Item 8. Financial Statements and Supplementary Data.

						Page Number in Form 10-K
Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34)						37
Financial Statements
			Consolidated Statement of Income			40
			Consolidated Statement of Comprehensive Income			41
			Consolidated Balance Sheet			42
			Consolidated Statement of Cash Flows			43
			Consolidated Statement of Equity			44
			Notes to Consolidated Financial Statements			45

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of Parker-Hannifin Corporation

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Parker-Hannifin Corporation and subsidiaries (the "Company") as of June 30, 2023 and 2022, the related consolidated statements of income, comprehensive income, cash flows, and equity, for each of the three years in the period ended June 30, 2023, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the "financial statements"). We also have audited the Company’s internal control over financial reporting as of June 30, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of June 30, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended June 30, 2023, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 30, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

As described in Management’s Report on Internal Control Over Financial Reporting, management excluded from its assessment the internal control over financial reporting at Meggitt plc ("Meggitt"), which was acquired on September 12, 2022, and whose financial statements constitute approximately 36% of total assets and 11% of net sales of the consolidated financial statement amounts as of and for the year ended June 30, 2023. Accordingly, our audit did not include the internal control over financial reporting at Meggitt.

Basis for Opinions

The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on these financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Revenue — Refer to Notes 1 and 2 to the financial statements

Critical Audit Matter Description

The Company is a highly diversified manufacturer with revenue derived from the sales of products in a variety of industrial and aerospace markets. The Company’s business activities are carried out by numerous individual business units, which offer unique technology and product platforms in over forty countries globally to more than 500,000 customers.

We identified revenue recorded as a result of product shipments as a critical audit matter due to the geographic dispersion of the Company’s operations and business units generating revenue. Extensive audit effort is performed due to the volume of the underlying transactions and number of individual business units. High levels of auditor judgment were necessary to determine the nature, timing, and extent of audit procedures performed to audit revenue recorded as a result of product shipments.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the Company’s revenue transactions generated from product shipments included the following, among others:

• We tested the design and effectiveness of internal controls within the revenue business processes, including controls over revenue recognition and controls over the review of operating results.

• We performed transaction testing for revenue populations subject to detail testing by agreeing the amounts recorded as revenue to source documents and determined that revenue was recognized appropriately.

• We tested the completeness of revenue for revenue populations subject to detail testing, by making selections from a reciprocal population such as a sales order listing and determined whether the product included in the sales order was appropriately recorded as a sale in the general ledger.

• We performed substantive analytical procedures to extend our testing from an interim date to the end of the fiscal year for revenue transactions not subject to detail transaction testing. We developed independent expectations of revenue based on data derived from the results of our detail revenue testing and compared these expectations to the revenue recorded by management.

Acquisition — Meggitt — Valuation of intangible assets — Refer to Note 3 to the financial statements

Critical Audit Matter Description

The Company completed the acquisition of Meggitt for $7.2 billion on September 12, 2022. The Company accounted for the acquisition under the acquisition method of accounting for business combinations. Accordingly, the Company allocated the purchase price, on a preliminary basis, to the assets acquired and liabilities assumed based on their estimated fair value and recorded $5.7 billion of intangible assets composed of customer-related intangible assets, technology, and trade names.

Management estimated the fair value of these intangible assets utilizing an income approach. The fair value determination of the customer-related intangible assets, technology, and trade names required management to make several significant assumptions related to the forecasts of revenue growth rates, and earnings before interest, taxes, depreciation, and amortization ("EBITDA") margins as well as the selection of royalty and discount rates.

We identified the valuation of Meggitt acquisition customer-related intangible assets, technology, and trade names as a critical audit matter because of the significant assumptions management makes to estimate the fair value of these assets. This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the forecasts of revenue growth rates and EBITDA margins, the selection of valuation methodologies utilized, and the selection of royalty rates and discount rates for the intangible assets included the following, among others:

• We evaluated the design and operating effectiveness of controls over the valuation of the intangible assets acquired, including management’s controls over the forecasts of revenue growth rates and EBITDA margins and selection of the royalty and discount rates.

• We assessed the reasonableness of management’s forecasts of revenue growth rates and EBITDA margins by comparing the projections to historical results, actual results to date and external market sources, and evaluated whether the estimated revenue growth rates were consistent with evidence obtained in other areas of the audit.

• We performed qualitative and quantitative analyses to identify the assumptions that would significantly impact the overall valuation of the intangible assets acquired. The assumptions identified included (1) revenue growth rates, (2) EBITDA margins, (3) royalty rates and (4) discount rates.

• With the assistance of our fair value specialists, we evaluated the reasonableness of the (1) valuation methodologies and (2) the selection of the royalty and discount rates selected by:

• Testing the source information underlying the determination of the royalty and discount rates.

• Comparing the selected royalty and discount rates to market data for comparable rates.

• Testing the mathematical accuracy of the calculations.

• Developing a range of independent estimates and comparing those to the royalty and discount rates selected by management.

• Comparing the valuation methodologies applied to acceptable valuation methodologies for the valuation of intangible assets

/s/ DELOITTE & TOUCHE LLP

Cleveland, Ohio

August 24, 2023

We have served as the Company's auditor since 2008.

CONSOLIDATED STATEMENT OF INCOME

						For the years ended June 30,
(Dollars in thousands, except per share amounts)						2023						2022*						2021*
Net Sales						$	19,065,194					$	15,861,608					$	14,347,640
Cost of sales						12,635,892						10,550,309						9,604,522
Selling, general and administrative expenses						3,354,103						2,504,061						2,383,407
Interest expense						573,894						255,252						250,036
Other expense (income), net						184,167						944,881						(27,950)
Gain on disposal of assets						(362,526)						(7,121)						(109,332)
Income before income taxes						2,679,664						1,614,226						2,246,957
Income taxes						596,128						298,040						500,096
Net Income						2,083,536						1,316,186						1,746,861
Less: Noncontrolling interest in subsidiaries' earnings						600						581						761
Net Income Attributable to Common Shareholders						$	2,082,936					$	1,315,605					$	1,746,100
Earnings per Share Attributable to Common Shareholders
Basic earnings per share						$	16.23					$	10.24					$	13.54
Diluted earnings per share						$	16.04					$	10.09					$	13.35
*Years ended June 30, 2022 and 2021 amounts have been reclassified to reflect the income statement reclassification, as described in Note 1 to the Consolidated Financial Statements.

The accompanying notes are an integral part of the consolidated financial statements.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

						For the years ended June 30,
(Dollars in thousands)						2023						2022						2021
Net Income						$	2,083,536					$	1,316,186					$	1,746,861
Less: Noncontrolling interests in subsidiaries' earnings						600						581						761
Net income attributable to common shareholders						2,082,936						1,315,605						1,746,100
Other comprehensive income (loss), net of tax
Foreign currency translation adjustment and other (net of tax of $(38,322), $(3,236) and $(3,664) in 2023, 2022 and 2021, respectively)						186,721						(284,732)						328,792
Retirement benefits plan activity (net of tax of $(26,019), $(95,574) and $(205,845) in 2023, 2022 and 2021, respectively)						63,299						306,735						664,076
Other comprehensive income (loss)						250,020						22,003						992,868
Less: Other comprehensive (loss) income for noncontrolling interests						(306)						(1,526)						720
Other comprehensive income (loss) attributable to common shareholders						250,326						23,529						992,148
Total Comprehensive Income Attributable to Common Shareholders						$	2,333,262					$	1,339,134					$	2,738,248

The accompanying notes are an integral part of the consolidated financial statements.

CONSOLIDATED BALANCE SHEET

(Dollars in thousands)
June 30,						2023						2022
Assets
Current Assets
Cash and cash equivalents						$	475,182					$	535,799
Marketable securities and other investments						8,390						27,862
Trade accounts receivable, net						2,827,297						2,341,504
Non-trade and notes receivable						309,167						543,757
Inventories						2,907,879						2,214,553
Prepaid expenses and other						306,314						6,383,169
Total Current Assets						6,834,229						12,046,644
Property, plant and equipment						6,865,545						5,897,955
Less: Accumulated depreciation						4,000,515						3,775,197
Property, plant and equipment, net						2,865,030						2,122,758
Deferred income taxes						81,429						110,585
Investments and other assets						1,104,576						788,057
Intangible assets, net						8,450,614						3,135,817
Goodwill						10,628,594						7,740,082
Total Assets						$	29,964,472					$	25,943,943
Liabilities and Equity
Current Liabilities
Notes payable and long-term debt payable within one year						$	3,763,175					$	1,724,310
Accounts payable, trade						2,050,934						1,731,925
Accrued payrolls and other compensation						651,319						470,132
Accrued domestic and foreign taxes						374,571						250,292
Other accrued liabilities						895,371						1,682,659
Total Current Liabilities						7,735,370						5,859,318
Long-term debt						8,796,284						9,755,825
Pensions and other postretirement benefits						551,510						639,939
Deferred income taxes						1,649,674						307,044
Other liabilities						893,355						521,897
Total Liabilities						19,626,193						17,084,023
Equity
Shareholders' Equity
Serial preferred stock, $.50 par value, authorized 3,000,000 shares; none issued						—						—
Common stock, $.50 par value, authorized 600,000,000 shares; issued 181,046,128 shares in 2023 and 2022						90,523						90,523
Additional capital						305,522						327,307
Retained earnings						17,041,502						15,661,808
Accumulated other comprehensive (loss)						(1,292,872)						(1,543,198)
Treasury shares at cost: 52,613,046 in 2023 and 52,594,956 in 2022						(5,817,787)						(5,688,429)
Total Shareholders' Equity						10,326,888						8,848,011
Noncontrolling interests						11,391						11,909
Total Equity						10,338,279						8,859,920
Total Liabilities and Equity						$	29,964,472					$	25,943,943

The accompanying notes are an integral part of the consolidated financial statements.

CONSOLIDATED STATEMENT OF CASH FLOWS

						For the years ended June 30,
(Dollars in thousands)						2023						2022						2021
Cash Flows From Operating Activities
Net income						$	2,083,536					$	1,316,186					$	1,746,861
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation						317,416						257,314						269,943
Amortization						500,713						314,450						325,447
Stock incentive plan compensation						142,720						137,093						121,483
Deferred income taxes						91,865						(351,201)						(51,500)
Foreign currency transaction loss (gain)						45,647						(39,987)						(10,948)
Loss (gain) on disposal of property, plant and equipment						3,819						(5,727)						(109,332)
Gain on sale of businesses						(366,345)						(1,394)						—
Gain on investments						(4,690)						(3,972)						(12,616)
(Gain) loss on marketable securities						(1,486)						5,131						(11,570)
Other						25,524						70,443						14,424
Changes in assets and liabilities, net of effects from acquisitions and divestitures:
Accounts receivable, net						(16,675)						(179,126)						(298,511)
Inventories						53,124						(212,134)						(85,597)
Prepaid expenses and other						1,550						37,630						(25,508)
Other assets						(109,032)						(11,167)						(8,779)
Accounts payable, trade						91,551						131,384						526,781
Accrued payrolls and other compensation						87,375						(15,524)						72,412
Accrued domestic and foreign taxes						102,476						32,514						36,552
Other accrued liabilities						112,822						999,831						11,397
Pensions and other postretirement benefits						(109,481)						1,822						17,875
Other liabilities						(72,499)						(41,836)						46,187
Net cash provided by operating activities						2,979,930						2,441,730						2,575,001
Cash Flows From Investing Activities
Acquisitions (net of cash acquired of $89,704 in 2023)						(7,146,110)						—						—
Capital expenditures						(380,747)						(230,044)						(209,957)
Proceeds from sale of property, plant and equipment						13,244						39,353						140,590
Proceeds from sale of businesses						473,207						3,366						—
Purchase of marketable securities and other investments						(37,791)						(27,895)						(34,809)
Maturities and sales of marketable securities and other investments						56,786						31,809						79,419
Payments of deal-contingent forward contracts						(1,405,418)						—						—
Other						250,017						(235,426)						24,744
Net cash used in investing activities						(8,176,812)						(418,837)						(13)
Cash Flows From Financing Activities
Proceeds from exercise of stock options						3,476						2,831						4,684
Payments for common shares						(297,323)						(460,056)						(218,818)
Proceeds from (payments of) notes payable, net						357,636						1,422,026						(723,496)
Proceeds from long-term borrowings						2,023,400						3,598,056						1,213
Payments for long-term borrowings						(2,340,566)						(18,737)						(1,211,748)
Financing fees paid						(13,605)						(58,629)						—
Dividends paid						(704,054)						(569,855)						(475,174)
Net cash (used in) provided by financing activities						(971,036)						3,915,636						(2,623,339)
Effect of exchange rate changes on cash						(4,776)						(23,770)						95,954
Net (decrease) increase in cash and cash equivalents and restricted cash						(6,172,694)						5,914,759						47,603
Cash, cash equivalents and restricted cash at beginning of year						6,647,876						733,117						685,514
Cash, cash equivalents and restricted cash at end of year						$	475,182					$	6,647,876					$	733,117
Supplemental Data:
Cash paid during the year for:
Interest						$	464,701					$	240,313					$	236,979
Income taxes						411,440						549,223						485,885

The accompanying notes are an integral part of the consolidated financial statements.

CONSOLIDATED STATEMENT OF EQUITY

(Dollars in thousands)						Common Stock						Additional Capital						Retained Earnings						Accumulated Other Comprehensive (Loss)						Treasury Shares						Noncontrolling Interests						Total
Balance June 30, 2020						$	90,523					$	416,585					$	13,643,907					$	(2,558,875)					$	(5,364,916)					$	14,546					$	6,241,770
Net income																		1,746,100																		761						1,746,861
Other comprehensive income																								992,148												720						992,868
Dividends paid ($3.67 per share)																		(474,510)																		(664)						(475,174)
Stock incentive plan activity												(86,966)																		94,311												7,345
Shares purchased at cost																														(100,000)												(100,000)
Balance June 30, 2021						$	90,523					$	329,619					$	14,915,497					$	(1,566,727)					$	(5,370,605)					$	15,363					$	8,413,670
Net income																		1,315,605																		581						1,316,186
Other comprehensive income (loss)																								23,529												(1,526)						22,003
Dividends paid ($4.42 per share)																		(569,294)																		(561)						(569,855)
Stock incentive plan activity												(2,312)																		62,510												60,198
Liquidation activity																																				(1,948)						(1,948)
Shares purchased at cost																														(380,334)												(380,334)
Balance June 30, 2022						$	90,523					$	327,307					$	15,661,808					$	(1,543,198)					$	(5,688,429)					$	11,909					$	8,859,920
Net income																		2,082,936																		600						2,083,536
Other comprehensive income (loss)																								250,326												(306)						250,020
Dividends paid ($5.47 per share)																		(703,242)																		(812)						(704,054)
Stock incentive plan activity												(21,785)																		70,641												48,856
Shares purchased at cost																														(199,999)												(199,999)
Balance June 30, 2023						$	90,523					$	305,522					$	17,041,502					$	(1,292,872)					$	(5,817,787)					$	11,391					$	10,338,279

The accompanying notes are an integral part of the consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts or as otherwise noted)

The term "year" and references to specific years refer to the applicable fiscal years.

1. Significant Accounting Policies

The significant accounting policies followed in the preparation of the accompanying consolidated financial statements are summarized below.

Nature of Operations - The Company is a leading worldwide diversified manufacturer of motion and control technologies and systems, providing precision engineered solutions for a wide variety of mobile, industrial and aerospace markets. We evaluate performance based on segment operating income before corporate administrative expenses, interest expense and income taxes.

There are no individual customers to whom sales are more than four percent of the Company's consolidated sales. Due to our diverse group of customers throughout the world, we do not consider ourself exposed to any concentration of credit risks.

The Company manufactures and markets its products throughout the world. Although certain risks and uncertainties exist, the diversity and breadth of our products and geographic operations mitigate the risk that adverse changes with respect to any particular product and geographic operation would materially affect our operating results.

Use of Estimates - The preparation of consolidated financial statements in conformity with U.S. GAAP 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.

Reclassification - Certain prior-year amounts in the Consolidated Statement of Income have been reclassified to conform to the current-year presentation. Effective July 1, 2022, we began classifying certain expenses, previously classified as cost of sales, as selling, general and administrative expenses ("SG&A") or within other expense (income), net. During the integration of recently acquired businesses, the Company has seen diversity in practice of the classification of certain expenses, and the reclassification was made to better align the presentation of expenses on the Consolidated Statement of Income with management’s internal reporting. The expenses reclassified from cost of sales to SG&A relate to certain administrative activities conducted in production facilities and research and development. Foreign currency transaction expense was also reclassified from cost of sales to other expense (income), net on the Consolidated Statement of Income. These reclassifications had no impact on net income, earnings per share, cash flows, segment reporting or the financial position of the Company.

For the year ended June 30, 2022, the reclassification resulted in a decrease of $837 million to cost of sales, an increase of $877 million to SG&A, and a decrease of $40 million to other expense (income), net. For the year ended June 30, 2021 the reclassification resulted in a decrease of $845 million to cost of sales, an increase of $856 million to SG&A, and a decrease of $11 million to other expense (income), net.

Basis of Consolidation - The consolidated financial statements include the accounts of all majority-owned domestic and foreign subsidiaries. All intercompany transactions and profits have been eliminated in the consolidated financial statements. The Company does not have off-balance sheet arrangements. Within the business segment information, inter-segment and inter-area sales have been eliminated.

Revenue Recognition - Revenues are recognized when control of performance obligations, which are distinct goods or services within the contract, is transferred to the customer. Control is transferred when the customer has the ability to direct the use of and obtain the benefits from the goods or services. When revenue is recognized at a point in time, control generally transfers at time of shipment. Revenues are recognized over time if the customer simultaneously receives control as the Company performs work under a contract, if the customer controls the asset as it is being produced, or if the product produced for the customer has no alternative use and the Company has a contractual right to payment.

For contracts where revenue is recognized over time, we use the cost-to-cost, efforts expended or units of delivery method depending on the nature of the contract, including length of production time. The estimation of these costs and efforts expended requires judgment on the part of management due to the duration of the contractual agreements as well as the technical nature of the products involved. We make adjustments to these estimates on a consistent basis and establish a contract reserve when the estimated costs to complete a contract exceed the expected contract revenues.

A contract’s transaction price is allocated to each distinct performance obligation. When there are multiple performance obligations within a contract, the transaction price is allocated to each performance obligation based on its standalone selling price. The primary method used to estimate a standalone selling price is the price observed in standalone sales to customers of the same product or service. Revenue is recognized when control of the individual performance obligations is transferred to the customer.

We consider the contractual consideration payable by the customer and assess variable consideration that may affect the total transaction price. Variable consideration primarily includes prompt pay discounts, rebates and volume discounts and is included in the estimated transaction price when there is a basis to reasonably estimate the amount, including whether the estimate should be constrained in order to avoid a significant reversal of revenue in a future period. These estimates are based on historical experience, anticipated performance under the terms of the contract and our best judgment at the time.

Payment terms vary by customer and the geographic location of the customer. The time between when revenue is recognized and payment is due is not significant. Our contracts with customers generally do not include significant financing components or noncash consideration.

Taxes collected from customers and remitted to governmental authorities are excluded from revenue. Shipping and handling costs are treated as fulfillment costs and are included in cost of sales. The costs to obtain a contract where the amortization period for the related asset is one year or less are expensed as incurred.

There is generally no unilateral right to return products. The Company primarily offers an assurance-type standard warranty that the product will conform to certain specifications for a defined period of time or usage after delivery. This type of warranty does not represent a separate performance obligation.

Cash - Cash equivalents consist of short-term, highly liquid investments with a maturity of three months or less. These investments are carried at cost plus accrued interest and are readily convertible into cash.

Marketable Securities and Other Investments - Consist of short-term, highly liquid investments with stated maturities of greater than three months from the date of purchase, which are carried at cost plus accrued interest. Marketable securities and other investments also include investments in equity securities which are carried at fair value. Changes in fair value related to equity securities are recorded in net income. We have the ability to liquidate these investments after giving appropriate notice to the issuer.

Trade Accounts Receivable, Net - Trade accounts receivable are initially recorded at their net collectible amount and are generally recorded at the time the revenue from the sales transaction is recorded. We evaluate the collectibility of our receivables based on historical experience and current and forecasted economic conditions based on management's judgment. Additionally, receivables are written off to bad debt when management makes a final determination of uncollectibility. Allowance for credit losses was $32 million and $10 million at June 30, 2023 and 2022, respectively. The increase in the allowance for credit losses from the June 30, 2022 amount is primarily due to the Acquisition.

Non-Trade and Notes Receivable - The non-trade and notes receivable caption in the Consolidated Balance Sheet is comprised of the following components:

June 30,						2023						2022
Notes receivable						$	102,288					$	103,558
Cash collateral receivable(a)						—						250,000
Accounts receivable, other						206,879						190,199
Total						$	309,167					$	543,757

(a) The cash collateral receivable relates to the deal-contingent forward contracts. Refer to Note 16 for further discussion.

Property, Plant and Equipment and Depreciation - Property, plant and equipment are recorded at cost and are depreciated principally using the straight-line method for financial reporting purposes. Depreciation rates are based on estimated useful lives of the assets, generally 40 years for buildings, 15 years for land improvements and building equipment, seven to 10 years for machinery and equipment, and three to eight years for vehicles and office equipment. Improvements, which extend the useful life of property, are capitalized, and maintenance and repairs are expensed. We review property, plant and equipment for impairment whenever events or changes in circumstances indicate that their carrying value may not be recoverable. When property, plant and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the appropriate accounts and any gain or loss is included in current income.

The property, plant and equipment caption in the Consolidated Balance Sheet is comprised of the following components:

June 30,						2023						2022
Land and land improvements						$	385,376					$	322,024
Buildings and building equipment						2,051,546						1,783,805
Machinery and equipment						4,086,334						3,588,106
Construction in progress						342,289						204,020
Total						$	6,865,545					$	5,897,955

Investments and Other Assets - Investments in joint-venture companies in which ownership is 50 percent or less and in which the Company does not have operating control are stated at cost plus the Company's equity in undistributed earnings and amounted to $297 million and $314 million at June 30, 2023 and 2022, respectively. A significant portion of the underlying net assets of the joint ventures are related to goodwill. The Company's share of earnings from investments in joint-venture companies were $124 million, $76 million and $41 million in 2023, 2022 and 2021, respectively.

Intangible Assets - Intangible assets primarily include patents and technology, trade names and customer relationships and contracts and are recorded at cost and amortized on a straight-line method. Patents and technology are amortized over the shorter of their remaining useful or legal life. Trade names are amortized over the estimated time period over which an economic benefit is expected to be received. Customer relationships are amortized over a period based on anticipated customer attrition rates or contractual lives. The Company reviews intangible assets for impairment whenever events or changes in circumstances indicate that their carrying value may not be recoverable.

Goodwill - The Company conducts a formal impairment test of goodwill on an annual basis and between annual tests if an event occurs or circumstances change that would, more likely than not, reduce the fair value of a reporting unit below its carrying value.

Income Taxes - Income taxes are provided based upon income for financial reporting purposes. Taxes related to Global Intangible Low-Taxed Income ("GILTI") are treated as a current period expense when incurred. Tax credits and similar tax incentives are applied to reduce the provision for income taxes in the year in which the credits arise. We recognize accrued interest related to unrecognized tax benefits in income tax expense. Penalties, if incurred, are recognized in income tax expense. Deferred income taxes arise from temporary differences in the recognition of income and expense for tax purposes. Income tax effects resulting from adjusting temporary differences recorded in accumulated other comprehensive (loss) are released when the circumstances on which they are based cease to exist.

Foreign Currency Translation - Assets and liabilities of foreign subsidiaries are translated at current exchange rates, and income and expenses are translated using weighted-average exchange rates. The effects of these translation adjustments, as well as gains and losses from certain intercompany transactions, are reported in accumulated other comprehensive (loss). Such adjustments will affect net income only upon sale or liquidation of the underlying foreign investments. Exchange (gains) losses from transactions in a currency other than the local currency of the entity involved are included within the other expense (income), net caption in the Consolidated Statement of Income and were $46 million, $(40) million and $(11) million, in 2023, 2022 and 2021, respectively.

Business Combinations - From time to time, we may enter into business combinations. Business acquisitions are accounted for using the acquisition method of accounting, which allocates the fair value of the purchase consideration to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values. The excess of the purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. The acquisition method of accounting also requires us to refine these estimates over a measurement period not to exceed one year to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date. Transaction costs associated with these acquisitions are expensed as incurred.

Subsequent Events - We evaluated subsequent events that have occurred through the date of filing of this Annual Report on Form 10-K for the year ended June 30, 2023. No subsequent events occurred that required adjustment to or disclosure in these financial statements.

Recent Accounting Pronouncements - In November 2021, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2021-10, "Government Assistance (Topic 832), Disclosures by Business Entities about Government Assistance", which requires entities to provide disclosures on material government assistance transactions for annual reporting periods. The disclosures include information around the nature of the assistance, the related accounting policies used to account for government assistance, the effect of government assistance on the entity’s financial statements, and any significant terms and conditions of the agreements, including commitments and contingencies. The new guidance is effective for all entities for annual reporting periods beginning after December 15, 2021; however, early adoption is permitted. The guidance may be applied either prospectively to all in-scope transactions that are reflected in the financial statements at the date of initial application and to new transactions that are entered into after the date of initial application, or retrospectively. The Company prospectively adopted this standard during the fourth quarter of fiscal 2023 with no material impact on its consolidated financial statements and related disclosures.

In September 2022, the FASB issued ASU 2022-04, "Liabilities—Supplier Finance Programs (Topic 405-50), Disclosure of Supplier Finance Program Obligations" ("ASU 2022-04"). ASU 2022-04 requires quantitative and qualitative disclosures about the key terms of supplier finance programs, an annual rollforward of obligations to finance providers, and interim disclosure of obligations as of each reporting period presented. ASU 2022-04 is effective for all entities for fiscal years beginning after December 15, 2022, on a retrospective basis, including interim periods within those fiscal years, except for the requirement to disclose rollforward information, which is effective prospectively for fiscal years beginning after December 15, 2023. Early adoption is permitted. The Company is currently evaluating the impact this guidance will have on its consolidated financial statements and does not expect it to be material.

2. Revenue recognition

Revenue is derived primarily from the sale of products in a variety of mobile, industrial and aerospace markets. A majority of the Company’s revenues are recognized at a point in time. However, a portion of the Company’s revenues are recognized over time.

Disaggregation of revenue

Revenue from contracts with customers is disaggregated by technology platforms for the Diversified Industrial Segment, by product platforms for the Aerospace Systems Segment and by geographic location for the total Company.

The Diversified Industrial Segment is an aggregation of several business units, which manufacture motion-control and fluid power system components for builders and users of various types of manufacturing, packaging, processing, transportation, agricultural, construction, and military vehicles and equipment. Contracts consist of individual purchase orders for standard product, blanket purchase orders and production contracts. Blanket purchase orders are often associated with individual purchase orders and have terms and conditions which are subject to a master supply or distributor agreement. Individual production contracts, some of which may include multiple performance obligations, are typically for products manufactured to the customer's specifications. Revenue in the Diversified Industrial Segment is typically recognized at the time of product shipment, but a portion of revenue may be recognized over time for installation services or in situations where the product has no alternative use and we have an enforceable right to payment.

Diversified Industrial Segment revenues by technology platform:

						2023						2022						2021
Motion Systems						$	3,830,062					$	3,489,431					$	3,081,366
Flow and Process Control						4,939,356						4,616,270						4,108,080
Filtration and Engineered Materials						5,936,275						5,236,345						4,770,713
Total						$	14,705,693					$	13,342,046					$	11,960,159

The Aerospace Systems Segment produces hydraulic, fuel, pneumatic and electro-mechanical systems and components, which are utilized on virtually every domestic commercial, military and general aviation aircraft. Contracts generally consist of blanket purchase orders and individual long-term production contracts. Blanket purchase orders, which have terms and conditions subject to long-term supply agreements, are typically associated with individual purchase orders. Revenue in the Aerospace Systems Segment is typically recognized at the time of product shipment, but a portion of revenue may be recognized over time in situations where the customer controls the asset as it is produced or the product has no alternative use and we have an enforceable right to payment.

Aerospace Systems Segment revenues by product platform:

						2023						2022						2021
Commercial original equipment manufacturer ("OEM")						$	1,461,279					$	889,649					$	761,679
Commercial aftermarket						1,363,965						514,727						379,438
Military OEM						905,328						705,988						791,245
Military aftermarket						628,929						409,198						455,119
Total						$	4,359,501					$	2,519,562					$	2,387,481

Upon completing the Acquisition, we reviewed the disaggregation of revenue disclosure for the Aerospace Systems Segment and believe that disaggregation by primary market provides more meaningful information than disaggregation by product platform.

Total revenues by geographic region based on the Company's selling operation's location:

						2023						2022						2021
North America						$	12,689,719					$	10,216,292					$	9,046,162
Europe						3,777,507						3,156,024						2,919,025
Asia Pacific						2,379,791						2,290,557						2,215,686
Latin America						218,177						198,735						166,767
Total						$	19,065,194					$	15,861,608					$	14,347,640

The majority of revenues from the Aerospace Systems Segment is generated from sales to customers within North America.

Contract balances

Contract assets and contract liabilities are reported on a contract-by-contract basis. Contract assets reflect revenue recognized and performance obligations satisfied in advance of customer billing. Contract liabilities relate to payments received in advance of the satisfaction of performance under the contract. Payments from customers are received based on the terms established in the contract with the customer.

Total contract assets and contract liabilities are as follows:

						2023						2022
Contract assets, current (included within Prepaid expenses and other)						$	123,705					$	28,546
Contract assets, noncurrent (included within Investments and other assets)						23,708						794
Total contract assets						147,413						29,340
Contract liabilities, current (included within Other accrued liabilities)						(244,799)						(60,472)
Contract liabilities, noncurrent (included within Other liabilities)						(78,239)						(2,225)
Total contract liabilities						(323,038)						(62,697)
Net contract liabilities						$	(175,625)					$	(33,357)

Net contract liabilities at June 30, 2023 increased from the prior year amount due to timing differences between when revenue was recognized and the receipt of advance payments as well as acquiring Meggitt's contract liabilities in excess of Meggitt's contract assets. During 2023, approximately $47 million of revenue was recognized that was included in the contract liabilities at June 30, 2022.

Remaining performance obligations

Our backlog represents written firm orders from a customer to deliver products and, in the case of blanket purchase orders, only includes the portion of the order for which a schedule or release has been agreed to with the customer. We believe our backlog represents our unsatisfied or partially unsatisfied performance obligations. Backlog at June 30, 2023 was $11.0 billion, of which approximately 79 percent is expected to be recognized as revenue within the next 12 months and the balance thereafter.

3. Acquisitions and Divestitures

Acquisitions

On September 12, 2022, we completed the Acquisition of all the outstanding ordinary shares of Meggitt for 800 pence per share, resulting in an aggregate cash purchase price of $7.2 billion, including the assumption of debt.

Meggitt is a leader in design, manufacturing and aftermarket support of technologically differentiated systems and equipment in aerospace, defense and selected energy markets with annual sales of approximately $2.1 billion for the year ended December 31, 2021. For segment reporting purposes, approximately 82 percent of Meggitt's sales are included in the Aerospace Systems Segment, while the remaining 18 percent are included in the Diversified Industrial Segment.

Assets acquired and liabilities assumed are recognized at their respective fair values as of the date of the Acquisition. The process of estimating the fair values of certain tangible assets, identifiable intangible assets and assumed liabilities requires the use of judgment in determining the appropriate assumptions and estimates. The following table presents the preliminary estimated fair values of Meggitt's assets acquired and liabilities assumed on the date of the Acquisition. These preliminary estimates are based on available information and may be revised during the measurement period, not to exceed 12 months from the date of the Acquisition, as third-party valuations are finalized, additional information becomes available or as additional analysis is performed. Such revisions may have a material impact on our results of operations and financial position within the measurement period.

			September 12, 2022 (previously reported)						Measurement Period Adjustments						September 12, 2022
Assets:
Cash and cash equivalents			$	89,704					$	—					$	89,704
Accounts receivable			427,255						(17,613)						409,642
Inventories			833,602						(94,298)						739,304
Prepaid expenses and other			125,763						(23,731)						102,032
Property, plant and equipment, net			675,232						(16,235)						658,997
Deferred income taxes			5,720						28,478						34,198
Other assets			219,472						(38,481)						180,991
Intangible assets			5,418,795						260,405						5,679,200
Goodwill			2,830,845						(41,765)						2,789,080
Total assets acquired			$	10,626,388					$	56,760					$	10,683,148
Liabilities:
Notes payable and long-term debt payable within one year			$	306,266					$	1,910					$	308,176
Accounts payable, trade			219,780						62						219,842
Accrued payrolls and other compensation			89,226						(2,152)						87,074
Accrued domestic and foreign taxes			—						21,068						21,068
Other accrued liabilities			367,605						(45,565)						322,040
Long-term debt			669,321						42,382						711,703
Pensions and other postretirement benefits			85,899						13,654						99,553
Deferred income taxes			1,274,726						(15,309)						1,259,417
Other liabilities			377,751						40,710						418,461
Total liabilities assumed			3,390,574						56,760						3,447,334
Net assets acquired			$	7,235,814					$	—					$	7,235,814

Goodwill is calculated as the excess of the purchase price over the net assets acquired and represents cost synergies and enhancements to our existing technologies. For tax purposes, Meggitt's goodwill is not deductible. Based upon a preliminary acquisition valuation, we acquired $4.3 billion of customer-related intangible assets, $1.1 billion of technology and $304 million of trade names, each with weighted average estimated useful lives of 22, 21 and 18 years, respectively. These intangible assets were valued using the income approach, which includes significant assumptions around future revenue growth, earnings before interest, taxes, depreciation and amortization, royalty rates and discount rates. Such assumptions are classified as level 3 inputs within the fair value hierarchy.

The fair value of the assets acquired includes $116 million and $91 million of operating and finance lease right-of-use assets, respectively. The fair value of liabilities assumed includes $118 million and $90 million of operating and finance lease liabilities, respectively, of which, $19 million and $1 million of operating and finance lease liabilities, respectively, are current liabilities.

Debt assumed includes $900 million aggregate principal amount of private placement notes with fixed interest rates ranging from 2.78 percent to 3.60 percent, and maturity dates ranging from July 2023 to July 2026. The private placement notes were recorded at fair value at acquisition. In October 2022, we paid off $300 million aggregate principal amount of private placement notes in two tranches pursuant to an offer to noteholders according to change in control provisions. In June 2023, the Company paid the remaining $600 million aggregate principal amount of private placement notes assumed in the Acquisition, which resulted in a $10 million charge recorded in interest expense in the Consolidated Statement of Income associated with the fair value discount.

Upon acquiring Meggitt, we also assumed $134 million of liabilities associated with environmental matters, the liabilities are included within other liabilities. The environmental matters primarily relate to known exposures arising from environmental litigation, investigations and remediation of certain sites for which Meggitt has been identified as a potentially responsible party. The liabilities are based on outcomes of litigation and estimates of the level and timing of remediation costs, including the period of operating and monitoring activities required.

Our consolidated financial statements include the results of operations of Meggitt from the date of acquisition through June 30, 2023. Net sales and segment operating income attributable to Meggitt during 2023 was $2.1 billion and $23 million, respectively. Segment operating income attributable to Meggitt includes estimated amortization and depreciation expense associated with the preliminary fair value estimates of intangible assets, plant and equipment, inventory, as well as acquisition integration charges. Refer to Note 4 for further discussion of acquisition integration charges.

Acquisition-related transaction costs totaled $115 million in 2023. These costs are included in SG&A in the Consolidated Statement of Income.

The following table presents unaudited pro forma information for 2023 and 2022 as if the Acquisition had occurred on July 1, 2021.

(Unaudited)
															2023						2022
Net sales															$	19,446,524					$	17,911,409
Net income attributable to common shareholders															1,956,813						1,529,970

The historical consolidated financial information of Parker and Meggitt has been adjusted in the pro forma information in the table above to give effect to events that are directly attributable to the Acquisition and factually supportable. To reflect the occurrence of the Acquisition on July 1, 2021, the unaudited pro forma information includes adjustments for the amortization of the step-up inventory to fair value and incremental depreciation and amortization expense resulting from the fair value adjustments to property, plant and equipment and intangible assets. These adjustments were based upon a preliminary purchase price allocation. Additionally, adjustments to financing costs and income tax expense were also made to reflect the capital structure and anticipated effective tax rate of the combined entity. Additionally, the pro forma information includes adjustments for non-recurring transactions directly related to the Acquisition, including the gain on the divestiture of the aircraft wheel and brake business, loss on deal-contingent forward contracts, and transaction costs. These non-recurring adjustments totaled $199 million and $654 million in 2023 and 2022, respectively. The resulting pro forma amounts are not necessarily indicative of the results that would have been obtained if the Acquisition had occurred as of the beginning of the period presented or that may occur in the future, and do not reflect future synergies, integration costs or other such costs or savings.

Divestitures

During September 2022, we divested our aircraft wheel and brake business, which was part of the Aerospace Systems Segment, for proceeds of $443 million. The resulting pre-tax gain of $374 million is included in other expense (income), net in the Consolidated Statement of Income. The operating results and net assets of the aircraft wheel and brake business were immaterial to the Company's consolidated results of operations and financial position. As of June 30, 2022, the aggregate carrying amount of aircraft wheel and brake assets held for sale was $66 million. These assets primarily included goodwill and inventory and were recorded within prepaid expenses and other assets in the Consolidated Balance Sheet. Goodwill was allocated to the aircraft wheel and brake business using the relative fair value method.

During March 2023, we divested a French aerospace business, which was part of the Aerospace Systems Segment, for proceeds of $27 million. The resulting pre-tax loss of $12 million is included in other expense (income), net in the Consolidated Statement of Income. The operating results and net assets of the French aerospace business were immaterial to the Company's consolidated results of operations and financial position.

Restricted Cash

At June 30, 2022, prepaid expenses and other in the Consolidated Balance Sheet included a $6.1 billion balance in an escrow account restricted to payments for the Acquisition. These funds were used to finance a portion of the Acquisition, and there was no restricted cash at June 30, 2023.

4. Business Realignment and Acquisition Integration Charges

The Company incurred business realignment and acquisition integration charges in 2023, 2022 and 2021. Business realignment charges in 2023, 2022, and 2021 included severance costs related to actions taken under the Company's simplification initiative aimed at reducing organizational and process complexity as well as plant closures. During 2021, business realignment charges primarily consisted of actions taken to address the impact of COVID-19 on our business. A majority of the business realignment charges were incurred in Europe. We believe the realignment actions will positively impact future results of operations but will not have a material effect on liquidity and sources and uses of capital.

Business realignment charges by business segment are as follows:

			2023						2022						2021
Diversified Industrial			$	23,641					$	13,787					$	38,557
Aerospace Systems			3,065						967						6,680
Corporate administration			—						—						1,399
Other expense			—						3						1,226

Workforce reductions in connection with such business realignment charges by business segment are as follows:

			2023						2022						2021
Diversified Industrial			728						300						820
Aerospace Systems			30						10						327
Corporate administration			—						—						20

The business realignment charges are presented in the Consolidated Statement of Income as follows:

			2023						2022*						2021*
Cost of sales			$	15,993					$	5,007					$	27,276
Selling, general and administrative expenses			10,713						9,747						19,360
Loss on disposal of assets			—						3						1,226
*Years ended June 30, 2022 and 2021 amounts have been reclassified to reflect the income statement reclassification, as described in Note 1 to the Consolidated Financial Statements.

During 2023, approximately $22 million in payments were made relating to business realignment charges. Remaining payments related to current-year and prior-year business realignment actions of approximately $14 million, a majority of which are expected to be paid by December 31, 2023, are primarily reflected within the other accrued liabilities caption in the Consolidated Balance Sheet. Additional charges may be recognized in future periods related to the business realignment and acquisition integration actions described above, the timing and amount of which are not known at this time.

In addition to the business realignment charges discussed above, in 2022, we also incurred $20 million of expense as a result of our exit of business operations in Russia. These charges primarily consist of write-downs of inventory and other working capital items and $8 million of foreign currency translation expense reclassified from accumulated other comprehensive income. Within the business segment information in Note 18, $7 million of expense was recorded in the other expense (income), net, while the remainder of the charge was split evenly between the Aerospace Systems Segment and the Diversified Industrial International businesses.

We also incurred the following acquisition integration charges related to the Meggitt, Lord and Exotic Metals Forming Company LLC ("Exotic") acquisitions:

			2023						2022						2021
Diversified Industrial			$	8,511					$	3,589					$	11,222
Aerospace Systems			86,928						1,177						719

In 2023, acquisition integration charges relate to the acquisition of Meggitt. In 2022, charges within the Diversified Industrial and Aerospace Systems Segment relate to the acquisitions of Lord and Meggitt, respectively. Acquisition integration charges in 2021 within the Diversified Industrial and Aerospace Systems Segment relate to the acquisitions of Lord and Exotic, respectively. These charges were primarily included in selling, general and administrative expenses within the Consolidated Statement of Income.

5. Income Taxes

Income before income taxes was derived from the following sources:

			2023						2022						2021
United States			$	1,408,206					$	646,364					$	1,273,037
Foreign			1,271,458						967,862						973,920
			$	2,679,664					$	1,614,226					$	2,246,957

Income taxes include the following:

			2023						2022						2021
Federal
Current			$	161,465					$	297,672					$	247,094
Deferred			81,426						(253,123)						(52,960)
Foreign
Current			297,199						303,089						269,607
Deferred			(13,509)						(45,977)						8,851
State and local
Current			45,599						48,479						34,895
Deferred			23,948						(52,100)						(7,391)
			$	596,128					$	298,040					$	500,096

A reconciliation of the effective income tax rate to the statutory federal rate follows:

			2023						2022						2021
Statutory federal income tax rate			21.0		%				21.0		%				21.0		%
State and local income taxes			2.1						(0.2)						1.0
Tax related to international activities			1.2						2.7						3.6
Cash surrender value of life insurance			(0.1)						0.5						(0.6)
Foreign derived intangible income deduction			(1.1)						(3.7)						(1.0)
Research tax credit			(0.7)						(0.8)						(0.4)
Share-based compensation			(1.0)						(1.3)						(1.6)
Other			0.8						0.3						0.3
Effective income tax rate			22.2		%				18.5		%				22.3		%

Deferred income taxes are provided for the temporary differences between the financial reporting basis and the tax basis of assets and liabilities. The differences comprising the net deferred taxes shown on the Consolidated Balance Sheet at June 30 were as follows:

			2023						2022
Retirement benefits			$	158,560					$	207,147
Other liabilities and reserves			333,012						180,624
Long-term contracts			37,747						8,739
Stock-based compensation			33,374						31,490
Loss carryforwards			1,083,732						888,552
Unrealized currency exchange gains and losses			(1,680)						254,334
Inventory			96,501						14,649
Tax credit carryforwards			18,773						17,326
Undistributed foreign earnings			(21,304)						(21,822)
Depreciation and amortization			(2,228,606)						(875,623)
Valuation allowance			(1,078,354)						(901,875)
Net deferred tax (liability)			$	(1,568,245)					$	(196,459)
Change in net deferred tax (liability):
Provision for deferred tax			$	(91,865)					$	351,201
Items of other comprehensive (loss) income			(64,342)						(98,810)
Acquisitions and other			(1,215,579)						880
Total change in net deferred tax			$	(1,371,786)					$	253,271

As of June 30, 2023, we recorded deferred tax assets of $1,084 million resulting from $4,350 million in loss carryforwards. A valuation allowance of $1,059 million related to the loss carryforwards has been established due to the uncertainty of their realization. Of this valuation allowance, $1,030 million relates to non-operating entities whose loss carryforward utilization is considered to be remote. Some of the loss carryforwards can be carried forward indefinitely; others can be carried forward from three to 20 years. In addition, a valuation allowance of $20 million related to other future deductible items has been established due to the uncertainty of their realization.

Although future distributions of foreign earnings to the United States should not be subject to U.S. federal income taxes, other U.S. or foreign taxes may be imposed on such earnings. We have analyzed existing factors and determined we will no longer permanently reinvest certain foreign earnings. On these undistributed foreign earnings of approximately $754 million that are no longer permanently reinvested outside of the United States, we have recorded a deferred tax liability of $13 million. The remaining undistributed foreign earnings of approximately $1,130 million remain permanently reinvested outside the United States at June 30, 2023. Of these undistributed earnings, we have recorded a deferred tax liability of $8 million where certain foreign holding companies are not permanently reinvested in their subsidiaries. It is not practicable to estimate the additional taxes, including applicable foreign withholding taxes, that might be payable on the potential distribution of such permanently reinvested foreign earnings.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

			2023						2022						2021
Balance July 1			$	90,669					$	100,759					$	86,277
Additions for tax positions related to current year			9,389						7,039						10,145
Additions for tax positions of prior years			6,171						1,415						10,320
Additions for acquisitions			25,957						—						2,376
Reductions for tax positions of prior years			(3,063)						(140)						(1,996)
Reductions for settlements			(6,923)						(3,127)						(7,165)
Reductions for expiration of statute of limitations			(11,199)						(6,647)						(2,252)
Effect of foreign currency translation			2,502						(8,630)						3,054
Balance June 30			$	113,503					$	90,669					$	100,759

The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was $114 million, $91 million and $101 million as of June 30, 2023, 2022 and 2021, respectively. The accrued interest related to the gross unrecognized tax benefits, excluded from the amounts above, was $21 million, $18 million, and $18 million as of June 30, 2023, 2022 and 2021, respectively. The accrued penalties related to the gross unrecognized tax benefits, excluded from the amounts above, was $2 million as of June 30, 2023. There were no accrued penalties related to the gross unrecognized tax benefits as of June 30, 2022 and 2021.

It is reasonably possible that, within the next 12 months, the amount of gross unrecognized tax benefits could be reduced by up to approximately $40 million as a result of the revaluation of existing uncertain tax positions arising from developments in the examination process or the closure of tax statutes. Any increase in the amount of unrecognized tax benefits within the next 12 months is expected to be insignificant.

We file income tax returns in the United States and in various foreign jurisdictions. In the normal course of business, we are subject to examination by taxing authorities throughout the world. We are open to assessment of our U.S. federal income tax returns by the Internal Revenue Service for years after 2013, and our state and local income tax returns for years after 2016. We are open to assessment for significant foreign jurisdictions for years after 2011.

6. Earnings Per Share

Basic earnings per share are computed using the weighted-average number of common shares outstanding during the year. Diluted earnings per share are computed using the weighted-average number of common shares and common share equivalents outstanding during the year. Common share equivalents represent the dilutive effect of outstanding equity-based awards. The reconciliation of the numerator and denominator of basic and diluted earnings per share was as follows:

			2023						2022						2021
Numerator:
Net income attributable to common shareholders			$	2,082,936					$	1,315,605					$	1,746,100
Denominator:
Basic - weighted-average common shares			128,367,842						128,539,387						128,999,879
Increase in weighted-average common shares from dilutive effect of equity-based awards			1,454,243						1,816,556						1,834,599
Diluted - weighted-average common shares, assuming exercise of equity-based awards			129,822,085						130,355,943						130,834,478
Basic earnings per share			$	16.23					$	10.24					$	13.54
Diluted earnings per share			$	16.04					$	10.09					$	13.35

For 2023, 2022 and 2021, 1.0 million, 0.4 million and 0.4 million common shares, respectively, subject to equity-based awards were excluded from the computation of diluted earnings per share because the effect of their exercise would be anti-dilutive.

7. Inventories

Inventories are stated at the lower of cost or net realizable value using the first-in, first-out ("FIFO") method.

The inventories caption in the Consolidated Balance Sheet is comprised of the following components:

June 30,						2023						2022
Finished products						$	794,128					$	811,702
Work in process						1,488,665						1,128,501
Raw materials						625,086						274,350
Total						$	2,907,879					$	2,214,553

8. Goodwill and Intangible Assets

The changes in the carrying amount of goodwill are as follows:

			Diversified Industrial Segment						Aerospace Systems Segment						Total
Balance June 30, 2021			$	7,457,309					$	602,378					$	8,059,687
Divestitures			(164)						—						(164)
Goodwill reclassified to held for sale			—						(48,242)						(48,242)
Foreign currency translation			(271,164)						(35)						(271,199)
Balance June 30, 2022			$	7,185,981					$	554,101					$	7,740,082
Acquisitions			452,008						2,337,072						2,789,080
Divestitures			(1,064)						(2,232)						(3,296)
Foreign currency translation			45,830						56,898						102,728
Balance June 30, 2023			$	7,682,755					$	2,945,839					$	10,628,594

Acquisitions represent goodwill resulting from the preliminary purchase price allocation for the Acquisition during the measurement period. Refer to Note 3 for further discussion.

Divestitures represent goodwill associated with the sale of businesses during 2023 and 2022.

Goodwill reclassified to held for sale, which was allocated using the relative fair value method, relates to the aircraft wheel and brake business. Refer to Note 3 for further discussion.

Goodwill is tested for impairment at the reporting unit level annually and between annual tests whenever events or circumstances indicate that the carrying value of a reporting unit may exceed its fair value. Our annual impairment tests performed in 2023, 2022 and 2021 resulted in no impairment loss being recognized.

Intangible assets are amortized on a straight-line method over their legal or estimated useful lives. The gross carrying value and accumulated amortization for each major category of intangible asset at June 30 are as follows:

			2023												2022
			Gross Carrying Amount						Accumulated Amortization						Gross Carrying Amount						Accumulated Amortization
Patents and technology			$	2,128,847					$	352,040					$	990,775					$	259,587
Trade names			1,047,678						390,737						727,820						339,244
Customer relationships and other			8,109,063						2,092,197						3,735,042						1,718,989
Total			$	11,285,588					$	2,834,974					$	5,453,637					$	2,317,820

Total intangible asset amortization expense in 2023, 2022 and 2021 was $501 million, $314 million and $325 million, respectively. The estimated intangible asset amortization expense for the five years ending June 30, 2024 through 2028 is $550 million, $528 million, $523 million, $518 million and $508 million, respectively.

Intangible assets are evaluated for impairment whenever events or circumstances indicate that the undiscounted net cash flows to be generated by their use over their expected useful lives and eventual disposition may be less than their net carrying value. No material intangible asset impairments occurred in 2023, 2022 or 2021.

9. Financing Arrangements

The Company has a line of credit totaling $3.0 billion through a multi-currency revolving credit agreement with a group of banks, of which $1.2 billion was available for borrowing as of June 30, 2023. During 2023, the Company amended its credit agreement by extending the expiration to June 2028. The Company has the right to request a one-year extension of the expiration date on an annual basis, which request may result in changes to the current terms and conditions of the credit agreement. Advances from the credit agreement can be used for general corporate purposes, including acquisitions, and for the refinancing of existing indebtedness. The credit agreement supports our commercial paper program, and issuances of commercial paper reduce the amount of credit available under the agreement. The credit agreement requires the payment of an annual facility fee, the amount of which may increase in the event our credit ratings are lowered. Although a lowering of our credit ratings would likely increase the cost of future debt, it would not limit our ability to use the credit agreement nor would it accelerate the repayment of any outstanding borrowings.

The Company is currently authorized to sell up to $3.0 billion of short-term commercial paper notes. There were $1.8 billion commercial paper notes outstanding at June 30, 2023 and $1.4 billion were outstanding at June 30, 2022. The Company had no outstanding borrowings from foreign banks at June 30, 2023 and 2022. The weighted-average interest rate on notes payable outstanding at June 30, 2023 and 2022 was 5.6 percent and 0.7 percent, respectively.

In the ordinary course of business, some of our locations may enter into financial guarantees through financial institutions which enable customers to be reimbursed in the event of nonperformance by the Company.

The Company's credit agreements and indentures governing certain debt agreements contain various covenants, the violation of which would limit or preclude the use of the applicable agreements for future borrowings, or might accelerate the maturity of the related outstanding borrowings covered by the applicable agreements. Based on our rating level at June 30, 2023, the most restrictive financial covenant provides that the ratio of debt to debt-shareholders' equity cannot exceed 0.65 to 1.0. As of June 30, 2023, our debt to debt-shareholders' equity ratio was 0.55 to 1.0. We are in compliance with all covenants.

10. Debt

June 30,						2023						2022
Domestic:
Fixed rate medium-term notes, 3.30% to 6.25%, due 2025 - 2045						$	1,825,000					$	2,125,000
Senior Notes, 2.70% to 4.50%, due 2024 - 2049						7,275,000						7,275,000
Term Loan Facility, due 2026						875,000						—
Foreign:
Euro Senior Notes, 1.125%, due 2025						763,770						733,950
Other long-term debt						106,598						11,127
Deferred debt issuance costs						(74,713)						(86,972)
Total long-term debt						10,770,655						10,058,105
Less: Long-term debt payable within one year						1,974,371						302,280
Long-term debt, net						$	8,796,284					$	9,755,825

In connection with the Acquisition, the Company entered into a Bridge Credit Agreement on August 2, 2021 (the "Bridge Credit Agreement"). Under the Bridge Credit Agreement, lenders committed to provide senior, unsecured financing in the aggregate principal amount of £6.5 billion at August 2, 2021. In July 2022, after consideration of the escrow balance and funds available under the delayed-draw term loan facility (the “Term Loan Facility”), we reduced the aggregate committed principal amount of the Bridge Credit Agreement to zero, and the Bridge Credit Agreement was terminated.

In September 2022, the Company fully drew against the $2.0 billion delayed-draw Term Loan Facility, which will mature in its entirety in September 2025. We used the proceeds of the Term Loan Facility to finance a portion of the Acquisition. At June 30, 2023, the Term Loan Facility had an interest rate of Secured Overnight Financing Rate plus 122.5 bps. Interest payments are made at the interest reset dates, which are either one, three, or six months at the discretion of the Company.

Additionally, the provisions of the Term Loan Facility allow for prepayments at the Company's discretion. During 2023, we made principal payments totaling $1.1 billion related to the Term Loan Facility.

Principal amounts of long-term debt payable in the five years ending June 30, 2024 through 2028 are $1,980 million, $1,268 million, $879 million, $704 million and $1,204 million, respectively. The principal amounts of long-term debt payable exclude the amortization of debt issuance costs.

11. Leases

We primarily enter into lease agreements for office space, distribution centers, certain manufacturing facilities and equipment. Certain leases contain options that provide us with the ability to extend the lease term. Such options are included in the lease term when it is reasonably certain that the option will be exercised. When accounting for leases, we combine payments for leased assets, related services and other components of a lease. Payments within certain lease agreements are adjusted periodically for changes in an index or rate. In addition, leases with an initial term of 12 months or less are not recorded on the Consolidated Balance Sheet.

The discount rate implicit within our leases is generally not determinable, and therefore we determine the discount rate based on our incremental borrowing rate. The incremental borrowing rate for our leases is determined based on lease term and the currency in which lease payments are made.

The components of lease expense are as follows:

			2023						2022						2021
Operating lease expense			$	60,411					$	46,026					$	48,171
Finance lease cost:
Amortization of lease assets			5,604						1,861						1,576
Interest on lease liabilities			4,383						390						455
Short-term lease cost			7,577						7,041						7,674
Variable lease cost			5,747						5,849						5,835
Total lease cost			$	83,722					$	61,167					$	63,711

Supplemental cash flow information related to leases is as follows:

			2023						2022						2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows - payments on operating leases			$	57,717					$	45,371					$	47,080
Operating cash outflows - interest payments on finance leases			4,383						390						455
Financing cash outflows - payments on finance lease obligations			5,141						1,992						1,713
Right-of-use assets obtained in exchange for operating lease obligations			45,365						50,925						41,637
Right-of-use assets obtained in exchange for finance lease obligations			1,340						—						3,834

Supplemental balance sheet information related to operating leases is as follows:

			2023						2022
Operating Leases
Operating lease right-of-use assets (included within Investments and other assets)			$	232,733					$	133,412
Current operating lease liabilities (included within Other accrued liabilities)			$	50,523					$	36,023
Long-term operating lease liabilities (included within Other liabilities)			187,445						100,337
Total operating lease liabilities			$	237,968					$	136,360
Finance Leases
Land and buildings			$	107,910					$	9,223
Machinery and equipment			5,113						5,066
Accumulated depreciation			(8,196)						(3,836)
Net property, plant and equipment			$	104,827					$	10,453
Current portion of long-term debt (included within Other accrued liabilities)			$	4,198					$	1,691
Long-term debt (included within Other liabilities)			100,889						8,575
Total finance lease liabilities			$	105,087					$	10,266
Weighted-average remaining lease term
Operating leases			6.9 years						5.6 years
Finance leases			20.8 years						15.7 years
Weighted-average discount rate
Operating leases			3.9		%				1.6		%
Finance leases			5.2		%				3.3		%

Maturities of lease liabilities at June 30, 2023 are as follows:

			Operating Leases						Finance Leases
2024			$	58,351					$	9,483
2025			49,196						8,871
2026			38,352						8,792
2027			28,590						8,896
2028			21,481						8,936
Thereafter			82,407						128,519
Total lease payments			$	278,377					$	173,497
Less imputed interest			40,409						68,410
Total lease liabilities			$	237,968					$	105,087

12. Retirement Benefits

Pensions - The Company has noncontributory defined benefit pension plans covering eligible employees, including certain employees in foreign countries. Our largest plans are generally closed to new participants. Plans for most salaried employees provide pay-related benefits based on years of service. Plans for hourly employees generally provide benefits based on flat-dollar amounts and years of service. We also have arrangements for certain key employees, which provide for supplemental retirement benefits. In general, the Company's policy is to fund these plans based on legal requirements, tax considerations, local practices and investment opportunities. We also sponsor defined contribution plans and participate in government-sponsored programs in certain foreign countries.

A summary of the Company's defined benefit pension plans follows:

			2023						2022						2021
Benefit cost
Service cost			$	57,418					$	76,638					$	84,188
Interest cost			225,468						110,250						102,475
Expected return on plan assets			(311,145)						(267,888)						(267,579)
Amortization of prior service cost			931						4,103						5,325
Amortization of unrecognized actuarial loss			17,178						157,288						207,897
Amortization of transition obligation			—						8						18
One-time charges related to divestitures			(2,480)						—						—
Net periodic benefit cost			$	(12,630)					$	80,399					$	132,324

Components of net pension benefit cost, other than service cost, are included in other expense (income), net in the Consolidated Statement of Income.

			2023						2022
Change in benefit obligation
Benefit obligation at beginning of year			$	4,959,319					$	6,323,003
Service cost			57,418						76,638
Interest cost			225,468						110,250
Acquisition			1,181,139						—
Plan amendments			2,521						(5,691)
Divestiture			(1,779)						—
Actuarial gain			(349,476)						(1,097,053)
Benefits paid			(312,758)						(256,868)
Foreign currency translation and other			73,839						(190,960)
Benefit obligation at end of year			$	5,835,691					$	4,959,319
Change in plan assets
Fair value of plan assets at beginning of year			$	4,362,153					$	5,305,577
Actual gain (loss) on plan assets			31,399						(605,642)
Acquisition			1,140,707						—
Employer contributions			153,038						96,717
Benefits paid			(312,758)						(256,868)
Foreign currency translation and other			80,756						(177,631)
Fair value of plan assets at end of year			$	5,455,295					$	4,362,153
Funded status			$	(380,396)					$	(597,166)

Amounts recognized on the Consolidated Balance Sheet
Investments and other assets			$	145,809					$	103,632
Other accrued liabilities			(57,783)						(19,307)
Pensions and other postretirement benefits			(468,422)						(681,491)
Net amount recognized			$	(380,396)					$	(597,166)
Amounts recognized in Accumulated Other Comprehensive (Loss)
Net actuarial loss			$	593,937					$	672,775
Prior service cost			6,489						4,901
Net amount recognized			$	600,426					$	677,676

The presentation of the amounts recognized on the Consolidated Balance Sheet and in accumulated other comprehensive (loss) is on a debit (credit) basis and excludes the effect of income taxes.

As of the date of the Acquisition, the Meggitt plans were remeasured at fair value using accounting policies consistent with Parker plans.

At June 30, 2023, the benefit obligation increased primarily due to plans acquired with the Acquisition partially offset by increased discount rates. At June 30, 2022, the benefit obligation decreased primarily due to significantly higher discount rates.

The plans acquired with the Acquisition are the primary contributing factor for the increase in plan assets' fair value during 2023. In 2022, investment (losses) were the largest driver for the decrease in plan assets.

The accumulated benefit obligation for all defined benefit plans was $5.7 billion and $4.8 billion at June 30, 2023 and 2022, respectively.

Information for pension plans with accumulated benefit obligations in excess of plan assets:

			2023						2022
Accumulated benefit obligation			$	4,352,952					$	4,284,601
Fair value of plan assets			3,955,284						3,742,513

Information for pension plans with projected benefit obligations in excess of plan assets:

			2023						2022
Projected benefit obligation			$	4,545,650					$	4,483,486
Fair value of plan assets			4,019,445						3,782,688

We expect to make cash contributions of approximately $171 million to our defined benefit pension plans in 2024, the majority of which relates to our non-U.S. plans. Estimated future benefit payments in the five years ending June 30, 2024 through 2028 are $413 million, $413 million, $380 million, $387 million and $388 million, respectively, and $2.0 billion in the aggregate for the five years ending June 30, 2029 through June 30, 2033.

The assumptions used to measure net periodic benefit cost for the Company's significant defined benefit plans are:

			2023						2022						2021
U.S. defined benefit plan
Discount rate			4.36		%				2.55		%				2.36		%
Average increase in compensation			3.35		%				3.05		%				2.98		%
Expected return on plan assets			6.50		%				6.50		%				6.75		%
Non-U.S. defined benefit plans
Discount rate			0.60 to 5.06%						0.25 to 2.95%						0.20 to 3.03%
Average increase in compensation			1.75 to 4.00%						1.75 to 4.50%						1.75 to 4.50%
Expected return on plan assets			1.00 to 5.10%						1.00 to 4.50%						1.00 to 5.40%

The assumptions used to measure the benefit obligation for the Company's significant defined benefit plans are:

			2023						2022
U.S. defined benefit plan
Discount rate			4.88		%				4.36		%
Average increase in compensation			3.81		%				3.81		%
Non-U.S. defined benefit plans
Discount rate			0.90 to 5.20%						0.60 to 5.06%
Average increase in compensation			2.00 to 4.40%						1.75 to 4.00%

The discount rate assumption is based on current rates of high-quality, long-term corporate bonds over the same estimated time period that benefit payments will be required to be made. The expected return on plan assets assumption is based on the weighted-average expected return of the various asset classes in the plans' portfolio. The asset class return is developed using historical asset return performance as well as current market conditions such as inflation, interest rates and equity market performance.

The weighted-average allocation of the majority of the assets related to defined benefit plans is as follows:

			2023						2022
Equity securities			30		%				31		%
Debt securities			45		%				43		%
Other investments			25		%				26		%
			100		%				100		%

The weighted-average target asset allocation as of June 30, 2023 is 39 percent equity securities, 45 percent debt securities and 16 percent other investments. The investment strategy for the Company's worldwide defined benefit pension plan assets focuses on achieving prudent actuarial funding ratios while maintaining acceptable levels of risk in order to provide adequate liquidity to meet immediate and future benefit requirements. This strategy requires investment portfolios that are broadly diversified across various asset classes and external investment managers. Assets held in the U.S. defined benefit plan account for approximately 65 percent of our total defined benefit plan assets. The overall investment strategy with respect to our U.S. defined benefit plan is to use a funding strategy more heavily weighted toward liability-hedging assets as the funded status improves. Over time, we will continue to add long duration fixed income investments to the portfolio. These securities are highly correlated with our pension liabilities and will be managed in a liability framework.

The fair values of pension plan assets at June 30, 2023 and at June 30, 2022, by asset class, are as follows:

			June 30, 2023						Quoted Prices In Active Markets (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)
Cash and cash equivalents			$	341,812					$	333,978					$	7,834					$	—
Equity securities
U.S. based companies			538,118						523,649						14,469						—
Non-U.S. based companies			152,354						76,173						76,181						—
Fixed income securities
Corporate debt securities			464,056						118,536						345,520						—
Government issued securities			610,326						570,368						39,958						—
Mutual funds
Equity funds			11,406						11,406						—						—
Fixed income funds			357						357						—						—
Mutual funds measured at net asset value			264,346
Common/Collective trusts measured at net asset value			2,626,832
Limited Partnerships measured at net asset value			137,077
Miscellaneous			308,610						—						308,610						—
Total at June 30, 2023			$	5,455,294					$	1,634,467					$	792,572					$	—

			June 30, 2022						Quoted Prices In Active Markets (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)
Cash and cash equivalents			$	201,053					$	190,616					$	10,437					$	—
Equity securities
U.S. based companies			327,122						327,122						—						—
Non-U.S. based companies			8,700						8,700						—						—
Fixed income securities
Corporate debt securities			380,694						1,309						379,385						—
Government issued securities			87,650						55,201						32,449						—
Mutual funds
Equity funds			9,085						9,085						—						—
Fixed income funds			9,679						9,679						—						—
Mutual funds measured at net asset value			279,849
Common/Collective trusts measured at net asset value			2,718,445
Limited Partnerships measured at net asset value			133,026
Miscellaneous			206,850						—						206,850						—
Total at June 30, 2022			$	4,362,153					$	601,712					$	629,121					$	—

Cash and cash equivalents are valued at cost, which approximates fair value. During 2021, the U.S. defined benefit plan implemented a new liability-hedging initiative that requires the plan to maintain a certain cash balance. At June 30, 2023, this required cash balance totaled approximately $49 million.

Equity securities are valued at the closing price reported on the active market on which the individual securities are traded. U.S. based companies include Parker stock with a fair value of $519 million and $327 million as of June 30, 2023 and 2022, respectively.

Fixed income securities are valued using both market observable inputs for similar assets that are traded on an active market and the closing price on the active market on which the individual securities are traded.

Mutual funds are valued using the closing market price reported on the active market on which the fund is traded or at net asset value per share and primarily consist of equity and fixed income funds. The equity funds primarily provide exposure to U.S. and international equities, real estate and commodities. The fixed income funds primarily provide exposure to high-yield securities and emerging market fixed income instruments. Mutual funds measured at fair value using the net asset value per share practical expedient have not been categorized in the fair value hierarchy and are presented in the tables above to permit reconciliation of the fair value hierarchy to total pension plan assets. Redemption of a certain mutual fund is subject to a lock-up period, lasting throughout its duration, scheduled to terminate July 2026. However, this mutual fund may extend its duration up to an additional two years under certain conditions.

Common/Collective trusts primarily consist of equity, fixed income and real estate funds and are valued using the closing market price reported on the active market on which the fund is traded or at net asset value per share. Common/Collective trust investments can be redeemed without restriction after giving appropriate notice to the issuer. Generally, redemption of the entire investment balance of all common/collective trusts requires no more than a 90-day notice period. The equity funds provide exposure to large, mid and small cap U.S. equities, international large and small cap equities and emerging market equities. The fixed income funds provide exposure to U.S., international and emerging market debt securities. Common/Collective trusts measured at fair value using the net asset value per share practical expedient have not been categorized in the fair value hierarchy and are presented in the tables above to permit reconciliation of the fair value hierarchy to total pension plan assets.

Limited Partnerships' interest in venture capital investments are measured at fair value based on net asset value as determined by the respective fund investment. A certain limited partnership investment, for which the lock-up period expired June 30, 2022, is restricted to a maximum redemption of 20 percent of its account balance every six months upon a 90-day notification period. Limited Partnerships measured at fair value using the net asset value per share practical expedient have not been categorized in the fair value hierarchy and are presented in the tables above to permit reconciliation of the fair value hierarchy to total pension plan assets.

Miscellaneous primarily includes insurance contracts held in the asset portfolio of the Company's non-U.S. defined benefit pension plans and net payables for securities purchased but not settled in the asset portfolio of the Company's U.S. defined benefit pension plan. Insurance contracts are valued at the present value of future cash flows promised under the terms of the insurance contracts.

The primary investment objective of equity securities and equity funds, within both the mutual fund and common/collective trust asset class, is to obtain capital appreciation in an amount that at least equals various market-based benchmarks. The primary investment objective of fixed income securities and fixed income funds, within both the mutual fund and common/collective trust asset class, is to provide for a constant stream of income while preserving capital. The primary investment objective of limited partnerships is to achieve capital appreciation through an investment program focused on specialized investment strategies. The primary investment objective of the investments in the miscellaneous category is to provide a stable rate of return over a specified period of time.

Employee Savings Plan - We sponsor an employee stock ownership plan ("ESOP") as part of our legacy savings and investment 401(k) plan. The ESOP is available to eligible domestic employees. Effective January 1, 2022, the Company matching contributions were increased, up to a maximum of five percent of eligible compensation from the previous maximum of four percent of eligible compensation. These contributions are recorded as compensation expense. Participants may direct company matching contributions to any investment option within the savings and investment 401(k) plan.

			2023						2022						2021
Shares held by ESOP			3,779,985						4,125,214						4,497,902
Company matching contributions			$	104,237					$	87,554					$	66,249

In addition to shares within the ESOP, as of June 30, 2023, employees have elected to invest in 1,115,612 shares of common stock within a company stock fund of the savings and investment 401(k) plan.

The Company has a retirement income account ("RIA") within our legacy savings and investment 401(k) plan. We make a cash contribution to the participant's RIA each year and participants do not contribute to the RIA. Prior to January 1, 2021, the amount of the annual contribution was based on the participant's age and years of service. Beginning January 1, 2021, we amended the RIA ensuring most participants receive a flat three percent annual contribution of eligible compensation with some grandfathered participants receiving annual contributions calculated at a higher percent of eligible compensation. Under the amended RIA, no participant will receive less than the flat three percent contribution. The Company recognized $63 million, $57 million and $42 million in expense related to the RIA in 2023, 2022 and 2021, respectively.

In September 2023, we acquired several defined contribution plans, relating to the Meggitt acquisition, which are comprised of similar company matching contributions and RIA features as our legacy plan. During the year we recorded additional company matching expense of $9 million and additional RIA type expense of $11 million for the acquired plan.

Other Postretirement Benefits - The Company provides postretirement medical and life insurance benefits to certain retirees and eligible dependents. Most plans are contributory, with retiree contributions adjusted annually. The plans are unfunded and pay stated percentages of covered medically necessary expenses incurred by retirees after subtracting payments by Medicare or other providers and after stated deductibles have been met. For most plans, the Company has established cost maximums to more effectively control future medical costs. We have reserved the right to change these benefit plans.

The Company recognized $2 million, $1 million and $1 million in expense related to other postretirement benefits in 2023, 2022 and 2021, respectively. Components of net other postretirement benefit cost, other than service cost, are included in other expense (income), net in the Consolidated Statement of Income.

			2023						2022
Change in benefit obligation
Benefit obligation at beginning of year			$	48,876					$	63,739
Service cost			330						206
Interest cost			3,004						982
Acquisition			39,112						—
Actuarial gain			(4,403)						(11,220)
Benefits paid			(8,352)						(4,831)
Benefit obligation at end of year			$	78,567					$	48,876
Funded status			$	(78,567)					$	(48,876)

Amounts recognized on the Consolidated Balance Sheet
Other accrued liabilities			$	(7,831)					$	(4,971)
Pensions and other postretirement benefits			(70,736)						(43,905)
Net amount recognized			$	(78,567)					$	(48,876)
Amounts recognized in Accumulated Other Comprehensive (Loss)
Net actuarial gain			$	(17,952)					$	(15,154)

The presentation of the amounts recognized on the Consolidated Balance Sheet and in accumulated other comprehensive (loss) is on a debit (credit) basis and is before the effect of income taxes.

As of the date of the Acquisition, the Meggitt plans were remeasured at fair value using accounting policies consistent with Parker plans.

The increase in the benefit obligation is due to the Acquisition in 2023. The decrease in the benefit obligation in 2022 is due to significantly higher discount rates and updated census data and actuarial assumptions.

The assumptions used to measure the net periodic benefit cost for postretirement benefit obligations are:

			2023						2022						2021
Discount rate			4.26		%				2.36		%				2.14		%
Current medical cost trend rate (Pre-65 participants)			6.73		%				6.45		%				6.73		%
Current medical cost trend rate (Post-65 participants)			6.81		%				6.72		%				7.03		%
Ultimate medical cost trend rate			4.50		%				4.50		%				4.50		%
Medical cost trend rate decreases to ultimate in year			2031						2029						2028

The discount rate assumption used to measure the benefit obligation was 4.86 percent and 4.26 percent in 2023 and 2022, respectively.

Estimated future benefit payments for other postretirement benefits in the five years ending June 30, 2024 through 2028 are $8 million, $7 million, $7 million, $7 million and $7 million, respectively, and $29 million in the aggregate for the five years ending June 30, 2029 through June 30, 2033.

Other - The Company has established nonqualified deferred compensation programs, which permit officers, directors and certain management employees to annually elect to defer a portion of their compensation, on a pre-tax basis, until their retirement. The retirement benefit to be provided is based on the amount of compensation deferred, company matching contributions and earnings on the deferrals. In addition, we maintain a defined contribution nonqualified supplemental executive pension plan in which the Company is the only contributor. During 2023, 2022 and 2021, we recorded expense (income) relating to these programs of $20 million, $(21) million and $45 million, respectively.

The Company has invested in corporate-owned life insurance policies to assist in meeting the obligations under these programs. The policies are held in a rabbi trust and are recorded as assets of the Company.

13. Equity

Changes in accumulated other comprehensive (loss) in shareholders' equity by component:

			Foreign Currency Translation Adjustment and Other						Retirement Benefit Plans						Total
Balance June 30, 2021			$	(865,865)					$	(700,862)					$	(1,566,727)
Other comprehensive (loss) income before reclassifications			(290,853)						185,101						(105,752)
Amounts reclassified from accumulated other comprehensive (loss)			7,647						121,634						129,281
Balance June 30, 2022			$	(1,149,071)					$	(394,127)					$	(1,543,198)
Other comprehensive income before reclassifications			187,027						53,172						240,199
Amounts reclassified from accumulated other comprehensive (loss)			—						10,127						10,127
Balance June 30, 2023			$	(962,044)					$	(330,828)					$	(1,292,872)

Significant reclassifications out of accumulated other comprehensive (loss) in shareholders' equity during 2023:

Details about Accumulated Other Comprehensive (Loss) Components						Income (Expense) Reclassified from Accumulated Other Comprehensive (Loss)						Consolidated Statement of Income Classification
Retirement benefit plans
Amortization of prior service cost and initial net obligation						$	(931)					Other expense (income), net
Recognized actuarial loss						(15,573)						Other expense (income), net
Divestiture activity						2,480						Other expense (income), net
Total before tax						(14,024)
Tax benefit						3,897
Net of tax						$	(10,127)

Significant reclassifications out of accumulated other comprehensive (loss) in shareholders' equity during 2022:

Details about Accumulated Other Comprehensive (Loss) Components						Income (Expense) Reclassified from Accumulated Other Comprehensive (Loss)						Consolidated Statement of Income Classification
Retirement benefit plans
Amortization of prior service cost and initial net obligation						$	(4,111)					Other expense (income), net
Recognized actuarial loss						(156,912)						Other expense (income), net
Total before tax						(161,023)
Tax benefit						39,389
Net of tax						$	(121,634)

Share Repurchases - The Company has a program to repurchase its common shares. On October 22, 2014, the Board of Directors of the Company approved an increase in the overall number of shares authorized to repurchase under the program so that, beginning on such date, the aggregate number of shares authorized for repurchase was 35 million. There is no limitation on the number of shares that can be repurchased in a year. Repurchases may be funded primarily from operating cash flows and commercial paper borrowings and the shares are initially held as treasury shares.

The number of common shares repurchased at the average purchase price follows:

			2023						2022						2021
Shares repurchased			663,599						1,281,818						331,259
Average price per share, including commissions			$	301.39					$	296.71					$	301.88

14. Stock Incentive Plans

The Company's 2016 Omnibus Stock Incentive Plan ("2016 SIP") provides for the granting of share-based incentive awards in the form of nonqualified stock options, stock appreciation rights ("SARs"), restricted stock units ("RSUs") and restricted and unrestricted stock to officers and key employees of the Company. On October 23, 2019, the number of shares of common stock authorized for issuance under the 2016 SIP increased to 23.8 million shares. At June 30, 2023, 6.4 million common stock shares were available for future issuance.

We satisfy share-based incentive award obligations by issuing shares of common stock out of treasury, which have been repurchased pursuant to our share repurchase program described in Note 13, or through the issuance of previously unissued common stock.

SARs - Upon exercise, SARs entitle the participant to receive shares of common stock equal to the increase in value of the award between the grant date and the exercise date. SARs are exercisable from one to three years after the date of grant and expire no more than 10 years after grant.

The fair value of each SAR award granted in 2023, 2022 and 2021 was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions:

			2023						2022						2021
Risk-free interest rate			3.0		%				0.8		%				0.4		%
Expected life of award			5.6 years						5.6 years						5.4 years
Expected dividend yield of stock			1.8		%				1.9		%				2.0		%
Expected volatility of stock			37.1		%				35.7		%				35.2		%
Weighted-average fair value			$	97.70					$	81.71					$	53.92

The risk-free interest rate was based on U.S. Treasury yields with a term similar to the expected life of the award. The expected life of the award was derived by referring to actual exercise and post-vesting employment termination experience. The expected dividend yield was based on our historical dividend rate and stock price over a period similar to the expected life of the award. The expected volatility of stock was derived by referring to changes in our historical common stock prices over a time-frame similar to the expected life of the award.

SAR activity during 2023 is as follows (aggregate intrinsic value in millions):

			Number of Shares						Weighted-Average Exercise Price						Weighted-Average Remaining Contractual Term						Aggregate Intrinsic Value
Outstanding June 30, 2022			4,099,144						$	172.27
Granted			605,135						$	298.26
Exercised			(800,815)						$	134.38
Canceled			(30,035)						$	263.62
Outstanding June 30, 2023			3,873,429						$	199.08					6.0 years						$	739.7
Exercisable June 30, 2023			2,737,336						$	165.45					5.0 years						$	614.8

A summary of the status and changes of shares subject to SAR awards and the related average price per share follows:

			Number of Shares						Weighted-Average Grant Date Fair Value
Nonvested June 30, 2022			1,212,497						$	60.44
Granted			605,135						$	97.36
Vested			(654,784)						$	52.13
Canceled			(26,755)						$	83.35
Nonvested June 30, 2023			1,136,093						$	84.36

During 2023, 2022 and 2021, we recognized stock-based compensation expense of $51 million, $37 million and $35 million, respectively, relating to SAR awards. The Company derives a tax deduction measured by the excess of the market value over the grant price at the date stock-based awards are exercised. The related income tax benefit was credited to income tax expense.

At June 30, 2023, $19 million of expense with respect to nonvested SAR awards has yet to be recognized and will be amortized into expense over a weighted-average period of approximately 23 months. The total fair value of shares vested during 2023, 2022 and 2021 was $34 million, $29 million and $25 million, respectively.

Information related to SAR awards exercised during 2023, 2022 and 2021 is as follows:

			2023						2022						2021
Net cash proceeds			$	3,476					$	2,831					$	4,684
Intrinsic value			$	158,452					$	97,002					$	225,025
Income tax benefit			$	26,854					$	15,845					$	37,437
Number of shares surrendered			152,835						98,673						316,330

RSUs - RSUs constitute an agreement to deliver shares of common stock to the participant at the end of a vesting period. Generally, the RSUs granted to employees vest, and the underlying stock is issued ratably, over a three-year graded vesting period. Nonvested RSUs may not be transferred and do not have dividend or voting rights. For each nonvested RSU, recipients are entitled to receive a dividend equivalent, payable in cash or common shares, equal to the cash dividend per share paid to common shareholders.

The fair value of each RSU award granted in 2023, 2022 and 2021 was based on the fair market value of our common stock on the date of grant. A summary of the status and changes of shares subject to RSU awards for employees and the related average price per share follows:

			Number of Shares						Weighted-Average Grant Date Fair Value
Nonvested June 30, 2022			277,902						$	224.40
Granted			93,336						$	298.54
Vested			(155,718)						$	194.46
Canceled			(9,999)						$	262.95
Nonvested June 30, 2023			205,521						$	278.88

During 2023, 2022 and 2021, we recognized stock-based compensation expense of $27 million, $26 million and $26 million, respectively, relating to RSU awards for employees. At June 30, 2023, $18 million of expense with respect to nonvested RSU awards has yet to be recognized and will be amortized into expense over a weighted-average period of approximately 21 months. The total fair value of RSU awards vested during 2023, 2022 and 2021 was $30 million, $26 million and $21 million, respectively. We recognized an income tax benefit of $2 million, $4 million and $1 million relating to the issuance of common stock for RSU awards that vested during 2023, 2022 and 2021, respectively.

Additionally, we granted RSUs with a one-year vesting period to non-employee members of the Board of Directors. Recipients receive a dividend equivalent payable in common shares, equal to the cash dividend per share paid to common shareholders. A summary of the status and changes of shares subject to Board of Directors RSU awards and the related average price per share follows:

			Number of Shares						Weighted-Average Grant Date Fair Value
Nonvested June 30, 2022			5,620						$	297.89
Granted			6,638						$	278.99
Vested			(5,650)						$	297.89
Canceled			(383)						$	278.90
Nonvested June 30, 2023			6,225						$	278.90

The fair value of each RSU award granted to the Board of Directors in 2023, 2022 and 2021 was based on the fair market value of our common stock on the date of grant. In 2023, 2022 and 2021, we recognized stock-based compensation expense of $1.9 million, $1.8 million and $1.5 million, respectively, relating to these awards. During 2023, 2022 and 2021, we recognized an income tax (cost) benefit of $(0.02) million, $0.2 million and $2.1 million, respectively, related to the vesting of Board of Directors RSU awards. At June 30, 2023, $0.4 million of expense with respect to nonvested RSU awards granted to the Board of Directors has yet to be recognized and will be amortized into expense over a weighted-average period of approximately three months.

LTIP - The Company's Long Term Incentive Plans ("LTIP") provide for the issuance of unrestricted stock to certain officers and key employees based on the attainment of certain goals relating to our revenue growth, earnings per share growth and return on invested capital during the three-year performance period.

Stock issued and surrendered for LTIP						2023						2022						2021
LTIP three-year plan						2020-21-22						2019-20-21						2018-19-20
Number of shares issued						204,175						251,783						210,864
Number of shares surrendered						102,120						124,007						105,402
Share value on date of issuance						$	311.65					$	271.38					$	317.60
Total value of shares issued						$	63,631					$	68,329					$	66,970

Under the Company's 2021-22-23 LTIP, a payout of unrestricted stock will be issued in April 2024.

The fair value of each LTIP award granted in 2023, 2022 and 2021 was based on the fair market value of our common stock on the date of grant. These nonvested LTIP awards entitle participants to earn a dividend equivalent unit, payable in common shares, equal to the cash dividend per share paid to common shareholders. These dividend equivalent units do not have dividend or voting rights and are subject to the same performance goals as the initial award granted. A summary of shares relating to the LTIP and the related average price per share follows:

			Number of Shares						Weighted-Average Grant Date Fair Value
Nonvested June 30, 2022			417,789						$	246.63
Granted			186,194						$	301.64
Vested			(199,143)						$	205.95
Canceled			(12,233)						$	279.75
Nonvested June 30, 2023			392,607						$	292.32

During 2023, 2022 and 2021, we recorded stock-based compensation expense of $63 million, $72 million and $59 million, respectively, relating to the LTIP. During 2023, 2022 and 2021, we recognized an income tax benefit of $4 million, $5 million and $2 million, respectively, relating to the LTIP.

15. Research and Development

Independent research and development costs amounted to $258 million in 2023, $191 million in 2022 and $205 million in 2021. Pre-production expense incurred in connection with development contracts amounted to $73 million in 2023, $74 million in 2022 and $54 million in 2021.

16. Financial Instruments

The Company’s financial instruments consist primarily of cash and cash equivalents, marketable securities and other investments, accounts receivable and long-term investments, as well as obligations under accounts payable, trade, notes payable and long-term debt. Due to their short-term nature, the carrying values for cash and cash equivalents, accounts receivable, accounts payable, trade and notes payable approximate fair value.

Marketable securities and other investments include deposits and equity investments. Deposits are recorded at cost, and equity investments are recorded at fair value. Changes in fair value of equity investments are recognized in net income.

The carrying value of long-term debt, which excludes the impact of net unamortized debt issuance costs, and estimated fair value of long-term debt at June 30 are as follows:

						2023						2022
Carrying value of long-term debt						$	10,845,359					$	10,145,077
Estimated fair value of long-term debt						10,221,563						9,709,407

The fair value of long-term debt is classified within level 2 of the fair value hierarchy.

The Company utilizes derivative and non-derivative financial instruments, including forward exchange contracts, costless collar contracts, cross-currency swap contracts and certain foreign currency denominated debt designated as net investment hedges, to manage foreign currency transaction and translation risk. Additionally, we acquired forward exchange contracts and cross-currency swap contracts in connection with the Acquisition. The derivative financial instrument contracts are with major investment grade financial institutions, and the Company does not anticipate any material non-performance by any of the counterparties. The Company does not hold or issue derivative financial instruments for trading purposes.

The Company’s €700 million aggregate principal amount of Senior Notes due 2025 have been designated as a hedge of the Company’s net investment in certain foreign subsidiaries. The translation of the Senior Notes due 2025 into U.S. dollars is recorded in accumulated other comprehensive (loss) and remains there until the underlying net investment is sold or substantially liquidated.

In connection with the Acquisition, the Company entered into deal-contingent forward contracts during October 2021 to mitigate the risk of appreciation in the GBP-denominated purchase price. The deal-contingent forward contracts had an aggregate notional amount of £6.4 billion, and were settled in September 2022 in connection with the Acquisition. In June 2022, we amended the agreement to include a credit support annex ("CSA") obligating Parker to post $250 million of cash collateral, which was recorded within non-trade and notes receivables on the Consolidated Balance Sheet. In July 2022, the Company received, and subsequently deposited into the escrow account, the $250 million cash collateral previously posted. Cash flows associated with the cash collateral are recorded in cash flow from investing activities on the Consolidated Statement of Cash Flows.

Derivative financial instruments are recognized on the Consolidated Balance Sheet as either assets or liabilities and are measured at fair value.

The location and fair value of derivative financial instruments reported on the Consolidated Balance Sheet are as follows:

			Balance Sheet Caption						2023						2022
Net investment hedges
Cross-currency swap contracts			Investments and other assets						$	21,578					$	21,444
Other derivative contracts
Forward exchange contracts			Non-trade and notes receivable						—						20,976
Forward exchange contracts			Other accrued liabilities						—						5,651
Deal-contingent forward contracts			Other accrued liabilities						—						1,015,426
Costless collar contracts			Non-trade and notes receivable						—						351
Costless collar contracts			Other accrued liabilities						—						1,578

The cross-currency swap, forward exchange, deal-contingent forward and costless collar contracts are reflected on a gross basis in the Consolidated Balance Sheet. The Company has not entered into any master netting arrangements.

The €69 million, €290 million and ¥2.1 billion cross-currency swap contracts have been designated as hedging instruments. The forward exchange, deal-contingent forward and costless collar contracts, as well as cross-currency swap contracts acquired as part of the Acquisition, have not been designated as hedging instruments and are considered to be economic hedges of forecasted transactions.

The forward exchange and costless collar contracts, as well as the cross-currency swap contracts acquired as part of the Acquisition, are adjusted to fair value by recording gains and losses through the cost of sales caption in the Consolidated Statement of Income. The deal-contingent forward contracts are adjusted to fair value by recording gains and losses through the other expense (income), net caption in the Consolidated Statement of Income.

Derivatives designated as hedges are adjusted to fair value by recording gains and losses through accumulated other comprehensive (loss) on the Consolidated Balance Sheet until the hedged item is recognized in earnings. We assess the effectiveness of the €69 million, €290 million and ¥2.1 billion cross-currency swap hedging instruments using the spot method. Under this method, the periodic interest settlements are recognized directly in earnings through interest expense.

Gains (losses) on derivative financial instruments were recorded in the Consolidated Statement of Income as follows:

			2023						2022						2021
Deal-contingent forward contracts			$	(389,992)					$	(1,015,426)					$	—
Forward exchange contracts			(7,259)						55,860						15,879
Costless collar contracts			11,528						(4,364)						(2,092)
Cross-currency swap contracts			(18,739)						—						—

Gains (losses) on derivative and non-derivative financial instruments that were recorded in accumulated other comprehensive (loss) in the Consolidated Balance Sheet are as follows:

			2023						2022
Cross-currency swap contracts			$	451					$	69,992
Foreign currency denominated debt			(22,534)						72,670

During 2023, 2022, and 2021, the periodic interest settlements related to the cross-currency swaps were not material.

A summary of financial assets and liabilities that were measured at fair value on a recurring basis at June 30, 2023 and 2022 are as follows:

						June 30, 2023						Quoted Prices In Active Markets (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)
Assets:
Derivatives						$	21,578					$	—					$	21,578					$	—

						June 30, 2022						Quoted Prices In Active Markets (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)
Assets:
Equity securities						$	13,038					$	13,038					$	—					$	—
Derivatives						42,771						—						42,771						—
Liabilities:
Derivatives						1,022,655						—						1,022,655						—

The fair values of the equity securities are determined using the closing market price reported in the active market in which the fund is traded.

Derivatives consist of forward exchange, deal-contingent forward, costless collar and cross-currency swap contracts, the fair values of which are calculated using market observable inputs including both spot and forward prices for the same underlying currencies. The calculation of fair value of the cross-currency swap contracts also utilizes a present value cash flow model that has been adjusted to reflect the credit risk of either the Company or the counterparty.

The primary investment objective for all investments is the preservation of principal and liquidity while earning income.

There are no other financial assets or financial liabilities that are marked to market on a recurring basis.

17. Contingencies

The Company is involved in various litigation matters arising in the normal course of business, including proceedings based on product liability claims, workers' compensation claims, employee claims, class action lawsuits, and alleged violations of various environmental laws. We are self-insured in the United States for health care, workers' compensation, general liability and product liability up to predetermined amounts, above which third-party insurance applies. Management regularly reviews the probable outcome of these proceedings, the expenses expected to be incurred, the availability and limits of the insurance coverage and the established accruals for liabilities. While the outcome of pending proceedings cannot be predicted with certainty, management believes that any liabilities that may result from these proceedings will not have a material adverse effect on our liquidity, financial condition or results of operations.

Environmental - We are currently responsible for environmental matters primarily relating to known exposures arising from environmental litigation, investigations, and remediation at various manufacturing facilities presently or formerly operated by Parker and for which we have been named as a “potentially responsible party,” along with other companies, at off-site waste disposal facilities and regional sites.

As of June 30, 2023, we had an accrual of $149.4 million for environmental matters, which are probable and reasonably estimable. The accrual is recorded based upon the best estimate of costs to be incurred in light of the progress made in determining the magnitude of remediation costs, the timing and extent of remedial actions required by governmental authorities, the amount of our liability in proportion to other responsible parties, and outcomes of litigation.

Our estimated total liability for environmental matters ranges from a minimum of $149.4 million to a maximum of $251.5 million. The largest range for any one site is approximately $27.8 million. The actual costs we will incur are dependent on final determination of contamination and required remedial action, negotiations with governmental authorities with respect to cleanup levels, changes in regulatory requirements, innovations in investigatory and remedial technologies, effectiveness of remedial technologies employed, the ability of other responsible parties to pay, outcomes of litigation, and any insurance or other third-party recoveries.

18. Business Segment Information

The Company operates in two reportable business segments: Diversified Industrial and Aerospace Systems. Both segments utilize eight core technologies, including hydraulics, pneumatics, electromechanical, filtration, fluid and gas handling, process control, engineered materials and climate control, to drive superior customer problem solving and value creation.

The Diversified Industrial Segment is an aggregation of several business units, which manufacture motion-control and fluid power system components for builders and users of various types of manufacturing, packaging, processing, transportation, agricultural, construction, and military vehicles and equipment. Diversified Industrial Segment products are marketed primarily through field sales employees and independent distributors. The Diversified Industrial North American operations have manufacturing plants and distribution networks throughout the United States, Canada and Mexico and primarily service North America. The Diversified Industrial International operations provide Parker products and services to 41 countries throughout Europe, Asia Pacific, Latin America, the Middle East and Africa.

The Aerospace Systems Segment produces actuation, fuel, oil, pneumatic, hydraulic, electric power, sensing, fire suppression, thermal management, and braking systems and components, which are utilized on virtually every domestic commercial and military aircraft. This segment serves original equipment and maintenance, repair and overhaul customers worldwide. Aerospace Systems Segment products are marketed by field sales employees and are sold directly to manufacturers and end users.

The accounting policies of the business segments are the same as those described in the Significant Accounting Policies footnote except that the business segment results are prepared on a basis that is consistent with the manner in which the Company’s management disaggregates financial information for internal review and decision-making.

						2023						2022						2021
Net Sales:
Diversified Industrial:
North America						$	8,916,194					$	7,703,150					$	6,676,449
International						5,789,499						5,638,896						5,283,710
Aerospace Systems						4,359,501						2,519,562						2,387,481
						$	19,065,194					$	15,861,608					$	14,347,640
Segment Operating Income:
Diversified Industrial:
North America						$	1,853,079					$	1,515,259					$	1,247,419
International						1,218,331						1,178,044						988,054
Aerospace Systems						562,444						501,431						402,895
Total segment operating income						3,633,854						3,194,734						2,638,368
Corporate administration						229,677						219,699						178,427
Income before interest expense and other expense						3,404,177						2,975,035						2,459,941
Interest expense						573,894						255,252						250,036
Other expense (income)						150,619						1,105,557						(37,052)
Income before income taxes						$	2,679,664					$	1,614,226					$	2,246,957
Assets:
Diversified Industrial						$	15,572,849					$	15,838,512					$	16,518,688
Aerospace Systems(a)						13,661,086						3,020,606						3,077,395
Corporate						730,537						7,084,825						745,117
						$	29,964,472					$	25,943,943					$	20,341,200
Property Additions:
Diversified Industrial						$	292,456					$	197,675					$	186,233
Aerospace Systems						81,456						27,452						20,705
Corporate						6,835						4,917						3,019
						$	380,747					$	230,044					$	209,957

						2023						2022						2021
Depreciation:
Diversified Industrial						$	204,632					$	219,206					$	229,891
Aerospace Systems						104,286						29,576						32,151
Corporate						8,498						8,532						7,901
						$	317,416					$	257,314					$	269,943
Amortization:
Diversified Industrial						$	267,779					$	263,430					$	274,368
Aerospace Systems						232,934						51,020						51,079
						$	500,713					$	314,450					$	325,447
By Geographic Area**(b)**
Net Sales:
North America						$	12,689,719					$	10,216,292					$	9,046,162
International						6,375,475						5,645,316						5,301,478
						$	19,065,194					$	15,861,608					$	14,347,640
Long-Lived Assets:
North America						$	1,828,457					$	1,398,966					$	1,448,109
International						1,036,573						723,792						818,367
						$	2,865,030					$	2,122,758					$	2,266,476

(a) Includes an investment in a joint venture in which ownership is 50 percent or less and in which the Company does not have operating control (2023 - $216 million; 2022 - $211 million; 2021 - $219 million) and assets held for sale (2022 - $66 million).

(b) Net sales are attributed to countries based on the location of the selling unit. North America includes the United States, Canada and Mexico. No country other than the United States represents greater than 10 percent of consolidated sales. Long-lived assets are comprised of property, plant and equipment based on physical location.