DONALDSON Co INCDCI
DONALDSON Co INC Stock Compensation Disclosure
Note 13. Stock-Based Compensation
The Company recognizes compensation expense for all stock-based awards based on the grant date fair value of the award. Stock-based awards consist primarily of non-qualified stock options, performance-based awards, restricted stock awards and restricted stock units. Grants related to restricted stock awards and restricted stock units are immaterial. The Company issues treasury shares for stock options and performance-based awards.
Stock Options
The exercise price of options granted is equal to the market price of the Company’s common stock at the date of the grant. Options are generally exercisable for up to ten years from the date of grant and vest in equal increments over three years.
Pretax stock-based compensation expense associated with options was $16.1 million, $14.2 million and $12.4 million for the years ended July 31, 2025, 2024 and 2023, respectively.
Fair value is calculated using the Black-Scholes option pricing model. The weighted average fair value for options granted during the years ended July 31, 2025, 2024 and 2023 was $21.67, $19.00 and $15.67 per share, respectively.
The fair value of these awards was determined using the following inputs:
| Year Ended July 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Risk-free interest rate | 3.6% - 4.5% | 3.8% - 4.6% | 3.8% - 4.2% | |||||||||||||||||
| Expected volatility | 26.1% - 27.0% | 26.8% - 27.2% | 26.8% - 27.5% | |||||||||||||||||
| Expected dividend yield | 1.6 | % | 1.6 | % | 1.6 | % | ||||||||||||||
| Expected life: | ||||||||||||||||||||
| Director grants | 8 years | 8 years | 8 years | |||||||||||||||||
| Officer grants | 7 years | 7 years | 7 years | |||||||||||||||||
| Non-officer grants | 7 years | 7 years | 7 years | |||||||||||||||||
Option activity was as follows:
| Options | Weighted Average Exercise Price | |||||||||||||
| Balance outstanding as of July 31, 2024 | 6,163,056 | $ | 50.57 | |||||||||||
| Granted | 800,025 | 72.87 | ||||||||||||
| Exercised | (692,308) | 42.46 | ||||||||||||
| Expired/forfeited | (47,693) | 63.45 | ||||||||||||
| Balance outstanding as of July 31, 2025 | 6,223,080 | $ | 54.24 | |||||||||||
The total intrinsic value of options exercised during the years ended July 31, 2025, 2024 and 2023 was $20.2 million, $35.9 million and $20.2 million, respectively.
The number of shares authorized as of July 31, 2025 for outstanding options and future grants was 11,144,365. Forfeited options are recorded as an offset to operating expenses in the Consolidated Statements of Earnings in the period in which they occur.
Outstanding and exercisable stock options as of July 31, 2025 were as follows:
| Range of Exercise Prices | Number Outstanding | Weighted Average Remaining Contractual Life (Years) | Weighted Average Exercise Price | Number Exercisable | Weighted Average Remaining Contractual Life (Years) | Weighted Average Exercise Price | ||||||||||||||||||||||||||||||||
$28.00 to $37.99 | 231,143 | 0.4 | $ | 28.17 | 231,143 | 0.4 | $ | 28.17 | ||||||||||||||||||||||||||||||
$38.00 to $47.99 | 1,625,429 | 3.2 | 44.85 | 1,625,429 | 3.2 | 44.85 | ||||||||||||||||||||||||||||||||
$48.00 to $57.99 | 1,519,987 | 5.6 | 51.44 | 1,251,934 | 5.3 | 51.56 | ||||||||||||||||||||||||||||||||
$58.00 to $67.99 | 2,096,337 | 6.2 | 59.66 | 1,537,904 | 5.4 | 59.40 | ||||||||||||||||||||||||||||||||
$68.00 and above | 750,184 | 9.2 | 73.13 | 1,629 | 8.7 | 72.68 | ||||||||||||||||||||||||||||||||
| 6,223,080 | 5.4 | $ | 54.24 | 4,648,039 | 4.4 | $ | 50.65 | |||||||||||||||||||||||||||||||
As of July 31, 2025, the aggregate intrinsic value of stock options outstanding and exercisable was $111.2 million and $99.1 million, respectively.
For the year ended July 31, 2025, activity for non-vested stock options that contain vesting provisions was as follows:
| Options | Weighted Average Grant Date Fair Value | |||||||||||||
| Balance outstanding as of beginning of year | 1,657,970 | $ | 17.02 | |||||||||||
| Granted | 800,025 | 21.67 | ||||||||||||
| Vested | (835,261) | 16.24 | ||||||||||||
| Forfeited | (47,693) | 19.29 | ||||||||||||
| Balance outstanding as of end of year | 1,575,041 | $ | 19.73 | |||||||||||
As of July 31, 2025, there was $8.9 million of total unrecognized compensation expense related to non-vested stock options, which is expected to be recognized over the remaining vesting period during fiscal 2026, 2027 and 2028.
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 after three years with payouts ranging from 0% to 200% of the target award depending on achievement. Pretax performance-based awards expense was $5.7 million, $5.8 million and $6.3 million for the years ended July 31, 2025, 2024 and 2023, respectively.
The weighted average grant date fair value related to the Company’s performance-based awards was as follows:
| Year Ended July 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Weighted average grant date fair value | $ | 73.18 | $ | 59.66 | $ | 50.89 | ||||||||||||||
Performance-based awards for non-vested activity were as follows:
| Performance Shares | Weighted Average Grant Date Fair Value | |||||||||||||
Balance outstanding as of July 31, 2024 | 227,900 | $ | 55.31 | |||||||||||
| Granted | 111,900 | 73.18 | ||||||||||||
| Vested | (106,723) | 50.89 | ||||||||||||
| Forfeited | (35,393) | 64.39 | ||||||||||||
Balance outstanding as of July 31, 2025 | 197,684 | $ | 66.19 | |||||||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Sep 26, 2025 | Showing above |
| 2024 | Sep 27, 2024 | |
| 2023 | Sep 22, 2023 | |
| 2022 | Sep 23, 2022 | |
| 2021 | Sep 24, 2021 | |
| 2020 | Sep 25, 2020 | |
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.