Group 1: Stock Split Overview - A stock split is an action where a company splits its existing shares into multiple new shares, making the stock more accessible to investors [1] - A forward stock split lowers the price per share, with examples such as a 2-for-1 split or a 10-for-1 split, which do not alter the company's market capitalization or total value of holdings [1] - While a stock split may lead to short-term increases in trading volume and positive investor sentiment, it does not guarantee long-term performance improvements [1] Group 2: Market Insights from Bob Keiser - Bob Keiser, co-chief investment officer at Aspire Strategist Portfolios, has been bullish on large-cap core and growth stocks for two years, citing them as primary drivers of earnings growth [2] - Keiser believes that a predicted Fed interest rate cut will not significantly alter the macro trend of growth in these sectors, although it will be a positive factor [2] - The top 10 stocks in the index account for approximately 40% of its market capitalization, driven by the tech and growth sector expected to post four consecutive quarters of double-digit earnings growth [3] Group 3: Earnings Growth Projections - Consensus expectations forecast a third consecutive year of double-digit earnings growth in 2026, with S&P 500 earnings projected to reach $300 per share [3] - The anticipated broadening of earnings growth beyond the tech sector includes contributions from industrials, materials, and financials, which is necessary for achieving the $300 per share target [3] Group 4: Stock Recommendations - A list of stocks trading over $400 that could potentially split was compiled, focusing on those with significant price surges and a history of stock splits [6] - The methodology emphasizes stocks popular among elite hedge funds, with a strategy that has outperformed the market significantly since May 2014 [7] Group 5: Company-Specific Highlights - Parker-Hannifin Corporation (NYSE:PH) reported total revenue of $19.9 billion for FY2025, with a record adjusted segment operating margin of 26.1% and a backlog of $11 billion [10][11] - W.W. Grainger Inc. (NYSE:GWW) achieved total sales of approximately $4.6 billion in Q2 2025, marking a 5.6% year-over-year increase, despite a decline in operating margin to 14.9% [13][14]

Group 1 - The company is responsible for the development of all transcript-related projects [1] - The company publishes thousands of quarterly earnings calls per quarter and is expanding its coverage [1] - The purpose of the profile is to share new transcript-related developments with readers [1]

Core Insights - The company has achieved significant margin expansion and effective M&A integration over the past five years, which is linked to its Win Strategy [1] - The Win Strategy serves as the company's operational excellence guide and is considered a proven approach to achieving business goals [1] - The decentralized operating structure empowers 85 general managers with full P&L accountability, focusing on customer engagement and business growth [2] Win Strategy Overview - The first pillar of the Win Strategy emphasizes the importance of engaged people, with safety and engagement being the two key metrics tracked at all levels [2] - The Win Strategy aims to enhance customer experience while ensuring profitable growth [3]

Parker-Hannifin FY Conference Summary Company Overview - **Company**: Parker-Hannifin (NYSE: PH) - **Date of Conference**: September 10, 2025 Key Industry Insights - **Industry**: Motion and Control Technologies - **Market Dynamics**: The company has experienced significant margin expansion and successful M&A integration over the past five years, attributed to its "Win Strategy" which focuses on operational excellence and decentralized management [3][5][4]. Core Points and Arguments 1. **Win Strategy**: - The Win Strategy is a business system aimed at operational excellence, emphasizing engaged employees, customer experience, profitable growth, and financial performance [3][4]. - The first pillar, "engaged people," is crucial for sustainable performance across the company [4]. 2. **Distributor Network**: - Parker-Hannifin has a 70-year-old global independent distributor network that enhances customer value through application expertise [6]. - The distribution business yields 10% to 15% higher margins than the OEM business, with 50% of industrial sales going through distribution [6]. 3. **M&A Strategy**: - The company is pursuing a robust M&A pipeline, focusing on technologies that complement existing interconnected technologies [9][10]. - Successful integration of past acquisitions, such as Meggitt, has enhanced market credibility and growth potential [9]. 4. **North American Industrial Outlook**: - Positive order trends have been observed, with expectations of low single-digit growth in the industrial sector [15][16]. - Specific sectors like transportation are forecasted to improve in the second half of the year, while agriculture remains weak [15][16]. 5. **International Market Performance**: - EMEA has faced challenges with six quarters of negative organic growth, but there are signs of potential recovery due to stimulus and defense spending [23][25]. - The company anticipates modest growth in international markets, particularly in aerospace and defense [30][38]. 6. **Margin Expansion**: - Margins have expanded significantly, currently at 27%, with expectations for further growth through continuous improvement initiatives [40][41]. - The Win Strategy plays a critical role in managing price-cost dynamics and mitigating tariff impacts [46][47]. 7. **Pricing Power and Tariffs**: - The company has successfully managed pricing in response to inflation and tariffs, maintaining strong relationships with customers [49][50]. - There is a cautious outlook on potential pricing fatigue in the market, but the company remains confident in its pricing strategies [48][49]. 8. **Aerospace Growth**: - Aerospace has shown strong growth, with a backlog of $7.4 billion, and is expected to continue high single-digit growth [54]. - The relationship between OEM production rates and aftermarket growth remains positive, with expectations for both segments to grow [35][36]. Additional Important Insights - **Employee Engagement**: The company has revamped its compensation plan to align employee performance with sales, earnings, and cash flow metrics [14]. - **Market Uncertainty**: Factors such as tariffs and interest rate fluctuations are contributing to cautious capital investment decisions among customers [20][21]. - **Long-term Outlook**: The company is optimistic about growth opportunities across various sectors, leveraging its global footprint and technological capabilities [30][38]. This summary encapsulates the key insights and strategic directions discussed during the Parker-Hannifin FY Conference, highlighting the company's operational strategies, market outlook, and growth potential across its business segments.

Company Overview - Parker Hannifin Corporation is a Fortune 250 global leader in motion and control technologies, with over 100 years of experience in enabling engineering breakthroughs for a better future [2] - The company has a strong track record of increasing its annual dividend per share for 69 consecutive fiscal years, ranking among the top five longest-running dividend-increase records in the S&P 500 index [2] Upcoming Events - Parker Hannifin is scheduled to present at the Morgan Stanley Annual Laguna Conference on September 10, 2025, at 10:00 a.m. Pacific time (1:00 p.m. Eastern time) [1] - A live webcast of the presentation will be available on Parker's investor information website and will be archived for future access [1]

Group 1 - Parker Hannifin Corporation is scheduled to present at the Morgan Stanley Annual Laguna Conference on September 10, 2025, at 10:00 a.m. Pacific time [1] - A live webcast of the presentation will be available on Parker's investor information website and will be archived [1] Group 2 - Parker Hannifin is a Fortune 250 global leader in motion and control technologies with over 100 years of experience [2] - The company has increased its annual dividend per share for 69 consecutive fiscal years, ranking among the top five longest-running dividend-increase records in the S&P 500 index [2]

Group 1 - The recent underperformance of momentum factors due to market breadth expansion is viewed as a "bullish top-down signal" [1] - Tactical pullbacks are seen as opportunities to buy high-momentum stocks, reaffirming their attractiveness as late-cycle factors [1] - The analysis indicates that the industrial, financial, and technology sectors have the highest momentum scores, while healthcare, real estate investment trusts, and energy rank the lowest [1] Group 2 - Low market-weighted sectors suggest that momentum factors are expected to perform well in the coming months [1] - Capital goods, aerospace and defense, construction, and electrical equipment have reestablished their positions in momentum scores at the expense of commercial services [1] - Top-rated capital goods stocks include General Dynamics (GD.US), Parker-Hannifin (PH.US), United Rentals (URI.US), and Xylem (XYL.US) [1] Group 3 - Within the banking sector, large banks and brokers maintain a preferred position over deteriorating insurance companies, with regional banks also seeing a rise due to small-cap recovery [1] - Top-rated bank stocks include Bank of America (BAC.US), Citigroup (C.US), JPMorgan Chase (JPM.US), and Morgan Stanley (MS.US) [2] Group 4 - In the semiconductor and technology sectors, the semiconductor segment has expanded beyond selected large-cap stocks, indicating meaningful strength [2] - Top-rated semiconductor stocks include KLA Corporation (KLAC.US), Lam Research Corporation (LRCX.US), Monolithic Power Systems (MPWR.US), and NXP Semiconductors (NXPI.US) [2]

Core Viewpoint - Parker Hannifin Corporation has elected Beth A. Wozniak to its Board of Directors, effective September 1, 2025, bringing extensive experience in engineering and operational excellence to the company [1][3]. Group 1: Appointment Details - Beth A. Wozniak is currently the Chair and CEO of nVent Electric plc, with over 35 years of experience in aerospace, automation, and industrial manufacturing sectors [2]. - Wozniak's leadership roles include serving as President of the Flow & Filtration Solutions segment and the Electrical segment at Pentair plc before leading nVent's spin-off [3]. Group 2: Executive Impact - Wozniak is recognized for her ability to drive strategic growth and operational excellence, which is expected to add significant value to Parker Hannifin's Board [3]. - Her expertise encompasses engineering, operational excellence, strategy development, mergers and acquisitions, and sales and marketing [3]. Group 3: Company Background - Parker Hannifin is a Fortune 250 global leader in motion and control technologies, with a history of enabling engineering breakthroughs for over a century [4].

Group 1: Aerospace Systems Performance - Parker-Hannifin Corporation (PH) is experiencing strong momentum in the Aerospace Systems segment, with revenues increasing approximately 13% year over year in fiscal 2025 [1][7] - The segment benefits from robust demand in both commercial and military end markets, particularly in OEM and aftermarket channels [1] - Growth in air transport activities and stable U.S. and international defense spending are expected to further enhance demand for products and aftermarket support services [1] Group 2: Strategic Acquisitions - In June 2025, Parker-Hannifin announced the acquisition of Curtis Instruments, Inc., aimed at enhancing its electrification portfolio and capabilities in electric vehicle motors and hydraulics [2] - The acquisition is anticipated to close by the end of 2025, subject to customary conditions [2] - The previous acquisition of Meggitt plc in September 2022 expanded Parker-Hannifin's presence in the UK and its offerings for aircraft and aero-engine components [2] Group 3: Shareholder Returns - In fiscal 2025, Parker-Hannifin returned $1.7 billion to shareholders through dividends and share buybacks, with dividends amounting to $861 million, a 10.1% increase from the previous year [3][7] - The company repurchased shares worth $851 million during the same period [3] Group 4: Diversified Industrial Segment Challenges - The Diversified Industrial segment faced challenges, with sales decreasing 5.5% year over year in fiscal 2025 due to weakness in the off-highway and transportation end markets [5] - The agricultural sector's softness and lower demand for automotive cars have negatively impacted both North American and international businesses [5] - Additionally, lower oil and gas prices have affected performance in the energy end market [5][8] Group 5: Currency Translation Risks - Parker-Hannifin is exposed to currency translation risks, which may impact performance, particularly with a stronger U.S. dollar potentially depressing overseas business results [8] - In fiscal 2025, foreign currency translation reduced the Diversified Industrial segment's sales by 0.5% [8]

PART I [Business](index=4&type=section&id=Item%201.%20Business) Parker-Hannifin is a global leader in motion and control technologies, operating two segments: Diversified Industrial and Aerospace Systems - Parker is a global leader in motion and control technologies, providing highly engineered solutions primarily in aerospace & defense, in-plant & industrial equipment, transportation, off-highway, energy, and HVAC & refrigeration markets[15](index=15&type=chunk) - The company operates with a decentralized structure and deploys 'The Win Strategy' business system, focusing on engaged people, customer experience, profitable growth, and financial performance[16](index=16&type=chunk) [Markets and Segments](index=4&type=section&id=1.1%20Markets%20and%20Segments) Parker serves diverse markets through two segments: Diversified Industrial (69% of FY2025 net sales) and Aerospace Systems (31%) - Parker's interconnected technologies serve market verticals including aerospace & defense, in-plant & industrial equipment, transportation, off-highway, energy, and HVAC & refrigeration[18](index=18&type=chunk) FY2025 Net Sales by Reportable Segment | Segment | % of Net Sales (FY2025) | | :-------------------- | :---------------------- | | Diversified Industrial | 69% | | Aerospace Systems | 31% | [Principal Products and Methods of Distribution](index=5&type=section&id=1.2%20Principal%20Products%20and%20Methods%20of%20Distribution) No single product exceeds 1% of total net sales; Diversified Industrial uses distributors, Aerospace Systems sells directly - No single product contributed more than **one percent** to total net sales for the year ended June 30, 2025[21](index=21&type=chunk) - Diversified Industrial Segment products are marketed primarily through field sales employees and independent distributors globally[22](index=22&type=chunk) - Aerospace Systems Segment products are marketed through regional sales organizations, selling directly to OEMs and end users worldwide[25](index=25&type=chunk) [Competition](index=7&type=section&id=1.3%20Competition) Parker competes in highly competitive global markets based on quality, innovation, and price, leveraging its broad technology portfolio - Parker competes in highly competitive global markets based on product quality and innovation, customer experience, manufacturing and distribution capability, aftermarket support, and price competitiveness[29](index=29&type=chunk) - The company's broad-based portfolio of core technologies (hydraulics, pneumatics, electromechanical, filtration, fluid & gas handling, process control, engineered materials, and climate control) is a key competitive factor[31](index=31&type=chunk) [Patents, Trademarks, Trade Names, Copyrights, Trade Secrets, Licenses](index=7&type=section&id=1.4%20Patents,%20Trademarks,%20Trade%20Names,%20Copyrights,%20Trade%20Secrets,%20Licenses) Parker owns various intellectual properties, but no single one is materially essential to its operations - Parker owns a number of patents, trademarks, trade names, copyrights, trade secrets, and licenses, and does not depend on any single one to a material extent[31](index=31&type=chunk) [Backlog and Seasonal Nature of Business](index=7&type=section&id=1.5%20Backlog%20and%20Seasonal%20Nature%20of%20Business) Parker's backlog was **$11.0 billion** at June 30, 2025, with **71%** for delivery in 12 months; operations are not seasonal Backlog (in billions) | Date | Backlog | | :----------- | :------ | | June 30, 2025 | $11.0 | | June 30, 2024 | $10.9 | - Approximately **71%** of the backlog at June 30, 2025, is scheduled for delivery in the succeeding twelve months[32](index=32&type=chunk) [Environmental Regulation](index=7&type=section&id=1.6%20Environmental%20Regulation) Parker is subject to environmental regulations due to hazardous materials, with compliance not materially affecting its financial position - Parker is subject to U.S. federal, state, local, and non-U.S. environmental laws and regulations, including the 'Superfund' law, due to the use and handling of hazardous materials[34](index=34&type=chunk) - The company believes its environmental compliance efforts have not had, and will not have, a material adverse effect on capital expenditures, earnings, or competitive position[36](index=36&type=chunk) [Government Regulation](index=8&type=section&id=1.7%20Government%20Regulation) Parker is subject to various government regulations across its global operations, covering product development, manufacturing, and sales - The company is subject to various federal, state, local, and foreign government regulations relating to the development, manufacture, marketing, sale, and distribution of its products and services[38](index=38&type=chunk) [Energy Matters and Sources and Availability of Raw Materials](index=8&type=section&id=1.8%20Energy%20Matters%20and%20Sources%20and%20Availability%20of%20Raw%20Materials) Electric power is the primary energy source; key raw materials like steel and copper are expected to be available from diverse sources - Electric power is the primary energy source, with costs managed through aggregation in deregulated markets and established pricing contracts[39](index=39&type=chunk) - Principal raw materials include steel, brass, copper, aluminum, nickel, rubber, and thermoplastic materials, expected to be available from numerous sources[40](index=40&type=chunk) [Acquisitions](index=8&type=section&id=1.9%20Acquisitions) Parker acquired Meggitt plc in 2022 and agreed to acquire Curtis Instruments, Inc. in June 2025 - Completed the acquisition of Meggitt plc on September 12, 2022[41](index=41&type=chunk) - Agreed to acquire Curtis Instruments, Inc. from Rehlko on June 30, 2025[41](index=41&type=chunk) [Human Capital Management](index=8&type=section&id=1.10%20Human%20Capital%20Management) Parker employed **57,950** globally, prioritizing safety and engagement, with a **0.27** recordable incident rate in FY2025 - As of June 30, 2025, Parker employed approximately **57,950** persons, with about **29,520** employed by foreign subsidiaries[42](index=42&type=chunk) - The Win Strategy 3.0 defines goals for Engaged People, Customer Experience, Profitable Growth, and Financial Performance, supported by a culture of safety, collaboration, and continuous improvement[45](index=45&type=chunk) Recordable Incident Rate per 100 Team Members | Fiscal Year | Rate | | :---------- | :--- | | 2025 | 0.27 | | 2024 | 0.31 | - The company achieved a **92%** response rate and **75%** overall engagement score in its FY2025 Global Engagement Survey[50](index=50&type=chunk) [Information about our Executive Officers](index=10&type=section&id=1.11%20Information%20about%20our%20Executive%20Officers) This section lists Parker-Hannifin's executive officers as of August 15, 2025, with their positions, ages, and career histories Key Executive Officers (as of August 15, 2025) | Name | Position | Officer Since | Age | | :------------------ | :------------------------------------------- | :------------ | :-- | | Jennifer A. Parmentier | Chairman of the Board and Chief Executive Officer | 2015 | 58 | | Todd M. Leombruno | Executive Vice President and Chief Financial Officer | 2017 | 55 | | Andrew D. Ross | President and Chief Operating Officer | 2012 | 58 | | Mark J. Hart | Executive Vice President – Human Resources and External Affairs | 2016 | 60 | [Risk Factors](index=11&type=section&id=Item%201A.%20Risk%20Factors) Parker faces risks from global economics, international operations, cybersecurity, raw material volatility, and strategic transactions - The company's business is sensitive to global macroeconomic conditions, including manufacturing activity, currency exchange rates, tariffs, and inflation, which can negatively impact revenues and profits[75](index=75&type=chunk) - As a global business, Parker is exposed to economic, political, and other risks in different countries, including fluctuations in currency exchange rates, trade restrictions, and political instability[77](index=77&type=chunk)[78](index=78&type=chunk)[80](index=80&type=chunk) - Increased cybersecurity threats and sophisticated computer crime pose a risk to information technology systems, potentially leading to business disruptions, data breaches, and adverse financial effects[81](index=81&type=chunk) [Business and Operational Risks](index=12&type=section&id=1A.1%20Business%20and%20Operational%20Risks) Operational risks include global downturns, foreign instability (**36%** of sales), cybersecurity, raw material volatility, and environmental compliance costs - Net sales from non-U.S. selling locations were approximately **36%** in 2025 and 2024, exposing the company to international economic and political risks[77](index=77&type=chunk) - Price and supply fluctuations of raw materials (steel, brass, copper, aluminum, nickel, rubber, thermoplastics) could negatively impact financial results if cost increases cannot be passed to customers[82](index=82&type=chunk)[83](index=83&type=chunk) - The company must make substantial investments in new product development and technology to remain competitive, with a risk that these investments may not lead to significant revenue[86](index=86&type=chunk) - Compliance with environmental laws and climate-related goals may require material expenditures, potentially increasing operational costs and affecting reputation if goals are not met[88](index=88&type=chunk)[91](index=91&type=chunk) [Strategic Transactions Risks](index=15&type=section&id=1A.2%20Strategic%20Transactions%20Risks) Acquisition risks include finding targets, consummating deals (e.g., Curtis Instruments), integration difficulties, and profitability challenges - The company's strategy of acquisitions and joint ventures carries risks, including the inability to find suitable businesses, consummate pending transactions (e.g., Curtis Instruments, Inc.), or successfully integrate acquired entities[93](index=93&type=chunk)[94](index=94&type=chunk) - Integration difficulties may include delays in integrating management, differing corporate cultures, retaining key employees, and challenges in unifying systems and policies[95](index=95&type=chunk) [Organizational Changes Risks](index=16&type=section&id=1A.3%20Organizational%20Changes%20Risks) Organizational changes like divestitures and realignments risk not achieving anticipated benefits, synergies, or cost savings - Risks related to organizational changes (divestitures, realignments) include the inability to successfully manage these activities and realize anticipated synergies or cost savings[97](index=97&type=chunk) [Financial Risks](index=16&type=section&id=1A.4%20Financial%20Risks) Financial risks include rising benefit costs, tax liabilities, debt limitations, and potential goodwill impairment charges - Increasing costs of defined benefit pension plans and healthcare benefits could adversely affect liabilities and results of operations[98](index=98&type=chunk)[99](index=99&type=chunk) - Changes in tax laws or judicial interpretations, and ongoing tax audits, could lead to additional income tax liabilities[100](index=100&type=chunk) - Significant indebtedness and restrictive covenants under credit facilities could limit operational and financial flexibility, potentially increasing financing costs and limiting acquisition opportunities[101](index=101&type=chunk) - Goodwill on the balance sheet is subject to annual impairment testing, and future declines in stock price or operating results could lead to significant non-cash charges[102](index=102&type=chunk)[103](index=103&type=chunk) [Legal and Regulatory Risks](index=17&type=section&id=1A.5%20Legal%20and%20Regulatory%20Risks) Legal risks include government contract dependence, litigation, anti-corruption/antitrust exposure, product liability, and IP protection challenges - As a U.S. government product provider, the company is subject to risks related to government spending levels, acquisition regulations, and potential investigations for wrongdoing[104](index=104&type=chunk) - Litigation and legal/regulatory proceedings, including those related to anti-corruption laws (FCPA, U.K. Bribery Act) and antitrust, could decrease liquidity, impair financial condition, and harm reputation[105](index=105&type=chunk)[106](index=106&type=chunk)[107](index=107&type=chunk) - The company is exposed to product liability risks inherent in its products, and failure to protect intellectual property could reduce competitive advantage and profitability[108](index=108&type=chunk)[109](index=109&type=chunk)[110](index=110&type=chunk) [Unresolved Staff Comments](index=18&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) There are no unresolved staff comments from the SEC regarding the company's filings - No unresolved staff comments[111](index=111&type=chunk) [Cybersecurity](index=18&type=section&id=Item%201C.%20Cybersecurity) Parker's cybersecurity program, integrated into ERM and using NIST framework, is overseen by the Board and led by CDIO/CISO - Parker's cybersecurity program is integrated into its Enterprise Risk Management and utilizes the National Institute of Standards and Technology (NIST) Cyber Security Framework[112](index=112&type=chunk)[113](index=113&type=chunk) - The program includes centrally managed, layered technical security, third-party security monitoring, a third-party risk management program, and ongoing mandatory cybersecurity awareness training for all team members[113](index=113&type=chunk)[115](index=115&type=chunk)[116](index=116&type=chunk) [Cybersecurity Risk Management and Strategy](index=18&type=section&id=1C.1%20Cybersecurity%20Risk%20Management%20and%20Strategy) Parker manages cybersecurity risk via a layered technical security approach, third-party monitoring, and continuous improvement, with immaterial past breaches - The Digital & IT Risk Management Program focuses on identifying, assessing, responding to, monitoring, and remediating cybersecurity-related risks[113](index=113&type=chunk) - Technical security configuration includes hardened PCs, endpoint security, email security, firewall appliances, network security protections, and enhanced measures for operational technologies[113](index=113&type=chunk) - Within the last three years, Parker has experienced only immaterial information security breaches, with no material impact on business strategy, results of operations, or financial condition expected[117](index=117&type=chunk) [Cybersecurity Governance](index=19&type=section&id=1C.2%20Cybersecurity%20Governance) Cybersecurity governance is overseen by Parker's Board, with annual reports from the CDIO (20 years experience) and CISO (25 years experience) - Parker's full Board of Directors maintains oversight of cybersecurity, receiving at least annual in-depth reports from the CDIO[120](index=120&type=chunk) - The cybersecurity program is led by the CDIO (**20 years experience**) and CISO (**25 years experience**), who report to the CEO and CDIO, respectively[118](index=118&type=chunk)[119](index=119&type=chunk) [Properties](index=19&type=section&id=Item%202.%20Properties) Parker has **322** manufacturing plants globally (35 US states, 42 countries), mostly owned, adequately maintained, and suitable for operations - As of June 30, 2025, Parker maintained approximately **322** manufacturing plants, sales and administrative offices, and distribution centers globally[121](index=121&type=chunk) - Facilities are located in **35 states** within the United States and in **42 other countries**, with the majority of manufacturing plants being owned by the company[121](index=121&type=chunk) - Properties are adequately maintained, in good condition, and suitable for current business operations, with most manufacturing facilities capable of handling volume increases[122](index=122&type=chunk) [Legal Proceedings](index=19&type=section&id=Item%203.%20Legal%20Proceedings) Parker is not involved in individually material legal proceedings, reporting matters exceeding **$1.0 million** in monetary sanctions - No material legal proceedings to report[123](index=123&type=chunk) - The company reports matters involving governmental authorities that exceed, or are reasonably believed to exceed, **$1.0 million** or more in monetary sanctions[123](index=123&type=chunk) [Mine Safety Disclosures](index=19&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to Parker-Hannifin Corporation - Not applicable[124](index=124&type=chunk) PART II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=20&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity,%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Parker's common stock (PH on NYSE) had **2,898** shareholders; **1.3 million** shares repurchased for **$817.8 million** in Q4 FY2025 - The Company's common stock is listed for trading on the New York Stock Exchange ('NYSE') under the symbol 'PH'[129](index=129&type=chunk) - As of July 31, 2025, the number of shareholders of record was **2,898**[129](index=129&type=chunk) Issuer Purchases of Equity Securities (Q4 FY2025) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs | | :----------------------------------- | :------------------------------- | :--------------------------- | :------------------------------------------------------------------------------- | :------------------------------------------------------------------------------------------------------- | | April 1, 2025 through April 30, 2025 | 30,600 | $569.23 | 30,600 | 6,074,002 | | May 1, 2025 through May 31, 2025 | 761,760 | $656.32 | 761,760 | 5,312,242 | | June 1, 2025 through June 30, 2025 | 502,719 | $663.31 | 502,719 | 4,809,523 | | Total | 1,295,079 | | 1,295,079 | | - On August 21, 2025, the Board of Directors approved an update to the share repurchase authorization, making **20.0 million** shares available for repurchase[127](index=127&type=chunk) [Reserved](index=20&type=section&id=Item%206.%20%5BReserved%5D) This item is reserved and contains no information - This item is reserved[128](index=128&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) FY2025 saw slight net sales decrease, but net income rose due to improved margins and lower interest, with strong liquidity and strategic capital deployment - Net sales in 2025 decreased from 2024 due to lower sales in the Diversified Industrial Segment, partially offset by higher sales in the Aerospace Systems Segment[141](index=141&type=chunk) - Gross profit margin increased in 2025 primarily due to higher margins in both segments resulting from price increases, favorable product mix, cost containment, and continued execution of the Win Strategy[142](index=142&type=chunk) - Cash flows from operating activities increased by **$392 million** in 2025, primarily related to an increase in earnings combined with strong management of working capital items[171](index=171&type=chunk) [Forward-Looking Statements](index=21&type=section&id=7.1%20Forward-Looking%20Statements) Forward-looking statements are subject to uncertainties and risks from economic conditions, acquisitions, raw material costs, and regulations - Forward-looking statements are subject to unforeseen uncertainties and risks, including changes in economic conditions, business relationships, acquisition integration, raw material costs, and regulatory developments[130](index=130&type=chunk)[131](index=131&type=chunk) [Overview](index=22&type=section&id=7.2%20Overview) Parker, a global motion and control leader, drives sustainable growth via 'The Win Strategy 3.0' focusing on people, customers, and efficiency - Parker's purpose is 'Enabling Engineering Breakthroughs that Lead to a Better Tomorrow', guiding its strategic objectives[134](index=134&type=chunk) - The Win Strategy 3.0 defines goals for Engaged People, Customer Experience, Profitable Growth, and Financial Performance to achieve long-term success[135](index=135&type=chunk) - The company manages its supply chain through a 'local for local' manufacturing strategy, ongoing supplier management, and a broadened supply base, while mitigating global trade policies and inflation through cost and pricing measures[136](index=136&type=chunk) [Consolidated Statement of Income Analysis](index=23&type=section&id=7.3%20Consolidated%20Statement%20of%20Income%20Analysis) FY2025 net sales decreased to **$19,850 million**, but net income rose to **$3,531 million** due to improved **36.9%** gross margin and lower taxes Consolidated Statement of Income Highlights (in millions, except percentages) | Metric | 2025 | 2024 | Change (2025 vs 2024) | | :-------------------------------------- | :-------- | :-------- | :-------------------- | | Net sales | $19,850 | $19,930 | $(80) | | Gross profit margin | 36.9 % | 35.8 % | +1.1 pp | | Selling, general and administrative expenses | $3,255 | $3,315 | $(60) | | Interest expense | $409 | $506 | $(97) | | Other (income) expense, net | $(183) | $(276) | $(93) | | Gain on sale of businesses and assets, net | $(273) | $(12) | $(261) | | Effective tax rate | 14.0 % | 20.9 % | -6.9 pp | | Net income attributable to common shareholders | $3,531 | $2,844 | $687 | - Net sales decreased by approximately **$41 million** in 2025 due to currency exchange rates, primarily attributable to the Diversified Industrial Segment[141](index=141&type=chunk) - The effective tax rate in 2025 was lower than the U.S. Federal statutory rate of **21%** due to tax benefits from the release of a foreign valuation allowance, share-based compensation, foreign-derived intangible income, and a lower taxable gain on divestitures[146](index=146&type=chunk) [Business Segment Information](index=24&type=section&id=7.4%20Business%20Segment%20Information) Diversified Industrial sales decreased in 2025, but operating margin improved; Aerospace Systems saw increased sales and margin from higher volume - Diversified Industrial Segment sales decreased by **$793 million** in 2025, with a **3.0%** decrease excluding divestitures and currency effects[151](index=151&type=chunk)[150](index=150&type=chunk) - Aerospace Systems Segment sales increased compared to the prior year due to higher volume across all market segments, especially commercial and defense aftermarkets[162](index=162&type=chunk) [Diversified Industrial Segment](index=24&type=section&id=7.4.1%20Diversified%20Industrial%20Segment) Diversified Industrial net sales decreased **5.5%** in 2025 due to lower demand, but operating margin improved to **22.8%**; backlog was **$3.66 billion** Diversified Industrial Segment Performance (in millions, except percentages) | Metric | 2025 | 2024 | Change (2025 vs 2024) | | :----------------------------------- | :-------- | :-------- | :-------------------- | | Net sales | $13,665 | $14,458 | $(793) (-5.5%) | | Operating income | $3,120 | $3,176 | $(56) | | Operating income as a percent of sales | 22.8 % | 22.0 % | +0.8 pp | | Backlog | $3,655 | $4,182 | $(527) | - North America businesses sales decreased by **$667 million**, reflecting lower demand in off-highway, transportation, in-plant & industrial equipment, and energy markets, partially offset by HVAC & refrigeration and aerospace & defense[152](index=152&type=chunk) - International businesses sales decreased by **$126 million**, primarily due to lower sales in Europe, partially offset by increases in Asia Pacific and Latin America[153](index=153&type=chunk) - Workforce reduction measures taken during 2025 are anticipated to increase operating income in 2026 by approximately **two percent** for both International and North America businesses[158](index=158&type=chunk) [Aerospace Systems Segment](index=26&type=section&id=7.4.2%20Aerospace%20Systems%20Segment) Aerospace Systems net sales increased to **$6,185 million** in 2025, with operating margin rising to **23.3%** and backlog reaching **$7.39 billion** Aerospace Systems Segment Performance (in millions, except percentages) | Metric | 2025 | 2024 | Change (2025 vs 2024) | | :----------------------------------- | :-------- | :-------- | :-------------------- | | Net sales | $6,185 | $5,472 | $713 | | Operating income | $1,441 | $1,111 | $330 | | Operating income as a percent of sales | 23.3 % | 20.3 % | +3.0 pp | | Backlog | $7,389 | $6,680 | $709 | - Operating margin increased primarily due to higher sales volume and favorable aftermarket mix, as well as benefits from cost containment initiatives and prior-year acquisition integration activities[163](index=163&type=chunk) [Corporate general and administrative expenses](index=27&type=section&id=7.5%20Corporate%20general%20and%20administrative%20expenses) Corporate G&A expenses decreased to **$214 million** in 2025, driven by lower incentive compensation and discretionary spending Corporate General and Administrative Expenses (in millions) | Metric | 2025 | 2024 | | :-------------------------------------- | :--- | :--- | | Corporate general and administrative expense | $214 | $218 | - The decrease was primarily due to lower expenses related to incentive compensation programs, deferred compensation plan, information technology expenses, and discretionary spending[167](index=167&type=chunk) [Other (income) expense, net](index=27&type=section&id=7.6%20Other%20(income)%20expense,%20net) Other (income) expense, net, was **$(169) million** in 2025, influenced by foreign currency loss and the **$8 million** Saegertown incident expense Other (Income) Expense, Net (in millions) | Component | 2025 | 2024 | | :-------------------------------------- | :----- | :----- | | Foreign currency transaction loss (gain) | $46 | $(38) | | Stock-based compensation | $97 | $95 | | Non-service components of retirement benefit cost | $(51) | $(73) | | Gain on sale of businesses and assets, net | $(273) | $(12) | | Interest income | $(11) | $(15) | | Saegertown incident | $8 | $0 | | Other items, net | $15 | $11 | | Total other (income) expense, net | $(169) | $(32) | - The Saegertown incident represents an **$8 million** deductible and retained liability expense associated with a fire at the Pennsylvania plant in February 2025[168](index=168&type=chunk) [Liquidity and Capital Resources](index=27&type=section&id=7.7%20Liquidity%20and%20Capital%20Resources) Parker generates strong cash, deploying it for dividends, growth, acquisitions, and share repurchases, maintaining robust liquidity and managing debt effectively - Strategic capital deployment objectives include continuing annual dividend increases, investing in organic growth and productivity, strategic acquisitions, and share repurchases[170](index=170&type=chunk) - The company targets **2.5%** of sales for capital expenditures in 2026, with a long-term target of **2%**[172](index=172&type=chunk) [Cash Flows](index=27&type=section&id=7.7.1%20Cash%20Flows) Operating cash flow increased by **$392 million** in 2025; investing activities generated **$224 million**; financing activities had a **$3,977 million** outflow Summary of Cash Flows (in millions) | Cash Flow Activity | 2025 | 2024 | Change (2025 vs 2024) | | :---------------------------------- | :-------- | :-------- | :-------------------- | | Operating activities | $3,776 | $3,384 | $392 | | Investing activities | $224 | $(298) | $522 | | Financing activities | $(3,977) | $(3,115) | $(862) | | Effect of exchange rates | $22 | $(24) | $46 | | Net increase (decrease) in cash and cash equivalents | $45 | $(53) | $98 | - Net proceeds from the sale of the CFC and non-core filtration businesses totaled **$621 million** in fiscal 2025[172](index=172&type=chunk) - Repurchases under the share repurchase program amounted to **2.5 million** common shares for **$1.6 billion** during 2025, a significant increase from **$200 million** in 2024[172](index=172&type=chunk) [Dividends and Share Repurchases](index=28&type=section&id=7.7.2%20Dividends%20and%20Share%20Repurchases) Parker has paid cash dividends for **300** consecutive quarters, with **69** years of annual increases, and repurchased **2.5 million** shares for **$1.6 billion** in 2025 - Cash dividends have been paid for **300** consecutive quarters, including a yearly increase in dividends for the last **69 years**[174](index=174&type=chunk) - The current annual dividend rate is **$7.20** per common share[174](index=174&type=chunk) - In 2025, **2.5 million** common shares were repurchased for **$1.6 billion**[175](index=175&type=chunk) - The Board of Directors approved an update to the share repurchase authorization on August 21, 2025, making **20.0 million** shares available for repurchase[175](index=175&type=chunk) [Liquidity and Debt Management](index=28&type=section&id=7.7.3%20Liquidity%20and%20Debt%20Management) Parker had **$467 million** cash, increased credit to **$3.75 billion**, and maintained investment-grade credit with a **0.41 to 1.0** debt ratio Key Liquidity and Debt Metrics (in millions, except ratio) | Metric | June 30, 2025 | June 30, 2024 | | :-------------------------------------- | :------------ | :------------ | | Cash and cash equivalents | $467 | $422 | | Revolving credit agreement (post-period) | $3,750 | $3,000 | | Commercial paper authorization (post-period) | $3,750 | $3,000 | | Debt to debt-shareholders' equity ratio | 0.41 to 1.0 | | - The company repaid the remaining **$490 million** principal balance of the Term Loan Facility and **$500 million** aggregate principal amount of fixed rate medium-term notes in 2025[180](index=180&type=chunk) - Parker aims to maintain an investment-grade credit profile, with current long-term credit ratings of A (Fitch), A3 (Moody's), and BBB+ (Standard & Poor's)[182](index=182&type=chunk) [Supply Chain Financing](index=29&type=section&id=7.7.4%20Supply%20Chain%20Financing) Parker uses supply chain financing to extend supplier payment terms, with no significant impact on liquidity expected from changes - The company uses supply chain financing (SCF) programs with financial intermediaries to extend payment terms with suppliers[183](index=183&type=chunk) - Changes in the availability of supply chain financing are not expected to have a significant impact on liquidity[183](index=183&type=chunk) [Strategic Acquisitions and Divestitures](index=29&type=section&id=7.7.5%20Strategic%20Acquisitions%20and%20Divestitures) Parker pursues strategic acquisitions like Curtis Instruments, Inc. for **$1.0 billion**, while divesting non-core businesses - The company has agreed to acquire Curtis Instruments, Inc. for approximately **$1.0 billion** in cash, expected to close by the end of calendar year 2025[184](index=184&type=chunk) - Parker divested two businesses in 2025 and two in 2024, as part of its strategy to divest businesses not considered a good long-term strategic fit[184](index=184&type=chunk) [Critical Accounting Policies & Estimates](index=30&type=section&id=7.8%20Critical%20Accounting%20Policies%20%26%20Estimates) Parker's critical accounting policies cover revenue recognition, goodwill impairment, pension assumptions, business combinations, income taxes, and loss contingencies - Revenue recognition involves judgment in estimating costs and efforts for contracts recognized over time, and allocating transaction prices for multiple performance obligations[187](index=187&type=chunk)[188](index=188&type=chunk) - Goodwill impairment testing requires valuation of reporting units using income-based (discounted cash flow) and market-based methods, with assumptions on future sales growth, operating margins, and discount rates[190](index=190&type=chunk) - Pension expense and benefit obligations rely on critical actuarial assumptions for discount rates, asset returns, and compensation increases, with changes potentially causing material impacts[193](index=193&type=chunk)[194](index=194&type=chunk) - Business combinations involve significant estimates in fair valuing acquired tangible and intangible assets and assumed liabilities, with adjustments possible during the measurement period[197](index=197&type=chunk) - Income tax expense and deferred tax assets/liabilities require judgment in evaluating tax positions and the probability of realizing deferred tax assets[198](index=198&type=chunk) [Recently Issued Accounting Pronouncements](index=31&type=section&id=7.9%20Recently%20Issued%20Accounting%20Pronouncements) Parker evaluates new FASB ASUs (expense disaggregation, income tax disclosures) and adopted segment reporting and supplier finance ASUs in Q4 FY2025 - ASU 2024-03 (Expense Disaggregation) requires expanded interim and annual disclosures of expense information, effective for annual periods beginning after December 15, 2026[252](index=252&type=chunk) - ASU 2023-09 (Income Tax Disclosures) enhances disclosure requirements for income taxes, effective for fiscal years beginning after December 15, 2024[253](index=253&type=chunk) - ASU 2023-07 (Segment Reporting) was adopted in the fourth quarter of fiscal 2025, updating reportable segment disclosure requirements[254](index=254&type=chunk) - ASU 2022-04 (Supplier Finance Programs) was adopted on July 1, 2023, with the rollforward requirement adopted in Q4 FY2025, having no material impact on consolidated financial statements[255](index=255&type=chunk)[256](index=256&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=32&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Parker manages foreign currency and interest rate risks; a **10%** exchange rate change affects earnings by **$80 million**, and a **100** bps rate increase raises interest expense by **$18 million** - Parker manages foreign currency transaction and translation risk using derivative and non-derivative financial instruments, including forward exchange contracts and cross-currency swap contracts[202](index=202&type=chunk) - A **10%** change in foreign exchange rates related to forward exchange contracts as of June 30, 2025, would affect earnings by approximately **$80 million**, mostly offset by changes in the value of hedged items[203](index=203&type=chunk) - The company's debt portfolio includes variable rate debt (commercial paper), exposing it to interest rate risk. The objective is to maintain a **60/40** mix between fixed rate and variable rate debt[204](index=204&type=chunk) - A **100 basis point** increase in near-term interest rates would increase annual interest expense on variable rate debt by approximately **$18 million**[204](index=204&type=chunk) [Financial Statements and Supplementary Data](index=33&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) Parker's audited financial statements (Income, Comprehensive Income, Balance Sheet, Cash Flows, Equity, Notes) received unqualified opinions, with revenue recognition as a critical audit matter - Deloitte & Touche LLP issued unqualified opinions on Parker-Hannifin's consolidated financial statements and internal control over financial reporting as of June 30, 2025[208](index=208&type=chunk) - Revenue from product shipments was identified as a critical audit matter due to the geographic dispersion of operations and the volume of underlying transactions[217](index=217&type=chunk) [Report of Independent Registered Public Accounting Firm](index=34&type=section&id=8.1%20Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) Deloitte & Touche LLP issued an unqualified opinion on Parker's FY2025 financial statements and internal controls, with revenue as a critical audit matter - The independent auditor issued an unqualified opinion on the financial statements and the effectiveness of internal control over financial reporting as of June 30, 2025[208](index=208&type=chunk) - Revenue from product shipments was identified as a critical audit matter due to the geographic dispersion of operations and the volume of underlying transactions, requiring extensive audit effort and judgment[216](index=216&type=chunk)[217](index=217&type=chunk) [Consolidated Statement of Income](index=36&type=section&id=8.2%20Consolidated%20Statement%20of%20Income) Parker's 2025 net sales were **$19,850 million**, with net income of **$3,531 million** and diluted EPS of **$27.12** Consolidated Statement of Income (in millions, except per share data) | Metric | 2025 | 2024 | 2023 | | :-------------------------------------- | :-------- | :-------- | :-------- | | Net Sales | $19,850 | $19,930 | $19,065 | | Cost of sales | $12,535 | $12,802 | $12,636 | | Selling, general and administrative expenses | $3,255 | $3,315 | $3,354 | | Interest expense | $409 | $506 | $574 | | Other (income) expense, net | $(183) | $(276) | $184 | | Gain on sale of businesses and assets, net | $(273) | $(12) | $(363) | | Income before income taxes | $4,107 | $3,595 | $2,680 | | Income taxes | $575 | $750 | $596 | | Net Income | $3,532 | $2,845 | $2,084 | | Net Income Attributable to Common Shareholders | $3,531 | $2,844 | $2,083 | | Basic Earnings per Share | $27.52 | $22.13 | $16.23 | | Diluted Earnings per Share | $27.12 | $21.84 | $16.04 | [Consolidated Statement of Comprehensive Income](index=37&type=section&id=8.3%20Consolidated%20Statement%20of%20Comprehensive%20Income) Total comprehensive income attributable to common shareholders was **$4,086 million** in 2025, including foreign currency and retirement benefits Consolidated Statement of Comprehensive Income (in millions) | Metric | 2025 | 2024 | 2023 | | :-------------------------------------- | :-------- | :-------- | :-------- | | Net Income | $3,532 | $2,845 | $2,084 | | Net income attributable to common shareholders | $3,531 | $2,844 | $2,083 | | Foreign currency translation adjustment and other | $413 | $(168) | $187 | | Retirement benefits plan activity | $142 | $23 | $63 | | Other comprehensive income (loss) attributable to common shareholders | $555 | $(145) | $250 | | Total Comprehensive Income Attributable to Common Shareholders | $4,086 | $2,699 | $2,333 | [Consolidated Balance Sheet](index=38&type=section&id=8.4%20Consolidated%20Balance%20Sheet) Parker's total assets rose to **$29,494 million** in 2025, liabilities decreased to **$15,803 million**, and total equity increased to **$13,691 million** Consolidated Balance Sheet Highlights (in millions) | Metric | June 30, 2025 | June 30, 2024 | | :-------------------------------------- | :------------ | :------------ | | Cash and cash equivalents | $467 | $422 | | Total Current Assets | $6,950 | $6,799 | | Property, plant and equipment, net | $2,937 | $2,876 | | Intangible assets, net | $7,374 | $7,816 | | Goodwill | $10,694 | $10,507 | | Total Assets | $29,494 | $29,298 | | Total Current Liabilities | $5,819 | $7,313 | | Long-term debt | $7,494 | $7,157 | | Total Liabilities | $15,803 | $17,217 | | Total Shareholders' Equity | $13,682 | $12,072 | | Total Equity | $13,691 | $12,081 | [Consolidated Statement of Cash Flows](index=39&type=section&id=8.5%20Consolidated%20Statement%20of%20Cash%20Flows) In 2025, operating cash flow rose to **$3,776 million**, investing activities generated **$224 million**, and financing had a **$3,977 million** outflow Consolidated Statement of Cash Flows (in millions) | Cash Flow Activity | 2025 | 2024 | 2023 | | :---------------------------------- | :-------- | :-------- | :-------- | | Net cash provided by operating activities | $3,776 | $3,384 | $2,980 | | Net cash provided by (used in) investing activities | $224 | $(298) | $(8,177) | | Net cash used in financing activities | $(3,977) | $(3,115) | $(971) | | Effect of exchange rate changes on cash | $22 | $(24) | $(5) | | Net increase (decrease) in cash and cash equivalents | $45 | $(53) | $(6,173) | | Cash, cash equivalents and restricted cash at end of year | $467 | $422 | $475 | Supplemental Cash Flow Data (in millions) | Cash Paid During the Year For: | 2025 | 2024 | 2023 | | :---------------------------------- | :--- | :--- | :--- | | Interest | $384 | $491 | $465 | | Income taxes and related interest, penalties and purchased credits, net of refunds | $927 | $852 | $411 | [Consolidated Statement of Equity](index=40&type=section&id=8.6%20Consolidated%20Statement%20of%20Equity) Total equity increased to **$13,691 million** in 2025, driven by net income and other comprehensive income, offset by dividends and share repurchases Consolidated Statement of Equity (in millions, except per share data) | Component | June 30, 2025 | June 30, 2024 | June 30, 2023 | | :------------------------------ | :------------ | :------------ | :------------ | | Common Stock | $91 | $91 | $91 | | Additional Paid-in Capital | $194 | $264 | $305 | | Retained Earnings | $21,775 | $19,105 | $17,042 | | Accumulated Other Comprehensive Loss | $(883) | $(1,438) | $(1,293) | | Treasury Shares | $(7,495) | $(5,950) | $(5,818) | | Noncontrolling Interests | $9 | $9 | $11 | | Total Equity | $13,691 | $12,081 | $10,338 | | Net Income | $3,532 | $2,845 | $2,084 | | Other Comprehensive Income (Loss) | $555 | $(145) | $250 | | Dividends Paid | $(861) | $(782) | $(704) | | Shares Purchased at Cost | $(1,613) | $(200) | $(200) | [Notes to Consolidated Financial Statements](index=41&type=section&id=8.7%20Notes%20to%20Consolidated%20Financial%20Statements) The Notes detail Parker's accounting policies, financial components, and other information, covering revenue, acquisitions, taxes, debt, and segment data - The notes provide a comprehensive summary of significant accounting policies, including revenue recognition, use of estimates, basis of consolidation, and fair value measurements[228](index=228&type=chunk)[231](index=231&type=chunk)[232](index=232&type=chunk)[234](index=234&type=chunk)[248](index=248&type=chunk) - Detailed information is provided on recent accounting pronouncements, acquisitions (Meggitt, Curtis Instruments), divestitures (CFC, Filter Resources), and business realignment and acquisition integration charges[252](index=252&type=chunk)[265](index=265&type=chunk)[277](index=277&type=chunk)[284](index=284&type=chunk) - Extensive disclosures cover income taxes, earnings per share, inventories, supply chain financing, goodwill and intangible assets, debt, leases, retirement benefits, equity, stock incentive plans, research and development, financial instruments, contingencies, and detailed business segment financial data[287](index=287&type=chunk)[296](index=296&type=chunk)[297](index=297&type=chunk)[298](index=298&type=chunk)[301](index=301&type=chunk)[305](index=305&type=chunk)[309](index=309&type=chunk)[312](index=312&type=chunk)[316](index=316&type=chunk)[338](index=338&type=chunk)[339](index=339&type=chunk)[350](index=350&type=chunk)[351](index=351&type=chunk)[363](index=363&type=chunk)[367](index=367&type=chunk) [Significant Accounting Policies](index=41&type=section&id=8.7.1%20Significant%20Accounting%20Policies) Parker's fundamental accounting policies cover operations, estimates, consolidation, revenue recognition, assets, goodwill, income taxes, and business combinations - Revenue is recognized when control of performance obligations is transferred to the customer, either at a point in time (generally shipment) or over time for specific contract types[234](index=234&type=chunk) - Goodwill is tested for impairment annually at the reporting unit level, and long-lived assets are evaluated for impairment when circumstances indicate carrying value may not be recoverable[246](index=246&type=chunk)[245](index=245&type=chunk) - Business acquisitions are accounted for using the acquisition method, allocating fair value of purchase consideration to assets and liabilities, with any excess recorded as goodwill[250](index=250&type=chunk) [Recent Accounting Pronouncements](index=43&type=section&id=8.7.2%20Recent%20Accounting%20Pronouncements) Parker evaluates new FASB ASUs (expense disaggregation, income tax disclosures) and adopted segment reporting and supplier finance ASUs in Q4 FY2025 - ASU 2024-03 (Expense Disaggregation) requires expanded disclosures of expense information, effective for annual periods beginning after December 15, 2026[252](index=252&type=chunk) - ASU 2023-09 (Income Tax Disclosures) enhances disclosure requirements for income taxes, effective for fiscal years beginning after December 15, 2024[253](index=253&type=chunk) - ASU 2023-07 (Segment Reporting) was adopted in Q4 FY2025, and ASU 2022-04 (Supplier Finance Programs) rollforward requirement was adopted in Q4 FY2025, with no material impact[254](index=254&type=chunk)[255](index=255&type=chunk)[256](index=256&type=chunk) [Revenue recognition](index=44&type=section&id=8.7.3%20Revenue%20recognition) Parker recognizes revenue primarily at shipment, with a **$11.0 billion** backlog at June 30, 2025 (**71%** within 12 months), disaggregated by technology, market, and geography - A majority of the company's revenues are recognized at a point in time, typically at product shipment, while a portion is recognized over time for specific contract types[257](index=257&type=chunk)[259](index=259&type=chunk)[260](index=260&type=chunk) Diversified Industrial Segment Revenues by Technology Platform (in millions) | Technology Platform | 2025 | 2024 | 2023 | | :------------------------------ | :------ | :------ | :------ | | Motion Systems | $3,341 | $3,706 | $3,830 | | Flow and Process Control | $4,518 | $4,673 | $4,939 | | Filtration and Engineered Materials | $5,806 | $6,079 | $5,936 | | Total | $13,665 | $14,458 | $14,705 | Aerospace Systems Segment Revenues by Market Segment (in millions) | Market Segment | 2025 | 2024 | 2023 | | :-------------------- | :------ | :------ | :------ | | Commercial OEM | $1,915 | $1,779 | $1,462 | | Commercial aftermarket | $2,214 | $1,814 | $1,364 | | Defense OEM | $1,138 | $1,125 | $905 | | Defense aftermarket | $918 | $754 | $629 | | Total | $6,185 | $5,472 | $4,360 | Total Revenues by Geographic Region (in millions) | Geographic Region | 2025 | 2024 | 2023 | | :---------------- | :------ | :------ | :------ | | North America | $13,406 | $13,512 | $12,690 | | Europe | $3,862 | $3,916 | $3,778 | | Asia Pacific | $2,364 | $2,278 | $2,380 | | Latin America | $218 | $224 | $217 | | Total | $19,850 | $19,930 | $19,065 | - Backlog at June 30, 2025, was **$11.0 billion**, with approximately **71%** expected to be recognized as revenue within the next **12 months**[264](index=264&type=chunk) [Acquisitions and Divestitures](index=45&type=section&id=8.7.4%20Acquisitions%20and%20Divestitures) Parker announced the **$1.0 billion** Curtis Instruments acquisition, finalized **$7.2 billion** Meggitt, and divested CFC for **$555 million** and a filtration business for **$66 million** - On June 30, 2025, Parker agreed to acquire Curtis Instruments, Inc. for approximately **$1.0 billion** in cash, expected to close by the end of calendar year 2025[265](index=265&type=chunk)[266](index=266&type=chunk) - The acquisition of Meggitt plc (September 12, 2022) had an aggregate cash purchase price of **$7.2 billion**. Final estimated fair values were **$10,681 million** for assets acquired and **$3,445 million** for liabilities assumed, resulting in **$2,800 million** in goodwill[267](index=267&type=chunk)[270](index=270&type=chunk) - In November 2024, Parker divested its CFC business for net proceeds of **$555 million**, resulting in a pre-tax gain of **$241 million**[278](index=278&type=chunk) - Also in November 2024, a non-core filtration business was divested for **$66 million**, yielding a pre-tax gain of **$11 million**[279](index=279&type=chunk) [Business Realignment and Acquisition Integration Charges](index=48&type=section&id=8.7.5%20Business%20Realignment%20and%20Acquisition%20Integration%20Charges) Parker incurred **$56 million** in realignment charges (1,166 workforce reductions) and **$22 million** in integration charges in 2025, expecting **2%** operating income increase in 2026 Business Realignment Charges by Segment (in millions) | Segment | 2025 | 2024 | 2023 | | :---------------------- | :--- | :--- | :--- | | Diversified Industrial | $53 | $51 | $24 | | Aerospace Systems | $0 | $0 | $3 | | Corporate G&A Expenses | $1 | $0 | $0 | | Other (income) expense, net | $2 | $2 | $0 | | Total | $56 | $55 | $27 | Workforce Reductions by Segment (headcount) | Segment | 2025 | 2024 | 2023 | | :---------------------- | :---- | :---- | :--- | | Diversified Industrial | 1,092 | 1,064 | 728 | | Aerospace Systems | 61 | 1 | 30 | | Corporate G&A Expenses | 13 | 0 | 0 | | Total | 1,166 | 1,065 | 758 | Acquisition Integration Charges by Segment (in millions) | Segment | 2025 | 2024 | 2023 | | :---------------------- | :--- | :--- | :--- | | Diversified Industrial | $3 | $4 | $9 | | Aerospace Systems | $19 | $34 | $86 | | Total | $22 | $38 | $95 | - Cost savings from workforce reduction measures taken during 2025 are expected to increase operating income in 2026 by approximately **two percent** for both International and North America businesses[158](index=158&type=chunk) [Income Taxes](index=49&type=section&id=8.7.6%20Income%20Taxes) Parker's 2025 income before taxes was **$4,107 million**, with a **14.0%** effective tax rate due to foreign valuation allowance release; unrecognized tax benefits totaled **$104 million** Income Before Income Taxes by Source (in millions) | Source | 2025 | 2024 | 2023 | | :------------ | :------ | :------ | :------ | | United States | $2,514 | $2,120 | $1,408 | | Foreign | $1,593 | $1,475 | $1,272 | | Total | $4,107 | $3,595 | $2,680 | Effective Income Tax Rate Reconciliation | Component | 2025 | 2024 | 2023 | | :-------------------------------- | :----- | :----- | :----- | | Statutory federal income tax rate | 21.0 % | 21.0 % | 21.0 % | | State and local income taxes | 0.6 | 0.9 | 2.1 | | Tax related to international activities | (2.8) | 2.3 | 1.2 | | Foreign derived intangible income deduction | (1.3) | (1.5) | (1.1) | | Share-based compensation | (1.2) | (1.2) | (1.0) | | Other | (1.8) | 0.1 | 0.8 | | Effective income tax rate | 14.0 % | 20.9 % | 22.2 % | - A foreign legal entity structure simplification in 2025 led to a **$180 million** discrete tax benefit from a valuation allowance release[289](index=289&type=chunk) - The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was **$104 million** as of June 30, 2025[293](index=293&type=chunk) [Earnings Per Share](index=51&type=section&id=8.7.7%20Earnings%20Per%20Share) Parker's basic EPS rose to **$27.52** in 2025 (**$22.13** in 2024), and diluted EPS to **$27.12** (**$21.84** in 2024) Earnings Per Share Attributable to Common Shareholders | Metric | 2025 | 2024 | 2023 | | :-------------------------------------- | :------ | :------ | :------ | | Basic - weighted-average common shares (millions) | 128.3 | 128.5 | 128.4 | | Dilutive effect of equity-based awards (millions) | 1.9 | 1.7 | 1.5 | | Diluted - weighted-average common shares (millions) | 130.2 | 130.2 | 129.9 | | Basic earnings per share | $27.52 | $22.13 | $16.23 | | Diluted earnings per share | $27.12 | $21.84 | $16.04 | - For 2025, **0.3 million** common shares subject to equity-based awards were excluded from diluted EPS computation due to their anti-dilutive effect[296](index=296&type=chunk) [Inventories](index=52&type=section&id=8.7.8%20Inventories) Parker's inventories, valued at FIFO, increased slightly to **$2,839 million** at June 30, 2025, with work in process as the largest component - Inventories are stated at the lower of cost or net realizable value using the first-in, first-out ('FIFO') method, including raw materials, purchased components, labor, and overhead[297](index=297&type=chunk) Inventories (in millions) | Component | June 30, 2025 | June 30, 2024 | | :-------------- | :------------ | :------------ | | Finished products | $778 | $778 | | Work in process | $1,485 | $1,421 | | Raw materials | $576 | $588 | | Total | $2,839 | $2,787 | [Supply Chain Financing](index=52&type=section&id=8.7.9%20Supply%20Chain%20Financing) Parker uses SCF programs for early supplier payments; amounts due to participating suppliers increased to **$175 million** in 2025 - Parker has SCF programs with financial intermediaries, providing suppliers the option for early payment, with no reimbursement for supplier participation costs[298](index=298&type=chunk) Changes in Amounts Due to Participating Suppliers in SCF Programs (in millions) | Metric | 2025 | 2024 | | :------------------------ | :--- | :--- | | Beginning balance | $116 | $85 | | Invoices confirmed during the year | $500 | $363 | | Invoices settled during the year | $(446) | $(331) | | Foreign currency translation adjustments | $5 | $(1) | | Ending balance | $175 | $116 | [Goodwill and Intangible Assets](index=52&type=section&id=8.7.10%20Goodwill%20and%20Intangible%20Assets) Parker's goodwill rose to **$10,694 million** at June 30, 2025, with no impairment; amortization was **$553 million** in 2025, estimated **$550 million** for 2026 Goodwill by Segment (in millions) | Segment | June 30, 2025 | June 30, 2024 | June 30, 2023 | | :---------------------- | :------------ | :------------ | :------------ | | Diversified Industrial | $7,728 | $7,607 | $7,683 | | Aerospace Systems | $2,966 | $2,900 | $2,946 | | Total | $10,694 | $10,507 | $10,629 | - No goodwill impairment loss was recognized in 2025, 2024, or 2023[302](index=302&type=chunk) Total Intangible Asset Amortization Expense (in millions) | Year | Amortization Expense | | :--- | :------------------- | | 2025 | $553 | | 2024 | $578 | | 2023 | $501 | - Estimated intangible asset amortization expense for the five years ending June 30, 2026 through 2030, is **$550 million**, **$547 million**, **$539 million**, **$518 million**, and **$489 million**, respectively[303](index=303&type=chunk) [Financing Arrangements](index=53&type=section&id=8.7.11%20Financing%20Arrangements) Parker had **$3.0 billion** revolving credit (now **$3.75 billion**) and **$3.0 billion** commercial paper (now **$3.75 billion**), maintaining **0.41 to 1.0** debt ratio - As of June 30, 2025, the company had a **$3.0 billion** multi-currency revolving credit agreement, with **$1.2 billion** available. This was amended to **$3.75 billion** on August 21, 2025[305](index=305&type=chunk) - Authorization for short-term commercial paper notes was **$3.0 billion** as of June 30, 2025, with **$1.8 billion** outstanding, and increased to **$3.75 billion** on August 21, 2025[306](index=306&type=chunk) - The debt to debt-shareholders' equity ratio was **0.41 to 1.0** at June 30, 2025, well within the most restrictive financial covenant of **0.65 to 1.0**[308](index=308&type=chunk) [Debt](index=54&type=section&id=8.7.12%20Debt) Parker's long-term debt was **$7,494 million** at June 30, 2025, after issuing **€700 million** notes and repaying **$490 million** Term Loan and **$500 million** notes Long-Term Debt (in millions) | Metric | June 30, 2025 | June 30, 2024 | | :-------------------------------------- | :------------ | :------------ | | Total | $7,501 | $8,412 | | Less: Long-term debt payable within one year | $7 | $1,255 | | Long-term debt | $7,494 | $7,157 | - In 2025, the company issued **€700 million** of **2.90%** Senior Notes due 2030 to repay **€700 million** of **1.125%** Senior Notes due 2025[309](index=309&type=chunk) - The remaining **$490 million** principal balance of the Term Loan Facility and **$500 million** fixed rate medium-term notes were repaid in 2025[310](index=310&type=chunk) Principal Amounts of Long-Term Debt Payable (in millions) | Year | Amount | | :---------- | :----- | | 2026 | $7 | | 2027 | $706 | | 2028 | $1,200 | | 2029 | $1,000 | | 2030 | $1,800 | [Leases](index=54&type=section&id=8.7.13%20Leases) Parker's total lease cost was **$96 million** in 2025; operating lease ROU assets were **$192 million**, and finance lease PPE was **$102 million** Components of Lease Expense (in millions) | Component | 2025 | 2024 | 2023 | | :-------------------- | :--- | :--- | :--- | | Operating lease expense | $64 | $68 | $60 | | Finance lease cost | $13 | $12 | $10 | | Short-term lease cost | $13 | $9 | $8 | | Variable lease cost | $6 | $6 | $6 | | Total lease cost | $96 | $95 | $84 | Supplemental Balance Sheet Information Related to Leases (in millions) | Metric | June 30, 2025 | June 30, 2024 | | :-------------------------------------- | :------------ | :------------ | | Operating lease right-of-use assets | $192 | $226 | | Total operating lease liabilities | $201 | $234 | | Finance lease property, plant and equipment, net | $102 | $101 | | Total finance lease liabilities | $108 | $103 | Weighted-Average Lease Terms and Discount Rates (2025) | Lease Type | Remaining Lease Term | Discount Rate | | :-------------- | :------------------- | :------------ | | Operating leases | 6.3 years | 4.3 % | | Finance leases | 18.8 years | 5.2 % | [Retirement Benefits](index=56&type=section&id=8.7.14%20Retirement%20Benefits) Parker's U.S. pension plans had **$(20) million** credit and **$(152) million** funded status; non-U.S. plans had **$18 million** cost and **$298 million** funded status; **$58 million** expected contributions in 2026 Net Periodic Benefit Cost (Credit) (in millions) | Plan Type | 2025 | 2024 | 2023 | | :------------------------ | :------ | :------ | :------ | | U.S. Pension Benefits | $(20) | $(36) | $(29) | | Non-U.S. Pension Benefits | $18 | $13 | $16 | | Other Postretirement Benefits | $2 | $2 | $2 | Funded Status (in millions) | Plan Type | June 30, 2025 | June 30, 2024 | | :------------------------ | :------------ | :------------ | | U.S. Pension Benefits | $(152) | $(360) | | Non-U.S. Pension Benefits | $298 | $186 | | Other Postretirement Benefits | $(63) | $(71) | - The company expects to make cash contributions of approximately **$58 million** to its defined benefit pension plans in 2026 (**$11 million** for U.S. plans, **$47 million** for non-U.S. plans)[321](index=321&type=chunk) Defined Contribution Plan Expense (in millions) | Plan Type | 2025 | 2024 | 2023 | | :---------------- | :--- | :--- | :--- | | U.S. plans | $187 | $194 | $167 | | International plans | $33 | $31 | $30 | [Equity](index=61&type=section&id=8.7.15%20Equity) Parker's accumulated other comprehensive loss decreased to **$(883) million** at June 30, 2025; **2.5 million** shares repurchased for **$1.6 billion** in 2025 Changes in Accumulated Other Comprehensive Loss (in millions) | Component | 2025 | 2024 | 2023 | | :-------------------------------------- | :------ | :-------- | :-------- | | Foreign Currency Translation Adjustment and Other (Ending Balance) | $(717) | $(1,130) | $(962) | | Retirement Benefit Plans (Ending Balance) | $(166) | $(308) | $(331) | | Total accumulated other comprehensive loss ending balance | $(883) | $(1,438) | $(1,293) | - The company repurchased **2.5 million** common shares for **$1.6 billion** during 2025[338](index=338&type=chunk) - On August 21, 2025, the Board of Directors updated the share repurchase authorization to **20.0 million** shares[338](index=338&type=chunk) [Stock Incentive Plans](index=62&type=section&id=8.7.16%20Stock%20Incentive%20Plans) Parker's 2023 SIP has **7.2 million** shares available; stock-based compensation was **$159 million** in 2025; **3,088 thousand** SARs outstanding - The 2023 Omnibus Stock Incentive Plan (SIP) has **11.3 million** shares authorized, with **7.2 million** available for future issuance at June 30, 2025[339](index=339&type=chunk) Total Stock-Based Compensation Expense (in millions) | Year | Expense | | :--- | :------ | | 2025 | $159 | | 2024 | $156 | | 2023 | $143 | SAR Activity (Shares in thousands) | Metric | Number of Shares | | :------------------------ | :--------------- | | Outstanding June 30, 2024 | 3,495 | | Granted | 347 | | Exercised | (733) | | Canceled and forfeited | (21) | | Outstanding June 30, 2025 | 3,088 | | Exercisable June 30, 2025 | 2,230 | Nonvested RSU and LTIP Awards (Shares in thousands) | Metric | RSU Shares | LTIP Awards | | :------------------------ | :--------- | :---------- | | Nonvested June 30, 2025 | 146 | 275 | [Research and Development](index=64&type=section&id=8.7.17%20Research%20and%20Development) Independent R&D costs were **$240 million** in 2025 (**$253 million** in 2024); pre-production expenses were **$58 million** in 2025 Research and Development Costs (in millions) | Metric | 2025 | 2024 | 2023 | | :-------------------------- | :--- | :--- | :--- | | Independent R&D costs | $240 | $253 | $258 | | Pre-production expense | $58 | $45 | $73 | [Financial Instruments](index=64&type=section&id=8.7.18%20Financial%20Instruments) Parker uses derivatives and foreign currency debt for FX risk; notional amounts for hedges were **€69 million**, **€290 million**, **¥2.1 billion**; non-designated derivative losses were **$63 million** - The company uses cross-currency swap contracts and foreign currency denominated debt as net investment hedges to manage foreign exchange risk[352](index=352&type=chunk) - Notional amounts for cross-currency swap contracts designated as hedging instruments were **€69 million**, **€290 million**, and **¥2.1 billion** as of June 30, 2025 and 2024[353](index=353&type=chunk) (Losses) Gains on Non-Designated Derivative Financial Instruments (in millions) | Component | 2025 | 2024 | 2023 | | :-------------------------------- | :---- | :--- | :----- | | Forward exchange contracts | $(63) | $11 | $(7) | | Deal-contingent forward contracts | $0 | $0 | $(390) | | Total | $(63) | $11 | $(385) | Fair Value of Long-Term Debt (in millions) | Metric | June 30, 2025 | June 30, 2024 | | :-------------------------- | :------------ | :------------ | | Carrying value of long-term debt | $7,555 | $8,470 | | Estimated fair value of long-term debt | $7,174 | $7,885 | [Contingencies](index=66&type=section&id=8.7.19%20Contingencies) Parker faces litigation and environmental proceedings; **$88 million** accrued for environmental matters, with total liability estimated between **$88 million** and **$290 million** - The company is involved in various litigation matters, including product liability, workers' compensation, employee claims, class action lawsuits, and alleged environmental law violations[363](index=363&type=chunk) - As of June 30, 2025, an accrual of **$88 million** was recorded for environmental matters that are probable and reasonably estimable[365](index=365&type=chunk) - The estimated total liability for environmental matters ranges from a minimum of **$88 million** to a maximum of **$290 million**[366](index=366&type=chunk) [Business Segment Information](index=66&type=section&id=8.7.20%20Business%20Segment%20Information) Parker operates two segments: Diversified Industrial (**$13,665 million** sales, **$3,120 million** operating income) and Aerospace Systems (**$6,185 million** sales, **$1,441 million** operating income) in 2025 - The company operates in two reportable business segments: Diversified Industrial and Aerospace Systems, both utilizing eight core technologies[367](index=367&type=chunk) - The Chief Operating Decision Maker (CODM), the Chief Executive Officer, uses Segment Operating Income to assess performance and allocate capital[371](index=371&type=chunk) Net Sales and Segment Operating Income by Segment (in millions) | Segment | Net Sales 2025 | Net Sales 2024 | Net Sales 2023 | Operating Income 2025 | Operating Income 2024 | Operating Income 2023 | | :---------------------- | :------------- | :------------- | :------------- | :-------------------- | :-------------------- | :-------------------- | | Diversified Industrial | $13,665 | $14,458 | $14,705 | $3,120 | $3,176 | $3,071 | | Aerospace Systems | $6,185 | $5,472 | $4,360 | $1,441 | $1,111 | $563 | | Total | $19,850 | $19,930 | $19,065 | $4,561 | $4,287 | $3,634 | Assets and Property Additions by Segment (in millions) | Segment | Assets 2025 | Assets 2024 | Assets