Donaldson Co. Inc.
02/26/2026 | Press release | Distributed by Public on 02/26/2026 10:04
Quarterly Report for Quarter Ending JANUARY 31, 2026 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations
Overview
Founded in 1915, Donaldson Company, Inc. is a global leader in technology-led filtration products and solutions, serving a broad range of industries and advanced markets. Donaldson's diverse and skilled employees at more than 150 locations on six continents, 77 of which are manufacturing and/or distribution centers, partner with customers - from small business owners to the world's largest original equipment manufacturer (OEM) brands - to solve complex filtration challenges. Customers choose Donaldson's filtration solutions due to their stringent technical and performance requirements, the need for reliability and the value proposition of Donaldson's solutions and/or services.
The Company's operating segments are Mobile Solutions, Industrial Solutions and Life Sciences. The Mobile Solutions segment is organized based on a combination of customers and products and consists of the Off-Road, On-Road and Aftermarket business units. Within these business units, products consist of replacement filters for both air and liquid filtration applications and filtration housings for new equipment production and systems related to exhaust and emissions. Applications include air filtration systems, fuel, lube and hydraulic systems, emissions systems and sensors, indicators and monitoring systems. Mobile Solutions sells to OEMs in the construction, mining, agriculture and transportation end markets and to independent distributors and OEM dealer networks.
The Industrial Solutions segment is organized based on product type and consists of Industrial Air Filtration, Industrial Gases, Industrial Hydraulics, Power Generation and Aerospace and Defense products. These products are further organized by the Industrial Filtration Solutions and Aerospace and Defense business units. Within our industrial portfolio, the Company provides a wide product offering in the market to industrial customers consisting of equipment, ancillary components, replacement parts, performance monitoring and service globally, that cost-effectively enhances productivity and manufacturing efficiency. Industrial Air Filtration, Industrial Gases and Industrial Hydraulics products consist of dust, fume and mist collectors, compressed air and industrial gases purification systems, hydraulic and lubricated rotating filtration applications as well as gas and liquid filtration for industrial processes. Power Generation products consist of air inlet systems and filtration sold to gas compression, power generation and natural gas liquification industries. Aerospace and Defense products consist of air, fuel, lubrication and hydraulic filtration for fixed-wing and rotorcraft aerospace applications and ground defense vehicle and naval platforms. Industrial Solutions businesses sell through multiple channels which include OEMs, distributors and direct-to-consumer in some markets.
The Life Sciences segment is organized by end market and consists of the Food and Beverage, Disk Drive, Vehicle Electrification and Medical Device, Microelectronics and Bioprocessing Equipment and Consumables markets. Within these markets, products consist of micro-environment gas and liquid filtration for food and beverage and industrial processes, bioprocessing equipment, including bioreactors and fermenters, bioprocessing consumables including chromatography devices, reagents and filters, polytetrafluoroethylene membrane-based products, as well as specialized air and gas filtration systems for applications including hard disk drives, semiconductor manufacturing, sensors, battery systems and powertrain components. Life Sciences primarily sells to large OEMs and directly to various end users requiring cell growth, separation, purification, high purity filtration and device protection.
The Company's results of operations are affected by conditions in the global economic and geopolitical environment. Under most economic conditions, the Company's diversification between its diesel engine end markets, its global end markets, its diversification through technology and its OEM and replacement parts customers has helped to limit the impact of weakness in any one product line, market or geography on the consolidated operating results of the Company.
Operating Environment
Tariffs
The U.S. imposed tariffs on a wide range of imports, with the potential for further tariff actions, which resulted in retaliatory tariffs. These trade measures, along with updates to export controls and sanctions regimes, pose ongoing risks to global supply chains, potentially increasing the cost of goods, straining procurement cycles and impacting customer demand. On February 20, 2026, the United States Supreme Court issued a decision concluding that the International Emergency Economic Powers Act does not provide authority for the President to impose tariffs. Certain tariffs that affected us were imposed under this statute pursuant to presidential executive order. The extent and timing of any potential recoveries of tariffs previously paid remain subject to further legal interpretation and administrative processes. We will continue to monitor developments and will evaluate the effect of the ruling on future reporting periods as additional information becomes available. The Company is closely monitoring the evolving trade landscape, as well as its ability to mitigate the impact of tariffs and its analysis of the potential impact. The Company will continue to utilize its global manufacturing footprint and supply chain to mitigate the cost impact of tariffs.
Any additional tariffs in the U.S. or retaliatory tariffs imposed by other governments could exacerbate the impact. Any new, substantial tariff increases on imports to the U.S. from Mexico, China and the European Union (EU) should they be implemented and sustained for an extended period of time, could have a significant adverse effect on the Company and its supply chain.
For additional information regarding the impact and potential impact of trade policy and tariffs on the Company, refer to the "Risk Factors" section in the Company's Annual Report on Form 10-K for the fiscal year ended July 31, 2025 which outlines the risks and uncertainties the Company believes are the most material to its business.
Consolidated Results of Operations
Three months ended January 31, 2026 compared with three months ended January 31, 2025
Operating Results
Operating results were as follows (in millions, except per share amounts):
| Three Months Ended January 31, | |||||||||||||||||||||||
| 2026 | % of net sales | 2025 | % of net sales | ||||||||||||||||||||
| Net sales | $ | 896.3 | $ | 870.0 | |||||||||||||||||||
| Cost of sales | 596.5 | 66.5 | % | 564.1 | 64.8 | % | |||||||||||||||||
| Gross profit | 299.8 | 33.5 | 305.9 | 35.2 | |||||||||||||||||||
| Selling, general and administrative | 162.5 | 18.1 | 159.2 | 18.3 | |||||||||||||||||||
| Research and development | 18.6 | 2.2 | 21.2 | 2.4 | |||||||||||||||||||
| Operating expenses | 181.1 | 20.2 | 180.4 | 20.7 | |||||||||||||||||||
| Operating income | 118.7 | 13.2 | 125.5 | 14.4 | |||||||||||||||||||
| Interest expense | 7.7 | 0.8 | 5.9 | 0.7 | |||||||||||||||||||
| Other income, net | (5.6) | (0.6) | (5.4) | (0.6) | |||||||||||||||||||
| Earnings before income taxes | 116.6 | 13.0 | 125.0 | 14.4 | |||||||||||||||||||
| Income taxes | 24.1 | 2.7 | 29.1 | 3.3 | |||||||||||||||||||
| Net earnings | $ | 92.5 | 10.3 | % | $ | 95.9 | 11.0 | % | |||||||||||||||
| Net earnings per share (EPS) - diluted | $ | 0.78 | $ | 0.79 | |||||||||||||||||||
Geographic Net Sales by Origination
Net sales, disaggregated by location where the customer's order was received, were as follows (in millions):
| Three Months Ended January 31, | ||||||||||||||||||||||||||
| 2026 | % of net sales | 2025 | % of net sales | |||||||||||||||||||||||
| U.S. and Canada | $ | 372.7 | 41.6 | % | $ | 391.0 | 44.9 | % | ||||||||||||||||||
|
Europe, Middle East and Africa (EMEA)
|
264.8 | 29.5 | 228.3 | 26.2 | ||||||||||||||||||||||
| Asia Pacific (APAC) | 165.1 | 18.4 | 151.9 | 17.5 | ||||||||||||||||||||||
|
Latin America (LATAM)
|
93.7 | 10.5 | 98.8 | 11.4 | ||||||||||||||||||||||
| Total Company | $ | 896.3 | 100.0 | % | $ | 870.0 | 100.0 | % | ||||||||||||||||||
Net Sales
(1)The impact of foreign currency translation was calculated by translating the second quarter of fiscal 2026 foreign currency net sales into U.S. dollars using the average foreign currency exchange rates for the second quarter of the prior fiscal year. The impact of currency translation does not change the underlying drivers of revenue shown in this chart.
Net sales by segment (in millions):
| January 31, 2025 | Sales volume | Pricing | Currency translation | January 31, 2026 | ||||||||||||||||||||||||||||
|
Mobile Solutions segment
|
$ | 547.5 | $ | (16.6) | $ | 9.1 | $ | 16.6 | $ | 556.6 | ||||||||||||||||||||||
|
Industrial Solutions segment
|
253.7 | (7.8) | 6.9 | 6.9 | 259.7 | |||||||||||||||||||||||||||
|
Life Sciences segment
|
68.8 | 7.0 | (0.2) | 4.4 | 80.0 | |||||||||||||||||||||||||||
|
Total Company
|
$ | 870.0 | $ | (17.4) | $ | 15.8 | $ | 27.9 | $ | 896.3 | ||||||||||||||||||||||
Net sales for the three months ended January 31, 2026 increased $26.3 million, or 3.0%, from the three months ended January 31, 2025, reflecting higher sales in the Mobile Solutions segment of $9.1 million, or 1.6% growth, the Industrial Solutions segment of $6.0 million, or 2.4% growth, and the Life Sciences segment of $11.2 million, or 16.2% growth. Foreign currency translation increased net sales by $27.9 million compared to the three months ended January 31, 2025, reflecting an increase in the Mobile Solutions segment of $16.6 million, an increase in the Industrial Solutions segment of $6.9 million, and an increase in the Life Sciences segment of $4.4 million. During the three months ended January 31, 2026, the Company's net sales increase was driven by favorable foreign currency impacts and pricing benefits, partially offset by volume decline.
Gross Margin
Gross margin as a percentage of net sales for the three months ended January 31, 2026 was 33.5% compared with 35.2% for the three months ended January 31, 2025. The decrease in gross margin as a percentage of net sales was driven primarily by operational inefficiencies related to shifting Power Generation equipment production to a new point of manufacturing to support higher customer demand in Industrial Solutions and costs associated with footprint optimization efforts, partially offset by benefits from pricing actions.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the three months ended January 31, 2026 were $162.5 million, or 18.1% of net sales, compared with $159.2 million, or 18.3% of net sales, for the three months ended January 31, 2025, an increase of $3.3 million, or 2.1%. The decrease in selling, general and administrative expenses as a percentage of net sales was primarily due to ongoing disciplined expense management, partially offset by restructuring and other charges.
Research and Development Expenses
Research and development expenses for the three months ended January 31, 2026 were $18.6 million, or 2.2% of net sales, compared with $21.2 million, or 2.4% of net sales, for the three months ended January 31, 2025, a decrease of $2.6 million, or 11.7%, driven by focused project prioritization.
Non-Operating Items
Interest expense for the three months ended January 31, 2026 was $7.7 million, compared with $5.9 million for the three months ended January 31, 2025, an increase of $1.8 million, or 29.0%. The increase reflected a combination of higher proportion of variable interest rate debt and higher overall level of debt.
Other income, net for the three months ended January 31, 2026 was $5.6 million, compared with other income, net of $5.4 million for the three months ended January 31, 2025, an increase of $0.2 million, which was relatively consistent with the prior year.
Income Taxes
The effective tax rate was 20.7% and 23.2% for the three months ended January 31, 2026 and 2025, respectively. The lower effective tax rate was primarily due to an increase in excess tax benefits on stock-based compensation.
Net Earnings
Net earnings for the three months ended January 31, 2026 were $92.5 million, compared with $95.9 million for the three months ended January 31, 2025, a decrease of $3.4 million, or 3.6%. Diluted EPS were $0.78 for the three months ended January 31, 2026, compared with $0.79 for the three months ended January 31, 2025, a decrease of $0.01, or 0.7%.
Six months ended January 31, 2026 compared with six months ended January 31, 2025
Operating Results
Operating results were as follows (in millions, except per share amounts):
| Six Months Ended January 31, | |||||||||||||||||||||||
| 2026 | % of net sales | 2025 | % of net sales | ||||||||||||||||||||
| Net sales | $ | 1,831.7 | $ | 1,770.1 | |||||||||||||||||||
| Cost of sales | 1,203.1 | 65.7 | % | 1,144.6 | 64.7 | % | |||||||||||||||||
| Gross profit | 628.6 | 34.3 | 625.5 | 35.3 | |||||||||||||||||||
| Selling, general and administrative | 332.1 | 18.1 | 325.3 | 18.4 | |||||||||||||||||||
|
Gain on sale of fixed assets
|
(9.3) | (0.5) | - | - | |||||||||||||||||||
| Research and development | 37.8 | 2.1 | 43.9 | 2.5 | |||||||||||||||||||
| Operating expenses | 360.6 | 19.7 | 369.2 | 20.9 | |||||||||||||||||||
| Operating income | 268.0 | 14.6 | 256.3 | 14.5 | |||||||||||||||||||
| Interest expense | 14.8 | 0.8 | 11.4 | 0.6 | |||||||||||||||||||
| Other income, net | (10.9) | (0.6) | (10.6) | (0.6) | |||||||||||||||||||
| Earnings before income taxes | 264.1 | 14.4 | 255.5 | 14.4 | |||||||||||||||||||
| Income taxes | 57.7 | 3.1 | 60.6 | 3.4 | |||||||||||||||||||
| Net earnings | $ | 206.4 | 11.3 | % | $ | 194.9 | 11.0 | % | |||||||||||||||
| Net EPS - diluted | $ | 1.75 | $ | 1.60 | |||||||||||||||||||
Geographic Net Sales by Origination
Net sales, disaggregated by location where the customer's order was received, were as follows (in millions):
| Six Months Ended January 31, | ||||||||||||||||||||||||||
| 2026 | % of net sales | 2025 | % of net sales | |||||||||||||||||||||||
| U.S. and Canada | $ | 780.1 | 42.6 | % | $ | 800.8 | 45.3 | % | ||||||||||||||||||
|
EMEA
|
527.6 | 28.8 | 469.3 | 26.5 | ||||||||||||||||||||||
| APAC | 330.5 | 18.0 | 307.0 | 17.3 | ||||||||||||||||||||||
|
LATAM
|
193.5 | 10.6 | 193.0 | 10.9 | ||||||||||||||||||||||
| Total Company | $ | 1,831.7 | 100.0 | % | $ | 1,770.1 | 100.0 | % | ||||||||||||||||||
Net Sales
(1)The impact of foreign currency translation was calculated by translating the year-to-date fiscal 2026 foreign currency net sales into U.S. dollars using the average foreign currency exchange rates for the year-to-date net sales of the prior fiscal year. The impact of currency translation does not change the underlying drivers of revenue shown in this chart.
Net sales by segment (in millions):
| January 31, 2025 | Sales volume | Pricing | Currency translation | January 31, 2026 | ||||||||||||||||||||||||||||
| Mobile Solutions segment | $ | 1,119.9 | $ | (7.2) | $ | 18.9 | $ | 23.3 | $ | 1,154.9 | ||||||||||||||||||||||
| Industrial Solutions segment | 511.3 | (17.0) | 13.3 | 9.9 | 517.5 | |||||||||||||||||||||||||||
| Life Sciences segment | 138.9 | 14.3 | (0.5) | 6.6 | 159.3 | |||||||||||||||||||||||||||
| Total Company | $ | 1,770.1 | $ | (9.9) | $ | 31.7 | $ | 39.8 | $ | 1,831.7 | ||||||||||||||||||||||
Net sales for the six months ended January 31, 2026 increased $61.6 million, or 3.5%, from the six months ended January 31, 2025, reflecting higher sales in the Mobile Solutions segment of $35.0 million, or 3.1% growth, the Industrial Solutions segment of $6.2 million, or 1.2% growth, and the Life Sciences segment of $20.4 million, or 14.6% growth. Foreign currency translation increased net sales by $39.8 million compared to the six months ended January 31, 2025, reflecting an increase in the Mobile Solutions segment of $23.3 million, an increase in the Industrial Solutions segment of $9.9 million, and an increase in the Life Sciences segment of $6.6 million. During the six months ended January 31, 2026, the Company's net sales increased due to favorable foreign currency impacts and pricing benefits, partially offset by volume decline.
Gross Margin
Gross margin as a percentage of net sales for the six months ended January 31, 2026 was 34.3% compared with 35.3% for the six months ended January 31, 2025. The decrease in gross margin as a percentage of net sales was driven primarily by operational inefficiencies related to shifting Power Generation equipment production to a new point of manufacturing to support higher customer demand in Industrial Solutions and costs associated with footprint optimization efforts, partially offset by benefits from pricing actions.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the six months ended January 31, 2026 were $332.1 million, or 18.1% of net sales, compared with $325.3 million, or 18.4% of net sales, for the six months ended January 31, 2025, an increase of $6.8 million, or 2.1%. The decrease in selling, general and administrative expenses as a percentage of net sales was primarily due to ongoing disciplined expense management and leverage on higher sales.
Gain on Sale of Fixed Assets
Gain on sale of fixed assets for the six months ended January 31, 2026 was $9.3 million, or 0.5% of net sales, compared to no gain on sale of fixed assets for the six months ended January 31, 2025. The gain on sale of fixed assets was driven by the sale of land and a building associated with footprint optimization initiatives.
Research and Development Expenses
Research and development expenses for the six months ended January 31, 2026 were $37.8 million, or 2.1% of net sales, compared with $43.9 million, or 2.5% of net sales, for the six months ended January 31, 2025, a decrease of $6.1 million, or 13.7%, driven by focused project prioritization.
Non-Operating Items
Interest expense for the six months ended January 31, 2026 was $14.8 million, compared with $11.4 million for the six months ended January 31, 2025, an increase of $3.4 million, or 30.4%. The increase reflected a combination of higher proportion of variable interest rate debt and higher overall level of debt.
Other income, net for the six months ended January 31, 2026 was $10.9 million, compared with other income, net of $10.6 million for the six months ended January 31, 2025, an increase of $0.3 million, which was relatively consistent with the prior year.
Income Taxes
The effective tax rate was 21.8% and 23.7% for the six months ended January 31, 2026 and 2025, respectively. The lower effective tax rate was primarily due to an increase in excess tax benefits on stock-based compensation.
Net Earnings
Net earnings for the six months ended January 31, 2026 were $206.4 million, compared with $194.9 million for the six months ended January 31, 2025, an increase of $11.5 million, or 5.9%. Diluted EPS were $1.75 for the six months ended January 31, 2026, compared with $1.60 for the six months ended January 31, 2025, an increase of $0.15, or 9.3%.
Segment Results of Operations
Net sales and earnings (loss) before income taxes were as follows (in millions):
|
Three Months Ended January 31, |
Six Months Ended January 31, |
||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Net sales | |||||||||||||||||||||||
| Mobile Solutions | $ | 556.6 | $ | 547.5 | $ | 1,154.9 | $ | 1,119.9 | |||||||||||||||
| Industrial Solutions | 259.7 | 253.7 | 517.5 | 511.3 | |||||||||||||||||||
| Life Sciences | 80.0 | 68.8 | 159.3 | 138.9 | |||||||||||||||||||
| Total Company | $ | 896.3 | $ | 870.0 | $ | 1,831.7 | $ | 1,770.1 | |||||||||||||||
| Earnings (loss) before income taxes | |||||||||||||||||||||||
| Mobile Solutions | $ | 93.7 | $ | 95.5 | $ | 205.0 | $ | 200.2 | |||||||||||||||
| Industrial Solutions | 31.0 | 40.9 | 63.2 | 81.9 | |||||||||||||||||||
| Life Sciences | 7.4 | (0.5) | 14.7 | (5.8) | |||||||||||||||||||
|
Total segment
|
132.1 | 135.9 | 282.9 | 276.3 | |||||||||||||||||||
|
Corporate and unallocated(1)
|
(15.5) | (10.9) | (18.8) | (20.8) | |||||||||||||||||||
| Total Company | $ | 116.6 | $ | 125.0 | $ | 264.1 | $ | 255.5 | |||||||||||||||
(1)Corporate and unallocated includes interest expense and certain corporate expenses determined to be non-allocable to the segments, such as a gain on the sale of fixed assets, restructuring and related charges, business development charges and portions of incentive compensation.
Mobile Solutions Segment
Net sales and earnings before income taxes were as follows (in millions):
|
Three Months Ended January 31, |
Six Months Ended January 31, |
||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Off-Road | $ | 86.5 | $ | 80.2 | $ | 181.1 | $ | 169.3 | |||||||||||||||
| On-Road | 23.0 | 25.3 | 46.4 | 57.4 | |||||||||||||||||||
| Aftermarket | 447.1 | 442.0 | 927.4 | 893.2 | |||||||||||||||||||
| Total Mobile Solutions segment | $ | 556.6 | $ | 547.5 | $ | 1,154.9 | $ | 1,119.9 | |||||||||||||||
| Mobile Solutions segment earnings before income taxes | $ | 93.7 | $ | 95.5 | $ | 205.0 | $ | 200.2 | |||||||||||||||
| Mobile Solutions segment earnings before income taxes % of net sales | 16.8 | % | 17.4 | % | 17.8 | % | 17.9 | % | |||||||||||||||
Three months ended January 31, 2026 compared with three months ended January 31, 2025
(1)The impact of foreign currency translation was calculated by translating the second quarter of fiscal 2026 foreign currency net sales into U.S. dollars using the average foreign currency exchange rates for the second quarter of the prior fiscal year. The impact of currency translation does not change the underlying drivers of revenue shown in this chart.
Net sales for the Mobile Solutions segment for the three months ended January 31, 2026 were $556.6 million, compared with $547.5 million for the three months ended January 31, 2025, an increase of $9.1 million, or 1.6%. Foreign currency translation favorably impacted net sales for the Mobile Solutions segment by 3.0%. All business units were positively impacted by foreign currency translation.
Net sales of Aftermarket increased $5.1 million primarily driven by higher vehicle utilization rates in EMEA and APAC. Net sales of Off-Road increased $6.3 million, reflecting a modest rebound following declines in the prior year. Net sales of On-Road decreased $2.3 million primarily due to a continuing decline in global truck production.
Earnings before income taxes for the Mobile Solutions segment for the three months ended January 31, 2026 were $93.7 million, or 16.8% of net sales, a decrease from 17.4% of net sales for the three months ended January 31, 2025. The decrease was driven primarily by higher operational costs from footprint optimization efforts and deleverage from lower volume.
Six months ended January 31, 2026 compared with six months ended January 31, 2025
(1)The impact of foreign currency translation was calculated by translating the year-to-date fiscal 2026 foreign currency net sales into U.S. dollars using the average foreign currency exchange rates for the year-to-date net sales of the prior fiscal year. The impact of currency translation does not change the underlying drivers of revenue shown in this chart.
Net sales for the Mobile Solutions segment for the six months ended January 31, 2026 were $1,154.9 million, compared with $1,119.9 million for the six months ended January 31, 2025, an increase of $35.0 million, or 3.1%. Foreign currency translation favorably impacted net sales for the Mobile Solutions segment by 2.1%. All business units were positively impacted by foreign currency translation.
Net sales of Aftermarket increased $34.2 million due to market share gains and higher vehicle utilization rates, primarily in EMEA and APAC. Net sales of Off-Road increased $11.8 million, reflecting a modest rebound following declines in the prior year. Net sales of On-Road decreased $11.0 million primarily due to a continuing decline in global truck production.
Earnings before income taxes for the Mobile Solutions segment for the six months ended January 31, 2026 were $205.0 million, or 17.8% of net sales, consistent with 17.9% of net sales for the six months ended January 31, 2025.
Industrial Solutions Segment
Net sales and earnings before income taxes were as follows (in millions):
|
Three Months Ended January 31, |
Six Months Ended January 31, |
||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Industrial Filtration Solutions (IFS) | $ | 222.6 | $ | 207.5 | $ | 438.3 | $ | 419.9 | |||||||||||||||
| Aerospace and Defense | 37.1 | 46.2 | 79.2 | 91.4 | |||||||||||||||||||
| Total Industrial Solutions segment | $ | 259.7 | $ | 253.7 | $ | 517.5 | $ | 511.3 | |||||||||||||||
| Industrial Solutions segment earnings before income taxes | $ | 31.0 | $ | 40.9 | $ | 63.2 | $ | 81.9 | |||||||||||||||
|
Industrial Solutions segment earnings before income taxes % of net sales
|
11.9 | % | 16.1 | % | 12.2 | % | 16.0 | % | |||||||||||||||
Three months ended January 31, 2026 compared with three months ended January 31, 2025
(1)The impact of foreign currency translation was calculated by translating the second quarter of fiscal 2026 foreign currency net sales into U.S. dollars using the average foreign currency exchange rates for the second quarter of the prior fiscal year. The impact of currency translation does not change the underlying drivers of revenue shown in this chart.
Net sales for the Industrial Solutions segment for the three months ended January 31, 2026 were $259.7 million, compared with $253.7 million for the three months ended January 31, 2025, an increase of $6.0 million, or 2.4%. Foreign currency translation favorably impacted net sales for the Industrial Solutions segment by 2.2%. Both business units were positively impacted by foreign currency translation.
Net sales of IFS increased $15.1 million, driven by First Fit project timing and strong Aftermarket demand in Power Generation, as well as strong global demand in Industrial Gases. Net sales of Aerospace and Defense decreased by $9.1 million primarily due to project timing.
Earnings before income taxes for the Industrial Solutions segment for the three months ended January 31, 2026 were $31.0 million, or 11.9% of net sales, a decrease from 16.1% of net sales for the three months ended January 31, 2025. The decrease was driven primarily by operational inefficiencies related to shifting Power Generation equipment production to a new point of manufacturing to support higher customer demand and costs associated with footprint optimization efforts, as well as unfavorable mix in business unit sales.
Six months ended January 31, 2026 compared with six months ended January 31, 2025
(1)The impact of foreign currency translation was calculated by translating the year-to-date fiscal 2026 foreign currency net sales into U.S. dollars using the average foreign currency exchange rates for the year-to-date net sales of the prior fiscal year. The impact of currency translation does not change the underlying drivers of revenue shown in this chart.
Net sales for the Industrial Solutions segment for the six months ended January 31, 2026 were $517.5 million, compared with $511.3 million for the six months ended January 31, 2025, an increase of $6.2 million, or 1.2%. Foreign currency translation favorably impacted net sales for the Industrial Solutions segment by 1.6%. Both business units were positively impacted by foreign currency translation.
Net sales of IFS increased $18.4 million, driven by First Fit project timing and strong Aftermarket demand in Power Generation, as well as strong global demand in Industrial Gases. Net sales of Aerospace and Defense decreased by $12.2 million primarily due to project timing.
Earnings before income taxes for the Industrial Solutions segment for the six months ended January 31, 2026 were $63.2 million, or 12.2% of net sales, a decrease from 16.0% of net sales for the six months ended January 31, 2025 driven primarily by operational inefficiencies related to shifting Power Generation equipment production to a new point of manufacturing to support higher customer demand, costs associated with footprint optimization efforts and unfavorable mix in business unit sales.
Life Sciences Segment
Net sales and earnings (losses) before income taxes were as follows (in millions):
|
Three Months Ended January 31, |
Six Months Ended January 31, |
||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Life Sciences segment net sales | $ | 80.0 | $ | 68.8 | $ | 159.3 | $ | 138.9 | |||||||||||||||
| Life Sciences segment earnings (losses) before income taxes | $ | 7.4 | $ | (0.5) | $ | 14.7 | $ | (5.8) | |||||||||||||||
| Life Sciences segment earnings (losses) before income taxes % of net sales | 9.3 | % | (0.7) | % | 9.2 | % | (4.2) | % | |||||||||||||||
Three months ended January 31, 2026 compared with three months ended January 31, 2025
(1)The impact of foreign currency translation was calculated by translating the second quarter of fiscal 2026 foreign currency net sales into U.S. dollars using the average foreign currency exchange rates for the second quarter of the prior fiscal year. The impact of currency translation does not change the underlying drivers of revenue shown in this chart.
Net sales for the Life Sciences segment for the three months ended January 31, 2026 were $80.0 million, compared with $68.8 million for the three months ended January 31, 2025, an increase of $11.2 million, or 16.2%. Foreign currency translation favorably impacted net sales for the Life Sciences segment by 6.4%. The increase in net sales was driven by strong global sales in Food and Beverage and Disk Drive.
Earnings before income taxes for the Life Sciences segment for the three months ended January 31, 2026 were $7.4 million, or 9.3% of net sales, an increase from losses before income taxes of $0.5 million, or 0.7% of net sales, for the three months ended January 31, 2025. The improvement was driven by leverage from higher volume and disciplined expense management.
Six months ended January 31, 2026 compared with six months ended January 31, 2025
(1)The impact of foreign currency translation was calculated by translating the year-to-date fiscal 2026 foreign currency net sales into U.S. dollars using the average foreign currency exchange rates for the year-to-date net sales of the prior fiscal year. The impact of currency translation does not change the underlying drivers of revenue shown in this chart.
Net sales for the Life Sciences segment for the six months ended January 31, 2026 were $159.3 million, compared with $138.9 million for the six months ended January 31, 2025, an increase of $20.4 million, or 14.6%. Foreign currency translation favorably impacted net sales for the Life Sciences segment by 4.8%. The increase in net sales was driven by strong global sales in Food and Beverage and Disk Drive.
Earnings before income taxes for the Life Sciences segment for the six months ended January 31, 2026 were $14.7 million, or 9.2% of net sales, an improvement from losses before income taxes of $5.8 million, or 4.2% of net sales, for the six months ended January 31, 2025. The improvement was driven by leverage on higher volume and benefits from restructuring activities that occurred during fiscal 2025.
Liquidity, Capital Resources and Financial Condition
Liquidity
Liquidity is assessed in terms of the Company's ability to generate cash to fund its operating, investing and financing activities. Significant factors affecting liquidity are cash flows generated from operating activities, capital expenditures, acquisitions, dividends, repurchases of outstanding shares, adequacy of available credit facilities and the ability to attract long-term capital with satisfactory terms. The Company generates substantial cash from the operation of its businesses as its primary source of liquidity, with sufficient liquidity available to fund growth through reinvestment in existing businesses and strategic acquisitions.
Cash Flow Summary
Cash flows were as follows (in millions):
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Six Months Ended January 31, |
||||||||||||||||||||
| 2026 | 2025 | $ Change | ||||||||||||||||||
| Net cash provided by (used in): | ||||||||||||||||||||
| Operating activities | $ | 158.4 | $ | 163.3 | $ | (4.9) | ||||||||||||||
| Investing activities | (18.4) | (115.1) | 96.7 | |||||||||||||||||
| Financing activities | (131.5) | (88.5) | (43.0) | |||||||||||||||||
| Effect of exchange rate changes on cash | 5.5 | (3.3) | 8.8 | |||||||||||||||||
| Increase (decrease) in cash and cash equivalents | $ | 14.0 | $ | (43.6) | $ | 57.6 | ||||||||||||||
Operating Activities
Cash provided by operating activities for the six months ended January 31, 2026 was $158.4 million, compared with $163.3 million for the six months ended January 31, 2025, a decrease of $4.9 million. The decrease in cash provided by operating activities was primarily driven by higher income taxes paid in the current fiscal year, partially offset by higher earnings.
Investing Activities
Cash used in investing activities for the six months ended January 31, 2026 was $18.4 million, compared with $115.1 million for the six months ended January 31, 2025, a decrease of $96.7 million. The decrease in cash used in investing activities was primarily due to the $71.2 million equity method investment in Medica during the six months ended January 31, 2025, as well as $10.8 million received from the sale of property, plant and equipment in the first six months ended January 31, 2026.
Financing Activities
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 of borrowing activity and proceeds from the exercise of stock options. Cash used in financing activities for the six months ended January 31, 2026 was $131.5 million, compared with cash used in financing activities of $88.5 million for the six months ended January 31, 2025, an increase of $43.0 million. The increase in cash used in financing activities was primarily driven by a decrease in short-term borrowings of $41.8 million and an increase in the repurchases of the Company's common stock of $29.6 million, partially offset by an increase of $26.3 million in 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 six months ended January 31, 2026 and 2025 were $69.3 million and $64.6 million, respectively. Share repurchases for the six months ended January 31, 2026 and 2025 were $111.2 million and $81.6 million, respectively.
Capital Resources
Additional sources of liquidity are existing cash and available credit facilities. Cash and cash equivalents as of January 31, 2026 was $194.4 million, compared with $180.4 million as of July 31, 2025. The Company has capacity of $755.3 million available for further borrowing under existing credit facilities as of January 31, 2026.
The Company believes the liquidity available from the combination of expected cash generated by operating activities, existing cash and available credit under existing credit facilities will be sufficient to meet its cash requirements for the next 12 months and beyond, including working capital needs, debt service obligations, capital expenditures, payment of dividends, share repurchase activity and potential acquisitions, including the additional debt we expect to incur to fund the Facet acquisition.
Financial Condition
Short-Term Borrowings and Long-Term Debt
As of January 31, 2026, total debt, including short-term borrowings and long-term debt, represented 30.2% of total capitalization, defined as total debt plus total stockholders' equity, compared with 31.5% as of July 31, 2025. As of January 31, 2026, the Company was in compliance with its financial covenants.
Long-term debt outstanding was $680.8 million as of January 31, 2026, compared with $637.1 million as of July 31, 2025, an increase of $43.7 million, primarily due to share repurchases during the six months ended January 31, 2026. As of January 31, 2026, there was $491.6 million available and $100.0 million outstanding on the Company's $600.0 million unsecured revolving credit facility that expires on June 12, 2030. We expect to finance the Facet acquisition with a combination of cash on hand and proceeds from new debt.
Working Capital
In order to help measure and analyze the impact of working capital management, the Company calculates days sales outstanding as the average accounts receivable, net for the quarter, divided by net sales for the quarter multiplied by the number of days in the quarter. The Company calculates days inventory outstanding as the average inventories, net for the quarter, divided by cost of sales for the quarter multiplied by the number of days in the quarter. The Company calculates days payable outstanding as the average accounts payable for the quarter, divided by cost of sales for the quarter multiplied by the number of days in the quarter. The Company calculates net cash cycle as the sum of days sales outstanding and days inventory outstanding, less days payables outstanding.
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January 31, 2026 |
July 31, 2025 |
Change
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Accounts receivable, net
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$ | 647.9 | $ | 662.2 | $ | (14.3) | ||||||||||||||
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Days sales outstanding
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67 | 62 | 5 | |||||||||||||||||
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Inventories, net
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$ | 555.8 | $ | 513.6 | $ | 42.2 | ||||||||||||||
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Days inventory outstanding
|
84 | 75 | 9 | |||||||||||||||||
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Accounts payable
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$ | 348.8 | $ | 368.6 | $ | (19.8) | ||||||||||||||
|
Days payable outstanding
|
56 | 52 | 4 | |||||||||||||||||
|
Net cash cycle
|
95 | 85 | 10 | |||||||||||||||||
Off-Balance Sheet Arrangements
The Company guarantees 50% of certain debts of its joint venture, AFSI, as discussed in Note 16 in the Notes to Condensed Consolidated Financial Statements included in Item 1 of this report.
Critical Accounting Estimates
There have been no material changes to the Company's critical accounting estimates as disclosed in the Company's Annual Report on Form 10-K for the fiscal year ended July 31, 2025.
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.
Safe Harbor Statement Under the Private Securities Litigation 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, 2025, which could cause actual results to differ materially from historical results or those anticipated. The words or phrases such as "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 affect the Company's performance and could cause the Company's actual results for future periods to differ materially from any opinions or statements expressed. These factors include, but are not limited to, challenges in global operations; changes in international trade policy; impacts of global economic, industrial and political conditions on product demand, impacts from unexpected events, effects of unavailable raw materials, significant demand fluctuations or material cost changes; inability to attract and retain qualified personnel; inability to meet customer demand; inability to maintain competitive advantages; threats from disruptive technologies; effects of highly competitive markets with pricing pressure; exposure to customer concentration in certain cyclical industries; inability to manage productivity improvements; inability to achieve commitments related to sustainability; results of execution of any acquisition, divestiture and other strategic transactions; vulnerabilities associated with information technology systems and security; inability to protect and enforce intellectual property rights; costs associated with governmental laws and regulations; impacts of foreign currency fluctuations; and effects of changes in capital and credit markets. These and other factors are described in Part I, Item 1A, "Risk Factors" of the Company's Annual Report on Form 10-K for the fiscal year ended July 31, 2025. 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.
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