SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 11K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(D) OF THE SECURITIES EXCHANGE ACT
of 1934 (FEE REQUIRED) for the fiscal year ended July 31, 1996 or
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT of 1934 (NO FEE REQUIRED) for the transition period from
_______________ to _________________
COMMISSION FILE NUMBER 1-7891
A. Full title of the plan and the address of the plan, if different
from that of the issuer named below:
DONALDSON COMPANY, INC.
EMPLOYEES' RETIREMENT SAVINGS PLAN
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
DONALDSON COMPANY, INC.
1400 WEST 94TH STREET
MINNEAPOLIS, MINNESOTA 55431
Donaldson Company, Inc.
Employees' Retirement Savings Plan
Financial Statements
Years ended July 31, 1996 and 1995
CONTENTS
Report of Independent Auditors...............................................1
Audited Financial Statements
Statements of Net Assets Available for Benefits..............................2
Statements of Changes in Net Assets Available for Benefits...................3
Notes to Financial Statements................................................6
Item 27(a)--Assets Held for Investment Purposes.............................11
Item 27(d)--Schedule of Reportable Transactions.............................12
Report of Independent Auditors
Administrative Committee
Donaldson Company, Inc. Employees' Retirement
Savings Plan
We have audited the accompanying statements of net assets available for benefits
of Donaldson Company, Inc. Employees' Retirement Savings Plan as of July 31,
1996 and 1995, and the related statements of changes in net assets available for
benefits for the years then ended. These financial statements are the
responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan at July
31, 1996 and 1995, and the changes in its net assets available for benefits for
the years then ended, in conformity with generally accepted accounting
principles.
Our audits were made for the purpose of forming an opinion on the financial
statements taken as a whole. The accompanying supplemental schedule of assets
held for investment purposes as of July 31, 1996 and schedule of reportable
transactions for the year then ended are presented for purposes of complying
with the Department of Labor's Rules and Regulations for Reporting and
Disclosure under the Employee Retirement Income Security Act of 1974, and are
not a required part of the basic financial statements. The supplemental
schedules have been subjected to the auditing procedures applied in our audit of
the 1996 financial statements and, in our opinion, are fairly stated in all
material respects in relation to the 1996 financial statements taken as a whole.
/s/ Ernst & Young LLP
November 27, 1996
Donaldson Company, Inc.
Employees' Retirement Savings Plan
Statements of Net Assets Available for Benefits
JULY 31
1996 1995
---------------------------
Cash $ -- $ 1,504,057
Employee contribution receivable 155,980 --
Investments at fair value:
Mutual funds 47,138,916 37,672,952
Donaldson stock 12,447,111 12,859,929
----------- -----------
Total investments 59,742,007 52,036,938
Participant loans 2,034,683 1,635,557
Accrued interest -- 7,180
----------- -----------
Net assets available for benefits $61,776,690 $53,679,675
=========== ===========
SEE ACCOMPANYING NOTES.
Donaldson Company, Inc.
Employees' Retirement Savings Plan
Statements of Changes in Net Assets Available for Benefits
<TABLE>
<CAPTION>
------------------------------------------------------------
FIDELITY
--------------------------------------------
FIXED EQUITY
INCOME MAGELLAN CONTRA INCOME
FUND FUND FUND FUND
------------ ------------ ------------ ------------
Additions:
<S> <C> <C> <C> <C>
Contribution from employer $ -- $ 7,671 $ 1,249 $ 7,971
Contribution from employees -- 994,969 496,615 1,672,999
Investment income -- 908,412 286,793 1,224,828
Loan repayments -- 84,328 31,087 215,291
------------ ------------ ------------ ------------
-- 1,995,380 815,744 3,121,089
Deductions:
Payments to participants 664,093 89,894 74,287 302,619
Loan withdrawals 214,974 113,458 40,165 377,524
Miscellaneous -- -- -- --
Administration fees 1,523 851 81 586
------------ ------------ ------------ ------------
880,590 204,203 114,533 680,729
Interfund transfers (net) (4,554,873) 3,584,175 2,655,903 (906,126)
Realized/unrealized appreciation
(depreciation) of investments 1,023,306 (927,326) (141,559) 1,377,051
------------ ------------ ------------ ------------
Net increase (decrease) (4,412,157) 4,448,026 3,215,555 2,911,285
Net assets available for benefits:
Beginning of year 20,900,636 -- -- 16,771,885
------------ ------------ ------------ ------------
End of year $ 16,488,479 $ 4,448,026 $ 3,215,555 $ 19,683,170
============ ============ ============ ============
</TABLE>
[WIDE TABLE CONTINUED FROM ABOVE]
<TABLE>
<CAPTION>
YEAR ENDED JULY 31, 1996
-----------------------------------------------------------------------------------------------
-----------------------
MANAGED
INCOME DONALDSON
OVERSEAS PORTFOLIO STOCK CASH FLOW UNALLOCATED LOAN
FUND FUND FUND FUND FUND FUND TOTAL
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Additions:
Contribution from employer $ 607 $ 12,479 $ 19,708 $ -- $ -- $ -- $ 49,685
Contribution from employees 214,958 1,481,450 1,611,495 -- 155,980 -- 6,628,466
Investment income 16,568 116,063 35,820 -- -- -- 2,588,484
Loan repayments 18,645 218,778 202,213 -- -- (770,342) --
----------- ----------- ------------ ----------- ---------- ------------ ------------
250,778 1,828,770 1,869,236 -- 155,980 (770,342) 9,266,635
Deductions:
Payments to participants 9,007 52,131 296,204 65,837 -- 52,481 1,606,553
Loan withdrawals 17,376 90,752 342,208 -- -- (1,196,457) --
Miscellaneous -- -- -- -- -- 2,534 2,534
Administration fees -- 188 6,351 -- -- -- 9,580
----------- ----------- ------------ ----------- ---------- ------------ ------------
26,383 143,071 644,763 65,837 -- (1,141,442) 1,618,667
Interfund transfers (net) 734,461 614,733 (868,480) (2,923,376) -- 1,663,583 --
Realized/unrealized appreciation
(depreciation) of investments 44,397 -- (926,822) -- -- -- 449,047
----------- ----------- ------------ ----------- ---------- ------------ ------------
Net increase (decrease) 1,003,253 2,300,432 (570,829) (2,989,213) 155,980 2,034,683 8,097,015
Net assets available for benefits:
Beginning of year -- -- 13,017,941 2,989,213 -- -- 53,679,675
----------- ----------- ------------ ----------- ---------- ------------ ------------
End of year $ 1,003,253 $ 2,300,432 $ 12,447,112 $ -- $ 155,980 $ 2,034,683 $ 61,776,690
=========== =========== ============ =========== ========== ============ ============
</TABLE>
Donaldson Company, Inc.
Employees' Retirement Savings Plan
Statements of Changes in Net Assets Available for Benefits (continued)
<TABLE>
<CAPTION>
YEAR ENDED JULY 31, 1995
--------------------------------------------------------------------------
FIDELITY
FIXED EQUITY DONALDSON
INCOME CASH FLOW INCOME STOCK
FUND FUND FUND FUND TOTAL
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Additions:
Contribution from
employees $ -- $ 4,582,545 $ -- $ -- $ 4,582,545
Investment income 789,948 143,511 1,104,530 134,022 2,172,011
------------ ------------ ------------ ------------ ------------
789,948 4,726,056 1,104,530 134,022 6,754,556
Deductions:
Payments to participants 2,023,912 (480,836) 352,186 269,505 2,164,767
------------ ------------ ------------ ------------ ------------
2,023,912 (480,836) 352,186 269,505 2,164,767
Interfund transfers (net) 1,355,172 (4,702,786) 810,415 2,537,199 --
1,160,955 1,160,955
Realized/unrealized appre-
ciation (depreciation) of
investments 406,579 87,304 1,502,260 -- 1,996,143
------------ ------------ ------------ ------------ ------------
Net increase (decrease) 527,787 591,410 3,065,019 3,562,671 7,746,887
Net assets available for
benefits:
Beginning of year 20,372,849 2,397,803 13,706,866 9,455,270 45,932,788
------------ ------------ ------------ ------------ ------------
End of year $ 20,900,636 $ 2,989,213 $ 16,771,885 $ 13,017,941 $ 53,679,675
============ ============ ============ ============ ============
</TABLE>
SEE ACCOMPANYING NOTES.
Donaldson Company, Inc.
Employees' Retirement Savings Plan
Notes to Financial Statements
July 31, 1996
1. SIGNIFICANT ACCOUNTING POLICIES
ACCOUNTING METHOD
The accounting records of the Plan are maintained on the accrual basis.
INVESTMENTS
Investments are recorded at current value. Securities which are traded on a
national securities exchange are valued at the last reported sales price of the
year. The market value of the units of participation in collective investment
funds is based on the fair market value of the underlying investments.
The change in the difference between current value and the cost of investments
is reflected in the statement of changes in net assets available for benefits as
unrealized appreciation (depreciation) of investments.
The net gain (loss) on the sale of investments is the difference between the
proceeds received and the historical average cost of investments sold. For
purposes of complying with the Department of Labor's requirements for preparing
Form 5500, the Company determines net gain based on a revalued, rather than
historical, cost.
EXPENSES
Except for investment management fees, Donaldson Company, Inc. (the Plan's
sponsor) pays all Plan related expenses including legal, accounting and other
services.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
RECLASSIFICATIONS
Certain reclassifications have been made to the 1995 statements to conform with
the 1996 presentation.
2. DESCRIPTION OF THE PLAN
The following description of the Plan provides only general information.
Participants should refer to the Summary Plan Description for a more complete
description of the Plan's provisions.
The Plan is a defined contribution plan sponsored by Donaldson Company, Inc. The
Plan allows employee contributions to the Plan through payroll deductions of 1%
to 10% of their salary. Employees are 100% vested in their accounts at all
times.
The Plan sponsor can elect to make employer contributions. The employees of the
Rensselaer plan receive an employer contribution that is a percentage of the
ratio of the participant income. The percentage is tied to the performance of
the Rensselaer plant. Participants are 100% vested at the time of the
contribution.
Amounts contributed to the Plan are invested in one of seven investment options.
Participants may choose between the following investment alternatives:
* FIDELITY EQUITY INCOME FUND: Monies are invested in a mutual fund
managed by Fidelity Management & Research Company. The fund invests
in a diversified portfolio of common stocks which have above average
dividend yields and potential for capital appreciation.
* FIXED INCOME FUND: Monies are invested in common collective funds.
One of the funds is managed by IDS Trust Company and the other by US
Trust Company. The Fixed Income Fund is designed to be a secure
investment that will earn a relatively stable rate of interest.
Effective August 1, 1995, participants can no longer contribute to
this fund.
* DONALDSON COMMON STOCK FUND: Monies are invested in the common stock
of Donaldson Company, Inc. This investment option is presented to
provide participants with the opportunity to invest in the future
growth of the Company.
* FIDELITY MANAGED INCOME PORTFOLIO FUND: Monies are invested in a
portfolio of investments consisting primarily of investment
contracts issued by high quality financial institutions. The fund's
objective is to earn a competitive level of income with preservation
of capital. The portfolio carries a low-to-moderate level of
investment risk in return for low-to-moderate earnings potential.
* FIDELITY CONTRAFUND: Monies are invested in foreign and domestic
common stocks of companies that the fund's manager believes are
undervalued or show potential for growth. This investment option
carries a high level of investment risk in return for high earnings
potential.
* FIDELITY MAGELLAN FUND: Monies are invested in a wide variety of
common and preferred stock from domestic, foreign and multi-national
companies of all sizes that offer potential for growth. An
investment in this fund carries a high level of investment risk in
return for high earnings potential.
* FIDELITY OVERSEAS FUND: Monies are invested mostly in securities
such as stocks and bonds from at least three developed countries
outside North America. The value of this fund can be affected by the
performance of foreign markets, the changing value of the American
dollar and foreign political events. An investment in this fund
carries a high level of investment risk in return for high earnings
potential.
The changes in net assets of the Plan are allocated to the individual
participants' accounts quarterly as provided for in the Plan Agreement.
The Company has the right under the Plan agreement to terminate the Plan. In the
event of termination of the Plan, each participant is fully vested and the
assets of the Plan shall be distributed to the participants.
3. INVESTMENTS
The current value of individual investments that represent 5% or more of the
Plan's net assets is as follows:
<TABLE>
<CAPTION>
1996 1995
---------------------------- -----------------------
UNITS OR CURRENT UNITS OR CURRENT
SHARES VALUE SHARES VALUE
---------------------------- -----------------------
<S> <C> <C> <C> <C>
Common Stock of Donaldson Company,
Inc. (sponsor) 1,335,527 $12,447,111 480,745 $12,859,929
Fixed Income Fund 15,588,405 16,488,480 - -
Fidelity Magellan Fund 62,367 4,448,026 - -
Fidelity Contrafund 85,725 3,215,555 - -
Fidelity Equity Income Fund 505,994 19,683,170 467,112 16,778,665
IDS Trust Collective Income Fund - - 267,326 10,374,919
Capital Trust Company Guaranteed
Investment Contract Fund - - 414,034 10,519,378
</TABLE>
4. LOANS TO PARTICIPANTS
Under the Plan agreement, a salaried participant may borrow up to 50% of their
account balance or $50,000, whichever is less. At July 31, 1996 and 1995,
$2,034,683 and $1,635,557, respectively, of loans were outstanding at interest
rates varying from 7% to 11.5%.
5. INCOME TAX STATUS
The Internal Revenue Service issued a favorable determination letter dated
October 19, 1995 stating that the Plan, as amended, is qualified under Section
401(a) and is exempt from federal income taxes under Section 501(a) of the
Internal Revenue Code. Accordingly, no provision for income taxes has been
included in these financial statements. Once qualified, the Plan is required to
operate in conformity with the Code and ERISA to maintain its tax-exempt status.
The administrator is not aware of any course of action or series of events that
have occurred that might adversely affect the Plan's qualified status.
6. TRANSACTIONS WITH PARTIES-IN-INTEREST
During the year ended July 31, 1995, the Plan purchased 90,300 shares of
Donaldson Company, Inc. Common Stock on the open market for $2,314,939 and sold
70,300 shares for $1,777,468.
The Plan received $146,561 and $125,305 in Common Stock dividends from Donaldson
Company, Inc. for the years ended July 31, 1996 and 1995, respectively.
7. RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500
The following is a reconciliation of net assets available for benefits per the
financial statements to the Form 5500:
<TABLE>
<CAPTION>
JULY 31
1996 1995
----------- -----------
<S> <C> <C>
Net assets available for benefits per the financial
statements
$61,776,690 $53,679,675
Amounts allocated to withdrawing participants - (117,743)
----------- -----------
Net assets available for benefits per Form 5500 $61,776,690 $53,561,932
=========== ===========
</TABLE>
The following is a reconciliation of benefits paid to participants reported in
the financial statements versus the Form 5500:
<TABLE>
<CAPTION>
JULY 31, 1996
-------------
<S> <C>
Benefits paid to participants per the financial statements $1,540,716
Add amounts allocated to withdrawing participants at July 31, 1996 -
Less amounts allocated to withdrawing participants at July 31, 1995 117,743
----------
Benefits paid to participants per the Form 5500 $1,422,973
==========
</TABLE>
Donaldson Company, Inc.
Employees' Retirement Savings Plan
Item 27(a)--Assets Held for Investment Purposes
EIN: 41-0222640
Plan #: 007
July 31, 1996
<TABLE>
<CAPTION>
IDENTITY OF ISSUE, CURRENT
BORROWER OR SIMILAR PARTY DESCRIPTION OF INVESTMENT COST VALUE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
*Donaldson Company, Inc. 1,335,527 shares of Common Stock $ 7,967,404 $12,447,111
Fixed Income Fund 15,588,405 units of participation 15,592,873 16,488,480
*Fidelity Magellan Fund 62,367 units of participation 5,314,417 4,448,026
*Fidelity Contrafund 85,725 units of participation 3,353,262 3,215,555
*Fidelity Equity Income Fund 505,994 units of participation 15,627,246 19,683,170
*Fidelity Overseas Fund 33,100 units of participation 960,798 1,003,253
*Fidelity Managed Income Portfolio Fund 2,300,432 units of participation 2,300,432 2,300,432
Participant loans Interest rates vary - 2,034,683
===========================
TOTAL ASSETS HELD FOR INVESTMENT $51,116,432 $61,620,710
===========================
</TABLE>
* Indicates party-in-interest.
Donaldson Company, Inc.
Employees' Retirement Savings Plan
Item 27(d)--Schedule of Reportable Transactions
EIN: 41-0222640
Plan #: 007
Year ended July 31, 1996
<TABLE>
<CAPTION>
IDENTITY OF PARTY INVOLVED DESCRIPTION OF ASSET
- -------------------------------------------------------------------------------------------------
CATEGORY (III)--A SERIES OF TRANSACTIONS IN EXCESS OF 5% OF BEGINNING PLAN ASSETS
<S> <C>
*Donaldson Company, Inc. Common Stock Purchased 90,300 shares of common stock
in 35 transactions
Sold 70,300 shares of common stock in
21 transactions
Fixed Income Fund Purchased 462,403 participating units in
136 transactions
Sold 6,223,271 participating units in
137 transactions
*Fidelity Magellan Fund Purchased 70,998 participating units in
184 transactions
Sold 8,630 participating units in
111 transactions
*Fidelity Contrafund Purchased 92,724 participating units in
169 transactions
Sold 6,999 participating units in
74 transactions
*Fidelity Equity Income Fund Purchased 150,461 participating units in
198 transactions
Sold 123,479 participating units in
144 transactions
*Fidelity Managed Income Portfolio Fund Purchased 3,124,018 participating units in
170 transactions
Sold 823,586 participating units in
130 transactions
There were no category (i), (ii) or (iv) reportable transactions in fiscal 1996.
* Indicates party-in-interest.
</TABLE>
[WIDE TABLE CONTINUED FROM ABOVE]
<TABLE>
<CAPTION>
CURRENT VALUE
OF ASSET ON
PURCHASE SELLING COST OF TRANSACTION NET
PRICE PRICE ASSET DATE GAIN (LOSS)
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
*Donaldson Company, Inc. Common Stock $2,314,939 $2,314,939 $2,314,939
$1,777,468 1,064,751 1,777,468 $ 712,717
Fixed Income Fund 468,862 468,862 468,862
6,352,962 6,225,263 6,352,962 127,699
*Fidelity Magellan Fund 6,069,077 6,069,077 6,069,077
693,725 754,660 693,725 (60,935)
*Fidelity Contrafund 3,625,029 3,625,029 3,625,029
267,915 271,767 267,915 (3,852)
*Fidelity Equity Income Fund 5,726,081 5,726,081 5,726,081
4,626,067 3,603,986 4,626,067 1,022,081
*Fidelity Managed Income Portfolio Fund 3,124,678 3,124,678 3,124,678
824,246 824,246 824,246 -
</TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934,
the trustees (or other persons who administer the employee benefit plan) have
duly caused this annual report to be signed on its behalf by the undersigned
thereunto duly authorized.
DONALDSON COMPANY, INC. EMPLOYEES'
RETIREMENT SAVINGS PLAN
(Name of Plan)
Date: February 3, 1997 By: /s/ Norman C. Linnell
---------------------
Norman C. Linnell
Secretary
EXHIBIT INDEX
ANNUAL REPORT ON FORM 11-K
23 - Consent of Independent Auditors
EXHIBIT 23
We consent to the incorporation by reference in the Registration Statement (Form
S-8, No. 2-90488) pertaining to the Donaldson Company, Inc. Employees'
Retirement Savings Plan and in the related Prospectus of our report dated
November 27, 1996, with respect to the financial statements and schedules of the
Donaldson Company, Inc. Employees' Retirement Savings Plan included in this
Annual Report (Form 11-K) for the year ended July 31, 1996.
Minneapolis, Minnesota
January 30, 1997 Ernst & Young LLP
