dci-20241031

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________________________________________________________

FORM 10-Q

_____________________________________________________________

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED OCTOBER 31, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _________________ TO _________________.

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, including zip code)

Registrant’s telephone number, including area code: (952) 887-3131

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $5.00 par value	DCI	New York Stock Exchange

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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

As of December 2, 2024, 119,424,543 shares of the registrant’s common stock, par value $5.00 per share, were outstanding.

PART I. FINANCIAL INFORMATION


Item 1. Financial Statements

DONALDSON COMPANY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(In millions, except per share amounts)

(Unaudited)


	Three Months Ended October 31,
	2024		2023
Net sales	$	900.1	$	846.3
Cost of sales	580.5		545.4
Gross profit	319.6		300.9
Selling, general and administrative	166.1		155.0
Research and development	22.7		21.3
Operating expenses	188.8		176.3
Operating income	130.8		124.6
Interest expense	5.5		5.5
Other income, net	(5.2)		(3.8)
Earnings before income taxes	130.5		122.9
Income taxes	31.5		30.8
Net earnings	$	99.0	$	92.1

Weighted average shares – basic	119.9		120.9
Weighted average shares – diluted	121.9		122.6

Net earnings per share – basic	$	0.83	$	0.76
Net earnings per share – diluted	$	0.81	$	0.75

See Notes to Condensed Consolidated Financial Statements.

DONALDSON COMPANY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

(Unaudited)


	Three Months Ended October 31,
	2024		2023
Net earnings	$	99.0	$	92.1
Other comprehensive income (loss):
Foreign currency translation gain (loss)	4.9		(37.6)
Pension liability adjustment, net of deferred taxes of $0.0 and $(0.2), respectively	0.4		1.0
Derivatives:
(Loss) gain on hedging derivatives, net of deferred taxes of $0.3 and $(0.1), respectively	(1.1)		0.1
Reclassification of hedging derivatives to net earnings, net of taxes of $(0.4) and $(0.2), respectively	1.7		0.7
Total derivatives	0.6		0.8

Net other comprehensive income (loss)	5.9		(35.8)
Comprehensive income	$	104.9	$	56.3

See Notes to Condensed Consolidated Financial Statements.

DONALDSON COMPANY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except share and per share amounts)

(Unaudited)


	October 31, 2024		July 31, 2024
Assets
Current assets:
Cash and cash equivalents	$	221.2	$	232.7

Accounts receivable, less allowances of $6.7 and $6.3, respectively	631.3		629.7
Inventories, net	520.0		476.7
Prepaid expenses and other current assets	106.9		99.0
Total current assets	1,479.4		1,438.1
Property, plant and equipment, net	647.4		645.5

Goodwill	479.9		478.4
Intangible assets, net	168.3		171.9

Other long-term assets	268.6		180.4
Total assets	$	3,043.6	$	2,914.3

Liabilities and Stockholders’ Equity
Current liabilities:
Short-term borrowings	$	78.2	$	28.3
Current maturities of long-term debt	25.0		25.0
Accounts payable	373.5		379.4
Accrued employee compensation and related taxes	135.3		140.9

Deferred revenue	24.8		19.7
Income taxes payable	60.5		42.6
Dividends payable	—		32.5
Other current liabilities	103.3		114.1
Total current liabilities	800.6		782.5
Long-term debt	538.6		483.4
Non-current income taxes payable	40.4		39.8
Deferred income taxes	15.3		16.1

Other long-term liabilities	105.7		103.4
Total liabilities	1,500.6		1,425.2




Stockholders’ equity:
Preferred stock, $1.00 par value, 1,000,000 shares authorized, none issued	—		—
Common stock, $5.00 par value, 240,000,000 shares authorized, 151,643,194 shares issued	758.2		758.2
Additional paid-in capital	32.6		26.8
Retained earnings	2,476.4		2,377.5

Accumulated other comprehensive loss	(193.0)		(198.9)
Treasury stock, 32,165,157 and 31,533,192 shares, respectively, at cost	(1,531.2)		(1,474.5)
Total stockholders’ equity	1,543.0		1,489.1
Total liabilities and stockholders’ equity	$	3,043.6	$	2,914.3

See Notes to Condensed Consolidated Financial Statements.

DONALDSON COMPANY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)


	Three Months Ended October 31,
	2024		2023
Operating Activities
Net earnings	$	99.0	$	92.1
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	25.5		24.3

Deferred income taxes	(4.7)		(4.6)
Stock-based compensation expense	12.2		10.5
Other, net	(2.4)		(0.2)
Changes in operating assets and liabilities	(56.7)		15.9

Net cash provided by operating activities	72.9		138.0

Investing Activities
Purchases of property, plant and equipment	(25.0)		(23.2)
Equity investment	(71.0)		—



Net cash used in investing activities	(96.0)		(23.2)

Financing Activities


Proceeds from long-term debt	55.0		35.0
Repayments of long-term debt	—		(73.8)
Change in short-term borrowings	50.1		41.5

Purchase of treasury stock	(74.4)		(53.3)

Dividends paid	(32.4)		(30.2)
Exercise of stock options and other	11.5		1.9


Net cash provided by (used in) financing activities	9.8		(78.9)
Effect of exchange rate changes on cash	1.8		(5.2)
(Decrease) increase in cash and cash equivalents	(11.5)		30.7
Cash and cash equivalents, beginning of period	232.7		187.1
Cash and cash equivalents, end of period	$	221.2	$	217.8

Supplemental Cash Flow Information

Income taxes paid	$	20.1	$	21.9
Interest paid	$	5.2	$	6.6
Supplemental Disclosure of Non-Cash Operating and Investing Transactions
Accrued property, plant and equipment additions	$	12.1	$	15.9

Leased assets obtained in exchange for new operating lease liabilities	$	12.8	$	4.4

See Notes to Condensed Consolidated Financial Statements.

DONALDSON COMPANY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(In millions)

(Unaudited)


	Three Months Ended October 31, 2024 and 2023
	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Total
Balance as of July 31, 2024	$	758.2	$	26.8	$	2,377.5	$	(198.9)	$	(1,474.5)	$	1,489.1
Net earnings					99.0						99.0
Other comprehensive income							5.9				5.9
Treasury stock acquired									(74.9)		(74.9)
Dividends declared					0.1						0.1
Stock compensation and other activity			5.8		(0.2)				18.2		23.8
Balance as of October 31, 2024	$	758.2	$	32.6	$	2,476.4	$	(193.0)	$	(1,531.2)	$	1,543.0













Balance as of July 31, 2023	$	758.2	$	24.8	$	2,087.8	$	(172.5)	$	(1,377.6)	$	1,320.7
Net earnings					92.1						92.1
Other comprehensive loss							(35.8)				(35.8)
Treasury stock acquired									(53.7)		(53.7)
Dividends declared					0.1						0.1
Stock compensation and other activity			0.8		0.2				11.7		12.7
Balance as of October 31, 2023	$	758.2	$	25.6	$	2,180.2	$	(208.3)	$	(1,419.6)	$	1,336.1

See Notes to Condensed Consolidated Financial Statements.

DONALDSON COMPANY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 1. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements of Donaldson Company, Inc. and its subsidiaries (the Company) have been prepared in accordance with generally accepted accounting principles (GAAP) in the United States (U.S.) and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and notes required for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair statement of earnings, comprehensive income, financial position, cash flows and changes in stockholders’ equity have been included and are of a normal recurring nature. Operating results for the three months ended October 31, 2024 are not necessarily indicative of the results that may be expected for future periods. The year-end Condensed Consolidated Balance Sheet information was derived from the Company’s Audited Consolidated Financial Statements but does not include all disclosures required by GAAP. For further information, refer to the Audited Consolidated Financial Statements and Notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended July 31, 2024.

Principles of Consolidation

The Condensed Consolidated Financial Statements include the accounts of the Company and all its majority-owned subsidiaries. All intercompany accounts and transactions have been eliminated. The Company’s joint ventures are not majority-owned and are accounted for under the equity method.

Use of Estimates

The preparation of the Company’s financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amount of assets and liabilities and the disclosures regarding contingent assets and liabilities at period end and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

New Significant Accounting Standard Recently Adopted

In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement (Topic 820), “Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions,” which clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair values; it also requires additional disclosures, including the nature and remaining duration of such restrictions. The guidance is effective for fiscal years beginning after December 15, 2023, with early application permitted. The Company adopted ASU 2022-03 in the first quarter of fiscal 2025. The adoption did not have an impact on its Condensed Consolidated Financial Statements.

New Significant Accounting Standards Not Yet Adopted

The Company considers the applicability and impact of the FASB’s ASUs issued but not yet adopted.

In December 2023, FASB issued ASU No. 2023-09, Income Taxes (Topic 740), “Improvements to Income Tax Disclosures,” which enhances the transparency and decision usefulness of income tax disclosures. The guidance is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company does not expect adoption of this standard will have a material impact on the related disclosures within its financial statements.

In November 2023, FASB issued ASU No. 2023-07, Segment Reporting (Topic 280), “Improvements to Reportable Segment Disclosures,” which improves the segment disclosures to include reportable segment’s expenses. The guidance is effective for fiscal years beginning after December 15, 2023, with early adoption permitted. This ASU is applicable to annual reporting for the Company’s fiscal 2025 and interim reporting for the first quarter of the Company’s fiscal 2026. The Company will adopt ASU 2023-07 for the annual reporting period ending July 31, 2025 and for interim reporting periods thereafter. The Company does not expect adoption of this standard will have a material impact on the related disclosures within its financial statements,

In October 2023, FASB issued ASU No. 2023-06, "Disclosure Improvements: Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative," which modifies the disclosure or presentation requirements of various FASB topics in the Codification. The effective date for each amendment will be the date on which the SEC's removal of that related disclosure from Regulation S-K becomes effective, with early adoption prohibited. The Company is in the process of evaluating the impact of the ASU on its related disclosures.

Note 2. Equity Method Investments

On August 9, 2024, the Company acquired a 49% non-controlling stake in Medica S.p.A. (Medica), headquartered in Medolla, Italy, for cash consideration of approximately €62.1 million, or $67.9 million, and capitalized transaction costs of approximately €5.1 million, or $5.8 million. Medica is a leader in hollow fiber membrane filtration technology for medical applications and water purification. The Company has the option to acquire the remaining 51% stake in four years. The investment is accounted for under the equity method of accounting. The earnings from the investment were not material for the three months ended October 31, 2024.

The Company is party to joint ventures in Advanced Filtration Systems Inc. (AFSI) with a 50% ownership and PT Panata Jaya Mandiri (PTPJM) with a 30% ownership and also holds a 49% stake in Medica S.p.A. (Medica), all of which are considered related parties. The investment and earnings from joint ventures and non-controlling interests are not material.

Note 3. Revenue

The Company recognizes revenue on a wide range of filtration solutions sold to customers in many industries around the globe. Most of the Company’s performance obligations within customer sales contracts are for manufactured filtration systems and replacement parts. The Company also performs limited services and installation. Customer contracts may include multiple performance obligations and the transaction price is allocated to each distinct performance obligation based on its relative standalone selling price.

Revenue Disaggregation

Net sales, generally disaggregated by location where the customer’s order was placed, were as follows (in millions):


	Three Months Ended October 31,
	2024		2023
U.S. and Canada	$	409.8	$	381.5
Europe, Middle East and Africa (EMEA)	240.9		234.4
Asia Pacific (APAC)	155.2		140.0
Latin America (LATAM)	94.2		90.4
Total net sales	$	900.1	$	846.3

See Note 18 for net sales disaggregated by segment and business unit.

Contract Assets and Liabilities

The satisfaction of performance obligations and the resulting recognition of revenue typically correspond with billing of the customer. In limited circumstances, the customer may be billed at a time later than when revenue is recognized, resulting in contract assets, which are reported in other current assets on the Condensed Consolidated Balance Sheets. Contract assets were $18.8 million and $15.9 million as of October 31, 2024 and July 31, 2024, respectively. In other limited circumstances, the customer may make a payment at a time earlier than when revenue is recognized and prior to the satisfaction of performance obligations, resulting in contract liabilities, which are reported in deferred revenue on the Condensed Consolidated Balance Sheets. Contract liabilities were $24.8 million and $19.7 million as of October 31, 2024 and July 31, 2024, respectively.

The Company will recognize revenue in future periods related to remaining performance obligations for certain open contracts. Generally, these contracts have terms of one year or less. The amount of revenue related to unsatisfied performance obligations in which the original duration of the contract is greater than one year is not significant. None of the Company’s contracts contained a significant financing component.

Note 4. Inventories, Net

The components of inventories, net were as follows (in millions):


	October 31, 2024		July 31, 2024
Raw materials	$	191.2	$	177.4
Work in process	69.8		61.2
Finished products	259.0		238.1
Total inventories, net	$	520.0	$	476.7

Note 5. Property, Plant and Equipment, Net

The components of property, plant and equipment, net were as follows (in millions):


	October 31, 2024		July 31, 2024
Land	$	29.7	$	29.5
Buildings	464.4		451.9
Machinery and equipment	1,082.3		1,052.1
Computer software	134.8		134.7
Construction in progress	48.5		68.4
Less accumulated depreciation	(1,112.3)		(1,091.1)
Total property, plant and equipment, net	$	647.4	$	645.5

Note 6. Goodwill and Intangible Assets

Goodwill

The Company allocates goodwill to reporting units within its Mobile Solutions, Industrial Solutions and Life Sciences segments. There were no dispositions or impairment charges recorded during the three months ended October 31, 2024 and 2023. Goodwill is assessed for impairment annually during the third quarter of the fiscal year, or more frequently if events or changes in circumstances indicate the asset may be impaired. The Company performed its annual impairment assessment during the third quarter of fiscal 2024 and did not record any impairment as a result of this assessment.

Goodwill by reportable segment was as follows (in millions):



	Mobile Solutions Segment		Industrial Solutions Segment		Life Sciences Segment		Total
Balance as of July 31, 2024	$	25.4	$	289.9	$	163.1	$	478.4



Foreign currency translation	—		1.1		0.4		1.5
Balance as of October 31, 2024	$	25.4	$	291.0	$	163.5	$	479.9

Intangible Assets

There was a foreign currency translation gain of $0.4 million and loss of $3.2 million for the three months ended October 31, 2024 and 2023, respectively.

Intangible asset classes were as follows (in millions):


	October 31, 2024
	Weighted Amortizable Life (in Years)	Gross Carrying Amount		Accumulated Amortization		Net
Customer relationships	9.2	$	77.6	$	(41.2)	$	36.4

Trademarks	7.9	14.2		(4.1)		10.1
Technology and patents	16.4	142.6		(22.5)		120.1
Non-compete agreements	2.7	3.9		(2.2)		1.7
Total intangible assets		$	238.3	$	(70.0)	$	168.3


	July 31, 2024
	Weighted Amortizable Life (in Years)	Gross Carrying Amount		Accumulated Amortization		Net
Customer relationships	9.4	$	77.4	$	(39.9)	$	37.5

Trademarks	8.1	14.2		(3.8)		10.4
Technology and patents	16.7	142.4		(20.4)		122.0
Non-compete agreements	2.7	3.9		(1.9)		2.0
Total intangible assets		$	237.9	$	(66.0)	$	171.9

Intangible asset amortization expense was $4.0 million in each of the three months ended October 31, 2024 and 2023. Amortization expense is included in selling, general and administrative expenses in the Condensed Consolidated Statements of Earnings.

Note 7. Long-Term Debt

As of October 31, 2024, there was $327.0 million available and $165.0 million outstanding on the Company’s $500.0 million unsecured revolving credit facility that expires on May 21, 2026.

Certain debt agreements contain financial covenants related to interest coverage and leverage ratios, as well as other non-financial covenants. As of October 31, 2024, the Company was in compliance with all such covenants.

Note 8. Income Taxes

The Company files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. The U.S. Internal Revenue Service has completed examinations of the Company’s U.S. federal income tax returns through fiscal 2020. With few exceptions, the Company is no longer subject to state and foreign income tax examinations by tax authorities for years before fiscal 2019.

As of October 31, 2024, gross unrecognized tax benefits were $21.2 million and accrued interest and penalties on these unrecognized tax benefits were $2.5 million. The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income taxes in the Condensed Consolidated Statements of Earnings. The Company estimates within the next 12 months it is reasonably possible its uncertain tax positions could decrease by as much as $3.2 million due to lapses in statutes of limitation. The statutes of limitation periods for the Company’s various tax jurisdictions range from two years to 10 years.

The Company believes it is remote that any adjustment necessary to the reserve for income taxes over the next 12 months will be material. However, it is possible the ultimate resolution of audits or disputes may result in a material change to the reserve for income taxes, although the quantification of such potential adjustments cannot be made at this time.

Note 9. Earnings Per Share

Basic net earnings per share (EPS) is computed by dividing net earnings by the weighted average number of outstanding common shares. Diluted net EPS is computed by dividing net earnings by the weighted average number of outstanding common shares and common share equivalents relating to stock options and other stock incentive plans.

Basic and diluted net EPS calculations were as follows (in millions, except per share amounts):


	Three Months Ended October 31,
	2024		2023
Net earnings	$	99.0	$	92.1

Weighted average common shares outstanding
Weighted average common shares – basic	119.9		120.9
Dilutive impact of stock-based awards	2.0		1.7
Weighted average common shares – diluted	121.9		122.6

Net EPS – basic	$	0.83	$	0.76
Net EPS – diluted	$	0.81	$	0.75
Stock options excluded from net EPS calculation	0.7		—

Note 10. Stockholders’ Equity

Share Repurchases

In November 2023, the Board of Directors authorized the repurchase of up to 12.0 million shares of common stock under the Company’s stock repurchase plan, replacing the Company’s previous stock repurchase plan dated May 31, 2019. This repurchase authorization is effective until terminated by the Board of Directors. During the three months ended October 31, 2024, the Company repurchased 1.0 million shares for $74.9 million. During the three months ended October 31, 2023, the Company repurchased 0.9 million shares for $53.7 million. As of October 31, 2024, the Company had remaining authorization to repurchase 9.7 million shares under the November 2023 stock repurchase plan.

Dividends

Dividends paid were 27.0 cents and 25.0 cents per common share for the three months ended October 31, 2024 and 2023, respectively.

On November 22, 2024, the Company’s Board of Directors declared a cash dividend in the amount of 27.0 cents per common share, payable December 23, 2024, to shareholders of record as of December 9, 2024.

Note 11. Accumulated Other Comprehensive Loss

Changes in accumulated other comprehensive loss for the three months ended October 31, 2024 and 2023 were as follows (in millions):


	Foreign Currency Translation Adjustment		Pension Benefits			Derivative Financial Instruments			Total
Balance as of July 31, 2024, net of tax	$	(133.8)	$	(69.1)		$	4.0		$	(198.9)
Other comprehensive income (loss) before reclassifications and tax	4.9		—			(1.4)			3.5
Tax benefit	—		—			0.3			0.3
Other comprehensive income (loss) before reclassifications, net of tax	4.9		—			(1.1)			3.8

Reclassifications, before tax	—		0.4		(1)	2.1			2.5
Tax expense	—		—			(0.4)			(0.4)
Reclassifications, net of tax	—		0.4			1.7		(2)	2.1
Other comprehensive income, net of tax	4.9		0.4			0.6			5.9
Balance as of October 31, 2024, net of tax	$	(128.9)	$	(68.7)		$	4.6		$	(193.0)

Balance as of July 31, 2023, net of tax	$	(109.6)	$	(67.2)		$	4.3		$	(172.5)
Other comprehensive (loss) income before reclassifications and tax	(37.6)		—			0.2			(37.4)
Tax expense	—		—			(0.1)			(0.1)
Other comprehensive (loss) income before reclassifications, net of tax	(37.6)		—			0.1			(37.5)

Reclassifications, before tax	—		1.2		(1)	0.9			2.1
Tax expense	—		(0.2)			(0.2)			(0.4)
Reclassifications, net of tax	—		1.0			0.7		(2)	1.7
Other comprehensive (loss) income, net of tax	(37.6)		1.0			0.8			(35.8)
Balance as of October 31, 2023, net of tax	$	(147.2)	$	(66.2)		$	5.1		$	(208.3)

(1)Amounts include foreign currency translation gain of $0.2 million and loss of $0.9 million, net amortization of prior service costs and actuarial losses of $0.6 million and $0.3 million in fiscal 2025 and 2024, respectively, included in other income, net in the Condensed Consolidated Statements of Earnings, see Note 13.

(2)Relates to designated foreign currency forward contracts that were reclassified from accumulated other comprehensive loss on the Condensed Consolidated Balance Sheets to net sales, cost of sales and selling, general and administrative expenses in the Condensed Consolidated Statements of Earnings, see Note 14.

Note 12. Stock-Based Compensation

The Company recognizes compensation expense for all stock-based awards based on the grant date fair value of the award. Stock-based awards consist primarily of non-qualified stock options, performance-based awards, restricted stock awards and restricted stock units. Grants related to restricted stock awards and restricted stock units are immaterial. The Company issues treasury shares for stock options and performance-based awards.

Stock Options

The exercise price of options granted is equal to the market price of the Company’s common stock at the date of the grant. Options are generally exercisable for up to 10 years from the date of grant and vest in equal annual increments over three years.

Pretax stock-based compensation expense associated with options was $9.8 million and $8.5 million for the three months ended October 31, 2024 and 2023, respectively.

Fair value is calculated

SEC Form 10-Q filed by Donaldson Company Inc.