (incorporated by reference from page 22 of the 1995
Annual Report to Shareholders)
Consolidated Statements of Changes in Shareholders' Equity--years
ended July 31, 1995, 1994 and 1993 (incorporated by reference
from page 23 of the 1995 Annual Report to Shareholders)
Notes to Consolidated Financial Statements (incorporated by
reference from pages 24 through 29 of the 1995 Annual Report to
Shareholders)
Report of Independent Auditors (incorporated by reference from
page 30 of the 1995 Annual Report to Shareholders).
(2) Financial Statement Schedules -
Schedule II Valuation and qualifying accounts
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission
are not required under the related instruction, or are
inapplicable, and therefore have been omitted.
(3) Exhibits
The exhibits listed in the accompanying index are filed as part
of this report or incorporated by reference as indicated therein.
(b) Reports on Form 8-K
No reports on Form 8-K were filed for the three months ended July 31,
1995.
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
DONALDSON COMPANY, INC.
(Registrant)
Date: October 27, 1995 By /s/ Raymond F. Vodovnik
Raymond F. Vodovnik
Vice President-Legal
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the date indicated.
/s/ William A. Hodder Chairman, Chief Executive
William A. Hodder Officer and Director
/s/ James R. Giertz Vice President and Chief
James R. Giertz Financial Officer
/s/ Thomas A. Windfeldt Vice President and Controller
Thomas A. Windfeldt
/s/ William G. Van Dyke President, Chief Operating
William G. Van Dyke Officer and Director
*A. Gary Ames Director
A. Gary Ames
*F. Guillaume Bastiaens Director
F. Guillaume Bastiaens
*Michael R. Bonsignore Director
Michael R. Bonsignore
*Jack W. Eugster Director
Jack W. Eugster
*Kendrick B. Melrose Director
Kendrick B. Melrose
*S. Walter Richey Director
S. Walter Richey
*Stephen W. Sanger Director
Stephen W. Sanger
*G. Angus Wurtele Director
G. Angus Wurtele
*By /s/Raymond F. Vodovnik Date: October 27, 1995
Raymond F. Vodovnik
* As attorney-in-fact
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
DONALDSON COMPANY, INC. AND SUBSIDIARIES
(Thousands of Dollars)
COL. A COL. B COL. C COL. D COL. E
Additions
Balance at Charged to Balance at
Beginning Costs and Charged to End of
Description of Period Expenses Other Accounts Deductions Period
Year ended July 31, 1995:
Allowance for doubtful
accounts deducted from
accounts receivable $3,443 $ 940 $ 111(A) $ (537)(B) $3,957
Year ended July 31, 1994:
Allowance for doubtful
accounts deducted from
accounts receivable $2,802 $ 949 $ 28(A) $ (336)(B) $3,443
Year ended July 31, 1993:
Allowance for doubtful
accounts deducted from
accounts receivable $2,594 $ 409 $(185)(A) $ (16)(B) $2,802
Note A--Foreign currency translation losses (gains) recorded directly to
retained earnings.
Note B--Bad debts charged to allowance, net of recoveries.
EXHIBIT INDEX
ANNUAL REPORT ON FORM 10-K
* 3-A - Certificate of Incorporation of Registrant as
currently in effect (Filed as Exhibit 3-a to 1993
Form 10-K Report)
3-B - By-laws of Registrant as currently in effect
* 4 - **
* 4-A - Preferred Stock Amended and Restated Rights
Agreement (Filed as Exhibit 1 to Form 8-K Report
Dated May 19, 1989)
* 4-B - Credit Agreement among Donaldson Company, Inc.
and certain listed banks dated as of October 8,
1987 (Filed as Exhibit 4-B to 1987 Form 10-K Report)
* 4-C - Copy of First Amendment to Preferred Stock Amended and
Restated Rights Agreement (Filed as Exhibit 1 to Form 8-K
Report Dated September 20, 1991)
10-A - Annual Cash Bonus
* 10-B - Supplementary Retirement Agreement with William A. Hodder
(Filed as Exhibit 10-B to 1993 Form 10-K Report)
* 10-C - 1980 Master Stock Compensation Plan as Amended
(Filed as Exhibit 10-C to 1993 Form 10-K Report)
10-D - Form of Performance Award Agreement under 1991 Master Stock
Compensation Plan
* 10-E - Copy of Phantom Stock Plan (Filed as exhibit 10-E to 1991
Form 10-K Report)
* 10-F - Deferred Compensation Plan for Non-employee Directors as
amended (Filed as Exhibit 10-F to 1990 Form 10-K Report)
* 10-G - Form of "Change in Control" Agreement with key employees as
amended (Filed as Exhibit 10-F to 1990 Form 10-K Report)
10-H - Independent Director Retirement and Benefit Plan as amended
* 10-I - Excess Benefit Plan (Filed as Exhibit 10-I to 1989
Form 10-K Report)
* 10-J - Copy of Supplementary Executive Retirement
Plan (Filed as Exhibit 10-J to 1991 Form 10-K Report)
10-K - 1991 Master Stock Compensation Plan as amended
* 10-L - Form of Restricted Stock Award under 1991 Master Stock
Compensation Plan. (Filed as Exhibit 10-L to 1992 Form
10-K Report)
* 10-M - Form of Agreement to Defer Compensation for certain
Executive Officers (Filed as Exhibit 10-M to 1993 Form 10-K
Report)
10-N - Stock Option Program for Nonemployee Directors as amended
11 - Statement re computation of per share earnings
13 - Portions of Registrant's Annual Report to Shareholders for
the year ended July 31, 1995
21 - Subsidiaries ("Wholly Owned Subsidiaries" and "Joint
Ventures" on the inside back cover of the 1995 Annual Report
to Shareholders is incorporated by reference)
23 - Consent of Independent Auditors
24 - Powers of Attorney
27 - Financial Data Schedule
99 - Annual Report of Employees' Retirement Savings Plan on Form
11-K for year ended July 31, 1995
* Exhibit has heretofore been filed with the Securities and Exchange
Commission and is incorporated herein by reference as an exhibit.
** Pursuant to the provisions of Regulation S-K Item 601(b)(4)(iii)(A) copies
of instruments defining the rights of holders of certain long-term debts of
Registrant and its subsidiaries are not filed and in lieu thereof
Registrant agrees to furnish a copy thereof to the Securities and Exchange
Commission upon request.
Note: Exhibits have been furnished only to the Securities and Exchange
Commission. Copies will be furnished to individuals upon request and payment of
$20 representing Registrant's reasonable expense in furnishing such exhibits.