Quarterlytics / Industrials / Industrial - Machinery / Donaldson Company

Donaldson Company

dci · NYSE Industrials
Claim this profile
Ticker dci
Exchange NYSE
Sector Industrials
Industry Industrial - Machinery
Employees 10,000+
← All annual reports
FY2005 Annual Report · Donaldson Company
Sign in to download
Loading PDF…
TM

2005 Annual Report

Worldwide Reach 

Local Connection

16 Consecutive Record Years 

       
Legend:

world headquarters
regional headquarters
sales offices
distribution centers
manufacturing facilities
joint ventures

distribution centers new in 2006
manufacturing facilities 
new in 2006

About Donaldson
Donaldson Company, Inc., is a leading worldwide designer and manufacturer
of filtration systems and replacement parts. We strive to be the technology
leader in every market we serve and to provide the best overall value to our
Customers. Our products include air and liquid filters and exhaust and emission
control products for mobile equipment; aircraft cabin air and defense equip-
ment filters; in-plant air cleaning systems; compressed air and gas purification
systems; air intake systems for industrial gas turbines; and specialized filters
for such diverse applications as computer disk drives, semiconductor process-
ing and fuel cell contamination control. We serve our Customers through our
extensive network of sales offices, distribution centers and manufacturing
facilities now located in 35 countries around the world.

Our financial objective is to create shareholder value through superior share
price appreciation and consistent dividend payouts. We will continue to grow
by aggressively pursuing new opportunities with our Customers in our existing
and related markets. We will utilize our diversified portfolio of related filtration
businesses around the world to deliver consistent earnings growth.

Mission Statement
We provide the best filtration solutions and value to our Customers through
our portfolio of global filter businesses. We manage our business to deliver
consistent long-term earnings growth and superior returns for our Shareholders.
By serving the best interests of both our Customers and Shareholders we
create security and opportunities for our Employees.

    
Industrial Products Segment

2005 Sales   $672 Million

Industrial Air Filtration

Compressed Air and 
Gas Purification

Industrial Liquid Filtration

Tetratex® Expanded 
PTFE Membrane

Disk Drive Filters

Industrial Filtration Solutions

Special Applications

Our Industrial Filtration Solutions
group (IFS) provides a broad range 
of filtration products to industrial 
end-use customers under the master
brand of Donaldson and three 
specialized product brands: Torit,
Ultrafilter and Torit/DCE. Also, a full
line of replacement filters and parts 
is offered.

IFS offers complete solutions to: 

(1) control and capture airborne

dust, fumes and mist; 

(2) provide clean, dry and oil-free
compressed air and gas; and 

(3) provide clean bulk oil, fuel,
hydraulic fluid and other
process liquids.

We provide a wide range of high 
efficiency media, filters and filtration
systems for various high technology
applications.

IFS products are applied in a wide 
variety of industrial segments 
including pharmaceutical, bulk food
handling, metalworking, mining,
cement, plastics, glass and wood.

Industrial Air Filtration
Filtration systems and replacement 
filters that capture a broad spectrum of
dust, mist or fume particles that create
maintenance and air quality problems
in manufacturing environments. 

Compressed Air and Gas 
Purification
Air intake filters, oil filters and air/
oil separators keep compressor
room equipment running efficiently. 
Air dryers and point-of-use
compressed air filters deliver 
clean, dry compressed air and gas
throughout manufacturing facilities. 

Industrial Liquid Filtration
Hydraulic filters protect manufac-
turing equipment by removing 
particulate contaminants that 
cause wear and damage to engines,
motors and moving parts. Process
liquid filters purify a variety of 
industrial liquids used in beverages,
dairy products, paint and other 
consumer products. 

We sell our Tetratex® expanded
PTFE membrane for applications
including dust collection, air pollu-
tion control, and performance 
fabrics such as military outerwear.

Products for the disk drive market
include particulate filters, desiccant
filters and chemical adsorbing filters.
Customers include major disk drive
manufacturers such as Maxtor,
Hitachi Global Storage Technologies,
Seagate and Western Digital.

Products for high technology appli-
cations include air filter systems for
semiconductor processing facilities, 
contamination control devices for 
fuel cells, as well as other filters 
for process-critical applications.

$425 Million

$134 Million

IFS products are provided through 
multiple channels. Donaldson field 
sales representatives and service 
technicians sell directly to end-users.
An extensive network of distributors,
dealers, resellers, installers and 

engineering firms are utilized to
help expand IFS coverage in spe-
cific markets and geographies.
Strong OEM relationships also help
incorporate IFS products into their
total system configurations.

Disk drive filters are sold to OEM 
disk drive manufacturers by a direct
sales force.

Tetratex® membranes are sold 
to various filter, garment and
footwear manufacturers.

Other high technology application
products are sold to OEMs and
directly to end-users.

s
t
c
u
d
o
r
P

s
n
o
i
t
a
c
i
l
p
p
A

s
e
l
a
S
5
0
0
2

t
e
k
r
a
M
o
t

s
e
t
u
o
R

 
 
 
Engine Products Segment 

2005 Sales   $924 Million

Gas Turbine Systems

Off-Road Equipment

Gas Turbine Systems

Off-Road Equipment

Trucks

Trucks

We provide complete systems to
deliver clean air to combustion gas
turbines. Products include self-
cleaning filter units, static air filter
units, inlet ducting and silencing,
evaporative coolers, chiller coils,
inlet heating and anti-icing systems.
A full line of replacement filters and
parts is also offered, along with 
field service.

Modern combustion turbines require
inlet air filtration and noise attenua-
tion systems. These turbines provide
base electricity, peaking capacity
and remote power generation for
special applications such as pipelines
and off-shore oil drilling platforms.

$113 Million

Products are primarily sold to gas
turbine OEMs such as, General
Electric, Solar and Siemens
Westinghouse. Replacement parts
are sold both to our OEMs as well 
as directly to end-users.

s
t
e
k
r
a
M
-
d
n
E

s
r
e
m
o
t
s
u
C
e
v
i
t
a
t
n
e
s
e
r
p
e
R

s
e
l
a
S
5
0
0
2

s
e
i
l
i

m
a
F

t
c
u
d
o
r
P

Products sold to agricultural, con-
struction, mining, aerospace and
defense equipment manufacturers.

Products sold to manufacturers 
of light-, medium- and heavy-duty
trucks.

Caterpillar, John Deere, 
Komatsu, CNH, Volvo Construction
Equipment, General Dynamics, 
Stewart & Stevenson, Bobcat 
and AGCO

Freightliner, PACCAR, 
Volvo, Scania, International, 
Mitsubishi, Ford, General Motors,
Hino and DAF 

Aftermarket

Aftermarket

Broad line of replacement 
filters and hard parts for all 
of the equipment applications 
noted at left.

Replacement parts are provided
through multiple channels including
our OEMs’ parts and service organi-
zations, independent distributors,
and private label accounts.

Our replacement parts are marketed
under both the Donaldson brand
and through our OEMs to support
their brands.

$286 Million

$175 Million

$463 Million

Engine Intake Air 
Filtration Systems

Exhaust Systems

Hydraulic Filtration 
Systems

Lube, Fuel and Coolant 
Filtration Systems

Cabin Air Filters 

3

3

3

3

3

3

3

3

3

3

3

3

3

3

 
 
 
Dear Shareholders:

Bill Cook, Chairman, President and Chief Executive Officer 

Donaldson is now deeply integrated into the global economy.
We are committed to growing our business on that basis –
addressing our worldwide end markets with sales, distribution
and manufacturing that allow a local response to our Customers’
needs. 2005 presented both global opportunities and global
challenges. The bottom line is, we had another great year and 
our 16th consecutive EPS record.

This was also a year of transition for the leadership of our Company. My predecessor and mentor, 
Bill Van Dyke, retired from the Company and Board. While he will be a tough act to follow, he also
leaves behind both a great company and a time-tested strategy.

We changed our strategy over 20 years ago with the objective of transforming ourselves from a cyclical
U.S. based company into a well diversified portfolio of filter businesses around the world. The theory
was that if we were in enough different filter businesses in different geographies running on different
cycles, that in aggregate we would have a stable platform for delivering consistent financials and above
average returns for our Shareholders.

That strategy has worked. 2005 represented another revenue record and our 16th consecutive earnings
record. The world around us will continue to change. We will adapt to these changes and continue to
execute our strategy to deliver the same goal. And that goal is the same one we have been focused on
since the mid-1980’s – providing superior returns to you, our Shareholders.

Operational Summary
Our revenue increased by $180 million to a new record of $1.6 billion. We saw solid strength on both
sides of our company with Engine Products sales up 14 percent and Industrial up 11 percent.

One of the challenges we encountered was in our gross margins. In the first half of the year, higher
steel prices affected margins. During the second half of the year, margins were again under pressure
from higher petroleum based raw materials and freight costs. In total, these were the most significant
inflationary pressures we have experienced since the early 1980’s. Fortunately, we were able to offset
these through a combination of selective price increases and very extensive cost reduction initiatives
with our Customers. Our people around the world did a magnificent job dealing with this challenge.

The bottom line is that we dealt with the challenges. Earnings per share were a record $1.27, up 8 per-
cent over the $1.18 reported in fiscal 2004, and net income was another record at $110.6 million.

Outlook
We enter fiscal 2006 on solid footing: The economic conditions in almost all of our end markets remain
good. As we started the year, our total order backlog was up 11 percent over the prior year.

In our Engine Products segment, our NAFTA heavy truck Customers are expecting strong build rates to
continue through calendar 2006. Our NAFTA construction and mining OEMs also continue to see robust
conditions. Our overseas Engine businesses also have good order backlogs. In summary, based on the
orders backlog we have in hand and the positive feedback from our Customers, we expect an increase
in Engine Product sales of about 10 percent in 2006. 

Groundbreaking in Wuxi
We are building two new plants in 
Wuxi, China in 2006. These plants 
are our fifth and sixth manufacturing 
facilities in China.

Czech Republic Plant
To meet European demand for our 
industrial filtration systems, we will 
build a new manufacturing facility in
Kadan, Czech Republic in 2006. This 
plant will serve our Western European
customers while allowing us to better
serve the fast-growing Eastern 
Europe market.

Two growth initiatives worth noting in our Engine Products segment: PowerCore™ filters and our diesel
emissions solutions. 

PowerCore is a filtration technology breakthrough that allows us to offer our Customers a significant
innovation and value improvement. Using PowerCore, we now have won 36 new vehicle platforms at
our OEM Customers. In addition, we have made another 60+ PowerCore proposals for new platforms.
The bottom line on PowerCore: we expect to see continued strong PowerCore sales growth over the
next several years with sales up another 40 percent during 2006. 

In diesel emissions, we’ve identified two significant growth opportunities. The first is related to the clean-
up of the exhaust of existing fleets of diesel powered vehicles. This is  being driven by state and local
governments, whose main area of focus is school buses. In 2005, we sold $12 million in retrofit solutions
for existing fleets and expect to experience continued growth in ’06 and beyond. The second opportunity
is related to the upcoming 2007 federal regulations for the reduction of diesel emissions for all new heavy
duty diesel powered trucks. We have already won the emissions business for two major truck engine
platforms with several more of our proposals in the bidding process. All in all, we expect to see our 
current $50 million truck exhaust and emissions business in North America grow to $150 million by 2010.

In the Industrial side of our business, global conditions are good, and we continue to execute our
growth plan around the combination of our industrial air filtration and Ultrafilter™ product lines. We
acquired Ultrafilter three years ago and are very pleased with how it has fit into our existing Industrial
businesses. In our Special Applications business, we are expecting a strong ’06 due to the continued
strength in both our disk drive filter and membrane businesses. Finally, conditions in our gas turbine
business are improving modestly, as we see good growth opportunities internationally. Combining all of
our Industrial related businesses, we’re expecting 2006 sales growth in our Industrial Products Segment
in the high single-digits. 

Donaldson’s Global Presence
Three years ago, our mix of international versus North American sales passed the 50 percent mark. 
This was a major milestone. We now have more than 11,000 Donaldson employees in 35 countries around
the world, supporting our global OEM, aftermarket and industrial Customers. 

In North America, our 4,500 employees serve our Customers in the U.S., Mexico, and Canada. Our main
global R&D center is in the U.S. We now have 14 production plants within NAFTA in addition to distribu-
tion centers and sales offices.

Farewell to Bill Van Dyke
In the 10 years Bill Van Dyke led Donaldson
Company as its President, CEO and Chairman, 
our company grew into a $1.6 billion international
enterprise with operations in 35 countries and
more than half of its revenue originating outside
the U.S.

Even more important, Bill built an organization
that delivered unprecedented financial results 
to our Shareholders: 16 consecutive years of
record earnings growth, a 21 percent average
annual return to our Shareholders. If he had one
mantra, it was always, “if we take care of the
Shareholders, the company and its people will
prosper.”And they most definitely have.

Bill’s definition of what ‘good’ looked like was 
setting earnings records – each and every year.
He vowed that we would never take a year off,
and that Shareholders would reward us for that
consistency.

To that end, under his thoughtful leadership, 
Bill built a management team who brought depth
and seasoned business acumen to the company.
Bill was a leader who gave people a chance to
succeed – or fail – and who surrounded himself
with top talent, then allowed them to do their
jobs. He was all about results, and had little
patience for excuses. 

Bill demanded the same of himself as he did of
others. He worked tirelessly as a leader and a
coach and demanded excellence in everything
he did as a manager, a CEO and as Chairman 
of our Board. At the same time, Bill always kept
things in perspective, drawing clear distinctions
between those things the company could control
and those it couldn’t.

Bill, for all that you did to build this great 
company – thank you! Best wishes for a 
wonderful retirement!

Financial Highlights

Donaldson Company, Inc. and Subsidiaries

Year ended July 31

Net sales

Net earnings

Return on sales

Return on average shareholders’ equity

Long-term capitalization ratio

Diluted earnings per share

Dividends paid per share

Shareholders’ equity per share

Diluted shares outstanding

Employees at year-end

Sales per employee

2005

2004

% change

$1,595,733

$1,414,980 

110,554 

106,317 

6.9%

20.6%

16.5%

$         1.27

$       0.235

$         6.32

86,883

11,132

7.5%

21.3%

11.4%

$         1.18 

$       0.205 

$         6.38 

90,430 

10,289 

$       143.4

$       137.5 

12.8%

4.0%

(0.6) pts.

(0.7) pts.

5.1  pts.

7.6%

14.6%

(0.9)%

(3.9)%

8.2%

4.3%

Our Europe, Middle East and Africa regions now employ more than 2,800 employees. We cover this area
through an extensive network including 37 sales offices, 14 production plants and five distribution centers. 

Our Asia Pacific region employs more than 3,700 employees in 19 sales offices, eight production plants
and three distribution centers.

From a long-term strategic standpoint, 2005 was distinguished by the number of significant investments
to further grow our International businesses. Some highlights include:

• Significant expansion of our existing plants in Australia and Italy. At our Australian plant, where 

we manufacture engine air filters and industrial air filtration equipment, we doubled the facility size. 
At our Italian plant, we also doubled the size of the plant to meet demand for our liquid filters for the
European market.

• We opened our first plant in Thailand. This Class 100 clean room will supply filters for the rapidly 
growing disk drive industry. We expect to produce almost 200 million disk drive filters in our first 
year of production in Thailand. 

In fiscal 2005, we spent more than $50 million in capital expenditures – the majority to support the growth
in our international operations. And in fiscal 2006, we expect an even bigger year – $85 million to $95
million as we continue to invest in our future. Our plans include two more plants in Wuxi, China. One 
will be dedicated to the production of air filters to support our Engine Customers throughout Asia. The
second new plant will help expand our industrial air filtration production. In Europe, we are building our
second plant in the Czech Republic; this plant will manufacture industrial air filtration equipment. We
are also building a new distribution center in South Africa to help serve our Customers’ growing need for
replacement filters throughout the African continent. And finally, we are working on several other major
expansion projects that are in the proposal stage. Stay tuned.

The filtration markets we participate in represent a great business opportunity. There is a growing need
for improved filtration throughout the world – we see examples of this in the news daily. Fortunately, we
have the right technology to apply to many of those critical needs, so it is easy to be excited about our
opportunities. To achieve our goals, we will continue to execute our strategy, leveraging both the out-
standing capabilities and commitment of our Employees. Finally, our goals remain the same – by taking
good care of our Customers, we provide for our Shareholders and our Employees.

Sincerely,

Bill Cook, Chairman, President and Chief Executive Officer

Ostiglia, Italy Plant Expansion
In Ostiglia, Italy we make hydraulic filters
for the mobile diesel equipment market.
The expanded facility allows us to serve
our European Customers more efficiently
through increased manufacturing and
storage capacity.

Disk Drive Filter Cleanroom in Thailand
This state-of-the-art cleanroom 
provides a local source for serving 
our Customers located in Thailand,
Malaysia and Singapore.

Sixteen-Year Comparison of Results

Donaldson Company, Inc. and Subsidiaries 
(Millions of dollars, except per share amounts)

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

Operating Results

Net sales

Gross margin

Gross margin
percentage

$1,595.7

$ 505.6

$1,415.0 

$1,218.3

$1,126.0 

$1,137.0 

$1,092.3 

$  944.1 

$  940.4 

$  833.3 

$    758.6 

$    704.0 

$    593.5 

$    533.3 

$    482.1 

$    457.7 

$    422.9 

447.7

391.2 

349.5 

341.7 

327.5 

275.7 

263.3 

250.3 

222.9 

198.0 

166.6 

152.2 

133.6 

129.9 

121.5 

31.7%

31.6%

32.1%

31.0%

30.1%

30.0%

29.2%

28.0%

30.0%

29.4%

28.1%

28.1%

28.5%

27.7%

28.4%

28.7%

Operating income

$   156.5

141.6 

131.8 

123.8 

112.1 

105.6 

88.4 

86.8 

82.7 

75.6 

65.5 

52.1 

45.2 

41.2 

41.3 

44.4 

Operating income 
percentage

9.8%

10.0%

10.8%

11.0%

9.9%

9.7%

9.4%

9.2%

9.9%

10.0%

9.3%

8.8%

8.5%

8.6%

9.0%

10.5%

Interest expense

$       9.4

5.0 

5.9 

6.5 

11.6 

9.9 

7.0 

4.7 

2.4 

2.9 

3.1 

3.4 

2.7 

2.7 

3.5 

3.7 

Earnings before 
income taxes

Income taxes

$   154.7

$

44.2

141.8 

130.6 

119.0 

104.9 

100.3 

35.5 

35.3 

32.1 

29.4 

30.1 

89.2 

26.8 

86.4 

29.4 

79.1 

28.5 

71.1 

27.7 

63.2 

24.6 

50.2 

18.2 

44.7 

16.5 

41.7 

16.0 

39.4 

15.3 

34.9 

13.8 

Effective income tax rate

28.6%

25.0%

27.0%

27.0%

28.0%

30.0%

30.0%

34.0%

36.0%

38.9%

39.0%

36.3%

36.9%

38.2%

38.9%

39.7%

Net earnings

$   110.6

106.3 

95.3 

86.9 

75.5 

70.2 

62.4 

57.1 

50.6 

43.4 

38.5 

31.9(1)

28.2 

25.8 

24.0 

21.0 

Return on sales

6.9%

7.5%

7.8%

7.7%

6.6%

6.4%

6.6%

6.1%

6.1%

5.7%

5.5%

5.4%

5.3%

5.3%

5.3%

5.0%

Return on average 
shareholders’ equity

Return on investment

Financial Position

20.6%

17.7%

21.3%

23.0%

24.8%

25.2%

25.9%

24.1%

22.8%

21.4%

19.3%

18.8%

17.6%

16.9%

17.2%

18.0%

17.8%

18.1%

18.3%

19.2%

19.1%

19.4%

19.0%

20.5%

20.8%

18.5%

17.6%

16.0%

15.0%

14.8%

14.9%

14.2%

Total assets

$1,111.8

1,001.6 

882.0 

850.1 

706.8 

677.5 

542.2 

513.0 

467.5 

402.9 

381.0 

337.4 

300.2 

286.3 

253.2 

245.9 

Current assets

Current liabilities

Working capital

Current ratio

Current debt 

Long-term debt

Total debt

$   618.8

$   354.2

$   264.6

1.7

$ 109.8

$ 103.3

$   213.1

557.4 

454.7 

456.5 

407.2 

383.3 

326.4 

300.8 

283.4 

250.8 

247.9 

220.3 

196.0 

187.4 

169.4 

168.5 

275.5 

214.1 

273.3 

217.3 

243.6 

142.1 

165.1 

177.3 

138.6 

123.7 

115.8 

93.7 

281.9 

240.6 

183.2 

189.9 

139.8 

184.3 

135.7 

106.0 

112.2 

124.2 

104.6 

102.3 

2.0

54.1 

70.9 

2.1

14.8 

1.7

60.9 

105.2 

104.6 

1.9

59.4 

99.3 

1.6

85.3 

92.6 

2.3

20.7 

86.7 

124.9

120.0 

165.4 

158.7 

178.0

107.4

1.8

45.9 

51.6 

97.4

1.6

42.7 

4.2 

46.9 

1.8

13.1 

10.0 

23.2 

2.0

20.8 

10.2 

31.0 

1.9

17.0 

16.0 

33.0 

2.1

7.6 

18.9 

26.5 

90.0 

97.4 

2.1

11.4 

23.5 

34.9 

77.5 

91.9 

2.2

6.4 

25.7 

32.1 

79.9 

88.6 

2.1

11.4 

28.3 

39.7

Shareholders’ equity

$   524.6

549.3 

447.4 

382.6 

319.1 

280.2 

262.8 

255.7 

243.9 

228.9 

221.2 

189.7 

174.0 

160.3 

138.9 

128.8 

Long-term 
capitalization ratio

Property, plant and 
equipment, net

Net expenditures 
on property, plant 
and equipment

Depreciation and 
amortization

16.5%

11.4%

19.0%

21.5%

23.7%

24.9%

24.8%

16.8%

1.7%

4.2%

4.4%

7.8%

9.8%

12.8%

15.6%

18.0%

$   275.5

261.5 

255.4 

240.9 

207.7 

204.5 

182.2 

178.9 

154.6 

124.9 

110.6 

99.6 

90.5 

84.9 

72.9 

68.3 

$

$

50.2

44.3

43.0 

33.3 

40.5 

38.9 

36.4 

29.5 

54.7 

47.3 

39.3 

25.3 

24.6 

15.0 

15.5 

16.2 

16.1

41.6 

37.6 

31.8 

38.6 

34.3 

27.7 

25.3 

21.5 

21.7 

20.5 

16.4 

14.8 

14.0 

12.2 

10.9 

Shareholder Information (adjusted for splits)

Net earnings per share –
assuming dilution

$

1.27

1.18 

1.05

0.95 

0.83 

0.76 

0.66 

0.57 

0.50 

0.42 

0.37 

0.30 (1)

0.26 

0.23 

0.21 

0.19 

Dividends paid per share $   0.235

0.205 

0.175 

0.155 

0.148 

0.135 

0.115 

0.095 

0.085 

0.075 

0.070 

0.060 

0.050 

0.045 

0.035 

0.030 

Shareholders’ equity 
per share

Shares outstanding 
(mils)

Common stock price 
range, per share

$

6.32

6.38 

5.16 

4.36 

3.59 

3.14 

2.84 

2.64 

2.47 

2.26 

2.11 

1.79 

1.59 

1.45 

1.25 

1.12 

83.0

86.1

86.7

87.8

88.8

89.3

92.4

96.8

98.9

101.3

104.7

106.0

109.1

110.3

111.0

115.5

High 

Low

$   34.45

$   25.11

30.75 

24.59 

22.50 

16.53 

12.41 

12.94 

13.59 

10.19 

23.55 

14.96 

13.47 

9.57 

9.57 

7.22 

9.28 

6.31 

7.00 

5.97 

7.00 

5.47 

6.53 

4.56 

5.03 

3.50 

3.97 

2.59 

3.28 

2.03 

2.91 

1.41 

1) Excludes the cumulative effect of an accounting change of $2,206, or $.08 per share in 1994

Long-Term Performance    Year ended July 31 (cumulative total return)
• = DCI
•  = S&P 400

210
195

181
173

342
245

100
100

275
212

470
328

786
450

505
296

457
246

722
492

977
570

765
729

1,241
739

1,363
605

2,001
698

2,203
813

2,716
1,012

Donaldson’s annual 
return to shareholders 
has averaged 21
percent per year over 
the last 16 years.

Net Sales

89

90

91

92

93

94

95

96

97

98

99

00

01

02

03

04

05

(millions of dollars)

423

458

482

533

594

704

759

833

940

944

1,092

1,137

1,126

1,218

1,415

1,596

Sales have grown 
9 percent per year, 
on average, over the 
last 16 years.

90

91

92

93

94

95

96

97

98

99

00

01

02

03

04

05

Earnings Per Share

(dollars)

0.19

0.21

0.23

0.26

0.30

0.37

0.42

0.50

0.57

0.66

0.76

0.83

0.95

1.05

1.18

1.27

Earnings per share were 
up 8 percent in 2005, the 
16th consecutive year of 
record earnings growth.

90

91

92

93

94

95

96

97

98

99

00

01

02

03

04

05

Dividends Per Share

(dollars)

0.030

0.035

0.045

0.050

0.060

0.070

0.075

0.085

0.095

0.115

0.135

0.148

0.155

0.175

0.205

0.235

Dividends per share
increased 15 percent in 
2005. The company 
distributes between 20
and 30 percent of the prior
three years’ average net 
income through regular 
quarterly dividends.

90

91

92

93

94

95

96

97

98

99

00

01

02

03

04

05

Safe Harbor Statement
The Company desires to take advantage of the “Safe Harbor” provisions of the Private Securities Litigation Reform Act 
of 1995 and is making this cautionary statement in connection with such safe harbor legislation. Some of the information 
provided in this annual report constitutes forward-looking statements which reflect the Company’s current views with
respect to future events and financial performance, but involve uncertainties that could significantly impact results. All 
forecasts and projections are “forward-looking” statements and are based on management’s current expectations of the
Company’s near-term results. There can be no assurance that actual results will not differ materially from its expectations.
For a more detailed explanation of the safe harbor statement and the risks, see the Company’s Form 10-K filed with the SEC.

Corporate Officers

William M. Cook, 52
Chairman, President and 
Chief Executive Officer
25 years service

James R. Giertz, 48
Senior Vice President, 
Commercial and Industrial
12 years service

Lowell F. Schwab, 57
Senior Vice President, 
Engine Systems and Parts
26 years service

Geert Henk Touw, 59
Senior Vice President, 
Asia Pacific
19 years service

Norman C. Linnell, 46
Vice President, 
General Counsel and Secretary
10 years service

Charles J. McMurray, 51
Vice President, 
Human Resources, 
IT and Europe, South Africa and Mexico
25 years service

William I. Vann, 60
Vice President, 
NAFTA Operations
38 years service

Thomas R. VerHage, 52 
Vice President and 
Chief Financial Officer
2 years service

Board of Directors

Shareholder Information

F. Guillaume Bastiaens, 62
Vice Chairman
Cargill, Inc., Minneapolis 
(Agribusiness)
Independent director since 1995 (1) (3)

William M. Cook, 52
Chairman, President and 
Chief Executive Officer
Donaldson Company, Inc.
Director since 2004

Janet M. Dolan, 55
President and Chief Executive Officer
Tennant Company, Minneapolis 
(Manufacturing) 
Independent director since 1996 (2) (3)

Jack W. Eugster, 60 
Non-Executive Chairman, 
ShopKo Stores, Inc.,
Green Bay, WI
(Specialty Discount Retailer)
Independent Director since 1993 (1) (2*)

John F. Grundhofer, 66
Retired Chairman and Chief Executive Officer
U.S. Bancorp, Minneapolis 
(Financial Services) 
Independent director since 1997 (1) (3*)

Paul David Miller, 63
Retired Chairman and Chief Executive Officer
Alliant Techsystems, Inc., Minneapolis 
(Defense and Aerospace) 
Independent director since 2001 (2) (3)

Jeffrey Noddle, 59
Chairman, President and Chief Executive Officer
SUPERVALU INC., Minneapolis 
(Food Retailer and Distributor)
Independent director since 2000 (1*) (2)

John Wiehoff, 44
Chief Executive Officer and President
C. H. Robinson Worldwide, Inc., Minneapolis
(Transportation & Logistics)
Independent director since 2003 (2) (3)

(1) Human Resources Committee

(2) Audit Committee

(3) Corporate Governance Committee

(*) Committee Chairperson

NYSE Listing
The common shares of Donaldson Company, Inc.
are traded on the New York Stock Exchange, 
under the symbol DCI.

Shareholder Information
For any concerns relating to your current or
prospective shareholdings, please contact
Shareowner Services at (800) 468-9716 or 
(651) 450-4064.

Dividend Reinvestment Plan
As of September 30, 2005, 1,153 of Donaldson
Company’s approximately 1,940 shareholders 
of record were participating in the Dividend
Reinvestment Plan. Under the plan, shareholders
can invest Donaldson Company dividends in 
additional shares of company stock. They may 
also make periodic voluntary cash investments 
for the purchase of company stock.

Both alternatives are provided without service
charges or brokerage commissions. Shareholders
may obtain a brochure giving further details 
by writing Wells Fargo Bank Minnesota, N.A.,
Shareowner Services, P.O. Box 64854,
St. Paul, MN 55164-0854.

Annual Meeting
The annual meeting of shareholders will be held 
at 1 p.m. CT on Friday, November 18, 2005, at
Donaldson Company, Inc., 1400 West 94th Street,
Bloomington, Minnesota. Shareholders are 
welcome to attend.

Investor Relations
You can access investor relations information,
including our SEC filings, on our website at
www.donaldson.com. For investor inquiries, con-
tact Rich Sheffer, Director of Investor Relations at 
(952) 887-3753 or rsheffer@mail.donaldson.com.

Auditors
PricewaterhouseCoopers LLP
Minneapolis, Minnesota

Public and Investor Relations Counsel
The Carideo Group, Inc.
Minneapolis, Minnesota

Transfer Agent and Registrar
Wells Fargo Bank Minnesota, N.A.
South St. Paul, Minnesota

TM

Mailing Address: 
Donaldson Company, Inc.
Mail Station 104
P.O. Box 1299  Minneapolis, Minnesota 55440-1299 U.S.A.

(952) 887-3131
www.donaldson.com