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, 2020

☐ 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, 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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: common stock, $5 par value - 126,239,919 shares as of November 30, 2020.

Item 1. Financial Statements

DONALDSON COMPANY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(In millions, except per share amounts)

(Unaudited)

	Three Months Ended<br>October 31,
	2020		2019
Net sales	$	636.6	$	672.7
Cost of sales	413.9		441.4
Gross profit	222.7		231.3
Operating expenses	135.5		142.6
Operating income	87.2		88.7
Interest expense	3.5		4.7
Other expense (income), net	1.5		(2.6)
Earnings before income taxes	82.2		86.6
Income taxes	20.3		21.6
Net earnings	$	61.9	$	65.0
Weighted average shares – basic	126.8		126.9
Weighted average shares – diluted	128.0		128.6
Net earnings per share – basic	$	0.49	$	0.51
Net earnings per share – diluted	$	0.48	$	0.51

See Notes to Condensed Consolidated Financial Statements.

DONALDSON COMPANY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

(Unaudited)

	Three Months Ended<br>October 31,
	2020		2019
Net earnings	$	61.9	$	65.0
Other comprehensive income (loss):
Foreign currency translation (loss) income	(5.0)		8.1
Pension liability adjustment, net of deferred taxes of $(1.5) and $0.1, respectively	6.1		0.8
Derivatives:
Gain on hedging derivatives, net of deferred taxes of $0.0 and $0.2, respectively	0.3		0.3
Reclassifications of (gains) losses on hedging derivatives to net earnings, net of taxes of $(0.2) and $(0.7), respectively	(0.2)		1.2
Total derivatives	0.1		1.5
Net other comprehensive income	1.2		10.4
Comprehensive income	$	63.1	$	75.4

See Notes to Condensed Consolidated Financial Statements.

DONALDSON COMPANY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except share amounts)

(Unaudited)

	October 31,<br>2020		July 31,<br>2020
Assets
Current assets:
Cash and cash equivalents	$	270.0	$	236.6
Accounts receivable, less allowances of $8.2 and $6.2, respectively	465.1		455.3
Inventories, net	329.5		322.7
Prepaid expenses and other current assets	79.0		82.1
Total current assets	1,143.6		1,096.7
Property, plant and equipment, net	617.1		631.6
Goodwill	315.0		316.8
Other long-term assets	193.7		199.5
Total assets	$	2,269.4	$	2,244.6
Liabilities and Shareholders’ equity
Current liabilities:
Short-term borrowings	$	1.0	$	3.8
Current maturities of long-term debt	5.7		5.7
Trade accounts payable	209.4		187.7
Current income taxes	27.5		17.6
Other current liabilities	175.8		192.0
Total current liabilities	419.4		406.8
Long-term debt	576.3		617.4
Other long-term liabilities	210.2		216.6
Total liabilities	1,205.9		1,240.8
Redeemable non-controlling interest	10.9		10.9
Shareholders’ 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	2.7		—
Retained earnings	1,491.9		1,430.0
Non-controlling interest	5.8		5.8
Stock-compensation plans	13.0		15.9
Accumulated other comprehensive loss	(182.8)		(184.0)
Treasury stock, 25,323,054 and 25,304,515 shares, respectively, at cost	(1,036.2)		(1,033.0)
Total shareholders’ equity	1,052.6		992.9
Total liabilities and shareholders’ equity	$	2,269.4	$	2,244.6

See Notes to Condensed Consolidated Financial Statements.

DONALDSON COMPANY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

	Three Months Ended<br>October 31,
	2020		2019
Operating activities
Net earnings	$	61.9	$	65.0
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	23.3		21.2
Deferred income taxes	(2.9)		3.1
Stock-based compensation expense	6.3		6.6
Other, net	7.3		7.1
Changes in operating assets and liabilities	33.0		(16.9)
Net cash provided by operating activities	128.9		86.1
Investing activities
Net expenditures on property, plant and equipment	(18.8)		(37.1)
Net cash used in investing activities	(18.8)		(37.1)
Financing activities
Proceeds from long-term debt	—		122.9
Repayments of long-term debt	(40.0)		(111.1)
Change in short-term borrowings	(2.8)		58.2
Purchase of treasury stock	(15.6)		(65.0)
Dividends paid	(26.6)		(26.6)
Tax withholding payments for stock compensation transactions	(2.2)		(4.1)
Exercise of stock options	8.3		11.0
Net cash used in financing activities	(78.9)		(14.7)
Effect of exchange rate changes on cash	2.2		(2.1)
Increase in cash and cash equivalents	33.4		32.2
Cash and cash equivalents, beginning of period	236.6		177.8
Cash and cash equivalents, end of period	$	270.0	$	210.0
Supplemental cash flow information
Income taxes paid	$	13.2	$	11.4
Interest paid	$	3.6	$	5.6
Supplemental disclosure of non-cash operating and investing transactions
Accrued property, plant and equipment additions	$	5.0	$	16.6
Leased assets obtained in exchange for new operating lease liabilities	$	1.2	$	13.0

See Notes to Condensed Consolidated Financial Statements.

DONALDSON COMPANY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(In millions)

(Unaudited)

	Common<br>Stock		Additional<br>Paid-in<br>Capital		Retained<br>Earnings		Non-<br>Controlling<br>Interest		Stock Compensation Plans		Accumulated<br>Other<br>Comprehensive<br>Loss		Treasury<br>Stock		Total
Balance July 31, 2020	$	758.2	$	—	$	1,430.0	$	5.8	$	15.9	$	(184.0)	$	(1,033.0)	$	992.9
Net earnings					61.9										61.9
Other comprehensive income											1.2				1.2
Treasury stock acquired													(15.6)		(15.6)
Dividends declared					0.1										0.1
Stock compensation and other activity			2.7		(0.1)				(2.9)				12.4		12.1
Balance October 31, 2020	$	758.2	$	2.7	$	1,491.9	$	5.8	$	13.0	$	(182.8)	$	(1,036.2)	$	1,052.6
Balance July 31, 2019	$	758.2	$	—	$	1,281.5	$	5.4	$	21.7	$	(192.9)	$	(981.2)	$	892.7
Net earnings					65.0										65.0
Other comprehensive income											10.4				10.4
Treasury stock acquired													(65.0)		(65.0)
Dividends declared					0.2										0.2
Stock compensation and other activity					(0.7)				(6.6)				21.0		13.7
Balance October 31, 2019	$	758.2	$	—	$	1,346.0	$	5.4	$	15.1	$	(182.5)	$	(1,025.2)	$	917.0

See Notes to Condensed Consolidated Financial Statements.

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 in the United States (GAAP) 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 shareholders’ equity have been included and are of a normal recurring nature. Operating results for the three month period ended October 31, 2020 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, 2020.

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.

The coronavirus outbreak (COVID-19), which was declared by the World Health Organization to be a pandemic, continues to impact economic conditions. The COVID-19 pandemic has resulted, and is likely to continue to result, in significant economic disruption and an adverse impact on the Company’s business. Significant uncertainty exists at this time with respect to the severity and duration of the COVID-19 pandemic. Management cannot predict with specificity the extent and duration of any future impact on the business and financial results from COVID-19. The Company’s businesses have been designated as essential, however, it is possible that the businesses may not continue to operate under future government orders, or may be subject to site-specific health and safety concerns which could require certain operations to be halted for some period.

New Accounting Standards Recently Adopted

In June 2016, the Financial Accounting Standards Board (FASB) issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments (ASU 2016-13). In November 2018, the FASB issued an update, ASU 2018-19, that clarifies the scope of the standard in the amendments in ASU 2016-13. This guidance introduces a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses. Financial instruments impacted include accounts receivable, trade receivables, other financial assets measured at amortized cost and other off-balance sheet credit exposures. The Company adopted ASU 2016-13 in the first quarter of fiscal 2021 using the modified retrospective approach. The adoption did not have a material impact on its Condensed Consolidated Financial Statements.

In April 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815 Derivatives and Hedging and Topic 825, Financial Instruments

(ASU 2019-04). This guidance clarifies the standards on credit losses (Topic 326), derivatives and hedging (Topic 815), and recognition and measurement of financial instruments (Topic 825). The Company adopted ASU 2019-04 in the first quarter of fiscal 2021 using the modified retrospective approach. The adoption did not have a material impact on its Condensed Consolidated Financial Statements.

Note 2. Acquisitions and Divestitures

In fiscal 2019, the Company acquired 91% of the shares of BOFA International LTD (BOFA), headquartered in the United Kingdom, for cash consideration of $101.3 million less cash acquired of $2.2 million. BOFA designs, develops and manufactures fume extraction systems across a wide range of industrial air filtration applications. The acquisition allowed the Company to accelerate its long-term global growth in the fume collection business and add additional filtration technology to the Company’s existing product lines. On November 12, 2020, the Company acquired the remaining 9% of the shares of BOFA for $8.0 million.

Note 3. Supplemental Balance Sheet Information

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

	October 31,<br>2020		July 31,<br>2020
Raw materials	$	110.1	$	109.6
Work in process	33.8		32.8
Finished products	185.6		180.3
Inventories, net	$	329.5	$	322.7

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

	October 31,<br>2020		July 31,<br>2020
Land	$	24.8	$	24.9
Buildings	384.8		384.5
Machinery and equipment	906.2		880.1
Computer software	143.8		145.4
Construction in progress	77.4		102.8
Less: accumulated depreciation	(919.9)		(906.1)
Property, plant and equipment, net	$	617.1	$	631.6

Note 4. Earnings Per Share

The Company’s basic net earnings per share is computed by dividing net earnings by the weighted average number of outstanding common shares. The Company’s diluted net earnings per share is computed by dividing net earnings by the weighted average number of outstanding common shares and common share equivalents relating to stock options and stock incentive plans. Certain outstanding options were excluded from the diluted net earnings per share calculations because their exercise prices are greater than the average market price of the Company’s common stock during the reporting periods. Options excluded from the diluted net earnings per share calculations were 1.7 million for the three months ended October 31, 2020 and 2019.

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

	Three Months Ended<br>October 31,
	2020		2019
Net earnings for basic and diluted earnings per share computation	$	61.9	$	65.0
Weighted average common shares outstanding:
Weighted average common shares – basic	126.8		126.9
Dilutive impact of share-based awards	1.2		1.7
Weighted average common shares – diluted	128.0		128.6
Net earnings per share – basic	$	0.49	$	0.51
Net earnings per share – diluted	$	0.48	$	0.51

Note 5. Goodwill and Intangible Assets

Goodwill is assessed for impairment annually during the third quarter of the fiscal year, or more frequently if events or changes in circumstances indicate that the asset may be impaired. The Company performed its annual impairment assessment during the third quarter of fiscal 2020 and did not record any impairment as a result of this assessment.

Goodwill by reportable segment for the three months ended October 31, 2020 is as follows (in millions):

	Engine<br>Products		Industrial<br>Products		Total
Balance as of July 31, 2020	$	84.8	$	232.0	$	316.8
Goodwill acquired	—		—		—
Currency translation	(0.2)		(1.6)		(1.8)
Balance as of October 31, 2020	$	84.6	$	230.4	$	315.0

Intangible asset classes as of October 31, 2020 are as follows (in millions):

	Gross Carrying Amount		Accumulated Amortization		Total
Customer relationships	$	104.5	$	(51.4)	$	53.1
Patents, trademarks and technology	23.8		(12.1)		11.7
Total intangible assets, net	$	128.3	$	(63.5)	$	64.8

Intangible asset classes as of July 31, 2020 are as follows (in millions):

	Gross Carrying Amount		Accumulated Amortization		Total
Customer relationships	$	105.2	$	(50.0)	$	55.2
Patents, trademarks and technology	23.7		(11.6)		12.1
Total intangible assets, net	$	128.9	$	(61.6)	$	67.3

Amortization expense was $2.1 million and $2.2 million for the three months ended October 31, 2020 and 2019, respectively.

Note 6. 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 disaggregated by geography is generally based on the location where the customer’s order was placed are as follows (in millions):

	Three Months Ended<br>October 31,
	2020		2019
United States and Canada	$	251.0	$	286.9
Europe, Middle East and Africa	187.8		194.8
Asia Pacific	144.1		133.5
Latin America	53.7		57.5
Total net sales	$	636.6	$	672.7

See Note 16 for net sales disaggregated by segment.

Contract Assets and Liabilities

The satisfaction of performance obligations and the resulting recognition of revenue typically correspond with billing 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 prepaid expenses and other current assets on the Condensed Consolidated Balance Sheets. Contract assets were $11.8 million and $11.9 million as of October 31, 2020 and July 31, 2020, 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 other current liabilities and other long-term liabilities on the Condensed Consolidated Balance Sheets. Contract liabilities were $10.6 million and $10.0 million as of October 31, 2020 and July 31, 2020, 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.

Note 7. Warranty

The Company estimates warranty expense on certain products at the time of sale. The reconciliation of warranty reserves is as follows (in millions):

	Three Months Ended<br>October 31,
	2020		2019
Balance at beginning of period	$	9.5	$	11.2
Accruals for warranties issued during the reporting period	0.1		0.4
Accruals related to pre-existing warranties (including changes in estimates)	(0.4)		(0.3)
Less: settlements made during the period	(0.8)		(1.0)
Balance at end of period	$	8.4	$	10.3

There were no individually material specific warranty matters accrued for or significant settlements made in the three months ended October 31, 2020 and 2019.

Note 8. Stock-Based Compensation

In November 2019, the Company’s stockholders approved the adoption of the 2019 Master Stock Incentive Plan (2019 Plan), which replaced the 2010 Master Stock Incentive Plan (2010 Plan). Consistent with the 2010 Plan, the 2019 Plan allows for granting of non-qualified stock options, incentive stock options, restricted stock awards, restricted stock units, stock appreciation rights, dividend equivalents and other stock-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 increments over three years.

Expenses associated with stock options are as follows (in millions):

	Three Months Ended<br>October 31,
	2020		2019
Pretax compensation expense associated with stock options	$	5.1	$	5.3
Tax benefits associated with stock options	$	0.6	$	1.1

Stock-based employee compensation expense is recognized using the fair value method for all stock option awards. The Company determines the fair value of these awards using the Black-Scholes option pricing model.

Stock option activity during the three months ended October 31, 2020 is as follows:

	Options<br>Outstanding	Weighted<br>Average<br>Exercise Price
Outstanding as of July 31, 2020	6,533,979	$	42.44
Granted	946,100	46.06
Exercised	(269,215)	32.33
Canceled	(10,433)	52.77
Outstanding as of October 31, 2020	7,200,431	$	43.28

Performance-based Awards

Performance-based awards are payable in common stock and are based on a formula that measures Company performance over a three year period. These awards are settled or forfeited after three years with payouts ranging from zero to 200% of the target award value depending on achievement.

Expenses associated with performance-based awards are as follows (in millions):

	Three Months Ended<br>October 31,
	2020		2019
Pretax compensation expense associated with performance-based awards	$	0.9	$	0.9

Performance-based award activity during the three months ended October 31, 2020 is as follows:

	Performance Shares<br>Outstanding	Weighted<br>Average Grant<br>Date Fair<br>Value
Non-vested at July 31, 2020	198,200	$	54.93
Granted	106,100	46.06
Vested	—	—
Canceled/forfeited	—	—
Non-vested at October 31, 2020	304,300	$	51.84

Note 9. Employee Benefit Plans

The Company and certain of its international subsidiaries have defined benefit pension plans for many of their hourly and salaried employees. There are two types of U.S. plans. The first type of U.S. plan (Hourly Pension Plan) is a traditional defined benefit pension plan primarily for union production employees. The second plan (Salaried Pension Plan) is for some salaried and non-union production employees, and provides defined benefits pursuant to a cash balance feature whereby a participant accumulates a benefit comprised of a percentage of current salary that varies with years of service, interest credits and transition credits. The Company no longer allows entrants into the U.S. Salaried Pension Plan and the participating employees no longer accrue Company contribution credits under the plan. Instead, eligible employees receive a 3% annual retirement contribution to their 401(k) in addition to the Company’s normal 401(k) match. The non-U.S. plans consist of plans in Belgium, Germany, Mexico and the United Kingdom. These defined plans generally provide pension benefits based on years of service and compensation level. Components of net periodic benefit cost other than the service cost component are included in other expense (income), net on the Condensed Consolidated Statements of Earnings.

Net periodic benefit costs for the Company’s pension plans are as follows (in millions):

	Three Months Ended<br>October 31,
	2020		2019
Net periodic benefit costs:
Service cost	$	2.2	$	1.6
Interest cost	2.4		3.4
Expected return on assets	(5.8)		(6.5)
Prior service cost amortization	0.1		0.2
Actuarial loss amortization	2.2		1.6
Curtailment charge	0.8		—
Net periodic benefit costs	$	1.9	$	0.3

The Company recorded a pension curtailment charge of $0.8 million as a result of freezing the pension benefit to certain employees in the Hourly Pension Plan. The corresponding remeasurement resulted in a decrease in the Company’s pension obligations and an adjustment to other comprehensive loss on the Condensed Consolidated Statements of Comprehensive Income of $4.0 million.

The Company’s general funding policy is to make at least the minimum required contributions as required by applicable regulations, plus any additional amounts that it determines to be appropriate.

For the three months ended October 31, 2020, the Company made required contributions of $0.9 million to its qualified U.S. pension plans and $1.1 million to its non-qualified U.S. pension plans. The estimated minimum funding requirement for the Company’s qualified U.S. plans for the plan year ending July 31, 2021 is $4.0 million. In November 2020, the Company contributed an additional $1.0 million to the qualified U.S. pension plans.

For the three months ended October 31, 2020, the Company made required contributions of $0.3 million to its non-U.S. pension plans. The estimated contributions, based upon the local government prescribed funding requirements for the Company’s non-U.S. pension plans for the plan year ending July 31, 2021 are $1.6 million.

Future estimates of the Company’s required pension plan contributions may change significantly depending on the actual rate of return on plan assets, discount rates and regulatory requirements.

Note 10. Income Taxes

The Company files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. With few exceptions, the Company is no longer subject to state and foreign income tax examinations by tax authorities for years before 2015. The United States Internal Revenue Service has completed examinations of the Company’s U.S. federal income tax returns through 2016.

As of October 31, 2020, gross unrecognized tax benefits were $18.5 million and accrued interest and penalties on these unrecognized tax benefits were $2.3 million. The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income taxes on the Condensed Consolidated Statements of Earnings. With an average statute of limitations of approximately five years, up to $5.8 million of the unrecognized tax benefits could potentially expire in the next 12 months, unless extended by an audit.

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 Company’s reserve for income taxes, although the quantification of such potential adjustments cannot be made at this time.

Note 11. Fair Value Measurements

Fair value measurements of financial instruments are reported in one of three levels based on the lowest level of significant input used. For Level 1, inputs to the fair value measurement are quoted prices in active markets for identical assets or liabilities. For Level 2, inputs to the fair value measurement include quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active and inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. For Level 3, inputs to the fair value measurement are unobservable inputs or valuation techniques.

As of October 31, 2020, the carrying values of cash and cash equivalents, accounts receivables, short-term borrowings and trade accounts payable approximate fair value because of the short-term nature of these instruments, and are classified as Level 1 in the fair value hierarchy.

As of October 31, 2020, the estimated fair value of long-term debt with fixed interest rates was $295.7 million compared to its carrying value of $275.0 million. As of July 31, 2020, the estimated fair value of long-term debt with fixed interest rates was $297.3 million compared to its carrying value of $275.0 million. The fair value is estimated by discounting the projected cash flows using the rate at which similar amounts of debt could currently be borrowed. Long-term debt is classified as Level 2 in the fair value hierarchy.

The carrying values of long-term debt, including current maturities, with variable interest rates of $308.7 million and $350.0 million as of October 31, 2020 and July 31, 2020, respectively, approximate fair value.

The fair values of the Company’s financial assets and liabilities for forward foreign currency exchange contracts, net investment hedges and interest rate swaps reflect the amounts that would be received to sell the assets or paid to transfer the liabilities in an orderly transaction between market participants at the measurement date (exit price). The fair values are based on inputs other than quoted prices that are observable for the asset or liability, and therefore are classified as Level 2 in the fair value hierarchy. These inputs include foreign currency exchange rates and interest rates. The financial assets and liabilities are primarily valued using standard calculations and models that use as their basis readily observable market parameters. Industry standard data providers are the primary source for forward and spot rate information for both interest rates and currency rates.

Derivative Fair Value Measurements

The Company enters into derivative instrument agreements, including forward foreign currency exchange contracts, net investment hedges and interest rate swaps, to manage risk in connection with changes in foreign currency and interest rates. The Company only enters into derivative instrument agreements with counterparties who have highly rated credit. The Company does not enter into derivative instrument agreements for trading or speculative purposes.

Forward Foreign Currency Exchange Contracts

The Company uses forward currency exchange contracts to manage exposure to fluctuations in foreign currency. The Company enters into certain purchase commitments with foreign suppliers based on the value of its purchasing subsidiaries’ local currency relative to the currency’s requirement of the supplier on the date of the commitment. The Company also sells into foreign countries based on the value of the purchaser’s local currency. The Company mitigates risk through using forward currency contracts that generally mature in 12 months or less, which is consistent with the related purchases and sales. Contracts that qualify for hedge accounting are designated as cash flow hedges.

Net Investment Hedges

The Company uses fixed-to-fixed cross-currency swap agreements to hedge its exposure to adverse foreign currency exchange rate movements for its operations in Europe. The Company has elected the spot method of designating these contracts.

Interest Rate Swaps

The Company uses swap agreements to hedge exposure related to interest expense and to manage its exposure to interest rate movements. During the first quarter of fiscal 2021, the Company entered into an interest rate swap agreement designated as a cash flow hedge with an aggregate notional amount of $40.0 million hedging future fixed-rate debt issuances, which effectively fixed the portion of interest payments that will be based on the ten year treasury rates. This instrument has a mandatory termination date of July 31, 2021.

The Company determines the fair values of its derivatives based on valuation models which project future cash flows and discount the future amounts to a present value using market-based observable inputs including foreign currency rates, interest rate curves, futures and basis spreads, as applicable.

The fair value of the Company’s derivative contracts, which are recorded on a gross basis on the Company’s Condensed Consolidated Balance Sheets as of October 31, 2020 and July 31, 2020 are as follows (in millions):

					Fair Values Significant Other Observable Inputs
	Notional Amounts				Assets (1)				Liabilities (2) (3)
	October 31,		July 31,		October 31,		July 31,		October 31,		July 31,
	2020		2020		2020		2020		2020		2020
Forward foreign currency exchange contracts	$	29.3	$	26.2	$	3.7	$	2.1	$	(0.9)	$	(1.4)
Net investment hedge	55.8		55.8		1.1		1.2		(0.3)		—
Interest rate swap	40.0		—		0.2		—		—		—
Total	$	125.1	$	82.0	$	5.0	$	3.3	$	(1.2)	$	(1.4)

(1)As of October 31, 2020, the Company recorded $4.8 million and $0.2 million in prepaid expenses and other current assets, and in other long-term assets, respectively, on the Company’s Condensed Consolidated Balance Sheets. As of July 31, 2020, the Company recorded $3.2 million and $0.1 million in prepaid expenses and other current assets, and in other long-term assets, respectively, on the Company’s Condensed Consolidated Balance Sheets.

(2)The forward foreign currency exchange contracts are recorded in other current liabilities in the Company’s Condensed Consolidated Balance Sheets.

(3) The net investment hedge is recorded in other long-term liabilities in the Company’s Condensed Consolidated Balance Sheets.

Changes in the fair value of the Company’s forward foreign currency exchange contracts are recorded in equity as a component of accumulated other comprehensive loss and are reclassified into earnings when the items underlying the hedged transactions are recognized into earnings as a component of cost of sales on the Company’s Condensed Consolidated Statements of Earnings and Condensed Consolidated Statements of Comprehensive Income.

The net gain or loss on net investment hedges are reported in foreign currency translation gains and losses as a component of accumulated other comprehensive loss on the Company’s Condensed Consolidated Balance Sheets. The interest earned is reclassified out of accumulated other comprehensive loss and into other expense (income), net on the Company’s Condensed Consolidated Statements of Earnings.

The net gain or loss on the Company’s interest rate swap is recorded in accumulated other comprehensive loss in the Company’s Condensed Consolidated Balance Sheets and subsequently reclassified into other expense (income), net in the Company’s Condensed Consolidated Statements of Earnings in the period in which the hedged transaction affects earnings.

Credit Risk Related Contingent Features

Contract provisions may require the posting of collateral or settlement of the contracts for various reasons, including if the Company’s credit ratings are downgraded below its investment grade credit rating by any of the major credit agencies or for cross default contractual provisions if there is a failure under other financing arrangements related to payment terms or covenants. As of October 31, 2020 and July 31, 2020, no collateral was posted.

Counterparty Credit Risk

There is risk that counterparties to derivative contracts will fail to meet their contractual obligations. In order to mitigate counterparty credit risk, the Company only enters into contracts with carefully selected financial institutions based upon their credit ratings and certain other financial factors.

The pre-tax impact of the gains and losses on the Company’s designated forward foreign currency exchange contracts and net investment hedges are as follows (in millions):

	Pre-tax Gains (Losses) Recognized in Accumulated Other Comprehensive Loss
	Three Months Ended October 31,
	2020		2019
Forward foreign currency exchange contracts	$	0.8	$	(0.7)
Net investment hedge	$	(0.7)	$	0.8
Interest rate swap	$	0.2	$	—
	Pre-tax (Gains) Losses Reclassified from Accumulated Other Comprehensive Loss
---	---	---	---	---
	Three Months Ended October 31,
	2020		2019
Forward foreign currency exchange contracts	$	—	$	1.9
Net investment hedge	$	—	$	—
Interest rate swap	$	—	$	—

The Company expects that substantially all the amounts recorded in accumulated other comprehensive loss for its forward foreign currency exchange contracts recorded on the Company’s Condensed Consolidated Balance Sheets will be reclassified into earnings during the next 12 months, based upon the timing of inventory purchases and sales. See Note 13 for additional information on accumulated other comprehensive loss.

The Company holds equity method investments, which are classified in other long-term assets in the accompanying Condensed Consolidated Balance Sheets. The aggregate carrying amount of these investments was $22.3 million and $21.7 million as of October 31, 2020 and July 31, 2020, respectively. These equity method investments are measured at fair value on a non-recurring basis. The fair value of the Company’s equity method investments has not been estimated as there have been no identified events or changes in circumstance that would have had an adverse impact on the value of these investments. In the event that these investments are required to be measured, they would fall within Level 3 of the fair value hierarchy due to the use of significant unobservable inputs to determine fair value, as the investments are in privately-held entities.

Note 12. Shareholders’ Equity

Share Repurchases

The Company’s Board of Directors has authorized the repurchase of up to 13.0 million shares of common stock under the Company’s stock repurchase plan. This repurchase authorization is effective until terminated by the Board of Directors. During the three months ended October 31, 2020, the Company repurchased 321,588 shares. As of October 31, 2020, the Company had remaining authorization to repurchase 10.4 million shares under this plan.

Dividends Paid and Declared

Dividends paid were 21.0 cents per common share for the three months ended October 31, 2020 and 2019.

On November 20, 2020, the Company’s Board of Directors declared a cash dividend in the amount of 21.0 cents per common share, payable December 22, 2020, to shareholders of record as of December 7, 2020.

Note 13. Accumulated Other Comprehensive Loss

Changes in accumulated other comprehensive loss by component for the three months ended October 31, 2020 and 2019 are as follows (in millions):

	Foreign<br>Currency<br>Translation<br>Adjustment		Pension<br>Benefits			Derivative<br>Financial<br>Instruments			Total
Balance as of July 31, 2020, net of tax	$	(74.0)	$	(110.0)		$	—		$	(184.0)
Other comprehensive (loss) income before reclassifications and tax	(5.0)		4.0		(1)	0.3			(0.7)
Tax expense	—		(1.0)			—			(1.0)
Other comprehensive (loss) income before reclassifications, net of tax	(5.0)		3.0			0.3			(1.7)
Reclassifications, before tax	—		3.6			—			3.6
Tax expense	—		(0.5)			(0.2)			(0.7)
Reclassifications, net of tax	—		3.1		(2)	(0.2)		(3)	2.9
Other comprehensive (loss) income, net of tax	(5.0)		6.1			0.1			1.2
Balance as of October 31, 2020, net of tax	$	(79.0)	$	(103.9)		$	0.1		$	(182.8)
Balance as of July 31, 2019, net of tax	$	(92.7)	$	(99.0)		$	(1.2)		$	(192.9)
Other comprehensive income before reclassifications and tax	8.1		—			0.1			8.2
Tax benefit	—		—			0.2			0.2
Other comprehensive income before reclassifications, net of tax	8.1		—			0.3			8.4
Reclassifications, before tax	—		0.7			1.9			2.6
Tax benefit (expense)	—		0.1			(0.7)			(0.6)
Reclassifications, net of tax	—		0.8		(2)	1.2		(3)	2.0
Other comprehensive income, net of tax	8.1		0.8			1.5			10.4
Balance as of October 31, 2019, net of tax	$	(84.6)	$	(98.2)		$	0.3		$	(182.5)

(1)In the first quarter of fiscal 2021, pension curtailment accounting was triggered and the Company recorded a charge of $0.8 million (see Note 9). As a result of the related remeasurement, the Company’s pension obligations decreased with a corresponding adjustment to other comprehensive loss of $4.0 million.

(2)Primarily includes net amortization of prior service costs and actuarial losses included in net periodic benefit cost (see Note 9) that were reclassified from accumulated other comprehensive loss in the Company’s Condensed Consolidated Balance Sheets to operating expenses and cost of sales in the Company’s Condensed Consolidated Statements of Earnings.

(3)Relates to foreign currency cash flow hedges that were reclassified from accumulated other comprehensive loss to other expense (income), net in the Company’s Condensed Consolidated Statements of Earnings.

Note 14. Guarantees

The Company and Caterpillar Inc. equally own the shares of Advanced Filtration Systems Inc. (AFSI), an unconsolidated joint venture, and guarantee certain debt and banking services, including credit and debit cards, merchant processing and treasury management services, of the joint venture. The Company accounts for AFSI as an equity method investment.

The outstanding debt relating to the joint venture and the contingent liability for standby letters of credit relating to the Company are as follows (in millions):

	October 31,<br>2020		July 31,<br>2020
Outstanding debt (the Company guarantees half)	$	38.9	$	40.0
Contingent liability for standby letters of credit	$	7.7	$	7.5
Amounts drawn for letters of credit	$	—	$	—

The letters of credit guarantee payment to third parties in the event the Company is in breach of contract terms as detailed in each letter of credit.

Items relating to the Company’s joint venture in AFSI are as follows (in millions):

	Three Months Ended October 31,
	2020		2019
Investment earnings from AFSI (1)	$	0.4	$	0.1
Royalty income from AFSI (1)	$	1.6	$	1.9

(1) Recorded in other expense (income), net in the Company’s Condensed Consolidated Statements of Earnings.

Note 15. Commitments and Contingencies

The Company records provisions with respect to identified claims or lawsuits when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Claims and lawsuits are reviewed quarterly and provisions are adjusted to reflect the status of a particular matter. The Company believes the recorded estimated liability in its Condensed Consolidated Financial Statements is adequate considering the probable and estimable outcomes. The recorded liabilities were not material to the Company’s results of operations, liquidity or financial position and the Company believes it is remote that the settlement of any of the currently identified claims or litigation will be materially in excess of what is accrued.

Note 16. Segment Reporting

The Company has two reportable segments: Engine Products and Industrial Products. Segment determination is based on the internal organization structure, management of operations and performance evaluation by management and the Company’s Board of Directors. Corporate and Unallocated includes corporate expenses determined to be non-allocable to the segments, such as interest expense.

The Company is an integrated enterprise, characterized by substantial intersegment cooperation, cost allocations and sharing of assets. Therefore, the Company does not represent that these segments, if operated independently, would report the earnings before income taxes and other financial information shown below.

Segment details are as follows (in millions):

	Three Months Ended<br>October 31,
	2020		2019
Net sales
Engine Products segment	$	436.2	$	459.2
Industrial Products segment	200.4		213.5
Total	$	636.6	$	672.7
Earnings before income taxes
Engine Products segment	$	60.4	$	62.4
Industrial Products segment	27.5		29.5
Corporate and Unallocated	(5.7)		(5.3)
Total	$	82.2	$	86.6

Net sales by product group within the Engine Products and Industrial Products segments are as follows (in millions):

	Three Months Ended<br>October 31,
	2020		2019
Engine Products segment
Off-Road	$	64.8	$	68.6
On-Road	32.0		40.7
Aftermarket	317.0		319.4
Aerospace and Defense	22.4		30.5
Engine Products segment net sales	436.2		459.2
Industrial Products segment
Industrial Filtration Solutions	135.6		149.0
Gas Turbine Systems	23.0		20.7
Special Applications	41.8		43.8
Industrial Products segment net sales	200.4		213.5
Total net sales	$	636.6	$	672.7

There were no customers that accounted for over 10% of net sales for the three months ended October 31, 2020 or 2019. There were no customers that accounted for over 10% of gross accounts receivable as of October 31, 2020 and July 31, 2020.

Note 17. Borrowings

The Company has a $500.0 million unsecured revolving credit facility that expires July 21, 2022. As of October 31, 2020, there was $292.3 million available on this facility. The Company also has a 364 day revolving credit agreement for $100.0 million that provides incremental borrowing capacity above the Company’s $500.0 million unsecured revolving credit facility. It has a maturity date of May 17, 2021 and a one year credit extension can be requested. As of October 31, 2020, there was $100.0 million available on this facility.

Certain debt agreements contain financial covenants related to interest coverage and leverage ratios, as well as customary non-financial covenants. As of October 31, 2020, the Company was in compliance with all such covenants.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

The Company is a worldwide manufacturer of filtration systems and replacement parts. The Company’s core strengths are leading filtration technology, strong customer relationships and its global presence. Products are manufactured around the world. Products are sold to original equipment manufacturers (OEMs), distributors, dealers and directly to end users.

The Company has two operating segments: Engine Products and Industrial Products. Products in the Engine Products segment consist of replacement filters for both air and liquid filtration applications, air filtration systems, liquid filtration systems for fuel, lube and hydraulic applications, exhaust and emissions systems and sensors, indicators and monitoring systems. The Engine Products segment sells to OEMs in the construction, mining, agriculture, aerospace, defense and transportation end markets and to independent distributors, OEM dealer networks, private label accounts and large fleets. Products in the Industrial Products segment consist of dust, fume and mist collectors, compressed air purification systems, gas and liquid filtration for food, beverage and industrial processes, air filtration systems for gas turbines, polytetrafluoroethylene (PTFE) membrane-based products and specialized air and gas filtration systems for applications including hard disk drives and semi-conductor manufacturing and sensors, indicators and monitoring systems. The Industrial Products segment sells to various dealers, distributors, OEMs and end users.

Consolidated Results of Operations

Operating results for the three months ended October 31, 2020 and 2019 are as follows (in millions):

	Three Months Ended October 31,
	2020		% of sales		2019		% of sales
Net sales	$	636.6			$	672.7
Cost of sales	413.9		65.0	%	441.4		65.6	%
Gross profit	222.7		35.0		231.3		34.4
Operating expenses	135.5		21.3		142.6		21.2
Operating income	87.2		13.7		88.7		13.2
Interest expense	3.5		0.5		4.7		0.7
Other expense (income), net	1.5		0.2		(2.6)		(0.4)
Earnings before income taxes	82.2		12.9		86.6		12.9
Income taxes	20.3		3.2		21.6		3.2
Net earnings	$	61.9	9.7	%	$	65.0	9.7	%

Net sales for the three months ended October 31, 2020 were $636.6 million, compared with $672.7 million for the three months ended October 31, 2019, a decrease of $36.1 million, or 5.4%. Net sales decreased $23.0 million, or 5.0%, in the Engine Products segment and decreased $13.1 million, or 6.1%, in the Industrial Products segment compared with the same period in the prior fiscal year. Refer to the Segment Results of Operations section for further discussion on the Engine Products and Industrial Products segments. During the three months ended October 31, 2020, sales declined as a result of the economic impacts of the COVID-19 pandemic and varied demand by market and geography. For the three months ended October 31, 2020, the United States region had a sales decrease of 12.5%, the Latin America region sales had a decrease of 6.5%, and the Europe region sales had a decrease of 3.5%. The decreases were partially offset by the Asia Pacific region sales growth of 7.9%. Additionally, sales for the three months ended October 31, 2020 were positively impacted by the effect of foreign currency translation of $7.3 million, or 1.2%.

Cost of sales for the three months ended October 31, 2020 was $413.9 million, compared with $441.4 million for the three months ended October 31, 2019, a decrease of $27.5 million, or 6.2%. Gross margin for the current year quarter was 35.0%, compared with 34.4% during the same period in the prior fiscal year. The gross margin increase was primarily driven by benefits from lower raw material costs, due in part to the Company’s procurement initiatives, and a favorable mix of sales. These benefits were partially offset by loss of leverage on lower sales, including an impact from higher depreciation expense related to the Company’s capacity expansion projects.

Operating expenses for the three months ended October 31, 2020 were $135.5 million, compared with $142.6 million for the three months ended October 31, 2019, a decrease of $7.1 million, or 5.0%. As a percentage of net sales, operating expenses for the current year quarter were 21.3%, compared with 21.2% during the same period in the prior fiscal year. The increase in operating expense as a percentage of net sales reflects a loss of leverage on lower sales, partially offset by disciplined expense management.

Interest expense was $3.5 million for the three months ended October 31, 2020, compared with $4.7 million for the three months ended October 31, 2019, a decrease of $1.2 million. The decrease was due to lower debt levels and interest rates compared with the same period in the prior fiscal year.

Other expense, net for the three months ended October 31, 2020 was $1.5 million, compared with other income, net of $2.6 million for the three months ended October 31, 2019, a decrease of $4.1 million. The decrease was primarily driven by charges related to the Company’s support of its communities and local efforts to combat the pandemic, including a donation of face masks, combined with a pension curtailment charge.

The effective tax rate for the three months ended October 31, 2020 was 24.7%, compared with 24.9% for the three months ended October 31, 2019. The decrease in the effective tax rate was primarily due to a favorable shift in the mix of earnings among tax jurisdictions, partially offset by a reduced amount of excess tax benefits on stock-based compensation.

Net earnings for the three months ended October 31, 2020 were $61.9 million, compared with net earnings of $65.0 million for the three months ended October 31, 2019, a decrease of $3.1 million.

Segment Results of Operations

Net sales and earnings before income taxes for the Engine Products and Industrial Products segments are as follows (in millions):

	Three Months Ended<br>October 31,
	2020		2019
Net sales
Engine Products segment	$	436.2	$	459.2
Industrial Products segment	200.4		213.5
Total	$	636.6	$	672.7
Earnings before income taxes
Engine Products segment	$	60.4	$	62.4
Industrial Products segment	27.5		29.5
Corporate and Unallocated (1)	(5.7)		(5.3)
Total	$	82.2	$	86.6

(1)Corporate and Unallocated includes corporate expenses determined to be non-allocable to the segments, such as interest expense.

Engine Products Segment

Net sales by product group within the Company’s Engine Products segment are as follows (in millions):

	Three Months Ended<br>October 31,
	2020		2019
Engine Products segment
Off-Road	$	64.8	$	68.6
On-Road	32.0		40.7
Aftermarket	317.0		319.4
Aerospace and Defense	22.4		30.5
Engine Products segment net sales	$	436.2	$	459.2
Engine Products segment earnings before income taxes	$	60.4	$	62.4

Net sales for the Engine Products segment for the three months ended October 31, 2020 were $436.2 million, compared with $459.2 million for the three months ended October 31, 2019, a decrease of $23.0 million, or 5.0%, and 5.7% excluding the impact from currency translation. The Engine Products sales decrease was driven by uneven conditions across markets and geographies. The Aerospace and Defense sales decline was due primarily to commercial aerospace, reflecting industry-wide pressure from the COVID-19 pandemic. The sales decline in the remaining Engine businesses was due primarily to conditions in the Americas where COVID-19 pandemic-related uncertainty contributed to lower levels of equipment production and utilization. Sales in the Asia-Pacific region increased from the prior year, led by China where market share gains and improving economic conditions drove strong sales growth in the Company’s On-Road and Off-Road first-fit businesses and Aftermarket channels.

Earnings before income taxes for the Engine Products segment for the three months ended October 31, 2020 was $60.4 million, or 13.9% of Engine Products’ sales, an increase from 13.6% for the three months ended October 31, 2019. The increase was driven by benefits from the Company’s initiatives related to lower raw materials costs and pricing optimization, partially offset by increased depreciation associated with recent capacity investments and loss of operating expense leverage due to lower sales.

Industrial Products Segment

Net sales by product group within the Company’s Industrial Products segment are as follows (in millions):

	Three Months Ended<br>October 31,
	2020		2019
Industrial Products segment
Industrial Filtration Solutions	$	135.6	$	149.0
Gas Turbine Systems	23.0		20.7
Special Applications	41.8		43.8
Industrial Products segment net sales	$	200.4	$	213.5
Industrial Products segment earnings before income taxes	$	27.5	$	29.5

Net sales for the Industrial Products segment for the three months ended October 31, 2020 were $200.4 million, compared with $213.5 million for the three months ended October 31, 2019, a decrease of $13.1 million, or 6.1%, and 8.1% excluding the impact from currency translation. In most geographies, the COVID-19 pandemic’s impact on industrial production and customers’ willingness to make capital investments drove lower demand for dust collection products. Conditions are more favorable in China, where sales of dust collection products increased as benefits from market share gains were complemented by recovery from the COVID-19 pandemic. Sales of Process Filtration products to the food and beverage industry were steadier, as lower sales of new equipment were partially offset by higher sales of replacement parts. Gas Turbine Systems benefited from strong replacement parts sales in every major region. Within Special Applications, lower sales of disk drive filters and PTFE roll-goods were partially offset by strong growth in sales of Integrated Venting Solutions.

Earnings before income taxes for the Industrial Products segment for the three months ended October 31, 2020 were $27.5 million, or 13.7% of Industrial Products’ sales, a decrease from 13.8% for the three months ended October 31, 2019. The decrease was driven by loss of leverage on lower sales, due in part to continued investments in the Company’s strategic growth initiatives.

Liquidity and Capital Resources

Cash provided by operating activities for the three months ended October 31, 2020 was $128.9 million, compared with $86.1 million for the three months ended October 31, 2019, an increase of $42.8 million. The increase in cash provided by operating activities was primarily driven by year-over-year reductions in net operating assets and liabilities as the Company continues to manage its working capital as sales levels decreased.

Cash used in investing activities for the three months ended October 31, 2020 was $18.8 million, compared with $37.1 million for the three months ended October 31, 2019, a decrease of $18.3 million. In fiscal 2021, the Company continued investing in capital expenditures aligned with its strategic priorities, though capital expenditures decreased in fiscal 2021 as many larger scale initiatives were completed during fiscal 2020.

Cash used in financing activities generally relates to the use of cash for payment of dividends and repurchases of the Company’s common stock, net borrowing activity and proceeds from the exercise of stock options. To determine the level of dividend and share repurchases, the Company considers recent and projected performance across key financial metrics, including earnings, cash flow from operations, and total debt. Dividends paid for the three months ended October 31, 2020 and 2019 were $26.6 million. Share repurchases for the three months ended October 31, 2020 and 2019 were $15.6 million and $65.0 million, respectively.

Cash used in financing activities for the three months ended October 31, 2020 was $78.9 million, compared with $14.7 million for the three months ended October 31, 2019, an increase of $64.2 million. In fiscal 2021, cash was used to repay borrowings and to fund the Company’s needs, driven by expenditures on property, plant and equipment, dividends and share repurchases. In fiscal 2020, proceeds from long-term debt were used to fund the Company’s needs, driven by expenditures on property, plant and equipment, dividends and share repurchases.

Cash and cash equivalents as of October 31, 2020, was $270.0 million, compared with $236.6 million as of July 31, 2020. The Company has capacity of $655.7 million available for further borrowing under existing credit facilities as of October 31, 2020. The Company believes that the liquidity available from the combination of expected cash generated by operating activities, existing cash and available credit under existing credit facilities will be adequate to meet cash requirements for the next twelve months.

Accounts receivable, net as of October 31, 2020, was $465.1 million, compared with $455.3 million as of July 31, 2020, an increase of $9.8 million. Days sales outstanding were 62 days as of October 31, 2020, down slightly from 63 days at July 31, 2020. Days sales outstanding is calculated using the count back method, which calculates the number of days of most recent revenue that is reflected in the net accounts receivable balance.

Inventories, net as of October 31, 2020, was $329.5 million, compared with $322.7 million as of July 31, 2020, an increase of $6.8 million. Inventory turns were 5.1 times and 4.9 times per year as of October 31, 2020 and July 31, 2020, respectively. Inventory turns are calculated by taking the annualized cost of sales based on the trailing three month period divided by the average of the beginning and ending net inventory values of the three month period. The inventory turn improvement was driven by management’s efforts to reduce levels of inventories and improve turns.

Long-term debt outstanding was $576.3 million as of October 31, 2020, compared with $617.4 million as of July 31, 2020, a decrease of $41.1 million due to use of strong cash flows to pay down long-term debt earlier than its maturity date. As of October 31, 2020, total debt, including long-term debt and short-term borrowings, represented 35.6% of total capitalization, defined as total debt plus total shareholders’ equity, compared with 38.7% as of July 31, 2020. As of October 31, 2020, the Company is in compliance with its financial covenants.

The Company has a $500.0 million unsecured revolving credit facility that expires July 21, 2022. As of October 31, 2020, there was $292.3 million available on this facility. The Company also has a 364 day revolving credit agreement for $100.0 million that provides incremental borrowing capacity above the Company’s $500.0 million unsecured revolving credit facility. The credit facility has a maturity date of May 17, 2021 and a one year credit extension can be requested. As of October 31, 2020, there was $100.0 million available on this facility.

The Company guarantees 50% of certain debt of its joint venture, Advanced Filtration Systems Inc., as further discussed in Note 14 in the Notes to Condensed Consolidated Financial Statements included in Item 1 of this report.

New Accounting Standards Not Yet Adopted

For new accounting standards not yet adopted, refer to Note 1 in the Notes to Condensed Consolidated Financial Statements included in Item 1 of this report.

Critical Accounting Policies

There have been no material changes to the Company’s critical accounting policies as disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended July 31, 2020.

Safe Harbor Statement under the Securities Reform Act of 1995

The Company, through its management, may make forward-looking statements reflecting the Company’s current views with respect to future events and expectations, such as forecasts, plans, trends and projections relating to the Company’s business and financial performance. These forward-looking statements, which may be included in reports filed under the Securities Exchange Act of 1934, as amended (the Exchange Act), in press releases and in other documents and materials as well as in written or oral statements made by or on behalf of the Company, are subject to certain risks and uncertainties, including those discussed in Part I, Item 1A, “Risk Factors” of the Company’s Annual Report on Form 10-K for the fiscal year ended July 31, 2020, which could cause actual results to differ materially from historical results or those anticipated. The words or phrases “will likely result,” “are expected to,” “will continue,” “will allow,” “estimate,” “project,” “believe,” “expect,” “anticipate,” “forecast,” “plan” and similar expressions are intended to identify forward-looking statements within the meaning of Section 21E of the Exchange Act and Section 27A of the Securities Act of 1933, as amended, as enacted by the Private Securities Litigation Reform Act of 1995 (PSLRA). In particular, the Company desires to take advantage of the protections of the PSLRA in connection with the forward-looking statements made in this Quarterly Report on Form 10-Q. All statements other than statements of historical fact are forward-looking statements. These statements do not guarantee future performance.

These forward-looking statements speak only as of the date such statements are made and are subject to risks and uncertainties that could cause the Company’s results to differ materially from these statements. These factors include, but are not limited to, pandemics and unexpected events, including the Coronavirus (COVID-19) pandemic; economic and industrial conditions worldwide; the Company’s ability to maintain competitive advantages; threats from disruptive innovation; highly competitive markets with pricing pressure; the Company’s ability to protect and enforce its intellectual property; the difficulties in operating globally; customer concentration in certain cyclical industries; significant demand fluctuations; unavailable raw materials or material cost inflation; inability of operations to meet customer demand; difficulties with information technology systems and security; foreign currency fluctuations; governmental laws and regulations; litigation; changes in tax laws and tax rates; regulations and results of examinations; the Company’s ability to attract and retain qualified personnel; changes in capital and credit markets; execution of the Company’s acquisition, divestiture and other strategic transactions strategy; the possibility of intangible asset impairment; the Company’s ability to manage productivity improvements; unexpected events and business disruptions; the Company’s ability to maintain an effective system of internal control over financial reporting; the United Kingdom’s decision to end its membership in the European Union and other factors included in Part I, Item 1A, “Risk Factors” of the Company’s Annual Report on Form 10-K for the fiscal year ended July 31, 2020. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by law.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

The Company’s market risk includes the potential loss arising from adverse changes in foreign currency exchange rates, interest rates and commodity prices. In an attempt to manage these risks, the Company employs certain strategies to mitigate the effect of these fluctuations. The Company does not enter into any of these instruments for speculative trading purposes.

The Company maintains significant assets and operations outside the U.S., resulting in exposure to foreign currency gains and losses. A portion of the Company’s foreign currency exposure is naturally hedged by incurring liabilities, including bank debt, denominated in the local currency in which the Company’s foreign subsidiaries are located.

During the three months ended October 31, 2020, the U.S. dollar was weaker than in the three months ended October 31, 2019 compared with many of the currencies of the foreign countries in which the Company operates. The overall weaker dollar had a positive impact on the Company’s international net sales results because the foreign denominated revenues translated into more U.S. dollars. Foreign currency translation had a positive impact to net sales and net earnings in many regions around the world. The estimated impact of foreign currency translation for the three months ended October 31, 2020, resulted in an overall increase in reported net sales by $7.3 million and net earnings of approximately $1.0 million, compared with the same period in the prior fiscal year.

Forward Foreign Currency Exchange Contracts

The Company uses forward currency exchange contracts to manage exposure to fluctuations in foreign currency. The Company enters into certain purchase commitments with foreign suppliers based on the value of its purchasing subsidiaries’ local currency relative to the currency requirement of the supplier on the date of the commitment. The Company also sells into foreign countries based on the value of purchaser’s local currency. The Company mitigates risk through using forward currency contracts that generally mature in 12 months or less, which is consistent with the related purchases and sales. Contracts that qualify for hedge accounting are designated as cash flow hedges.

Net Investment Hedges

The Company uses fixed-to-fixed cross currency swap agreements to hedge its exposure to adverse foreign currency exchange rate movements for its operations in Europe through July 2029. The Company has elected the spot method for assessing effectiveness of these contracts.

Based on the net investment hedge outstanding as of October 31, 2020, a 10% appreciation of the U.S. dollar compared to the Euro, would result in a net gain of $6.1 million in the fair value of these contracts.

Interest Rate Swaps

Interest Rates

The Company’s exposure to market risk for changes in interest rates relates primarily to debt obligations that are at variable rates, as well as the potential increase in fair value of long-term debt resulting from a potential decrease in interest rates. As of October 31, 2020, the Company’s financial liabilities with exposure to changes in interest rates consisted mainly of $200.0 million outstanding on the Company’s revolving credit facility, €80.0 million, or $93.4 million on a variable rate term loan, and ¥1.6 billion, or $15.3 million, of variable rate senior notes. Assuming a hypothetical increase of 0.5% in short-term interest rates, with all other variables remaining constant, interest expense would have increased roughly $0.3 million and interest income would have increased roughly $0.3 million in the three months ended October 31, 2020. Interest rate changes would also affect the fair market value of fixed-rate debt. As of October 31, 2020, the estimated fair value of long-term debt with fixed interest rates was $295.7 million compared to its carrying value of $275.0 million. The fair value is estimated by discounting the projected cash flows using the rate at which similar amounts of debt could currently be borrowed.

Commodity Prices

The Company is exposed to market risk from fluctuating market prices of certain purchased commodity raw materials, including steel, filter media and petrochemical-based products, including plastics, rubber and adhesives. On an ongoing basis, the Company enters into selective supply arrangements with certain of its suppliers that allow the Company to reduce volatility in its costs. The Company strives to recover or offset all material cost increases through selective price increases to its customers and the Company’s cost reduction initiatives, which include material substitution, process improvement and product redesigns. However, an increase in commodity prices could result in lower operating margins.

Chinese Notes

Consistent with common business practice in China, the Company’s Chinese subsidiaries accept bankers’ acceptance notes from Chinese customers in settlement of certain customer billed accounts receivable. Bankers’ acceptance notes represent a commitment by the issuing financial institution to pay a certain amount of money at a specified future maturity date to the legal owner of the bankers’ acceptance note as of the maturity date. The maturity date of bankers’ acceptance notes varies, but it is the Company’s policy to only accept bankers’ acceptance notes with maturity dates no more than 270 days from the date of the Company’s receipt of such draft. As of October 31, 2020 and July 31, 2020, the Company owned $11.9 million and $12.1 million, respectively, of these bankers’ acceptance notes, and includes them in accounts receivable on the Company’s Condensed Consolidated Balance Sheets.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Management of the Company, with the participation of its Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period. Based on their evaluation, as of the end of the period covered, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were effective. The Company’s disclosure controls and procedures are designed so that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to management of the Company, with the participation of its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

No change in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) occurred during the fiscal quarter ended October 31, 2020, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

The Company believes the recorded estimated liability in its Condensed Consolidated Financial Statements for claims or litigation is adequate and appropriate for the probable and estimable outcomes. Any recorded liabilities were not material to the Company’s financial position, results of operations or liquidity and the Company believes it is remote that the settlement of any of the currently identified claims or litigation will be materially in excess of what is accrued. The Company records provisions when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Claims and litigation are reviewed quarterly and provisions are taken or adjusted to reflect the status of a particular matter.

Item 1A. Risk Factors

There are inherent risks and uncertainties associated with the Company’s global operations that involve the manufacturing and sale of products for highly demanding customer applications throughout the world. These risks and uncertainties could adversely affect the Company’s operating performances or financial condition. The “Risk Factors” section in the Company’s Annual Report on Form 10-K for the fiscal year ended July 31, 2020 outlines the risks and uncertainties that the Company believes are the most material to its business.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Repurchases of Equity Securities

Information in connection with purchases made by, or on behalf of, the Company or any affiliated purchaser of the Company, of shares of the Company’s common stock during the three months ended October 31, 2020 are as follows:

Period	Total Number<br><br>of Shares<br><br>Purchased (1)	Average Price<br>Paid per Share		Total Number<br>of Shares<br>Purchased as<br>Part of Publicly<br>Announced Plans<br>or Programs	Maximum<br>Number<br>of Shares<br>that May Yet<br>Be Purchased<br>Under the Plans<br>or Programs
August 1 - August 31, 2020	—	$	—	—	10,719,455
September 1 - September 30, 2020	167,891	46.88		167,891	10,551,564
October 1 - October 31, 2020	162,338	50.26		153,697	10,397,867
Total	330,229	$	48.54	321,588	10,397,867

(1)The Board of Directors has authorized the repurchase of up to 13.0 million shares of the Company’s common stock. This repurchase authorization is effective until terminated by the Board of Directors. The Company has remaining authorization to repurchase 10.4 million shares under this plan. There were no repurchases of common stock made outside of the Company’s current repurchase authorization during the three months ended October 31, 2020. The “Total Number of Shares Purchased” column of the table above includes 8,641 shares of previously owned shares tendered by option holders in payment of the exercise price of options during the fiscal first quarter. While not considered repurchases of shares, the Company does at times withhold shares that would otherwise be issued under stock-based awards to cover the withholding of taxes due as a result of exercising stock options or payment of stock-based awards.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

Item 6. Exhibits

3-A*	Restated Certificate of Incorporation of Registrant as currently in effect (Filed as Exhibit 3-A to Form 10-Q Report for the second quarter ended January 31, 2012)
3-B*	Amended and Restated Bylaws of Registrant, dated as of July 29, 2016 (Filed as Exhibit 3-C to Form 8-K Report filed on July 29, 2016)
10-A	Form of Annual Incentive Plan (commencing f iscal 2021)**
10-AN	Form of Restricted Stock Unit Award Agreement (Graded Vesting) under the 2019 Master Stock Incentive Plan (commencing with f iscal 2021 grants)**
10-AO	Compensation Plan for Non-Employee Directors under the 2019 Master Stock Incentive Plan as amended on September 24, 2020**
31-A	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31-B	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32	Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101	The following information from Donaldson Company, Inc. Quarterly Report on Form 10-Q for the fiscal quarter ended October 31, 2020, as filed with the Securities and Exchange Commission, formatted in inline eXtensible Business Reporting Language (iXBRL): (i) the Condensed Consolidated Statements of Earnings, (ii) the Condensed Consolidated Statements of Comprehensive Income, (iii) the Condensed Consolidated Balance Sheets, (iv) the Condensed Consolidated Statements of Cash Flows, (v) the Condensed Consolidated Statements of Changes in Shareholders’ Equity and (vi) the Notes to Condensed Consolidated Financial Statements
104	The cover page from Donaldson Company Inc.’s Quarterly Report on Form 10-Q for the quarter ended October 31, 2020, formatted in iXBRL (included as Exhibit 101).
*	Exhibit has previously been filed with the Securities and Exchange Commission and is incorporated herein by reference as an exhibit.
---	---
**	Denotes compensatory plan or management contract.

SIGNATURES

Pursuant to the requirements of the 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: December 4, 2020	By:	/s/ Tod E. Carpenter
---	---	---
		Tod E. Carpenter<br>Chairman, President and<br>Chief Executive Officer<br>(duly authorized officer)
Date: December 4, 2020	By:	/s/ Scott J. Robinson
		Scott J. Robinson<br>Senior Vice President and<br>Chief Financial Officer<br>(principal financial officer)
Date: December 4, 2020	By:	/s/ Peter J. Keller
		Peter J. Keller<br>Corporate Controller<br>(principal accounting officer)

Document

Exhibit 10-A

PURPOSE

It is the philosophy of Donaldson Company to provide a total compensation package that attracts, retains and motivates key employees. The FY__ Annual Incentive Plan (“Plan”) emphasizes pay-for-performance by linking eligible employees’ compensation to key financial performance and provides participants the opportunity to share in Donaldson’s financial success.

PLAN YEAR

The Plan Year coincides with Donaldson’s fiscal year of August 1st through July 31st.

PLAN ELIGIBILITY

•Regular full-time and part-time employees in specific job grades/levels are eligible. Temporary staff is generally excluded unless specified differently within the operational procedure for a country. Contractors and other types of contingent/casual workers are excluded.

•Eligibility is determined based on grade and position.

•New hires, rehires, job changes occurring prior to May 1st.

TARGET INCENTIVE OPPORTUNITY

Target incentive opportunity varies by job grade and position and is expressed as a percentage of the participant’s annual base salary or compensation basis per local country definition effective as of July 31st or the last working day in an eligible position.

•Threshold is the level of performance at which the incentive starts to be earned.

•Target opportunity is the point in which 100% incentive is earned.

•Maximum is the level of performance at which no additional incentive is earned.

PERFORMANCE MEASUREMENT GOALS

“Performance Goal” shall mean one or more of the following performance goals, either individually, alternatively or in any combination, applied on a corporate, subsidiary, division, business unit or line of business basis: earnings per share; return on investment; revenues, including net sales growth; earnings, including net operating profit after taxes; return on equity; profit margins; cost reductions; inventory levels; delivery performance; safety performance; quality performance; core operating earnings; total stockholder return; cash flow, including operating cash flows, free cash

flow, discounted cash flow return on investment, and cash flow in excess of cost of capital; economic value added; stockholder value added; market share; price to earnings ratio; expense ratios; workforce goals; total expenditures; completion of key projects and any other financial, operational or strategic measure.

Participants should refer to their applicable fiscal year’s individual goal sheet for the target incentive opportunity for their position. Goal sheets specify the performance objectives and target incentive opportunities based on Performance Goal(s) for the Plan Year, specify in terms of a formula or standard the method for calculating the amount payable to a participant if the Performance Goal(s) are achieved, and determine the degree to which the grant, vesting, exercisability, lapse of restrictions and/or settlement of such award has been earned, including the degree to which applicable Performance Goal(s) have been achieved.

Each such Performance Goal may be based (i) solely by reference to absolute results of individual performance or organizational performance at various levels or (ii) upon organizational performance relative to the comparable performance of other companies. The Performance Goal may also exclude charges related to an event or occurrence, including (X) restructurings, acquisitions, divestitures, discontinued operations, extraordinary items, and other unusual or non-recurring charges, (Y) an event either not directly related to the operations of Donaldson or not within the reasonable control of Donaldson’s management, or (Z) the cumulative effects of tax or accounting changes in accordance with U.S. generally accepted accounting principles, as set forth on your individual goal sheet.

Goals are financial and are weighted based on importance and relevance. Appropriate goals and goal weightings for each participant will vary based on the organizational goals and position responsibilities.

INCENTIVE PAYOUT ELIGIBILITY

In order to be eligible for an incentive payout, a participant must:

•Be actively employed by Donaldson on the last working day of the fiscal year

AND

•Perform at an acceptable level as solely determined by Donaldson management (e.g., participants with a Missed performance rating may not be eligible for a payout)

Payout practices will comply with country specific legislation.

EMPLOYEE STATUS CHANGES

If a participant has one of the following employment status changes during the Plan Year, the incentive payout will be prorated based on the number of days in an incentive eligible position during the Plan Year:

•New Hire or Rehire on or before May 1 of the Plan Year

•Job or position change on or before May 1 of the Plan Year from non-incentive eligible position to an incentive eligible position or vice versa

•Retirement (age 55 with five years of service or per local country definition)

•Leave of absence (paid or unpaid) will be administered per country requirement

•Death

If a participant terminates employment prior to the last working day of the Plan Year for any reason other than retirement, death, long-term disability or select involuntary situations, no incentive will be paid.

If a participant terminates on or after the last working day of the Plan Year, the Plan Year incentive will be earned, and payout will be based on the participant’s goal achievement.

INCENTIVE RESULTS

Except in select involuntary situations, incentive payouts will be calculated based on the Plan Year-end financial results. Any proration calculations due to employee status changes will also be applied.

INCENTIVE PAYOUT TIMING

Incentive payouts will be paid according to the regional administrative timeline. In the U.S., incentive payouts will be paid no later than October 15th following the end of the Plan Year. Payouts are subject to all applicable taxes and will be paid net of any required withholdings.

Incentive payout timing may be delayed if the applicable fiscal year individual goal sheet(s) is not signed or electronically acknowledged by the participants. In such situations, Donaldson reserves the right to postpone or cancel payment as necessary.

PLAN MODIFICATIONS

Donaldson reserves the right to modify, amend or cancel the Plan at any time in response to changing business conditions or unforeseen circumstances. Donaldson also retains the right to make adjustments for any unusual item that has an unplanned impact on the incentive payout. Adjustments, if any, may have either a negative or positive effect on the incentive payout earned by a participant.

RIGHT TO CONTINUED EMPLOYMENT

Nothing contained in the Plan shall be construed to confer upon any participant the right to continued employment or alter the company’s right to terminate his/her employment at any time.

Document

Exhibit 10-AN

2019 MASTER STOCK INCENTIVE PLAN

RESTRICTED STOCK UNIT AWARD AGREEMENT

This Restricted Stock Unit Award Agreement (the “Agreement”) is made as of the date specified in the individual grant summary, by and between Donaldson Company, Inc., a Delaware corporation (“Donaldson”), and the person specified in the individual grant summary (the “Employee”). For purposes of the Agreement, the “Employer” means Donaldson or any Affiliate that employs the Employee.

Donaldson has adopted the 2019 Master Stock Incentive Plan (the “Plan”) which permits the grant of an award of Restricted Stock Units representing the right to receive shares of common stock, par value US $5.00 per share, of Donaldson (“Common Stock”) and dividend equivalent amounts corresponding to such shares. Donaldson is now granting this award under the Plan and in consideration of the Employee’s and Donaldson’s covenants in this Agreement.

1.Grant of Restricted Stock Units. Donaldson hereby grants to the Employee the number Restricted Stock Units specified in the grant summary for no cash consideration. The Restricted Stock Units shall be subject to the terms and conditions in this Agreement and the Plan. The Employee acknowledges receipt of a copy of the Plan and the Plan Prospectus. Capitalized terms not defined in this Agreement shall have the meaning ascribed to such terms in the Plan. The grant date shall be as specified on the Employee’s individual grant summary (“Grant Date”).

2.Vesting of Restricted Stock Units. Except as otherwise provided in the Plan or this Agreement, neither the Restricted Stock Units nor the underlying shares of Common Stock to which the units relate, may be sold, assigned, hypothecated or transferred (including without limitation, transfer by gift or donation) until the applicable vesting dates provided below (the “Restriction Period”). If the application of the vesting percentages below results in the vesting of a fractional Restricted Stock Unit, the number of Restricted Stock Units vested shall be rounded to the nearest whole number. Restricted Stock Units granted to the Employee shall be credited to a book-keeping account in the Employee’s name. This account shall be a record of book-keeping entries only and shall be utilized solely as a device for the measurement and determination of the number of shares of Common Stock to be issued to the Employee in settlement of the Restricted Stock Units pursuant to this Agreement.

Vesting Dates: Cumulative Units Vested:

First Anniversary of Grant Date 33.3%

Second Anniversary of Grant Date 66.6%

Third Anniversary of Grant Date 100%

3.Termination of Employment. Unvested Restricted Stock Units shall be cancelled and forfeited if, at any time within the Restriction Period, the Employee’s employment terminates for any reason (including, without limitation, termination by the Employer, with or without cause) other than for reasons of death, Retirement (as defined in the Plan), or Disability (as defined in the Plan). Upon termination of the Employee’s employment within the Restriction Period by reason of death, Retirement or Disability, the Restriction Period shall end upon such termination, and in lieu of the vesting schedule above, the unvested Restricted Stock Units shall vest as to the number (rounded to the nearest whole share) of Restricted Stock Units obtained by multiplying the total Restricted Stock Units specified in the grant summary by a fraction formed from dividing the full number of months of the Employee’s

employment since the Grant Date by thirty-six (36), minus the number of Restricted Stock Units already vested, if any. The remainder of Restricted Stock Units shall be cancelled and forfeited.

For purposes of this Agreement, the Employee’s date of termination of employment shall be the earlier of (i) the date the Employer tenders a notice of termination to the Employee or the Employee tenders a notice of resignation to the Employer, or (ii) the date the Employee ceases to render services to the Employer, and unless otherwise expressly provided in this Agreement or determined by the Committee in its sole discretion, the Employee’s right to vest in the Restricted Stock Units will terminate as of such date and will not be extended by any notice period (e.g., the Employee’s period of employment would not include any contractual notice period or any period of “garden leave” or similar period mandated under employment laws in the jurisdiction where the Employee is employed or the terms of the Employee’s employment agreement, if any). The Committee (or its delegate) shall have the exclusive discretion to determine the date of the Employee’s termination of employment for purposes of this award (including whether the Employee may still be considered to be providing services while on a leave of absence). For the avoidance of doubt, a transfer of employment between Donaldson Affiliates shall not constitute a termination of employment for purposes of this Agreement.

4.Settlement of Restricted Stock Units.

(a)Upon the expiration of the Restriction Period, Donaldson shall cause to be issued to the Employee, or to the Employee’s estate in the event of the Employee’s death, one (1) share of Common Stock in payment and settlement of each vested Restricted Stock Unit. Donaldson shall cause the shares of Common Stock issuable in connection with the vesting of any such Restricted Stock Units to be issued as soon as practicable after the Restriction Period, but in all events no later than 30 days after the Restriction Period, and the Employee shall have no power to affect the timing of such issuance. Such issuance shall be evidenced by a stock certificate or appropriate entry on the books of Donaldson or a duly authorized transfer agent of Donaldson and shall be in complete settlement and satisfaction of such vested Restricted Stock Units.

Notwithstanding the foregoing, if the Employee is resident or provides services outside of the United States, Donaldson, in its sole discretion, may provide for the settlement of the Restricted Stock Units in the form of:

(i) a cash payment in an amount equal to the Fair Market Value of the shares of Common Stock as of the vesting date that corresponds to the number of vested Restricted Stock Units, to the extent settlement in shares of Common Stock (i) is prohibited under local law, (ii) would require the Employee, Donaldson or any Affiliate to obtain the approval of any governmental or regulatory body in the Employee’s country of residence (or country of employment, if different), (iii) would result in adverse tax consequences for the Employee, Donaldson or any Affiliate, or (iv) is administratively burdensome; or

(ii) shares of Common Stock, but require the Employee to sell such shares of Common Stock immediately or within a specified period following the Employee’s termination of employment (in which case, the Employee agrees that Donaldson shall have the authority to issue sale instructions in relation to such shares of Common Stock on the Employee’s behalf).

(b)If the Employee is a taxpayer of the United States of America (“U.S.”) and has attained or will attain age 55 prior to the expiration of the Restriction Period applicable to Restricted Stock Units, such Restricted Stock Units shall be treated as “deferred compensation” subject to section 409A of Code.

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In such case, if those Restricted Stock Units vest and become payable on account of the Employee’s termination of employment, the Restricted Stock Units shall not become payable (even though non-forfeitable) unless the termination constitutes a “separation from service” as defined in Treasury Regulations promulgated under section 409A of the Code. In addition, if the Employee is a Specified Employee, payment on account of separation from service hereunder shall be made as of the date that is six (6) months following the Employee’s separation from service (or, if earlier, upon the Employee’s death).

5.Execution of Employee Agreement and Non-Competition Agreement. In consideration of the grant of Restricted Stock Units and other good and valuable consideration associated with the Employee’s employment with the Employer, the Employee agrees to execute an agreement (or agreements) containing restrictive covenants concerning the Employee’s behavior both during employment and following termination of employment that is satisfactory to Donaldson (the “Employee Agreement”). The Employee acknowledges and agrees that the grant of Restricted Stock Units is expressly conditioned upon the Employee’s execution of the Employee Agreement, and the Employee further acknowledges and agrees that the grant of Restricted Stock Units is adequate consideration for the Employee’s execution of the Employee Agreement and the restrictive covenants contained therein.

6.Accelerated Vesting Upon Change in Control. In the event of a Change in Control (as defined in the Plan) during the Restricted Period, the unvested Restricted Stock Units then outstanding shall immediately become fully vested and the underlying shares of Common Stock shall be issued to the Employee. Notwithstanding the foregoing, if any payment due under this Section 6 is deferred compensation subject to section 409A of the Code, and if the Change in Control is not a “change in control event” that serves as a permissible payment event under U.S. Treasury Regulation § 1.409A3(i)(5) or such other regulation or guidance issued under section 409A of the Code, then the Restricted Stock Units shall vest upon the Change in Control as provided above but issuance of the shares subject to the award shall be delayed until the end of the Restriction Period.

7.Tax and Social Insurance Contributions Withholding.

(a)Regardless of any action Donaldson or the Employer takes with respect to any or all income tax, social insurance, payroll tax, fringe benefit tax, payment on account or other tax-related items related to the Employee’s participation in the Plan (“Tax-Related Items”), the Employee acknowledges that the ultimate liability for all Tax-Related Items legally due by the Employee is and remains the Employee’s responsibility, and that Donaldson and the Employer: (a) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the award of Restricted Stock Units, including the grant of the Restricted Stock Units, the vesting of the Restricted Stock Units, the issuance of shares of Common Stock, the subsequent sale of any shares of Common Stock and the receipt of any dividends or dividend equivalent amounts; and (b) do not commit to structure the terms of the grant or any aspect of the Restricted Stock Unit award to reduce or eliminate the Employee’s liability for Tax-Related Items.

(b)Prior to any taxable or tax withholding event, as applicable, the Employee agrees to make adequate arrangements satisfactory to Donaldson and/or the Employer to satisfy all Tax-Related Items. Payment of all Tax-Related Items may be satisfied by (i) payment in cash, (ii) delivery of unencumbered shares of Common Stock previously acquired having a Fair Market Value that is equal to the Tax-Related Items, (iii) by a combination of cash and shares under (i) and (ii) above; (iv) by withholding of shares of Common Stock that would otherwise be issued upon settlement having a Fair Market Value equal to the Tax-Related Items or (v) by (broker-assisted) sell-to-cover transaction that complies with all applicable

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laws. In the absence of direction from the Employee, the Employee hereby authorizes Donaldson to satisfy all Tax-Related Items by (1) withholding shares of Common Stock to be issued at settlement or otherwise selling shares of Common Stock on the Employee’s behalf equal to the amount of all Tax-Related Items required to be withheld, pursuant to the policies and processes of Donaldson’s stock plan administrator and broker; or (2) withholding from the Employee’s wages or other cash compensation payable to the Employee by Donaldson and/or the Employer. If the Employee is subject to taxation in more than one jurisdiction, the Employee acknowledges that the Employer or another Affiliate may be required to withhold or account for Tax-Related Items in more than one jurisdiction.

(c)Depending on the withholding method, Donaldson may withhold or account for Tax-Related Items by considering applicable statutory withholding rates (as determined by the Committee in its sole discretion) or other applicable withholding rates, including maximum withholding rates. If the obligation for Tax-Related Items is satisfied by withholding from shares of Common Stock to be delivered upon vesting of the Restricted Stock Units, for tax purposes, the Employee is deemed to have been issued the full number of shares of Common Stock subject to the vested Restricted Stock Units, notwithstanding that a number of shares of Common Stock are held back solely for the purpose of paying the Tax-Related Items.

(d)The Employee agrees to pay to Donaldson or the Employer any amount of Tax-Related Items that Donaldson or the Employer may be required to withhold or account for as a result of the Employee’s participation in the Plan that cannot be satisfied by the means previously described. Donaldson may refuse to issue or deliver shares of Common Stock or proceeds from the sale of shares of Common Stock until arrangements satisfactory to the Committee have been made in connection with the Tax-Related Items.

8.Shareholder Rights; Dividend Equivalents. The Restricted Stock Units do not entitle the Employee to any rights of a stockholder of Donaldson with respect to shares of Common Stock underlying the Restricted Stock Units until such shares have been issued to the Employee upon settlement of the Restricted Stock Units. Notwithstanding the foregoing, the Employee shall accumulate an unvested right to dividend equivalent amounts on the shares of Common Stock underlying Restricted Stock Units if cash dividends are declared by Donaldson on the shares on or after the Grant Date. Each time a dividend is paid on the shares of Common Stock, the Employee shall accrue an additional number of Restricted Stock Units (rounded to the nearest whole share) having a Fair Market Value on the dividend payment date equal to the amount of the dividend payable on the Employee’s Restricted Stock Units on the dividend record date. The additional Restricted Stock Units shall be subject to the same vesting, forfeiture and share delivery terms in Sections 2, 3, 4 and 6 above as if they had been awarded on the Grant Date. The Employee shall not be entitled to dividend equivalents with respect to dividends declared prior to the Grant Date. All dividend equivalents accumulated with respect to forfeited Restricted Stock Units shall also be irrevocably forfeited. As of the date of issuance of shares underlying Restricted Stock Units, the Employee shall have all of the rights of a stockholder of Donaldson with respect to any shares issued pursuant hereto.

9.Effectiveness of Agreement; Non-Disclosure. This Agreement shall be effective only after the Employee agrees to the terms and conditions of this Agreement. The Employee shall not disclose either the contents or any of the terms and conditions of this award to any other person and agrees that Donaldson shall have the right, in its sole discretion, to immediately terminate the Agreement in the event of such disclosure by the Employee.

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Nature of Grant.

(a)Neither the Plan nor this Agreement shall (i) be deemed to give the Employee a right to remain an employee of the Employer, (ii) restrict the right of the Employer to discharge the Employee, with or without cause, or (iii) be deemed to be a written contract of employment.

(b)The Employee acknowledges and agrees that the Plan is discretionary in nature and limited in duration, and may be amended, cancelled, or terminated by Donaldson, in its sole discretion, at any time. Any amendment, modification or termination of the Plan shall not constitute a change or impairment of the terms and conditions of the Employee’s employment with the Employer.

(c)The grant of the Restricted Stock Unit award under the Plan is a one-time benefit and does not create any contractual or other right to receive an award or benefits in lieu of Restricted Stock Units in the future. Future awards, if any, will be at the sole discretion of Donaldson, including, but not limited to, the form and timing of an award, the number of shares of Common Stock subject to an award and the vesting provisions.

(d)The Employee’s participation in the Plan is exceptional, voluntary and occasional. The value of the Employee’s Restricted Stock Unit award is an extraordinary item of compensation outside the scope of the Employee’s employment contract, if any.

(e)The Employee’s award of Restricted Stock Units, the shares of Common Stock subject to the Restricted Stock Units and the income and value of the same are not part of normal or expected compensation for any purpose, including, without limitation, calculating any severance, resignation, redundancy, end of service payments, bonuses, long-service awards, pension, or retirement benefits or similar payments and in no event should be considered as compensation for, or relating in any way to, past services for Donaldson, the Employer or any Affiliate.

(f)No claim or entitlement to compensation or damages shall arise from termination of the Restricted Stock Unit award resulting from termination of the Employee’s employment (for any reason whatsoever, whether or not later found to be invalid or in breach of local employment laws or the terms of the Employee’s employment agreement, if any).

(g)The future value of the shares of Common Stock subject to the Restricted Stock Unit award is unknown and cannot be predicted with certainty. The value of any underlying shares of Common Stock issued hereunder may increase or decrease.

(h)Donaldson shall not be liable for any foreign exchange rate fluctuation, where applicable, between the Employee’s local currency and the United States dollar that may affect the value of the Restricted Stock Unit or of any amounts due to the Employee pursuant to the award or the subsequent sale of any shares of Common Stock acquired under the award.

(i)The Restricted Stock Units and the benefits evidenced by this Agreement do not create any entitlement not otherwise specifically provided for in the Plan or provided by Donaldson in its discretion, to have the Restricted Stock Units or any such benefits transferred to, or assumed by, another company, nor to be exchanged, cashed out or substituted for, in connection with any corporate transaction affecting the shares of Common Stock.

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Data Privacy.

(a)Pursuant to applicable personal data protection laws, Donaldson hereby notifies the Employee of the following in relation to the Employee’s personal Data (as defined below) and the collection, use, processing and transfer of such Data in relation to Donaldson’s grant of this award and the Employee’s participation in the Plan. The collection, use, processing and transfer of the Employee’s Data is necessary for Donaldson’s administration of the Plan and the Employee’s participation in the Plan, and the Employee’s denial and/or objection to the collection, use, processing and transfer of Data may affect the Employee’s participation in the Plan. As such, the Employee hereby voluntarily acknowledges and consents (where required under applicable law) to the collection, use, processing and transfer of Data as described in this paragraph.

(b)Donaldson and the Employer hold certain personal information about the Employee, specifically: the Employee’s name, home address, email address and telephone number, date of birth, social security number, passport number or other employee identification number, salary, nationality, job title, any shares of Common Stock or directorships held in Donaldson, details of all stock awards or any other entitlement to shares of Common Stock awarded, canceled, purchased, vested, unvested or outstanding in the Employee’s favor, for the purpose of managing and administering the Plan (“Data”). Data may be provided by the Employee or collected, where lawful, from third parties, and Donaldson will process Data for the exclusive purpose of implementing, administering and managing the Employee’s participation in the Plan. Data processing will take place through electronic and non-electronic means according to logics and procedures strictly correlated to the purposes for which Data are collected and with confidentiality and security provisions as set forth by applicable laws and regulations in the Employee’s country of residence. Data processing operations will be performed minimizing the use of personal and identification data when such operations are unnecessary for the processing purposes sought. Data will be accessible within Donaldson’s organization only by those persons requiring access for purposes of the implementation, administration and operation of the Plan and for the Employee’s participation in the Plan.

(c)Donaldson and the Employer will transfer Data amongst themselves as necessary for the purpose of implementation, administration and management of the Employee’s participation in the Plan, and Donaldson and the Employer may each further transfer Data to any third parties assisting Donaldson in the implementation, administration and management of the Plan. As permitted by applicable personal data protection laws, if Donaldson or the Employer becomes involved in a merger, acquisition, sale of assets, joint venture, securities offering, bankruptcy, reorganization, liquidation, dissolution, or other transaction or if the ownership of all or substantially all of Donaldson or the Employer otherwise changes, Donaldson or the Employer may transfer Data to a third party or parties in connection therewith. The Employee hereby authorizes (where required under applicable law) them to receive, possess, use, retain and transfer Data, in electronic or other form, for purposes of implementing, administering and managing the Employee’s participation in the Plan, including any requisite transfer of such Data as may be required for the administration of the Plan and/or the subsequent holding of shares of Common Stock on the Employee’s behalf to a broker or other third party with whom the Employee may elect to deposit any shares of Common Stock acquired pursuant to the Plan.

(d)The Employee may, at any time, exercise his or her rights provided under applicable personal data protection laws, which may include the right to (a) obtain confirmation as to the existence of Data, (b) verify the content, origin and accuracy of Data, (c) request the integration, update, amendment, deletion, or blockage (for breach of applicable laws) of Data, and (d) to oppose, for legal reasons, the collection, processing or transfer of Data which is not necessary or required for the

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implementation, administration and/or operation of the Plan and the Employee’s participation in the Plan. The Employee may seek to exercise these rights by contacting privacy@donaldson.com. The Employee understands that he or she is providing the consent herein on a purely voluntary basis. If the Employee does not consent or later seeks to remove his or her consent, the Employee’s salary from or employment with the Employer will not be affected; the only consequence of refusing or withdrawing his or her consent is that Donaldson would not be able to grant the Employee Restricted Stock Units or other equity awards or participation in the Plan.

12.Governing Law and Venue. This Agreement shall be construed and enforced in accordance with the laws of the U.S. state of Delaware, except with respect to its rules relating to conflicts of law. The Employee consents to the exclusive jurisdiction of the state and federal courts of the U.S. state of Minnesota in connection with any controversies relating to or arising out of this Agreement, and agrees that any and all litigation relating to or arising out of this Agreement shall be venued in Hennepin County, Minnesota.

13.Repatriation; Compliance with Law. The Employee agrees to repatriate all payments attributable to the shares of Common Stock and/or cash acquired under the Plan (including, but not limited to, dividends and any proceeds derived from the sale of the shares of Common Stock acquired pursuant to the award) in accordance with local foreign exchange rules and regulations in the Employee’s country of residence (and country of employment, if different). In addition, the Employee also agrees to take any and all actions, and consents to any and all actions taken by Donaldson or any Affiliate, as may be required to allow Donaldson and its Affiliates to comply with local laws, rules and regulations in the Employee’s country of residence (and country of employment, if different). Finally, the Employee agrees to take any and all actions as may be required to comply with the Employee’s personal legal and tax obligations under local laws, rules and regulations in the Employee’s country of residence (and country of employment, if different).

14.Electronic Delivery and Acceptance. Donaldson, in its sole discretion, may decide to deliver any documents related to the Restricted Stock Units or other awards granted to the Employee under the Plan by electronic means. The Employee hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through an on-line or electronic system established and maintained by Donaldson or a third party designated by Donaldson.

15.English Language. The Employee acknowledges and agrees that it is the Employee’s express intent that this Agreement, the Plan and all other documents, notices and legal proceedings entered into, given or instituted pursuant to the grant of this award of Restricted Stock Units, be drawn up in English. The Employee acknowledges that he or she is sufficiently proficient in English, or has consulted with an advisor who is sufficiently proficient in English, so as to allow the Employee to understand the terms and conditions of this Agreement and the Plan. If the Employee has received this Agreement, the Plan or any other documents related to the award of Restricted Stock Units translated into a language other than English, and if the meaning of the translated version is different than the English version, the English version shall control.

16.Addendum. Notwithstanding any provisions in this Agreement to the contrary, this award of Restricted Stock Units shall be subject to any special terms and conditions for the Employee’s country of residence (and country of employment, if different), as set forth in the applicable addendum to this Agreement. Further, if the Employee transfers residency and/or employment to another country reflected in an addendum to this Agreement, the special terms and conditions for such country will apply to the Employee to the extent Donaldson determines, in its sole discretion, that the application of such terms and

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conditions is necessary or advisable in order to comply with local laws, rules and/or regulations or to facilitate the operation and administration of the Restricted Stock Units and the Plan (or Donaldson may establish alternative terms and conditions as may be necessary or advisable to accommodate the Employee’s transfer). Any applicable addendum shall constitute part of this Agreement.

17.Imposition of Other Requirements. Donaldson reserves the right to impose other requirements on this award of Restricted Stock Units, any dividend equivalents, any shares of Common Stock acquired pursuant to this award, and the Employee’s participation in the Plan, to the extent Donaldson determines, in its sole discretion, that such other requirements are necessary or advisable in order to comply with local laws, rules and/or regulations or to facilitate the operation and administration of the Restricted Stock Unit award and the Plan. Such requirements may include (but are not limited to) requiring the Employee to sign any agreements or undertakings that may be necessary to accomplish the foregoing.

18.Not a Public Offering. This award is not intended to be a public offering of securities in the Employee’s country of residence (and country of employment, if different). Donaldson has not submitted any registration statement, prospectus or other filings with the local securities authorities (unless otherwise required under local law), and the award of Restricted Stock Units is not subject to the supervision of the local securities authorities.

19.No Advice Regarding Grant. No employee of Donaldson or any Affiliate is permitted to advise the Employee on whether the Employee should acquire shares of Common Stock by participating in the Plan. Investment in shares of Common Stock involves a degree of risk. Before deciding to participate in the Plan, the Employee should carefully review all the materials related to the Restricted Stock Units and the Plan. In addition, the Employee should consult the Employee’s personal advisor for professional investment advice.

20.Insider Trading/Market Abuse Laws. By participating in the Plan, the Employee agrees to comply with Donaldson’s policy on insider trading (to the extent that it is applicable to the Employee). Further, the Employee acknowledges that, depending on the Employee’s or the broker’s country of residence or where the shares of Common Stock are listed, the Employee may be subject to insider trading restrictions and/or market abuse laws which may affect the Employee’s ability to accept, acquire, sell or otherwise dispose of shares of Common Stock, rights to shares of Common Stock (e.g., Restricted Stock Units) or rights linked to the value of shares of Common Stock, during such time the Employee is considered to have “inside information” regarding Donaldson as defined by the laws or regulations in the Employee’s country. Local insider trading laws and regulations may prohibit the cancellation or amendment of orders the Employee places before he or she possessed inside information. Furthermore, the Employee could be prohibited from (i) disclosing the inside information to any third party (other than on a “need to know” basis) and (ii) “tipping” third parties or causing them otherwise to buy or sell securities. The Employee understands that third parties include fellow employees. Any restrictions under these laws or regulations are separate from and in addition to any restrictions that may be imposed under any applicable Donaldson insider trading policy. The Employee acknowledges that it is the Employee’s responsibility to comply with any applicable restrictions, and that the Employee should therefore consult his or her personal advisor on this matter.

21.Severability. The invalidity or unenforceability of any provision of the Plan or this Agreement will not affect the validity or enforceability of any other provision of the Plan or this Agreement, and each provision of the Plan and this Agreement will be severable and enforceable to the extent permitted by law.

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22.Waiver. The Employee agrees that a waiver by Donaldson of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any other provision of this Agreement, or of any subsequent breach by the Employee or any other Participant.

By execution of this Agreement as of the Grant Date, the Employee hereby accepts and agrees to be bound by all of the terms and conditions of this Agreement and the Plan.

EMPLOYEE:

SIGNED BY ELECTRONIC SIGNATURE*

* BY ELECTRONICALLY ACCEPTING THIS AWARD, THE EMPLOYEE AGREES THAT (i) SUCH ACCEPTANCE CONSTITUTES THE EMPLOYEE’S ELECTRONIC SIGNATURE IN EXECUTION OF THIS AGREEMENT; (ii) THE EMPLOYEE AGREES TO BE BOUND BY THE PROVISIONS OF THE PLAN, THE AGREEMENT AND THE ADDENDUM TO THE AGREEMENT (IF ANY); (iii) THE EMPLOYEE HAS REVIEWED THE PLAN, THE AGREEMENT AND THE ADDENDUM TO THE AGREEMENT (IF ANY) IN THEIR ENTIRETY, HAS HAD AN OPPORTUNITY TO OBTAIN THE ADVICE OF COUNSEL PRIOR TO ACCEPTING THE AWARD AND FULLY UNDERSTANDS ALL OF THE PROVISIONS OF THE PLAN, THE AGREEMENT AND THE ADDENDUM TO THE AGREEMENT (IF ANY); (iv) THE EMPLOYEE HAS BEEN PROVIDED WITH A COPY OR ELECTRONIC ACCESS TO A COPY OF THE U.S. PROSPECTUS FOR THE PLAN AND THE TAX SUPPLEMENT TO THE U.S. PROSPECTUS FOR THE EMPLOYEE’S COUNTRY, IF APPLICABLE; AND (v) THE EMPLOYEE HEREBY AGREES TO ACCEPT AS BINDING, CONCLUSIVE AND FINAL ALL DECISIONS OR INTERPRETATIONS OF THE HUMAN RESOURCES COMMITTEE UPON ANY QUESTIONS ARISING UNDER THE PLAN, THE AGREEMENT AND THE ADDENDUM TO THE AGREEMENT (IF ANY).

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ADDENDUM TO

RESTRICTED STOCK AWARD AGREEMENT

The Restricted Stock Units are subject to the following additional terms and conditions as set forth in this addendum to the Agreement (the “Addendum”) to the extent the Employee resides and/or is employed in one of the jurisdictions or countries addressed herein. To the extent the Employee transfers residence and/or employment to another country, the special terms and conditions for such country as reflected in this Addendum (if any) will apply to the Employee to the extent Donaldson determines, in its sole discretion, that the application of such terms and conditions is necessary or advisable to comply with local laws, rules and/or regulations, or to facilitate the operation and administration of the Restricted Stock Units and the Plan (or Donaldson may establish alternative terms and conditions as may be necessary or advisable to accommodate the Employee’s transfer). All defined terms as contained in this Addendum shall have the same meaning as set forth in the Plan and the Agreement.

EUROPEAN UNION (“EU”) AND EUROPEAN ECONOMIC AREA (“EEA”) MEMBER STATES

1. Personal Data. The following provision replaces Section 11 of the Agreement in its entirety:

Pursuant to applicable personal data protection laws, Donaldson hereby notifies the Employee of the following in relation to the Employee’s Personal Data (defined below) and the collection, processing and transfer in electronic or other form of such Personal Data in relation to Donaldson’s grant of this award and the Employee’s participation in the Plan. The collection, processing and transfer of the Employee’s Personal Data is necessary for the legitimate purpose of Donaldson’s administration of the Plan and the Employee’s participation in the Plan, and the Employee’s denial and/or objection to the collection, processing and transfer of Personal Data may affect the Employee’s participation in the Plan. As such, the Employee acknowledges the collection, use, processing and transfer of Personal Data as described herein.

Donaldson and the Employer hold certain personally identifiable information about the Employee, specifically the Employee’s name, home address, email address and telephone number, date of birth, social security number, passport number or other employee identification number, salary, nationality, job title, any shares of Common Stock or directorships held in Donaldson, details of all options or any other entitlement to shares of Common Stock awarded, canceled, exercised, vested, unvested or outstanding in the Employee’s favor, for the purpose of managing and administering the Plan (“Personal Data”). The Personal Data may be provided by the Employee or collected, where lawful, from third parties. Donaldson and the Employer each act as controllers of the Personal Data and will process the Personal Data in this context for the exclusive legitimate purpose of implementing, administering and managing the Employee’s participation in the Plan and meeting related legal obligations associated with these actions.

The processing will take place through electronic and non-electronic means according to logics and procedures correlated to the purposes for which the Personal Data was collected and with confidentiality and security provisions as set forth by applicable laws and regulations. Personal Data will be accessible within Donaldson’s organization only by those persons requiring access for purposes of the implementation, administration and operation of the Plan and other aspects of the employment relationship and for the Employee’s participation in the Plan.

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Donaldson and the Employer will transfer Personal Data amongst themselves as necessary for the purpose of implementation, administration and management of the Employee’s participation in the Plan, and Donaldson and the Employer may each further transfer Personal Data to third parties assisting Donaldson or the Employer in the implementation, administration and management of the Plan, including Morgan Stanley Smith Barney or any successor or other third party that Donaldson, the Employer or Morgan Stanley Smith Barney (or its successor) may engage to assist with administration of the Plan from time to time. Further and as permitted by applicable personal data protection laws, if Donaldson or the Employer becomes involved in a merger, acquisition, sale of assets, joint venture, securities offering, bankruptcy, reorganization, liquidation, dissolution, or other transaction or if the ownership of all or substantially all of Donaldson or the Employer otherwise changes, Donaldson or the Employer may transfer Data to a third party or parties in connection therewith. These recipients may be located in the EEA, or elsewhere throughout the world, such as the United States. By participating in the Plan, the Employee understands that these recipients may receive, possess, use, retain and transfer Personal Data, in electronic or other form, for purposes of implementing, administering and managing the Employee’s participation in the Plan, including any requisite transfer of such Personal Data as may be required for the administration of the Plan and/or the subsequent holding of shares of Common Stock on the Employee’s behalf to a broker or other third party with whom the Employee may elect to deposit any shares of Common Stock acquired pursuant to the Plan. The Employee further understands that the Employee may request a list with the names and addresses of any potential recipients of the Employee’s Personal Data by contacting privacy@donaldson.com. When transferring Personal Data to these potential recipients, Donaldson and the Employer provide appropriate safeguards in accordance with EU Standard Contractual Clauses, the EU-U.S. Privacy Shield Framework, or other legally binding and permissible arrangements. The Employee may request a copy of such safeguards by contacting privacy@donaldson.com.

To the extent provided by law, the Employee may, at any time, have the right to request: access to Personal Data, rectification of Personal Data, erasure of Personal Data, restriction of processing of Personal Data, and portability of Personal Data. The Employee may also have the right to object, on grounds related to a particular situation, to the processing of Personal Data, as well as opt-out of the Plan herein, in any case without cost, by contacting privacy@donaldson.com. The Employee’s provision of Personal Data is a contractual requirement. The Employee understands, however, that the only consequence of refusing to provide Personal Data is that Donaldson and the Employer may not be able to grant the Employee equity awards under the Plan, or administer or maintain such awards. For more information on the consequences of the Employee’s refusal to provide Personal Data, the Employee understands that the Employee may contact privacy@donaldson.com.

When Donaldson and the Employer no longer need to use Personal Data for the purposes above or do not need to retain it for compliance with any legal or regulatory purpose, each will take reasonable steps to remove Personal Data from their systems and/or records containing the Personal Data and/or take steps to properly anonymize it so that the Employee can no longer be identified from it.

2. EU Age Discrimination. If the Employee is a resident of or employed in a country that is a member of the EU, the grant of this award and the terms and conditions governing this award are intended to comply with the age discrimination provisions of the EU Equal Treatment Framework Directive, as implemented into local law (the “Age Discrimination Rules”). To the extent a court or tribunal of competent jurisdiction determines that any provision of this award is invalid or unenforceable, in whole or in part, under the Age Discrimination Rules, Donaldson shall have the power and authority to revise or strike such provision to the minimum extent necessary to make it valid and enforceable to the full extent permitted under local law.

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AUSTRALIA

1.Australia Offer Document. The grant of the Restricted Stock Units is intended to comply with the provisions of the Corporations Act 2001, Australia Securities and Investment Commission ("ASIC") Regulatory Guide 49 and ASIC Class Order 14/1000. Additional details are set forth in the Australia Offer Document, which is provided to the Employee with the Agreement. By accepting the Restricted Stock Units, the Employee acknowledges and confirms that he or she has received these documents.

2.Shareholder Approval Requirement. Notwithstanding any provision in the Agreement to the contrary, the Employee will not be entitled to, and shall not claim any benefit under the Plan if the provision of such benefit would give rise to a breach of Part 2D.2 of the Corporations Act 2001 (Cth), any other provision of that Act, or any other applicable statute, rule or regulation which limits or restricts the giving of such benefits. Further, Donaldson’s Affiliate in Australia is under no obligation to seek or obtain the approval of its shareholders for the purpose of overcoming any such limitation or restriction.

3.Tax Deferral. The Restricted Stock Units awarded under the Agreement is intended to be subject to tax deferral under Subdivision 83A-C of the Income Tax Assessment Act 1997 (Cth) (subject to the conditions of the Act).

BELGIUM

No country-specific provisions.

BRAZIL

1.Labor Law Acknowledgment. The Employee agrees that, for all legal purposes, (i) the benefits provided under the Agreement and the Plan are the result of commercial transactions unrelated to the Employee’s employment; (ii) the Agreement and the Plan are not a part of the terms and conditions of the Employee’s employment; and (iii) the income from the Restricted Stock Units, if any, is not part of the Employee’s remuneration from employment.

2.Compliance with Law. By accepting the Restricted Stock Units, the Employee acknowledges his / her agreement to comply with applicable Brazilian laws and to pay any and all applicable taxes associated with the vesting of the Restricted Stock Units, the issuance and/or sale of shares of Common Stock acquired under the Plan or the receipt of any dividends.

CANADA

1.Settlement of Restricted Stock Units. Notwithstanding any provision of the Agreement or the Plan to the contrary, the Restricted Stock Units do not provide any right for the Employee to receive a cash payment and the Restricted Stock Units will be settled in shares of Common Stock only.

2.Use of English Language. The Employee acknowledges and agrees that it is the Employee’s wish that the Agreement and the Addendum, as well as all documents, notices and legal proceedings entered into, given or instituted pursuant the Award, be drawn up in English.

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Utilisation de Langue anglaise. Employé admet et convient que c’est le désir du Employé que l’Accord et l’Addenda, aussi bien que tous les documents, remarque et les poursuites judiciaires entrées, données ou instituées conforme le Prix, être établi dans l’anglais.

3.Data Privacy. The following provision supplements Section 11 of the Agreement:

The Employee hereby authorizes Donaldson and Donaldson’s representatives to discuss and obtain all relevant information from all personnel, professional or non-professional, involved in the administration of the Plan. The Employee further authorizes Donaldson, the Employer and its Affiliates to disclose and discuss the Plan with their advisors. The Employee further authorizes Donaldson, the Employer and any other Affiliate to record such information and to keep such information in the Employee’s employee file.

DENMARK

1.Danish Stock Option Act. In accepting the Restricted Stock Units, the Employee acknowledges that the Employee has received an “Employer Statement” translated into Danish, which is being provided to comply with the Danish Act on the Use of Rights to Purchase or Subscribe for Shares etc. in Employment Relationships (the “Stock Option Act”).

FRANCE

1.Nature of Grant. The Restricted Stock Units are not granted under the French specific regime provided by Articles Section L.225-197-1 and seq. of the French commercial code.

GERMANY

No country-specific provisions.

HONG KONG

2.IMPORTANT NOTICE. The Agreement, the Addendum, the Plan and all other materials pertaining to the Restricted Stock Units have not been reviewed by any regulatory authority in Hong Kong. The Employee is advised to exercise caution in relation to the offer. If the Employee has any doubts about any of the contents of the materials pertaining to the Restricted Stock Units, the Employee should obtain independent professional advice.

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INDIA

1.Repatriation Requirements. The Employee understands that the Employee must repatriate any cash dividends paid on shares of Common Stock under the Plan and any proceeds from the sale of such shares of Common Stock to India within a certain period of time after receipt of the proceeds. It is the Employee’s sole responsibility to comply with applicable exchange control laws in India.

ITALY

1.Plan Document Acknowledgment. In accepting the Option, the Employee acknowledges that a copy of the Plan was made available to the Employee, and the Employee has reviewed the Plan and the Agreement, including this Addendum, in their entirety and fully understands and accepts all provisions of the Plan, the Agreement, and this Addendum.

The Employee further acknowledges that the Employee has read and specifically approves the following provision in the Agreement: Section 2 (Vesting of Restricted Stock Units), Section 3 (Termination of Employment), Section 7 (Tax and Social Insurance Contributions Withholding), Section 10 (Nature of Grant); and Section 17 (Imposition of Other Requirements).

JAPAN

No country-specific provisions.

MEXICO

1.Commercial Relationship. The Employee expressly recognizes that the Employee’s participation in the Plan and Donaldson’s grant of a Restricted Stock Units does not constitute an employment relationship between the Employee and Donaldson. The Employee has been granted the Restricted Stock Units as a consequence of the commercial relationship between Donaldson and Donaldson’s Affiliate in Mexico that employs the Employee (“Donaldson-Mexico”), and Donaldson-Mexico is the Employee’s sole employer. Based on the foregoing, (a) the Employee expressly recognizes that the Plan and the benefits the Employee may derive from participation in the Plan does not establish any rights between the Employee and Donaldson-Mexico, (b) the Plan and the benefits the Employee may derive from participation in the Plan are not part of the employment conditions and/or benefits provided by Donaldson-Mexico, and (c) any modifications or amendments of the Plan by Donaldson, or a termination of the Plan by Donaldson, shall not constitute a change or impairment of the terms and conditions of the Employee’s employment with Donaldson-Mexico.

2.Extraordinary Item of Compensation. The Employee expressly recognizes and acknowledges that the Employee’s participation in the Plan is a result of the discretionary and unilateral decision of Donaldson, as well as the Employee’s free and voluntary decision to participate in the Plan in accordance with the terms and conditions of the Plan, the Agreement and this Addendum. As such, the Employee acknowledges and agrees that Donaldson, in its sole discretion, may amend and/or discontinue the Employee’s participation in the Plan at any time and without any liability. The value of the Restricted Stock Units is an extraordinary item of compensation outside the scope of the Employee’s employment contract, if any. The Restricted Stock Units are not part of the Employee’s regular or expected compensation for purposes of calculating any severance, resignation, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits, or any similar payments, which are the exclusive obligations of Donaldson-Mexico.

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NETHERLANDS

1. Waiver of Termination Rights. The Employee hereby waives any and all rights to compensation or damages as a result of the Employee’s termination of employment with Donaldson or any Affiliate whatsoever, insofar as those rights result or may result from (i) the loss or diminution in value of such rights or entitlements under the Plan, or (ii) the Employee’s ceasing to have rights under, or ceasing to be entitled to any awards under the Plan as a result of such termination.

SINGAPORE

1.Qualifying Person Exemption. The grant of the Restricted Stock Units under the Plan is being made pursuant to the “Qualifying Person” exemption under section 273(1)(f) of the Securities and Futures Act (Chapter 289, 2006 Ed.) (“SFA”). The Plan has not been and will not be lodged or registered as a prospectus with the Monetary Authority of Singapore and is not regulated by any financial supervisory authority pursuant to any legislation in Singapore. The Employee should note that, as a result, the Restricted Stock Units is subject to section 257 of the SFA and the Employee will not be able to make (a) any subsequent sale of the shares of Common Stock in Singapore or (b) any offer of such subsequent sale of the shares of Common Stock subject to the Restricted Stock Units in Singapore, unless such sale or offer is made pursuant to the exemptions under Part XIII Division (1) Subdivision (4) (other than section 280) of the SFA (Chapter 289, 2006 Ed.).

SOUTH KOREA

No country-specific provisions.

POLAND

No country-specific provisions.

SPAIN

1.Acknowledgement of Discretionary Nature of the Plan.

In accepting the Restricted Stock Units, the Employee consents to participation in the Plan and acknowledges that the Employee has received a copy of the Plan.

The Employee understands that Donaldson has unilaterally, gratuitously and in its sole discretion granted restricted stock units under the Plan to individuals who may be employees of Donaldson or any of its Affiliates throughout the world. The decision is a limited decision that is entered into upon the express assumption and condition that any grant will not economically or otherwise bind Donaldson or any of its Affiliates on an ongoing basis. Consequently, the Employee understands that the Restricted Stock Units are granted on the assumption and condition that the Restricted Stock Units and the shares of Common Stock acquired upon vesting of the Restricted Stock Units shall not become a part of any employment contract (either with Donaldson or any of its Affiliates) and shall not be considered a mandatory benefit, salary for any purposes (including severance compensation) or any other right whatsoever. In addition, the Employee understands that this grant would not be made to the Employee but for the assumptions and conditions referenced above; thus, the Employee acknowledges and freely accepts that should any or all

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of the assumptions be mistaken or should any of the conditions not be met for any reason, the Restricted Stock Unit grant shall be null and void.

The Employee understands and agrees that, as a condition of the Restricted Stock Unit grant, unless otherwise provided in the Agreement, any unvested Restricted Stock Units as of the date the Employee ceases active employment, will be forfeited without entitlement to the underlying shares of Common Stock or to any amount of indemnification in the event of termination of employment. The Employee acknowledges that the Employee has read and specifically accepts the conditions referred to in the Agreement regarding the impact of a termination of employment on the Restricted Stock Units.

2.No Public Offering. No “offer of securities to the public,” within the meaning of Spanish law, has taken place or will take place in the Spanish territory in connection with the Option. The Plan, the Agreement (including this Addendum) and any other documents evidencing the grant of the Restricted Stock Units have not, nor will they be, registered with the Comisión Nacional del Mercado de Valores (the Spanish securities regulator) and none of those documents constitute a public offering prospectus.

THAILAND

No country-specific provisions.

UNITED ARAB EMIRATES

1.Securities Law Notice. The Plan is being offered only to qualified employees and is in the nature of providing equity incentives to employees of Donaldson and its Affiliates in the UAE. Any documents related to the Plan, including the Plan, this Addendum, the Plan prospectus and other grant documents (“Plan Documents”), are intended for distribution only to such employees and must not be delivered to, or relied on by, any other person. The Employee should conduct his or her own due diligence on the securities.

The Emirates Securities and Commodities Authority has no responsibility for reviewing or verifying any Plan Documents nor has it taken steps to verify the information set out in them, and thus, is not responsible for such documents. Further, neither the Ministry of Economy nor the Dubai Department of Economic Development has approved this statement nor taken steps to verify the information set out in it, and has no responsibility for it.

The Employee should, as prospective stockholder, conduct the Employee’s own due diligence on the securities. If the Employee does not understand the contents of the Plan Documents, he or she should consult an authorized financial adviser.

UNITED KINGDOM

1.Indemnification for Tax-Related Items. Without limitation to Section 7 of the Agreement, the Employee hereby agrees that he or she is liable for all Tax-Related Items and hereby covenants to pay all such Tax-Related Items, as and when requested by the Donaldson or (if different) the Employer or by Her Majesty’s Revenue & Customs (“HMRC”) (or any other tax authority or any other relevant authority). The Employee also hereby agrees to indemnify and keep indemnified Donaldson and (if different) the Employer against any Tax-Related Items that they are required to pay or withhold or

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have paid or will pay on the Employee’s behalf to HMRC (or any other tax authority or any other relevant authority).

Notwithstanding the foregoing, if the Employee is a director or executive officer (as within the meaning of Section 13(k) of the Exchange Act), the terms of the immediately foregoing provision will not apply. In the event that the Employee is a director or executive officer and income tax due is not collected from or paid by the Employee within 90 days after the U.K. tax year in which an event giving rise to the indemnification described above occurs, the amount of any uncollected tax may constitute a benefit to the Employee on which additional income tax and national insurance contributions may be payable. The Employee acknowledges that the Employee ultimately will be responsible for reporting and paying any income tax due on this additional benefit directly to HMRC under the self-assessment regime and for reimbursing Donaldson or (if different) the Employer for the value of any employee national insurance contributions due on this additional benefit, which Donaldson or (if different) the Employer may recover from the Employee at any time thereafter by any of the means referred to in Section 7 of the Agreement.

2. Exclusion of Claim. The Employee acknowledges and agrees that the Employee will have no entitlement to compensation or damages insofar as such entitlement arises or may arise from the Employee’s ceasing to have rights under or to be entitled to the Restricted Stock Units, whether or not as a result of termination (whether such termination is in breach of contract or otherwise), or from the loss or diminution in value of the Restricted Stock Units. Upon the grant of the Restricted Stock Units, the Employee shall be deemed irrevocably to have waived any such entitlement.

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Document

Exhibit 10-AO

DONALDSON COMPANY, INC.

COMPENSATION PLAN

FOR

NON-EMPLOYEE DIRECTORS

Amended on September 25, 2020

I. Introduction

The Board of Directors of Donaldson Company, Inc. (the “Company”) has adopted stock ownership guidelines attached hereto as Exhibit A because it believes that it is in the best interests of the Company and its stockholders for non-employee directors of the Company to have a significant equity interest in the Company in order to align their financial interests with those of the Company’s stockholders. The Company has previously established an automatic equity grant program and a deferred compensation program for non-employee directors, both of which are intended to assist non-employee directors in meeting the Company’s stock ownership guidelines. Set forth in writing below are the provisions of both programs combined into one restated plan document entitled the Donaldson Company, Inc. Compensation Plan for Non-Employee Directors (hereinafter, the “Plan”).

All equity awards granted hereunder, as well as any amounts deferred that are payable in shares of the Company’s common stock, par value of US$5.00 per share (“Common Stock”) are subject to the terms, conditions, and restrictions set forth in under the Company’s 2019 Master Stock Incentive Plan (the “Master Stock Plan”). In the event of any inconsistency between the terms contained herein and in the Plan, the Master Stock Plan shall govern. All capitalized terms that are not defined herein have the meanings set forth in the Master Stock Plan.

II. Plan Year

The Plan shall operate on a calendar year basis.

III. Eligibility

All members of the Board of Directors who are not employees of the Company (“Eligible Directors”) are eligible for the Plan.

IV. Automatic Equity Grant Program

1.Annual Award Grants

(a)Stock Options. On the first day following January 1 that the New York Stock Exchange is open for trading (the “First Trading Day”), each Eligible Director shall automatically be granted a Non-Qualified Stock Option with a fair market

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value (computed as of the date of grant in accordance with applicable financial accounting rules) equal to $70,000 (the “Annual Option Grant”). The number of shares subject to the Annual Option Grant shall be determined using the closing price of the Common Stock on the grant date, and rounding this number to the nearest integer multiple of one hundred (100) shares. With respect to an individual who becomes an Eligible Director during a calendar year after the First Trading Day, such Eligible Director’s Annual Option Grant for that year shall have a fair market value obtained by multiplying $70,000 by a fraction, the numerator of which is the number of whole calendar months remaining in the calendar year and the denominator of which is twelve. Such prorated grant shall be made upon the first trading day of the calendar month, within the Company’s open trading window, following the date such individual becomes an Eligible Director, with the number of shares determined using the closing price of the Common Stock on the grant date, and rounding this number to the nearest integer multiple of one hundred (100) shares.

(b)Restricted Stock Unit. On the First Trading Day, each Eligible Director shall automatically be granted a Restricted Stock Unit Award with a fair market value (computed as of the date of grant in accordance with applicable financial accounting rules) equal to $70,000 (the “Annual Restricted Stock Unit Grant”). The number of shares subject to the Annual Restricted Stock Unit Grant shall be determined using the closing price of the Common Stock on the grant date, and rounding this number to the nearest integer multiple of one hundred (100) shares. With respect to an individual who becomes an Eligible Director during a calendar year after the First Trading Day, such Eligible Director’s Annual Restricted Stock Unit Grant for that year shall have a fair market value obtained by multiplying $70,000 by a fraction, the numerator of which is the number of whole calendar months remaining in the calendar year and the denominator of which is twelve. Such prorated grant shall be made upon the first trading day of the calendar month, within the Company’s open trading window, following the date such individual becomes an Eligible Director, with the number of shares determined using the closing price of the Common Stock on the grant date, and rounding this number to the nearest integer multiple of one hundred (100) shares.

2.Award Terms

(a)Options. All Non-Qualified Stock Options granted under the Plan shall have: (i) a per share exercise price equal to the closing price of the Common Stock on the day on which such options are granted; and (ii) vesting, expiration and such other terms as provided in the Company’s form of Non-Employee Director Non-Qualified Stock Option Agreement attached hereto as Exhibit B.

(b)Restricted Stock Units. All Restricted Stock Units granted under the Plan shall have vesting and such other terms as provided in the Company’s form of Non-

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Employee Director Restricted Stock Unit Award Agreement attached hereto as Exhibit C.

V. Director Deferred Compensation Program

1.Compensation Covered by the Plan

Eligible Director compensation covered by this Plan includes annual retainers (including committee retainers) payable in quarterly installments at the beginning of each calendar quarter (hereinafter “Eligible Fees”). The first installment shall be made on the first day following January 1 that the New York Stock Exchange is open for trading, and the remaining installments shall be made on the first Friday in April, July and October (or if such Friday is a holiday, on the next business day). The Plan permits Eligible Directors to elect to receive this compensation in one or more of the following methods:

(a)In cash on a current basis;

(b)In cash on a deferred basis (a “Deferred Cash Election”); or

(c)In Company stock on a deferred basis (a “Deferred Stock Election”).

No other compensation or fees otherwise payable to an Eligible Director shall be eligible for an election under this Plan.

2.Election to Defer

An Eligible Director may elect to defer payment of Eligible Fees under Section V.3 or V.4 of this Plan by filing, no later than the last day of a Plan Year (or by such earlier date as the Plan administrator shall determine), an irrevocable election with the administrator on a form provided for that purpose. The Annual Deferral Election shall be effective with respect to the Eligible Fees payable during the following Plan Year. The Deferral Election Form shall specify an amount to be deferred expressed as a percentage of the Eligible Director’s annual retainer, as provided in the form attached hereto as Exhibit D.

That portion of Eligible Fees for which a valid form has not been timely received by the Company will be paid in cash in accordance with the Company’s customary practice of paying such Eligible Fees. Once a Plan Year has commenced, all Deferral Elections under this Plan for such Plan Year shall be irrevocable.

3.Deferral Elections

(a)Deferred Cash Election

For Eligible Directors who make an Annual Deferred Cash Election, the Company will establish a bookkeeping account for cash deferred for that Plan Year (an “Annual Deferred Cash Account”) and will credit to the Annual Deferred Cash Account the amount of the Eligible Fees earned and deferred by

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him/her as of the date such fees would normally be payable by the Company (the “Credit Date”). Amounts credited to an Eligible Director’s Annual Deferred Cash Account will be adjusted for gains and/or losses to the same extent that equal amounts would have been adjusted if they had been invested in one or more notional investments designated by the Company. The use of notional investments herein is solely as a device for computing the amount of benefits to be paid under the Plan, and the Company shall not be required to purchase such investments.

(b)Deferred Stock Election

Eligible Directors may elect to exchange part or all of their Eligible Fees for a Plan Year for the Company’s commitment to issue to such Eligible Directors a fixed number of shares of common stock of the Company at a future date. The Company’s commitment to issue shares shall be referred to as “Phantom Shares” held in an “Annual Deferred Stock Account”.

As of the Credit Date, an Eligible Director shall receive a credit to his or her Annual Deferred Stock Account. The amount of the credit shall be the number of Phantom Shares (rounded to the nearest whole Share) determined by dividing (i) an amount equal to Eligible Fees payable to the Eligible Director on the Credit Date and specified for deferral, by (ii) the fair market value of one share of Common Stock on such date.

For purposes of this paragraph (b), the following rules shall apply:

(i)Fair Market Value

The fair market value of each share of Common Stock shall be equal to the closing price of one share of the Company’s common stock on the New York Stock Exchange-Composite Transactions on the Credit Date as of which Phantom Shares are credited to the Eligible Director’s Deferred Stock Account.

(ii)No Actual Shares Prior to Distribution

No actual shares of Common Stock shall be issued until the distribution date described below. The Phantom Shares shall not be considered issued and outstanding shares for purposes of stockholder voting rights.

(iii)Dividend Credit

Each time a dividend is paid on Common Stock, an Eligible Director shall receive a credit to his or her Deferred Stock Account equal to that number of shares of common stock (rounded to the nearest whole share) having a fair market value on the dividend payment date equal to the amount of the

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dividend payable on the number of Phantom Shares credited to the Eligible Director’s Deferred Stock Account on the dividend record date.

(iv)Restrictions on Phantom Shares

All Phantom Shares issued under and subject to the terms of this Plan will be issued under the Master Stock Plan (and/or its successor plans) and shall be deemed to be “other stock-based awards” for purposes of such plan; provided, that any Phantom Shares credited before November 22, 2019 are subject to the Donaldson Company, Inc. 2010 Master Stock Incentive Plan, and any Phantom Shares credited before November 19, 2010 are subject to the Donaldson Company, Inc. 2001 Master Stock Incentive Plan.

4.Distributions of Annual Deferred Accounts

(a)Timing of Distributions

At the time an Eligible Director’s Annual Deferral Election is made for a Plan Year, each Eligible Director shall specify the time and manner in which his/her Annual Deferred Cash Account and/or Annual Deferred Stock Account shall be distributed. If an Eligible Director does not specify an election for the timing and manner of a distribution, the balance of an Eligible Director’s Annual Deferred Accounts shall be distributed in a lump sum in accordance with option (i) below. The Eligible Director shall be entitled to receive, or to commence receiving, his/her Annual Deferred Accounts as soon as practicable after the following:

(i)the first anniversary of his/her separation from service (as that term is defined under Section 409A of the Code) with the Company; or

(ii)a specified calendar year set by him/her (actual payment will occur within the first sixty (60) days of the specified year).

(b)Manner of Distribution

Each Eligible Director shall be entitled to receive the balance in his/her Annual Deferred Accounts in any one of the following manners:

(i)in a lump sum; or

(ii)in annual installments over a period of years stipulated by him/her not to exceed ten (10). The amount of the installments will be determined by annually dividing the value of the benefits in the Account by the number of installments remaining to be paid.

Notwithstanding anything to the contrary above, the Company may make an immediate lump sum payment of the Eligible Director’s Annual Deferral

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Accounts if the balance of such Accounts, combined with any other amounts required to be treated as deferred under a single plan pursuant to Section 409A of the Code, does not exceed the applicable dollar amount under Section 402(g)(1)(B) of the Code, provided any other such aggregated amounts are also distributed in a lump sum at the same time.

Each Eligible Director’s Annual Deferred Stock Account shall be distributed in Common Stock.

(c)Distribution in Event of Death

In the event of the Eligible Director’s death, either before or after commencement of payments, distribution of the Eligible Director’s entire Account balance will be made in a single lump sum to the beneficiary named by the Eligible Director (on such form or forms prescribed by the Plan administrator) or to that person who would have a right to receive such distribution by will or by the applicable laws of descent and distribution.

(d)Distribution to Specified Employees

Notwithstanding any other provision in this Plan, in the event that an Eligible Director in this Plan is determined to be a “specified employee” (as that term is defined under Section 409A of the Code), any distribution to the Eligible Director on account of the Eligible Director’s separation from service shall be delayed as necessary to comply with the requirements of Section 409A of the Code.

(e)Distribution in Event of Change of Control

Notwithstanding any other provision of this Plan, in the event of a Change of Control (as defined below), each Eligible Director who separates from service with the Company for any reason during the two (2) year period following such Change of Control shall receive within ten (10) business days after the date of separation the following:

(i)If a Eligible Director has a balance in an Annual Deferred Cash Account, a lump sum payment of the entire balance contained in his/her Annual Deferred Cash Account, together with applicable earnings adjustment, on the average daily balance in such Deferral Account for the period since the last earnings adjustment through the date of separation; and

(ii)If an Eligible Director has a balance in an Annual Deferred Stock Account, a distribution of the number of shares represented by the Phantom Shares issued pursuant to such election; and

Notwithstanding paragraph (e)(i) above, with respect to any Eligible Director who separated from service before the date of a Change of Control, the balance of the Annual Deferred Accounts shall be paid at the time and in the manner as elected

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by the Eligible Director (and shall not be commuted to a lump sum or otherwise accelerated by the Change of Control). For purposes of this section, a “Change of Control” shall have the meaning ascribed to that term in the Company’s 401(k) Excess Plan, as may be amended from time to time.

VI. General Provisions

1.Unsecured Obligation

The amounts credited to each Eligible Director’s Account shall not be held by the Company in a trust, escrow or similar fiduciary capacity, and neither the Eligible Director, nor any legal representative, shall have any right against the Company with respect to any portion of the Account except as a general unsecured creditor of the Company.

2.Administration of the Plan

The Plan shall be administered by the Human Resources Committee of the Board of Directors.

3.Amendment, Termination and Governing Law

This Plan may be amended or terminated at any time by the Board of Directors or the Human Resources Committee of the Board of Directors. This Plan shall be construed and enforced in accordance with the laws of the state of Delaware, except with respect to its rules relating to conflicts of law.

4.Cautionary Statement

Eligible Directors should be aware that their participation in the Plan involves the following risks, among others:

(a)Balances in the Annual Deferred Accounts represent unfunded, unsecured general obligations of the Company. If the Company is unable to pay its debts as they become due, Eligible Directors may not be able to collect the balances in their Annual Deferral Accounts.

(b)The value of an Eligible Director’s Non-Qualified Stock Options, Restricted Stock Unit and Phantom Shares will depend on the value of the Company’s Common Stock. An investment in the Company’s Common Stock involves risk. Eligible Directors are encouraged to review the Company’s filings with the U.S. Securities and Exchange Commission for a description of some of the risk factors associated with an investment in the Company’s Common Stock.

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EXHIBIT A

DONALDSON COMPANY, INC.

STOCK OWNERSHIP GUIDELINES FOR

NON-EMPLOYEE DIRECTORS

Amended January 25, 2019

Purpose

The Board of Directors of Donaldson Company, Inc. (the “Company”) has adopted these stock ownership guidelines because it believes that it is in the best interests of the Company and its stockholders for Non-Employee Directors of the Company to have a significant equity interest in the Company in order to align their financial interests with those of the Company’s stockholders.

Applicability

These guidelines are applicable to all Non-Employee Directors of the Company (“Covered Individuals”).

Minimum Ownership Guidelines

Each Covered Individual is expected to own shares of the Company’s common stock with a value at least equal to the amount shown in the following schedule:

Position	Value of Shares
Non-Employee Director	$ 400,000

Determining Share Ownership

Shares to be counted for purposes of the ownership guidelines will be all shares owned by the Covered Individual, including shares owned jointly with, or separately by, the Covered Individual’s immediate family members residing in the same household and shares held in trust for the benefit of the Covered Individual or his or her immediate family members residing in the same household. Additionally, the following rules apply to determining which shares are counted: (i) all outstanding shares “beneficially owned” for purposes of Section 16 of the Securities Exchange Act are included, (ii) all time-based restricted stock and restricted stock units, regardless of whether vested, less any estimated shares required to cover the assumed withholding tax amount upon vesting (iii) all “in-the-money” unexercised vested stock options, less any estimated shares required to cover the assumed withholding tax amount upon exercise, are included, (iv) all shares in the Company’s deferred compensation programs are included, and (v) all unvested performance-based restricted stock and restricted stock units (including performance units) are excluded.

Exh A-1

Valuation Methodology

The value of the shareholdings of a Covered Individual is based on the historical three-month average closing price of Donaldson stock at the time of valuation.

Achieving Compliance

A Covered Individual has five years from the date he or she becomes subject to these ownership guidelines to achieve compliance with the ownership guidelines. Until a Covered Individual has achieved compliance with these ownership guidelines, the Covered Individual must retain 100% of the “net profit shares” resulting from any option exercise or from the exercise, vesting, or settlement of any other form of equity-based compensation award. For these purposes, “net profit shares” refers to that portion of the number of shares subject to the exercise, vesting, or settlement of an award that the Covered Individual would receive had he or she authorized the Company to withhold shares otherwise deliverable in order to satisfy any applicable exercise price or withholding taxes.

Administration

The Human Resources Committee of the Board shall be responsible for monitoring the application of these stock ownership guidelines. In its discretion, the Human Resources Committee may alter the amount or form of compensation for any Covered Individual who fails to comply with the ownership guidelines, including the retention requirements described above.

Exh A-2

EXHIBIT B

NON-EMPLOYEE DIRECTOR

NON-QUALIFIED STOCK OPTION AWARD AGREEMENT

This Stock Option Award Agreement (the “Agreement”) is made as of the date specified in the individual grant summary by and between Donaldson Company, Inc., a Delaware corporation (hereinafter, together with its subsidiaries, called “Donaldson” or “Company”), and the person specified in the individual grant summary, a non-Employee Director of Donaldson (hereinafter called the “Participant”).

Donaldson has adopted the 2019 Master Stock Incentive Plan (the “Plan”) which permits issuance of stock options for the purchase of shares of common stock, par value US $5.00 per share, of Donaldson (“Common Stock”). Donaldson is now granting this option under the Plan.

1. Grant of Option. Donaldson grants the Participant the right and option (the “Option”) to purchase all or any part of an aggregate of the number of shares of Common Stock specified in the grant summary, at the Option purchase price specified in the grant summary (which shall be 100% of the Fair Market Value of the Common Stock on the date the award is granted). The Option shall be subject to the terms and conditions in this Agreement and in the Plan. Capitalized terms not defined in this Agreement shall have the meaning ascribed to such terms in the Plan. The Participant acknowledges receipt of a copy of the Plan and the Plan Prospectus. The grant date is the date specified in the individual grant summary (the “Grant Date”). The Option terminates at the close of business ten (10) years from the Grant Date unless terminated at an earlier time in accordance with this Agreement or the Plan. The Option is not intended to be an Incentive Stock Option within the meaning of Section 422 of the Code.

2. Vesting of Option Right. The Option may be exercised by the Participant under the following schedule except as otherwise provided in this Agreement. The Option may not be exercised for a period of one (1) year from the Grant Date. Following that one-year period, the Option vests and becomes exercisable in equal one-third increments: one-third vests on the one-year anniversary of the Grant Date; one-third vests on the two-year anniversary of the Grant Date; and one-third vests on the three-year anniversary of the Grant Date. The Option may be exercised as to any portion of the Option that is vested. An unvested portion of the Option shall only vest so long as:

(a)the Participant remains a Director of the Company on the date that the Option vests,

(b)the Participant retires or resigns from service as a Director of the Company in accordance with the age and term limits of the Corporate Governance Guidelines of the Company, or

(c)the Participant’s service as a Director of the Company is terminated for any other reason and a majority of the members of the Board of Directors other than the eligible Director consent to the continued vesting of such portion of the Option in accordance with the original vesting schedule.

The vesting of the Option also is subject to acceleration in the event of a Change in Control (as defined in the Plan).

Exh B-1

3. Exercise of Option. Once vested, the Participant may exercise this Option, in whole or in part, at any time during the term as specified above but not after ten (10) years from the Date of Grant; provided, that if the Participant dies, this Option, if vested, may be exercised within three (3) years after death, but not after ten (10) years from the Date of Grant, by the Participant’s estate or by the person or persons who acquire the right to exercise this Option by bequest, inheritance or otherwise by reason of such death. Donaldson and the Participant recognize that this Agreement in no way restricts the right of Donaldson to terminate the Participant’s membership consistent with applicable Delaware laws.

4. Method of Exercise of Option. The vested portion of the Option may be exercised only during the term of the Option by delivery of a notice of exercise in such form as may designated by the Committee from time to time. The notice must state the number of shares being exercised and include payment in full of the purchase price and all required tax withholding (if applicable). Payment of the purchase price and any applicable tax-related items shall be made (i) in cash, (ii) by delivery of unencumbered shares of Common Stock previously acquired having a Fair Market Value equal to the exercise price and tax-related items, (iii) by a combination of cash and shares under (i) and (ii) above; (iv) by withholding of shares of Common Stock that would otherwise be issued upon such exercise having a Fair Market Value on the date of exercise equal to the exercise price and tax-related items or (v) by a cashless (broker-assisted) exercise that complies with all applicable laws.

5. Acceleration of Exercisability Upon Change in Control. In the event of a Change in Control (as defined in the Plan), any outstanding Option granted under this Agreement not previously vested and exercisable shall become fully vested and exercisable and shall remain exercisable thereafter until they are either exercised or expire by their terms.

6. Miscellaneous.

(a)Donaldson shall not be liable for any foreign exchange rate fluctuation, where applicable, between the Participant’s local currency and the United States dollar that may affect the value of the Option or any amounts due to the Participant pursuant to the exercise of the Option or the subsequent sale of any shares of Common Stock acquired upon exercise.

(b)The exercise of all or any parts of the Option shall only be effective at such time that the sale of shares of Common Stock pursuant to such exercise will not violate any U.S. federal, state or foreign securities or other laws.

(c)It is understood and agreed that the Option price is the per share market value of a share of Common Stock on the Date of Grant. The Option is not intended to be an Incentive Option within the meaning of Section 422 of the Code. The Option is issued pursuant to the Plan and is subject to its terms.

(d)If all or any portion of the Option is exercised subsequent to any stock dividend or split, recapitalization, consolidation, or the like, occurring after the date hereof, as a result of which securities of any class shall be issued in respect of outstanding shares of Common Stock, or shares of Common Stock shall be changed into the same or a different number of shares or other securities of the same or other class or classes, then the Board of Directors shall determine if any equitable adjustment is necessary to protect the Participant against dilution and shall determine the terms of such adjustment, if any. In the case of any stock dividend or split effected after the date hereof, the number of shares

Exh B-2

of Common Stock to be granted hereunder shall be automatically adjusted to prevent dilution of the potential benefits intended to be made available hereunder.

(e)This Option grant shall be effective only after the Participant agrees to the terms and conditions of the Agreement.

(f)The Option may not be transferable in any manner (including without limitation, sale, alienation, anticipation, pledge, encumbrance, or assignment) other than by will or by laws of descent and distribution, unless otherwise determined by the Committee in accordance with the Plan. All rights with respect to the Option shall be exercisable during the lifetime of the Participant only by the Participant or his or her guardian or legal representative or permitted transferee, if applicable.

(g)This agreement shall be construed and enforced in accordance with the laws of the state of Delaware, except with respect to its rules relating to conflicts of law. The Participant consents to the exclusive jurisdiction of the state and federal courts of the state of Minnesota in connection with any controversies relating to or arising out of this Agreement, and agrees that any and all litigation relating to or arising out of this Agreement shall be venued in Hennepin County, Minnesota.

(h)As a condition of the grant of this Option, the Participant agrees to repatriate all payments attributable to the shares of Common Stock and/or cash acquired under the Plan (including, but not limited to, dividends and any proceeds derived from the sale of the shares of Common Stock acquired pursuant to the Option) in accordance with local foreign exchange rules and regulations in the Participant’s country of residence. In addition, the Participant also agrees to take any and all actions, and consents to any and all actions taken by Donaldson, as may be required to allow Donaldson to comply with local laws, rules and regulations in the Participant’s country of residence. Finally, the Participant agrees to take any and all actions as may be required to comply with the Participant’s personal legal and tax obligations under local laws, rules and regulations in the Participant’s country of residence.

(i)Donaldson, in its sole discretion, may decide to deliver any documents related to the Option or other awards granted to the Participant under the Plan by electronic means. The Participant hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through an on-line or electronic system established and maintained by Donaldson or a third party designated by Donaldson.

(j)The Participant acknowledges and agrees that it is the Participant’s express intent that this Agreement, the Plan and all other documents, notices and legal proceedings entered into, given or instituted pursuant to the grant of this Option, be drawn up in English. If the Participant has received this Agreement, the Plan or any other documents related to the Option translated into a language other than English, and if the meaning of the translated version is different than the English version, the English version shall control.

(k)Notwithstanding any provisions in this Agreement to the contrary, this Option shall be subject to any special terms and conditions for the Participant’s country of residence, as set forth in the applicable addendum to this Agreement, if any. Further, if the Participant transfers residency to another country reflected in an addendum to this Agreement, the

Exh B-3

special terms and conditions for such country will apply to the Participant to the extent Donaldson determines, in its sole discretion, that the application of such terms and conditions is necessary or advisable in order to comply with local laws, rules and/or regulations or to facilitate the operation and administration of the Option and the Plan (or Donaldson may establish alternative terms and conditions as may be necessary or advisable to accommodate the Participant’s transfer). Any applicable addendum shall constitute part of this Agreement.

(l)Donaldson reserves the right to impose other requirements on this Option, any shares of Common Stock acquired pursuant to this Option, and the Participant’s participation in the Plan, to the extent Donaldson determines, in its sole discretion, that such other requirements are necessary or advisable in order to comply with local laws, rules and/or regulations or to facilitate the operation and administration of the Option and the Plan. Such requirements may include (but are not limited to) requiring the Participant to sign any agreements or undertakings that may be necessary to accomplish the foregoing.

(m)If the Participant is resident outside the United States, the grant of the Option is not intended to be a public offering of securities in the Participant’s country of residence. Donaldson has not submitted any registration statement, prospectus or other filings with the local securities authorities (unless otherwise required under local law), and the grant of the Option is not subject to the supervision of the local securities authorities. No employee of Donaldson or any Affiliate is permitted to advise the Participant on whether the Participant should acquire shares of Common Stock by exercising the Option under the Plan. Investment in shares of Common Stock involves a degree of risk. Before deciding to acquire shares of Common Stock by exercising the Option, the Participant should carefully review all of the materials related to the Option and the Plan. In addition, the Participant should consult with the Participant’s personal advisor for professional investment advice.

(n)The Participant’s country of residence may have insider trading and/or market abuse laws that may affect the Participant’s ability to acquire or sell shares of Common Stock under the Plan during such times the Participant is considered to have “inside information” (as defined in the laws in Participant’s country of residence). These laws may be the same or different from any Donaldson insider trading policy. The Participant acknowledges that it is the Participant’s responsibility to be informed of and compliant with such regulations, and the Participant is advised to speak to his / her personal advisor on this matter.

(o)The invalidity or unenforceability of any provision of the Plan or this Agreement will not affect the validity or enforceability of any other provision of the Plan or this Agreement, and each provision of the Plan and this Agreement will be severable and enforceable to the extent permitted by law.

7. Data Privacy. Pursuant to applicable personal data protection laws, Donaldson hereby notifies the Participant of the following in relation to the Participant’s personal data and the collection, use, processing and transfer of such data in relation to Donaldson’s grant of this Option and the Participant’s participation in the Plan. The collection, use, processing and transfer of the Participant’s personal data is necessary for Donaldson’s administration of the Plan and the Participant’s participation in the Plan, and the Participant’s denial and/or objection to the collection, use, processing and transfer of

Exh B-4

personal data may affect the Participant’s participation in the Plan. As such, the Participant hereby voluntarily acknowledges and consents (where required under applicable law) to the collection, use, processing and transfer of personal data as described in this paragraph.

Donaldson holds certain personal information about the Participant, including the Participant’s name, home address, email address and telephone number, date of birth, social security number, passport number or other employee identification number, salary, nationality, job title, any shares of Common Stock or directorships held in Donaldson, details of all stock options or any other entitlement to shares of Common Stock awarded, canceled, purchased, vested, unvested or outstanding in the Participant’s favor, for the purpose of managing and administering the Plan (“Data”). Data may be provided by the Participant or collected, where lawful, from third parties, and Donaldson will process Data for the exclusive purpose of implementing, administering and managing the Participant’s participation in the Plan. Data processing will take place through electronic and non-electronic means according to logics and procedures strictly correlated to the purposes for which Data are collected and with confidentiality and security provisions as set forth by applicable laws and regulations in the Participant’s country of residence. Data processing operations will be performed minimizing the use of personal and identification data when such operations are unnecessary for the processing purposes sought. Data will be accessible within Donaldson’s organization only by those persons requiring access for purposes of the implementation, administration and operation of the Plan and for the Participant’s participation in the Plan.

Donaldson will transfer Data amongst themselves as necessary for the purpose of implementation, administration and management of the Participant’s participation in the Plan, and Donaldson may each further transfer Data to any third parties assisting Donaldson in the implementation, administration and management of the Plan. As permitted by applicable personal data protection laws, if Donaldson becomes involved in a merger, acquisition, sale of assets, joint venture, securities offering, bankruptcy, reorganization, liquidation, dissolution, or other transaction or if the ownership of all or substantially all of Donaldson otherwise changes, Donaldson may transfer Data to a third party or parties in connection therewith. The Participant hereby authorizes (where required under applicable law) them to receive, possess, use, retain and transfer Data, in electronic or other form, for purposes of implementing, administering and managing the Participant’s participation in the Plan, including any requisite transfer of such Data as may be required for the administration of the Plan and/or the subsequent holding of shares of Common Stock on the Participant’s behalf to a broker or other third party with whom the Participant may elect to deposit any shares of Common Stock acquired pursuant to the Plan.

The Participant may, at any time, exercise his or her rights provided under applicable personal data protection laws, which may include the right to (a) obtain confirmation as to the existence of Data, (b) verify the content, origin and accuracy of Data, (c) request the integration, update, amendment, deletion, or blockage (for breach of applicable laws) of Data, and (d) to oppose, for legal reasons, the collection, processing or transfer of Data which is not necessary or required for the implementation, administration and/or operation of the Plan and the Participant’s participation in the Plan. The Participant may seek to exercise these rights by contacting privacy@donaldson.com. The Participant understands that he or she is providing the consent herein on a purely voluntary basis. If the Participant does not consent or later seeks to remove his or her consent, the Participant’s remuneration from or service with Donaldson will not be affected; the only consequence of refusing or withdrawing his or her consent is that Donaldson would not be able to grant the Participant Restricted Stock Units or other equity awards or participation in the Plan.

Exh B-5

By executing this Agreement as of the Date of Grant, the Participant hereby accepts and agrees to be bound by all terms and conditions of this Agreement and the Plan.

PARTICIPANT:

SIGNED BY ELECTRONIC SIGNATURE*

* BY ELECTRONICALLY ACCEPTING THE OPTION, THE PARTICIPANT AGREES THAT (i) SUCH ACCEPTANCE CONSTITUTES THE PARTICIPANT’S ELECTRONIC SIGNATURE IN EXECUTION OF THE AGREEMENT; (ii) THE PARTICIPANT AGREES TO BE BOUND BY THE PROVISIONS OF THE PLAN, THE AGREEMENT AND THE ADDENDUM TO THE AGREEMENT (IF ANY); (iii) THE PARTICIPANT HAS REVIEWED THE PLAN, THE AGREEMENT AND THE ADDENDUM TO THE AGREEMENT (IF ANY) IN THEIR ENTIRETY, HAS HAD AN OPPORTUNITY TO OBTAIN THE ADVICE OF COUNSEL PRIOR TO ACCEPTING THE OPTION AND FULLY UNDERSTANDS ALL OF THE PROVISIONS OF THE PLAN, THE AGREEMENT AND THE ADDENDUM TO THE AGREEMENT (IF ANY); (iv) THE PARTICIPANT HAS BEEN PROVIDED WITH A COPY OR ELECTRONIC ACCESS TO A COPY OF THE U.S. PROSPECTUS FOR THE PLAN AND THE TAX SUPPLEMENT TO THE U.S. PROSPECTUS FOR THE PARTICIPANT’S COUNTRY, IF APPLICABLE; AND (v) THE PARTICIPANT HEREBY AGREES TO ACCEPT AS BINDING, CONCLUSIVE AND FINAL ALL DECISIONS OR INTERPRETATIONS OF THE HUMAN RESOURCES COMMITTEE UPON ANY QUESTIONS ARISING UNDER THE PLAN, THE AGREEMENT AND THE ADDENDUM TO THE AGREEMENT (IF ANY).

Exh B-6

EXHIBIT C

NON-EMPLOYEE DIRECTOR

RESTRICTED STOCK UNIT AWARD AGREEMENT

This Restricted Stock Unit Award Agreement (the “Agreement”) is made as of the date specified in the individual grant summary by and between Donaldson Company, Inc., a Delaware corporation (hereinafter, together with its subsidiaries, called “Donaldson” or “Company”), and the person specified in the individual grant summary, a non-Employee Director of Donaldson (hereinafter called the “Participant”).

1. Grant of Restricted Stock Units. Donaldson hereby grants to the Participant the number Restricted Stock Units specified in the grant summary for no cash consideration. The Restricted Stock Units shall be subject to the terms and conditions in this Agreement and the Plan. The Participant acknowledges receipt of a copy of the Plan and the Plan Prospectus. Capitalized terms not defined in this Agreement shall have the meaning ascribed to such terms in the Plan. The grant date shall be as specified on the Participant’s individual grant summary (“Grant Date”) and subject to the following terms and conditions:

(a)Neither the Restricted Stock Units, nor the shares of Common Stock to which the units relate, may be sold, assigned, hypothecated or transferred (including without limitation, transfer by gift or donation) until the first anniversary of the Grant Date (“Restriction Period”). Restricted Stock Units granted to the Participant shall be credited to an account in the Participant’s name. This account shall be a record of book-keeping entries only and shall be utilized solely as a device for the measurement and determination of the number of shares of Common Stock to be issued to or in respect of the Participant pursuant to this Agreement.

(b)The Restricted Stock Units subject to the Award shall be forfeited to Donaldson if, at any time within the Restriction Period, the Participant’s service as a Director of the Company is terminated for any reason unless:

(i)the Participant’s termination is due to retirement or resignation from service as a Director of the Company in accordance with the age and term limits of the Corporate Governance Guidelines of the Company; or

(ii)a majority of the members of the Board of Directors other than the eligible Director consent to the continued vesting of the Restricted Stock in accordance with the original vesting schedule.

(c)Upon the expiration of the Restriction Period, the Company shall cause to be issued to the Participant, or to the Participant’s designated beneficiary or estate in the event of the Participant’s death, one share of Common Stock in payment and settlement of each

Exh C-1

vested Restricted Stock Unit. The Company shall cause the shares issuable in connection with the vesting of any such Restricted Stock Units to be issued as soon as practicable after the Restriction Period, but in all events no later than 30 days after the Restriction Period, and the Participant shall have no power to affect the timing of such issuance. Such issuance shall be evidenced by a stock certificate or appropriate entry on the books of the Company or a duly authorized transfer agent of the Company and shall be in complete settlement and satisfaction of such vested Restricted Stock Units.

(d)Notwithstanding anything herein to the contrary such restrictions shall lapse and all of the shares of Common Stock shall become fully vested in the event of a Change in Control (as defined in the 2019 Master Stock Incentive Plan).

2. Vesting upon Change in Control. In the event of a Change in Control (as defined in the 2019 Master Stock Incentive Plan), the Restricted Stock Units shall immediately become fully vested and the shares subject to the Award shall be delivered to the Participant. Notwithstanding the foregoing, if any payment due under this Section 2 is deferred compensation subject to Section 409A of the Code, and if the Change in Control is not a “change in control event” that serves as a permissible payment event under Treasury Regulation § 1.409A-3(i)(5) or such other regulation or guidance issued under Section 409A of the Code, then the Restricted Stock Units shall vest upon the Change in Control as provided above but delivery of the shares subject to the Award shall be delayed until the end of the Restriction Period.

3. Miscellaneous.

(a)The Restricted Stock Units do not entitle the Participant to any rights of a stockholder of Donaldson with respect to shares of Common Stock underlying the Restricted Stock Units until such shares have been issued to the Participant upon settlement of the Restricted Stock Units. Notwithstanding the foregoing, the Participant shall accumulate an unvested right to dividend equivalent amounts on the shares of Common Stock underlying Restricted Stock Units if cash dividends are declared by Donaldson on the shares on or after the Grant Date. Each time a dividend is paid on the shares of Common Stock, the Participant shall accrue an additional number of Restricted Stock Units (rounded to the nearest whole share) having a Fair Market Value on the dividend payment date equal to the amount of the dividend payable on the Participant’s Restricted Stock Units on the dividend record date. The additional Restricted Stock Units shall be subject to the same vesting, forfeiture and share delivery terms in Sections 2, 3, 4 and 6 above as if they had been awarded on the Grant Date. The Participant shall not be entitled to dividend equivalents with respect to dividends declared prior to the Grant Date. All dividend equivalents accumulated with respect to forfeited Restricted Stock Units shall also be irrevocably forfeited. As of the date of issuance of shares underlying Restricted Stock Units, the Participant shall have all of the rights of a stockholder of Donaldson with respect to any shares issued pursuant hereto.

(b)This Award shall be effective only after the Participant agrees to the terms and conditions of the Agreement.

(c)This agreement shall be construed and enforced in accordance with the laws of the state of Delaware, except with respect to its rules relating to conflicts of law. The Participant consents to the exclusive jurisdiction of the state and federal courts of the state of

Exh C-2

Minnesota in connection with any controversies relating to or arising out of this Agreement, and agrees that any and all litigation relating to or arising out of this Agreement shall be venued in Hennepin County, Minnesota.

(d)As a condition of the grant of this Award, the Participant agrees to repatriate all payments attributable to the shares of Common Stock and/or cash acquired under the Plan (including, but not limited to, dividends and any proceeds derived from the sale of the shares of Common Stock) in accordance with local foreign exchange rules and regulations in the Participant’s country of residence. In addition, the Participant also agrees to take any and all actions, and consents to any and all actions taken by Donaldson, as may be required to allow Donaldson to comply with local laws, rules and regulations in the Participant’s country of residence. Finally, the Participant agrees to take any and all actions as may be required to comply with the Participant’s personal legal and tax obligations under local laws, rules and regulations in the Participant’s country of residence.

(e)Donaldson, in its sole discretion, may decide to deliver any documents related to the Restricted Stock Units or other Awards granted to the Participant under the Plan by electronic means. The Participant hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through an on-line or electronic system established and maintained by Donaldson or a third party designated by Donaldson.

(f)The Participant acknowledges and agrees that it is the Participant’s express intent that this Agreement, the Plan and all other documents, notices and legal proceedings entered into, given or instituted pursuant to the grant of this Award, be drawn up in English. If the Participant has received this Agreement, the Plan or any other documents related to the Award translated into a language other than English, and if the meaning of the translated version is different than the English version, the English version shall control.

(g)Notwithstanding any provisions in this Agreement to the contrary, this Award shall be subject to any special terms and conditions for the Participant’s country of residence, as set forth in the applicable addendum to this Agreement, if any. Further, if the Participant transfers residency to another country reflected in an addendum to this Agreement, the special terms and conditions for such country will apply to the Participant to the extent Donaldson determines, in its sole discretion, that the application of such terms and conditions is necessary or advisable in order to comply with local laws, rules and/or regulations or to facilitate the operation and administration of the Award and the Plan (or Donaldson may establish alternative terms and conditions as may be necessary or advisable to accommodate the Participant’s transfer). Any applicable addendum shall constitute part of this Agreement.

(h)Donaldson reserves the right to impose other requirements on this Award, any shares of Common Stock underlying the Award, and the Participant’s participation in the Plan, to the extent Donaldson determines, in its sole discretion, that such other requirements are necessary or advisable in order to comply with local laws, rules and/or regulations or to facilitate the operation and administration of the Award and the Plan. Such requirements may include (but are not limited to) requiring the Participant to sign any agreements or undertakings that may be necessary to accomplish the foregoing.

Exh C-3

(i)If the Participant is resident outside the United States, the grant of the Award is not intended to be a public offering of securities in the Participant’s country of residence. Donaldson has not submitted any registration statement, prospectus or other filings with the local securities authorities (unless otherwise required under local law), and the grant of the Award is not subject to the supervision of the local securities authorities. Investment in shares of Common Stock involves a degree of risk. The Participant should consult with the Participant’s personal advisor for professional investment advice.

(j)The Participant’s country of residence may have insider trading and/or market abuse laws that may affect the Participant’s ability to acquire or sell shares of Common Stock under the Plan during such times the Participant is considered to have “inside information” (as defined in the laws in Participant’s country of residence). These laws may be the same or different from any Donaldson insider trading policy. The Participant acknowledges that it is the Participant’s responsibility to be informed of and compliant with such regulations, and the Participant is advised to speak to his / her personal advisor on this matter.

(k)The invalidity or unenforceability of any provision of the Plan or this Agreement will not affect the validity or enforceability of any other provision of the Plan or this Agreement, and each provision of the Plan and this Agreement will be severable and enforceable to the extent permitted by law.

4. Data Privacy. Pursuant to applicable personal data protection laws, Donaldson hereby notifies the Participant of the following in relation to the Participant’s personal data and the collection, use, processing and transfer of such data in relation to Donaldson’s grant of this Award and the Participant’s participation in the Plan. The collection, use, processing and transfer of the Participant’s personal data is necessary for Donaldson’s administration of the Plan and the Participant’s participation in the Plan, and the Participant’s denial and/or objection to the collection, use, processing and transfer of personal data may affect the Participant’s participation in the Plan. As such, the Participant hereby voluntarily acknowledges and consents (where required under applicable law) to the collection, use, processing and transfer of personal data as described in this paragraph.

Donaldson holds certain personal information about the Participant, including the Participant’s name, home address, email address and telephone number, date of birth, social security number, passport number or other employee identification number, salary, nationality, job title, any shares of Common Stock or directorships held in Donaldson, details of all stock awards or any other entitlement to shares of Common Stock awarded, canceled, purchased, vested, unvested or outstanding in the Participant’s favor, for the purpose of managing and administering the Plan (“Data”). Data may be provided by the Participant or collected, where lawful, from third parties, and Donaldson will process Data for the exclusive purpose of implementing, administering and managing the Participant’s participation in the Plan. Data processing will take place through electronic and non-electronic means according to logics and procedures strictly correlated to the purposes for which Data are collected and with confidentiality and security provisions as set forth by applicable laws and regulations in the Participant’s country of residence. Data processing operations will be performed minimizing the use of personal and identification data when such operations are unnecessary for the processing purposes sought. Data will be accessible within Donaldson’s organization only by those persons requiring access for purposes of the implementation, administration and operation of the Plan and for the Participant’s participation in the Plan.

Exh C-4

By execution of this Agreement as of the Grant Date, the Participant hereby accepts and agrees to be bound by all of the terms and conditions of this Agreement and the Plan.

PARTICIPANT:

SIGNED BY ELECTRONIC SIGNATURE*

* BY ELECTRONICALLY ACCEPTING THIS AWARD, THE PARTICIPANT AGREES THAT (i) SUCH ACCEPTANCE CONSTITUTES THE PARTICIPANT’S ELECTRONIC SIGNATURE IN EXECUTION OF THE AGREEMENT; (ii) THE PARTICIPANT AGREES TO BE BOUND BY THE PROVISIONS OF THE PLAN, THE AGREEMENT AND THE ADDENDUM TO THE AGREEMENT (IF ANY); (iii) THE PARTICIPANT HAS REVIEWED THE PLAN, THE AGREEMENT AND THE ADDENDUM TO THE AGREEMENT (IF ANY) IN THEIR ENTIRETY, HAS HAD AN OPPORTUNITY TO OBTAIN THE ADVICE OF COUNSEL PRIOR TO ACCEPTING THIS AWARD AND FULLY UNDERSTANDS ALL OF THE PROVISIONS OF THE PLAN, THE AGREEMENT AND THE ADDENDUM TO THE AGREEMENT (IF ANY); (iv) THE PARTICIPANT HAS BEEN PROVIDED WITH A COPY OR ELECTRONIC ACCESS TO A COPY OF THE U.S. PROSPECTUS FOR THE PLAN AND THE TAX SUPPLEMENT TO THE U.S. PROSPECTUS FOR THE PARTICIPANT’S COUNTRY, IF APPLICABLE; AND (v) THE PARTICIPANT HEREBY AGREES TO ACCEPT AS BINDING, CONCLUSIVE AND FINAL ALL DECISIONS OR INTERPRETATIONS

Exh C-5

OF THE HUMAN RESOURCES COMMITTEE UPON ANY QUESTIONS ARISING UNDER THE PLAN, THE AGREEMENT AND THE ADDENDUM TO THE AGREEMENT (IF ANY).

Exh C-6

EXHIBIT D

DONALDSON COMPANY, INC.

COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS

20___ ANNUAL RETAINER ELECTION FORM

Name: __________________________________

Retainer Elections
Annual Retainer: I elect to receive my annual retainer for calendar year 20__ as follows (total must add up to 100%):
% in Cash: _____________%<br><br>% in Deferred Stock: _____________%<br><br>% in Deferred Cash: _____________%
Committee Retainer (including Committee Chair retainers): I elect to receive my Committee retainer as follows (total must add up to 100%):<br><br>% in Cash: _____________%<br><br>% in Deferred Stock: _____________%<br><br>% in Deferred Cash: _____________%
Deferred Stock Payment Election
---
I elect to receive my deferred stock account of shares of company stock beginning on (choose one):<br><br>☐ One year after I cease to be a director<br><br>☐ A specified calendar year: _________________ (payment to occur within first 60 days of year)
I elect to receive my deferred stock account of shares of company stock in the following form of payment:<br><br>☐ Lump Sum ☐ Annual Installments for ______ years (maximum of 10 years)
Deferred Cash Payment Election
---
I elect to receive my deferred cash account beginning on (choose one):<br><br>☐ One year after I cease to be a director<br><br>☐ A specified calendar year: _________________ (payment to occur within first 60 days of year)
I elect to receive my deferred cash account in the following form of payment:<br><br>☐ Lump Sum ☐ Annual Installments for ______ years (maximum of 10 years)

NOTE: Changes to this election may only be made under certain specific circumstances described in the Plan document.

Payments pursuant to this agreement shall be reduced for the amount of any applicable tax withholdings. I understand that this Agreement is covered by the terms of the Company’s Compensation Plan for Non-Employee Directors and the 2019 Master Stock Incentive Plan. I understand that this Agreement form must be returned to the Company before the beginning of the calendar year in which I wish the Agreement to take effect. I understand that the deferral account shall not be held by the Company in a fiduciary capacity and that I or my representative has no right with respect to such account, except as a general unsecured creditor of the Company.

By: __________________________________________ Date: _________________

Document

Exhibit 31-A

Certification of Chief Executive Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Tod E. Carpenter, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Donaldson Company, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:	December 4, 2020	/s/ Tod E. Carpenter
		Tod E. Carpenter<br>Chairman, President and Chief Executive Officer

Document

Exhibit 31-B

Certification of Chief Financial Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Scott J. Robinson, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Donaldson Company, Inc.;

b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:	December 4, 2020	/s/ Scott J. Robinson
		Scott J. Robinson<br>Senior Vice President and Chief Financial Officer

Document

Exhibit 32

Pursuant to 18 U.S.C. Section 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the following certifications are being made to accompany the Form 10-Q for the quarter ended October 31, 2020, for Donaldson Company, Inc.:

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Tod E. Carpenter, Chief Executive Officer of Donaldson Company, Inc., certify that:

1.The Form 10-Q of Donaldson Company, Inc. for the quarter ended October 31, 2020 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Donaldson Company, Inc.

Date:	December 4, 2020	/s/ Tod E. Carpenter
		Tod E. Carpenter<br>Chairman, President and Chief Executive Officer

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Scott J. Robinson, Chief Financial Officer of Donaldson Company, Inc., certify that:

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Donaldson Company, Inc.

Date:	December 4, 2020	/s/ Scott J. Robinson
		Scott J. Robinson<br>Senior Vice President and Chief Financial Officer