Item 8. . Financial Statements and Supplementary Data.

						Page Number in Form 10-K
Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34)						31
Financial Statements
			Consolidated Statement of Income			33
			Consolidated Statement of Comprehensive Income			34
			Consolidated Balance Sheet			35
			Consolidated Statement of Cash Flows			36
			Consolidated Statement of Equity			37
			Notes to Consolidated Financial Statements			38

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, 2025 and 2024, the related consolidated statements of income, comprehensive income, cash flows, and equity, for each of the three years in the period ended June 30 2025, and the related notes (collectively referred to as the “financial statements”). We also have audited the Company’s internal control over financial reporting as of June 30, 2025, 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, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended June 30, 2025, 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, 2025, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

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 Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates 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 matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

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

Critical Audit Matter Description

The Company recognizes revenue from the sale of products to customers primarily in aerospace & defense, in-plant & industrial equipment, transportation, off-highway, energy, and HVAC & refrigeration markets around the world. The Company’s business activities are carried out by a large number of individual business units collectively offering hundreds of thousands of individual products in over forty countries globally.

We identified revenue from 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 required 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 from product shipments.

How the Critical Audit Matter Was Addressed in the Audit

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

• We tested the operating effectiveness of internal controls over the recognition of revenue from product shipments, including controls over the quantity and price of products shipped and timing of revenue recognition.

• We performed detail transaction testing for revenue from product shipments by making a sample of transactions and comparing the transactions selected to source documents such as purchase orders and shipping records.

• We tested the completeness of revenue from product shipments by making a sample from a listing of sales orders and comparing the sample transactions to source documentation such as shipping records to determine whether the transactions selected were appropriately included in revenue from product shipments.

• We tested the timing of revenue recognition by making a sample from a list of products shipped prior to and subsequent to year end and used source documentation such as shipping records to determine whether the transactions selected were appropriately recorded in the correct period.

• We performed substantive analytical procedures for certain revenue transactions by developing independent expectations of revenue based on data derived from the results of our detail revenue testing and comparing these expectations to the revenue recorded by management.

/s/ DELOITTE & TOUCHE LLP

Cleveland, Ohio

August 22, 2025

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

CONSOLIDATED STATEMENT OF INCOME

						For the years ended June 30,
(In millions, except per share data)						2025						2024						2023
Net Sales						$	19,850					$	19,930					$	19,065
Cost of sales						12,535						12,802						12,636
Selling, general and administrative expenses						3,255						3,315						3,354
Interest expense						409						506						574
Other (income) expense, net						(183)						(276)						184
Gain on sale of businesses and assets, net						(273)						(12)						(363)
Income before income taxes						4,107						3,595						2,680
Income taxes						575						750						596
Net Income						3,532						2,845						2,084
Less: Noncontrolling interest in subsidiaries' earnings						1						1						1
Net Income Attributable to Common Shareholders						$	3,531					$	2,844					$	2,083
Earnings per Share Attributable to Common Shareholders:
Basic						$	27.52					$	22.13					$	16.23
Diluted						$	27.12					$	21.84					$	16.04

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

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

						For the years ended June 30,
(In millions)						2025						2024						2023
Net Income						$	3,532					$	2,845					$	2,084
Less: Noncontrolling interests in subsidiaries' earnings						1						1						1
Net income attributable to common shareholders						3,531						2,844						2,083
Other comprehensive income (loss), net of tax
Foreign currency translation adjustment and other						413						(168)						187
Retirement benefits plan activity						142						23						63
Other comprehensive income (loss) attributable to common shareholders						555						(145)						250
Total Comprehensive Income Attributable to Common Shareholders						$	4,086					$	2,699					$	2,333

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

CONSOLIDATED BALANCE SHEET

						June 30,
(In millions, except par value)						2025						2024
Assets
Current Assets
Cash and cash equivalents						$	467					$	422
Trade accounts receivable, net						2,910						2,866
Non-trade and notes receivable						318						331
Inventories						2,839						2,787
Prepaid expenses						263						253
Other current assets						153						140
Total Current Assets						6,950						6,799
Property, plant and equipment						7,417						7,075
Less: Accumulated depreciation						4,480						4,199
Property, plant and equipment, net						2,937						2,876
Deferred income taxes						270						93
Other assets						1,269						1,207
Intangible assets, net						7,374						7,816
Goodwill						10,694						10,507
Total Assets						$	29,494					$	29,298
Liabilities and Equity
Current Liabilities
Notes payable and long-term debt payable within one year						$	1,791					$	3,403
Accounts payable, trade						2,126						1,992
Accrued payrolls and other compensation						587						581
Accrued domestic and foreign taxes						382						355
Other accrued liabilities						933						982
Total Current Liabilities						5,819						7,313
Long-term debt						7,494						7,157
Pensions and other postretirement benefits						267						437
Deferred income taxes						1,490						1,584
Other liabilities						733						726
Total Liabilities						15,803						17,217
Equity
Shareholders' Equity
Serial preferred stock, $.50 par value, authorized 3.0 shares; none issued						—						—
Common stock, $.50 par value, authorized 600.0 shares; issued 181.0 shares in 2025 and 2024						91						91
Additional paid-in capital						194						264
Retained earnings						21,775						19,105
Accumulated other comprehensive loss						(883)						(1,438)
Treasury shares at cost: 54.4 shares in 2025 and 52.4 shares in 2024						(7,495)						(5,950)
Total Shareholders' Equity						13,682						12,072
Noncontrolling interests						9						9
Total Equity						13,691						12,081
Total Liabilities and Equity						$	29,494					$	29,298

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

CONSOLIDATED STATEMENT OF CASH FLOWS

						For the years ended June 30,
(In millions)						2025						2024						2023
Cash Flows From Operating Activities
Net income						$	3,532					$	2,845					$	2,084
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation						354						349						317
Amortization						553						578						501
Stock incentive plan compensation						159						155						143
Deferred income taxes						(304)						32						92
Foreign currency transaction loss (gain)						46						(38)						46
(Gain) loss on disposal of property, plant and equipment						(20)						12						4
Gain on sale of businesses						(253)						(24)						(366)
Other, net						14						20						18
Changes in assets and liabilities, net of effects from acquisitions and divestitures:
Accounts receivable, net						6						(85)						(17)
Inventories						(94)						101						53
Prepaid expenses						(9)						(49)						32
Other current assets						(11)						(15)						(30)
Other assets						(63)						(117)						(109)
Accounts payable, trade						119						(44)						92
Accrued payrolls and other compensation						2						(64)						87
Accrued domestic and foreign taxes						(18)						27						102
Other accrued liabilities						(173)						(73)						113
Pensions and other postretirement benefits						(21)						(80)						(109)
Other liabilities						(43)						(146)						(73)
Net cash provided by operating activities						3,776						3,384						2,980
Cash Flows From Investing Activities
Acquisitions, net of cash acquired						—						—						(7,146)
Capital expenditures						(435)						(400)						(381)
Proceeds from sale of property, plant and equipment						32						9						13
Proceeds from sale of businesses						623						78						473
Payments of deal-contingent forward contracts						—						—						(1,405)
Other, net						4						15						269
Net cash provided by (used in) investing activities						224						(298)						(8,177)
Cash Flows From Financing Activities
Proceeds from exercise of stock options						4						4						3
Payments for common shares						(1,766)						(332)						(297)
Acquisition of noncontrolling interests						—						(3)						—
Proceeds from notes payable, net						(364)						359						358
Proceeds from long-term borrowings						751						24						2,023
Payments for long-term borrowings						(1,741)						(2,385)						(2,341)
Financing fees paid						—						—						(13)
Dividends paid						(861)						(782)						(704)
Net cash used in financing activities						(3,977)						(3,115)						(971)
Effect of exchange rate changes on cash						22						(24)						(5)
Net increase (decrease) in cash and cash equivalents and restricted cash						45						(53)						(6,173)
Cash, cash equivalents and restricted cash at beginning of year						422						475						6,648
Cash, cash equivalents and restricted cash at end of year						$	467					$	422					$	475
Supplemental Data:
Cash paid during the year for:
Interest						$	384					$	491					$	465
Income taxes and related interest, penalties and purchased credits, net of refunds						927						852						411

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

CONSOLIDATED STATEMENT OF EQUITY

(In millions, except per share data)						Common Stock						Additional Paid-in Capital						Retained Earnings						Accumulated Other Comprehensive Loss						Treasury Shares						Noncontrolling Interests						Total
Balance June 30, 2022						$	91					$	327					$	15,662					$	(1,543)					$	(5,688)					$	11					$	8,860
Net income						—						—						2,083						—						—						1						2,084
Other comprehensive income						—						—						—						250						—						—						250
Dividends paid ($5.47 per share)						—						—						(703)						—						—						(1)						(704)
Stock incentive plan activity						—						(22)						—						—						70						—						48
Shares purchased at cost						—						—						—						—						(200)						—						(200)
Balance June 30, 2023						$	91					$	305					$	17,042					$	(1,293)					$	(5,818)					$	11					$	10,338
Net income						—						—						2,844						—						—						1						2,845
Other comprehensive loss						—						—						—						(145)						—						—						(145)
Dividends paid ($6.07 per share)						—						—						(781)						—						—						(1)						(782)
Stock incentive plan activity						—						(41)						—						—						68						—						27
Other						—						—						—						—						—						(2)						(2)
Shares purchased at cost						—						—						—						—						(200)						—						(200)
Balance June 30, 2024						$	91					$	264					$	19,105					$	(1,438)					$	(5,950)					$	9					$	12,081
Net income						—						—						3,531						—						—						1						3,532
Other comprehensive income						—						—						—						555						—						—						555
Dividends paid ($6.69 per share)						—						—						(861)						—						—						—						(861)
Stock incentive plan activity						—						(70)						—						—						68						—						(2)
Other						—						—						—						—						—						(1)						(1)
Shares purchased at cost, including excise tax						—						—						—						—						(1,613)						—						(1,613)
Balance June 30, 2025						$	91					$	194					$	21,775					$	(883)					$	(7,495)					$	9					$	13,691

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions, 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 global leader in motion and control technologies. Leveraging a unique combination of interconnected technologies, we design, manufacture, and provide aftermarket support for highly engineered solutions that create value for customers primarily in aerospace & defense, in-plant & industrial equipment, transportation, off-highway, energy, and HVAC & refrigeration markets around the world. We evaluate performance based on segment operating income before corporate administrative expenses, interest expense and income taxes.

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.

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. The Company has changed its presentation from thousands to millions and, as a result, any necessary rounding adjustments have been made to prior period disclosed amounts.

Certain prior year amounts have been reclassified to conform to the current year presentation.

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 and Cash Equivalents - 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.

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 $10 million and $21 million at June 30, 2025 and 2024, respectively.

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,						2025						2024
Notes receivable						$	84					$	93
Accounts receivable, other						234						238
Total						$	318					$	331

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. 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,						2025						2024
Land and land improvements						$	411					$	380
Buildings and building equipment						2,241						2,129
Machinery and equipment						4,432						4,217
Construction in progress						333						349
Total						$	7,417					$	7,075

Investments in Joint Ventures - Investments in joint venture companies in which ownership is 50 percent or less and in which the Company does not have operating control are accounted for under the equity method of accounting and are included in other assets on the Consolidated Balance Sheet. Equity method investments amounted to $280 million and $294 million at June 30, 2025 and 2024, respectively. A significant portion of the underlying net assets of the joint ventures are related to goodwill. Refer to Note 20 for further discussion.

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.

Fair Value Measurements - Assets and liabilities measured at fair value are classified according to the following hierarchy, which is determined by the observability of the inputs used in the valuation as of the measurement date. Level 1 inputs are quoted prices in active markets for identical assets or liabilities. Level 2 inputs are inputs other than quoted prices included within Level 1 that are directly or indirectly observable. Level 3 inputs are unobservable inputs that are significant to the fair value measurement.

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 hedging and 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 other (income) expense, net in the Consolidated Statement of Income. Refer to Note 20 for further discussion.

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, 2025 and determined no further events or transactions are required to be disclosed other than those already disclosed elsewhere in the Notes to Consolidated Financial Statements.

Recent Accounting Pronouncements

In November 2024, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2024-03, “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses,” which requires expanded interim and annual disclosures of expense information, including the amounts of inventory purchases, employee compensation, depreciation, amortization and depletion within commonly presented expense captions during the period. The amendments are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The amendments should be applied either (1) prospectively to financial statements issued for reporting periods after the effective date or (2) retrospectively to any or all prior periods presented in the financial statements. The Company is currently evaluating the ASU to determine its impact on the Company's disclosures.

In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures," which enhances the disclosure requirements for income taxes primarily related to the rate reconciliation and income taxes paid information. The amendments are effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The amendment should be applied on a prospective basis. Retrospective application is permitted. The Company is currently evaluating the impact this guidance will have on the Company's disclosures.

In November 2023, the FASB issued ASU 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures," which updates reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. The amendments should be applied retrospectively to all prior periods presented in the financial statements. The Company adopted the standard in the fourth quarter of fiscal 2025. Refer to Note 19 for further discussion.

In September 2022, the FASB issued ASU 2022-04, "Liabilities—Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations," which requires a buyer in a supplier finance program to disclose information about the program’s nature, activity during the period, changes from period to period, and potential magnitude. To achieve that objective, the buyer should disclose qualitative and quantitative information about its supplier finance programs, including the outstanding amount under the program, the balance sheet presentation of the outstanding amount, and a rollforward of the obligations in the program. This ASU should be adopted retrospectively for each balance sheet period presented; however, the rollforward

information should be provided prospectively. The amendments in this ASU are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, except for the amendment on rollforward information, which is effective for fiscal years beginning after December 15, 2023. Early adoption is permitted. The Company adopted the guidance on July 1, 2023, except for the rollforward requirement, which was adopted in the fourth quarter of fiscal 2025. The adoption did not have a material impact on the Company's consolidated financial statements. Refer to Note 8 for further discussion.

2. Revenue recognition

Revenue is derived primarily from the sale of products in the aerospace & defense, in-plant & industrial equipment, transportation, off-highway, energy, and HVAC & refrigeration 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 platform for the Diversified Industrial Segment, by market segment 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 a broad range of motion-control systems and 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:

						2025						2024						2023
Motion Systems						$	3,341					$	3,706					$	3,830
Flow and Process Control						4,518						4,673						4,939
Filtration and Engineered Materials						5,806						6,079						5,936
Total						$	13,665					$	14,458					$	14,705

The Aerospace Systems Segment produces engine and airframe components and systems, which are utilized on virtually every major commercial and military 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 market segment:

						2025						2024						2023
Commercial OEM						$	1,915					$	1,779					$	1,462
Commercial aftermarket						2,214						1,814						1,364
Defense OEM						1,138						1,125						905
Defense aftermarket						918						754						629
Total						$	6,185					$	5,472					$	4,360

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

						2025						2024						2023
North America						$	13,406					$	13,512					$	12,690
Europe						3,862						3,916						3,778
Asia Pacific						2,364						2,278						2,380
Latin America						218						224						217
Total						$	19,850					$	19,930					$	19,065

The majority of revenues from the Aerospace Systems Segment is generated from sales 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:

						2025						2024
Contract assets, current (included within Other current assets)						$	149					$	137
Contract assets, noncurrent (included within Other assets)						16						21
Total contract assets						165						158
Contract liabilities, current (included within Other accrued liabilities)						(211)						(184)
Contract liabilities, noncurrent (included within Other liabilities)						(71)						(78)
Total contract liabilities						(282)						(262)
Net contract liabilities						$	(117)					$	(104)

Net contract liabilities at June 30, 2025 increased from the prior year amount due to timing differences between when revenue was recognized and the receipt of advance payments. During 2025, approximately $165 million of revenue was recognized that was included in the contract liabilities at June 30, 2024.

Remaining performance obligation****s

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, 2025 was $11.0 billion, of which approximately 71 percent is expected to be recognized as revenue within the next 12 months and the balance thereafter.

3. Acquisitions and Divestitures

Pending Acquisition

On June 30, 2025, the Company announced that it has agreed to acquire Curtis Instruments, Inc. from Rehlko, for approximately $1.0 billion in cash.

Curtis designs and manufactures motor speed controllers, instrumentation, power conversion and input devices that complement Parker’s strength in electric vehicle motors, hydraulic and electrification technologies. The transaction is subject to customary closing conditions, including receipt of applicable regulatory approvals, and is expected to close by the end of calendar year 2025.

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, the majority of Meggitt's sales are included in the Aerospace Systems Segment, with the remainder attributed to the Diversified Industrial Segment.

Assets acquired and liabilities assumed are recognized at their respective fair values as of the acquisition date. 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. During the measurement period which ended in September 2023, adjustments did not have a material impact on the Consolidated Statement of Income. The following table presents the final estimated fair values of Meggitt's assets acquired and liabilities assumed on the acquisition date.

			June 30, 2023 (previously reported)						Measurement Period Adjustments						September 12, 2022 (Final)
Assets:
Cash and cash equivalents			$	90					$	—					$	90
Accounts receivable			410						1						411
Inventories			739						14						753
Prepaid expenses and other			102						21						123
Property, plant and equipment, net			659						(1)						658
Deferred income taxes			34						(19)						15
Other assets			181						(1)						180
Intangible assets			5,679						(28)						5,651
Goodwill			2,789						11						2,800
Total assets acquired			$	10,683					$	(2)					$	10,681
Liabilities:
Notes payable and long-term debt payable within one year			$	308					$	—					$	308
Accounts payable, trade			220						(1)						219
Accrued payrolls and other compensation			87						—						87
Accrued domestic and foreign taxes			21						(1)						20
Other accrued liabilities			322						158						480
Long-term debt			712						—						712
Pensions and other postretirement benefits			100						(2)						98
Deferred income taxes			1,259						(19)						1,240
Other liabilities			418						(137)						281
Total liabilities assumed			3,447						(2)						3,445
Net assets acquired			$	7,236					$	—					$	7,236

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 final acquisition valuation, we acquired $4.2 billion of customer-related intangible assets, $1.1 billion of technology and $303 million of trade names, each with weighted-average estimated useful lives of 21, 22 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.

Based upon a final acquisition valuation, the fair value of the assets acquired includes $115 million and $91 million of operating and finance lease right-of-use assets, respectively. As of the acquisition date, the fair value of liabilities assumed includes $116 million and $90 million of operating and finance lease liabilities, respectively, of which, $18 million and $1 million of operating and finance lease liabilities, respectively, are current liabilities.

Debt assumed included $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.

Based upon a final acquisition valuation, we also assumed $142 million of liabilities associated with environmental matters. As of the acquisition date, approximately $102 million of environmental matters are included within other accrued liabilities, and the remainder is included within other liabilities in the Consolidated Balance Sheet. 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 for 2023 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 were $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 selling, general and administrative expenses 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															$	19,447					$	17,911
Net income attributable to common shareholders															1,957						1,530

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 of 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

We continually assess our existing businesses and may divest those that are not considered to be a good long-term strategic fit for the Company.

During November 2024, we divested our CFC business within the North America businesses of the Diversified Industrial Segment, which was acquired in the acquisition of Meggitt, for net proceeds of $555 million. The resulting pre-tax gain of $241 million is included in gain on sale of businesses and assets, net in the Consolidated Statement of Income. The operating results and net assets of this business were immaterial to the Company's consolidated results of operations and financial position.

During November 2024, we divested a non-core filtration business within the North America businesses of the Diversified Industrial Segment for proceeds of $66 million. The resulting pre-tax gain of $11 million is included in gain on sale of businesses and assets, net in the Consolidated Statement of Income. The operating results and net assets of this business were immaterial to the Company's consolidated results of operations and financial position.

During December 2023, we divested our Filter Resources business, which was part of the Diversified Industrial Segment, for proceeds of $37 million. The resulting pre-tax gain of $12 million is included in gain on sale of businesses and assets, net in the Consolidated Statement of Income. The operating results and net assets of the Filter Resources business were immaterial to the Company's consolidated results of operations and financial position.

During September 2023, we divested the MicroStrain sensing systems business, which was part of the Diversified Industrial Segment, for proceeds of $37 million. The resulting pre-tax gain of $13 million is included in gain on sale of businesses and assets, net in the Consolidated Statement of Income. The operating results and net assets of the MicroStrain sensing systems business were immaterial to the Company's consolidated results of operations and financial position.

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 gain on sale of businesses and assets, 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.

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 gain on sale of businesses and assets, 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.

4. Business Realignment and Acquisition Integration Charges

The Company incurred business realignment and acquisition integration charges in 2025, 2024 and 2023. Business realignment charges 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. In 2025, 2024 and 2023, 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:

			2025						2024						2023
Diversified Industrial			$	53					$	51					$	24
Aerospace Systems			—						—						3
Corporate general and administrative expenses			1						—						—
Other (income) expense, net			2						2						—

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

(Headcount in single units)			2025						2024						2023
Diversified Industrial			1,092						1,064						728
Aerospace Systems			61						1						30
Corporate general and administrative expenses			13						—						—

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

			2025						2024						2023
Cost of sales			$	31					$	30					$	16
Selling, general and administrative expenses			23						21						11
Gain on sale of businesses and assets, net			2						2						—

During 2025, approximately $45 million in payments were made relating to business realignment charges. Remaining payments related to current-year and prior-year business realignment actions of approximately $26 million, a majority of which are expected to be paid by December 31, 2025, are primarily reflected within the accrued payrolls and other compensation and other accrued liabilities captions 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.

We also incurred acquisition integration charges related to the Meggitt acquisition. Charges by business segment are as follows:

			2025						2024						2023
Diversified Industrial			$	3					$	4					$	9
Aerospace Systems			19						34						86

In 2025, 2024 and 2023, acquisition integration charges relate to the acquisition of Meggitt. These charges were primarily included in selling, general and administrative expenses in the Consolidated Statement of Income.

5. Income Taxes

Income before income taxes was derived from the following sources:

			2025						2024						2023
United States			$	2,514					$	2,120					$	1,408
Foreign			1,593						1,475						1,272
Total			$	4,107					$	3,595					$	2,680

Income taxes include the following:

			2025						2024						2023
Federal
Current			$	424					$	328					$	161
Deferred			(98)						11						81
Foreign
Current			374						355						297
Deferred			(154)						16						(13)
State and local
Current			81						34						46
Deferred			(52)						6						24
Total			$	575					$	750					$	596

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

			2025						2024						2023
Statutory federal income tax rate			21.0		%				21.0		%				21.0		%
State and local income taxes			0.6						0.9						2.1
Tax related to international activities			(2.8)						2.3						1.2
Cash surrender value of life insurance			(0.1)						(0.1)						(0.1)
Foreign derived intangible income deduction			(1.3)						(1.5)						(1.1)
Research tax credit			(0.4)						(0.6)						(0.7)
Share-based compensation			(1.2)						(1.2)						(1.0)
Other			(1.8)						0.1						0.8
Effective income tax rate			14.0		%				20.9		%				22.2		%

In December 2021, the Organization for Economic Cooperation and Development ("OECD") published a framework, known as Pillar Two, defining a global minimum tax of 15 percent on large corporations. The OECD has since issued administrative guidance providing transition and safe harbor rules around the implementation of the Pillar Two global minimum tax. Several countries have proposed or enacted legislation to implement core elements of the Pillar Two proposal effective for years beginning after December 31, 2023, which for us is fiscal year 2025. Pillar Two does not currently have a significant impact on our consolidated financial statements. Future legislation and guidance may result in a change to our assessment.

On July 4, 2025, H.R. 1, commonly referred to as the One Big Beautiful Bill Act, (the "Act"), was signed into law. The Act makes various provisions of the 2017 Tax Cuts and Jobs Act permanent while also restoring full expensing of research & development costs and capital investments. The majority of these provisions will impact us starting in fiscal year 2027. We continue to evaluate the future impacts of these provisions and, as of June 30, 2025, have not recorded the impact of any future provisions. We do not expect The Act to have a material impact on our financial statements.

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:

			2025						2024
Retirement benefits			$	27					$	124
Other liabilities and reserves			189						214
Long-term contracts			41						45
Stock-based compensation			38						34
Loss carryforwards			114						1,064
Inventory			70						68
Capitalized research and development			172						146
Tax credit carryforwards			45						36
Unrealized currency exchange gains and losses			5						(18)
Undistributed foreign earnings			(32)						(30)
Depreciation and amortization			(1,748)						(2,104)
Valuation allowance			(141)						(1,070)
Net deferred tax (liability)			$	(1,220)					$	(1,491)
Change in net deferred tax (liability):
Provision for deferred tax			$	304					$	(32)
Items of other comprehensive (loss) income			(44)						(24)
Acquisitions and other			11						133
Total change in net deferred tax			$	271					$	77

The following schedule presents the changes in deferred tax asset valuation allowance as follows:

						Balance at Beginning of Period						(Deductions)/Additions Charged to Costs and Expenses						Other (Deductions)/ Additions**(1)**						Balance at End of Period
Deferred tax asset valuation allowance:
Year ended June 30, 2023						$	902					$	163					$	13					$	1,078
Year ended June 30, 2024						1,078						(10)						2						1,070
Year ended June 30, 2025						1,070						(929)						—						141
(1) The balance primarily represents adjustments due to acquisitions.

During the year ended June 30, 2025, we completed an initiative that simplified our foreign legal entity structure. The initiative impacted our evaluation of certain foreign tax loss carryforwards whose realizability was previously considered to be remote. This led to a valuation allowance release and the recording of a $180 million discrete tax benefit. Additionally, as a result of the initiative, $784 million in deferred tax assets for certain other foreign tax loss carryforwards whose realizability was previously considered to be remote, and the associated valuation allowances, were also written off.

As of June 30, 2025, we recorded deferred tax assets of $114 million resulting from $492 million in loss carryforwards. A valuation allowance of $106 million related to the loss carryforwards has been established due to the uncertainty of their realization. Of this valuation allowance, $92 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 years to 20 years. In addition, a valuation allowance of $35 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 $484 million that are no longer permanently reinvested outside of the United States, we have recorded a deferred tax liability of $16 million. The

remaining undistributed foreign earnings of approximately $1,011 million remain permanently reinvested outside the United States at June 30, 2025. Of these undistributed earnings, we have recorded a deferred tax liability of $17 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:

			2025						2024						2023
Balance July 1			$	102					$	114					$	91
Additions for tax positions related to current year			6						6						9
Additions for tax positions of prior years			19						—						6
Additions for acquisitions			—						4						26
Reductions for tax positions of prior years			—						(5)						(3)
Reductions for settlements			—						—						(7)
Reductions for expiration of statute of limitations			(27)						(15)						(11)
Effect of foreign currency translation			4						(2)						3
Balance June 30			$	104					$	102					$	114

The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was $104 million, $102 million and $114 million as of June 30, 2025, 2024 and 2023, respectively. The accrued interest related to the gross unrecognized tax benefits, excluded from the amounts above, was $28 million, $27 million, and $21 million as of June 30, 2025, 2024 and 2023, respectively. The accrued penalties related to the gross unrecognized tax benefits, excluded from the amounts above, was $2 million as of June 30, 2025, 2024, and 2023.

It is reasonably possible that, within the next 12 months, the amount of gross unrecognized tax benefits could be reduced by up to approximately $60 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 2018. We are open to assessment for significant foreign jurisdictions for years after 2013.

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 (shares in millions):

			2025						2024						2023
Numerator:
Net income attributable to common shareholders			$	3,531					$	2,844					$	2,083
Denominator:
Basic - weighted-average common shares			128.3						128.5						128.4
Dilutive effect of equity-based awards			1.9						1.7						1.5
Diluted - weighted-average common shares			130.2						130.2						129.9
Basic earnings per share(1)			$	27.52					$	22.13					$	16.23
Diluted earnings per share(1)			$	27.12					$	21.84					$	16.04
(1) Figures in the table may not recalculate exactly due to rounding. Earnings per share is calculated using unrounded numbers.

For 2025, 2024 and 2023, 0.3 million, 0.4 million and 1.0 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. Cost components include raw materials, purchased components, labor and overhead.

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

June 30,						2025						2024
Finished products						$	778					$	778
Work in process						1,485						1,421
Raw materials						576						588
Total						$	2,839					$	2,787

8. Supply Chain Financing

We have SCF programs with financial intermediaries, which provide certain suppliers the option to be paid by the financial intermediaries earlier than the due date on the applicable invoice. We are not a party to the agreements between the participating financial intermediaries and the suppliers in connection with the programs. The range of payment terms we negotiate with our suppliers is consistent, irrespective of whether a supplier participates in the SCF programs. We do not reimburse suppliers for any costs they incur for participation in the SCF programs and their participation is voluntary.

The following table summarizes the changes in amounts due to our suppliers that elected to participate in the SCF programs. These amounts are included in accounts payable, trade on the Consolidated Balance Sheet, and payments made under the SCF programs are included within operating activities on the Consolidated Statement of Cash Flows.

			2025						2024
Beginning balance			$	116					$	85
Invoices confirmed during the year			500						363
Invoices settled during the year			(446)						(331)
Foreign currency translation adjustments			5						(1)
Ending balance			$	175					$	116

9. 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, 2023			$	7,683					$	2,946					$	10,629
Acquisitions			1						10						11
Divestitures			(25)						—						(25)
Foreign currency translation			(52)						(56)						(108)
Balance June 30, 2024			$	7,607					$	2,900					$	10,507
Divestitures			(90)						—						(90)
Foreign currency translation			211						66						277
Balance June 30, 2025			$	7,728					$	2,966					$	10,694

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

Divestitures represent goodwill associated with the sale of businesses during 2025 and 2024.

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 2025, 2024 and 2023 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:

			2025												2024
			Gross Carrying Amount						Accumulated Amortization						Gross Carrying Amount						Accumulated Amortization
Patents and technology			$	2,134					$	556					$	2,117					$	452
Trade names			1,037						499						1,042						441
Customer relationships and other			8,194						2,936						8,044						2,494
Total			$	11,365					$	3,991					$	11,203					$	3,387

Total intangible asset amortization expense in 2025, 2024 and 2023 was $553 million, $578 million and $501 million, respectively. The estimated intangible asset amortization expense for the five years ending June 30, 2026 through 2030 is $550 million, $547 million, $539 million, $518 million and $489 million, respectively.

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 2025, 2024 or 2023.

10. Financing Arrangements

As of June 30, 2025, the Company had a line of credit totaling $3.0 billion through a multi-currency revolving credit agreement with a group of banks with $1.2 billion available for borrowing under the credit agreement. On August 21, 2025, the multi-currency revolving credit agreement was amended to increase the total line of credit by $750 million to $3.75 billion. The credit agreement expires June 2028; however, the Company has the right to request a one-year extension of the expiration date on an annual basis, which 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 was authorized to sell up to $3.0 billion of short-term commercial paper notes as of June 30, 2025 with commercial paper notes outstanding as of June 30, 2025 and 2024 of $1.8 billion and $2.1 billion, respectively. On August 21, 2025, the authorization limit for short-term commercial paper notes increased to $3.75 billion. The Company had $10 million outstanding borrowings from foreign banks at June 30, 2025 and no outstanding borrowings at June 30, 2024. The weighted-average interest rate on notes payable outstanding at June 30, 2025 and 2024 was 4.6 percent and 5.5 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, 2025, 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, 2025, our debt to debt-shareholders' equity ratio was 0.41 to 1.0. We are in compliance with all covenants.

11. Debt

June 30,						2025						2024
Domestic:
3.30% Fixed-rate medium term notes, due 2025						$	—					$	500
4.20% Fixed-rate medium term notes, due 2035						500						500
6.25% Fixed-rate medium term notes, due 2038						325						325
4.45% Fixed-rate medium term notes, due 2045						500						500
3.25% Senior Notes, due 2027						700						700
4.25% Senior Notes, due 2028						1,200						1,200
3.25% Senior Notes, due 2029						1,000						1,000
4.50% Senior Notes, due 2030						1,000						1,000
4.10% Senior Notes, due 2047						600						600
4.00% Senior Notes, due 2049						800						800
Term Loan Facility, due 2026						—						490
Foreign:
1.125% Euro Senior Notes, due 2025						—						750
2.90% Euro Senior Notes, due 2030						821						—
Other long-term debt (includes finance leases)						109						105
Deferred debt issuance costs						(54)						(58)
Total						7,501						8,412
Less: Long-term debt payable within one year						7						1,255
Long-term debt						$	7,494					$	7,157

During 2025, the company issued €700 million aggregate principal amount of 2.90 percent Senior Notes due March 1, 2030. Interest will be paid annually on March 1st of each year, commencing March 1, 2026. We used the net proceeds from the issuance, together with cash on hand, to repay the €700 million aggregate principal amount of 1.125 percent Senior Notes upon maturity in March 2025.

Our debt portfolio previously included a Term Loan Facility. During 2025, we repaid the remaining principal balance of $490 million of the Term Loan Facility. Additionally, we repaid the $500 million aggregate principal amount of fixed rate medium-term notes bearing interest of 3.30 percent upon maturity in November 2024.

In 2024, we repaid in full $575 million and $1.4 billion aggregate principal amount of Senior Notes, with interest rates of 2.70 percent and 3.65 percent, respectively, which matured in 2024.

Principal amounts of long-term debt payable in the five years ending June 30, 2026 through 2030 are $7 million, $706 million, $1.2 billion, $1.0 billion and $1.8 billion, respectively. The principal amounts of long-term debt payable exclude the amortization of debt issuance costs.

12. 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:

			2025						2024						2023
Operating lease expense			$	64					$	68					$	60
Finance lease cost:
Amortization of lease assets			8						7						6
Interest on lease liabilities			5						5						4
Short-term lease cost			13						9						8
Variable lease cost			6						6						6
Total lease cost			$	96					$	95					$	84

Supplemental cash flow information related to leases is as follows:

			2025						2024						2023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows - payments on operating leases			$	64					$	65					$	58
Operating cash outflows - interest payments on finance leases			5						5						4
Financing cash outflows - payments on finance lease obligations			5						5						5
Right-of-use assets obtained in exchange for operating lease obligations			18						42						45
Right-of-use assets obtained in exchange for finance lease obligations			2						4						1

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

			2025						2024
Operating Leases
Operating lease right-of-use assets (included within Other assets)			$	192					$	226
Current operating lease liabilities (included within Other accrued liabilities)			$	47					$	54
Long-term operating lease liabilities (included within Other liabilities)			154						180
Total operating lease liabilities			$	201					$	234
Finance Leases
Property, plant and equipment			$	127					$	116
Accumulated depreciation			(25)						(15)
Property, plant and equipment, net			$	102					$	101
Notes payable and long-term debt payable within one year			$	6					$	5
Long-term debt			102						98
Total finance lease liabilities			$	108					$	103
Weighted-average remaining lease term
Operating leases			6.3 years						6.4 years
Finance leases			18.8 years						19.5 years
Weighted-average discount rate
Operating leases			4.3		%				4.2		%
Finance leases			5.2		%				5.2		%

Maturities of lease liabilities at June 30, 2025 are as follows:

			Operating Leases						Finance Leases
2026			$	54					$	11
2027			43						11
2028			33						10
2029			24						10
2030			17						10
Thereafter			62						119
Total lease payments			$	233					$	171
Less imputed interest			32						63
Total lease liabilities			$	201					$	108

13. Retirement Benefits

Pensions and Other Postretirement Benefits

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.

The Company provides postretirement medical and life insurance benefits to certain retirees and eligible dependents through an unfunded plan. The plan is contributory, with retiree contributions adjusted annually, and pays 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. The Company has established cost maximums to more effectively control future health care costs. We have reserved the right to change this benefit plan.

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

			U.S. Pension Benefits																		Non-U.S. Pension Benefits																		Other Postretirement Benefits
			2025						2024						2023						2025						2024						2023						2025						2024						2023
Benefit cost
Service cost			$	28					$	29					$	35					$	22					$	22					$	23					$	—					$	—					$	—
Interest cost			184						190						165						76						80						60						4						4						3
Expected return on plan assets			(245)						(258)						(238)						(87)						(95)						(73)						—						—						—
Amortization of prior service cost			3						1						1						—						—						—						—						—						—
Amortization of net actuarial loss (gain)			7						2						8						7						6						9						(2)						(2)						(1)
Settlements			3						—						—						—						—						—						—						—						—
Divestitures			—						—						—						—						—						(3)						—						—						—
Net periodic benefit cost (credit)			$	(20)					$	(36)					$	(29)					$	18					$	13					$	16					$	2					$	2					$	2

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

			U.S. Pension Benefits												Non-U.S. Pension Benefits												Other Postretirement Benefits
			2025						2024						2025						2024						2025						2024
Change in benefit obligation
Benefit obligation at beginning of year			$	3,723					$	4,008					$	1,817					$	1,828					$	71					$	79
Service cost			28						29						22						22						—						—
Interest cost			184						190						76						80						4						4
Acquisition			—						—						—						—						—						—
Actuarial gain(1)			(12)						(106)						(104)						(6)						(6)						(5)
Benefits paid			(254)						(414)						(88)						(81)						(6)						(7)
Settlements			(55)						—						(6)						—						—						—
Plan amendments			1						16						—						—						—						—
Foreign currency translation and other			—						—						168						(26)						—						—
Benefit obligation at end of year			$	3,615					$	3,723					$	1,885					$	1,817					$	63					$	71
Change in plan assets
Fair value of plan assets at beginning of year			$	3,363					$	3,548					$	2,003					$	1,907					$	—					$	—
Actual return on plan assets			347						179						—						98						—						—
Employer contributions			62						50						87						105						6						7
Benefits paid			(254)						(414)						(88)						(81)						(6)						(7)
Settlements			(55)						—						(6)						—						—						—
Foreign currency translation and other			—						—						187						(26)						—						—
Fair value of plan assets at end of year			$	3,463					$	3,363					$	2,183					$	2,003					$	—					$	—
Funded status			$	(152)					$	(360)					$	298					$	186					$	(63)					$	(71)
(1) The actuarial gain for the Non-U.S. pension plans in 2025 was primarily driven by an increase in discount rates. Additionally, both the U.S. and Non-U.S. pension plans generated actuarial gains in 2025 due to favorable demographic experience. The actuarial gain for the U.S. pension plans in 2024 was primarily driven by an increase in discount rates.

			U.S. Pension Benefits												Non-U.S. Pension Benefits												Other Postretirement Benefits
			2025						2024						2025						2024						2025						2024
Amounts recognized on the Consolidated Balance Sheet
Other assets			$	—					$	—					$	346					$	244					$	—					$	—
Other accrued liabilities			(11)						(63)						(1)						(2)						(6)						(7)
Pensions and other postretirement benefits			(141)						(297)						(47)						(56)						(57)						(64)
Net amount recognized			$	(152)					$	(360)					$	298					$	186					$	(63)					$	(71)
Pre-tax amounts recognized in Accumulated Other Comprehensive Loss
Net actuarial loss (gain)			$	191					$	315					$	230					$	233					$	(25)					$	(20)
Prior service cost			18						20						2						2						—						—
Net amount recognized			$	209					$	335					$	232					$	235					$	(25)					$	(20)

In addition to the pension and other postretirement benefit obligations shown in the tables above, pensions and other postretirement benefits on the Consolidated Balance Sheet includes other immaterial international pension related liabilities.

The accumulated benefit obligation for all defined benefit plans was $5.4 billion and $5.4 billion at June 30, 2025 and 2024, respectively.

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

			2025						2024
Accumulated benefit obligation			$	316					$	3,778
Fair value of plan assets			171						3,502

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

			2025						2024
Projected benefit obligation			$	3,865					$	4,211
Fair value of plan assets			3,665						3,794

Expected Contributions and Benefit Payments - We expect to make cash contributions of approximately $58 million to our defined benefit pension plans in 2026, of which $11 million and $47 million relate to U.S. and non-U.S. plans, respectively.

The following estimated benefit payments are expected to be paid during each respective year:

			U.S. Pension Benefits						Non-U.S. Pension Benefits						Other Postretirement Benefits
2026			$	273					$	104					$	6
2027			275						108						6
2028			276						110						6
2029			286						97						6
2030			279						80						5
2031 - 2035			1,387						614						24

Assumptions - The weighted-average actuarial assumptions used to measure the net periodic benefit cost and benefit obligations are:

			U.S. Pension Benefits																		Non-U.S. Pension Benefits																		Other Postretirement Benefits
			2025						2024						2023						2025						2024						2023						2025						2024						2023
Net Periodic Benefit Cost
Discount rate			5.27		%				4.88		%				4.36		%				4.19		%				4.24		%				3.40		%				5.23		%				4.86		%				4.26		%
Average increase in compensation			3.81		%				3.81		%				3.35		%				2.73		%				2.76		%				2.87		%				NA						NA						NA
Expected return on plan assets			7.00		%				7.00		%				6.50		%				4.47		%				5.22		%				4.13		%				NA						NA						NA
Benefit Obligation
Discount rate			5.27		%				5.27		%				4.88		%				4.36		%				4.19		%				4.24		%				5.18		%				5.23		%				4.86		%
Average increase in compensation			3.79		%				3.76		%				3.81		%				2.65		%				2.73		%				2.76		%				NA						NA						NA

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 health care cost trend rate assumptions used to measure the postretirement benefit obligations are:

			2025						2024
Health care cost trend rate assumed for next year			9.73		%				10.35		%
Ultimate health care cost trend rate			4.50		%				4.50		%
Year that the ultimate rate is reached			2035						2034

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

			2025						2024
Equities			20		%				26		%
Fixed income			46		%				45		%
Other investments			34		%				29		%
			100		%				100		%

The weighted-average target asset allocation as of June 30, 2025 is 20 percent equities, 48 percent fixed income and 32 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. and U.K. defined benefit plans account for 61 percent and 24 percent, respectively, 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 increase the allocation to long duration fixed income investments and reduce exposure to return seeking assets such as equities and alternatives. The strategy utilizes fixed income investments aligned with the duration and cash flow profile of the plan's liabilities to hedge the impact of interest rate and inflation changes. For the overfunded U.K. defined benefit plans, the overall investment strategy primarily focuses on utilizing fixed income investments to achieve a rate of return that is at least commensurate with the changes in the cost of providing fixed and index-linked annuities.

Certain investments that are measured at their fair value using the Net Asset Value ("NAV") per share (or its equivalent) as a practical expedient have not been classified in the fair value hierarchy. The fair values of pension plan assets at June 30, 2025 and at June 30, 2024, by asset class, are as follows:

			June 30, 2025																		June 30, 2024
			Total			Level 1			Level 2			Level 3			NAV						Total			Level 1			Level 2			Level 3			NAV
Cash and cash equivalents			$	540		$	459		$	76		$	—		$	5					$	461		$	450		$	6		$	—		$	5
Equities
U.S. equity securities			7			7			—			—			—						680			680			—			—			—
Non-U.S. equity securities			57			57			—			—			—						58			50			8			—			—
Commingled equity funds			1,059			—			106			—			953						652			50			52			—			550
Fixed income
Corporate bonds			801			4			797			—			—						589			16			573			—			—
Government issued securities			552			521			31			—			—						574			544			30
Commingled fixed income funds			1,293			—			350			—			943						1,298			23			525			—			750
Alternatives(1)			778			—			—			—			778						770			—			56						714
Other(2)			648			66			(1)			583			—						341			12			329			—			—
			$	5,735		$	1,114		$	1,359		$	583		$	2,679					$	5,423		$	1,825		$	1,579		$	—		$	2,019
(Payables) receivables, net			(89)																		(57)
Total			$	5,646																	$	5,366
(1) Alternatives includes investments in real estate, hedge funds and private debt.
(2) Other investments primarily includes insurance contracts held under our non-U.S. plans.

The fair value measurement of plan assets using significant unobservable inputs (Level 3) changed during 2025 and 2024 due to the following:

			2025						2024
Balance at beginning of year			$	—					$	—
Actual return on plan assets still held at year-end			12						—
Purchases, sales, settlements - net			203						—
Transfers into Level 3			325						—
Changes due to exchange rates			43						—
Balance at end of year			$	583					$	—

Cash and cash equivalents consist of direct cash holdings and short-term investment vehicles. Cash is valued at cost, which approximates fair value. Short-term investments are primarily valued at quoted prices in active markets and are classified within Level 1. The U.S. defined benefit plan uses a liability-hedging initiative that requires the plan to maintain a certain cash balance.

Equity securities are valued at the closing price reported on the active market on which the individual securities are traded. Substantially all equity securities are classified within Level 1. As of June 30, 2024, the U.S. defined benefit plan held $672 million worth of Parker stock, which was divested in 2025.

Corporate bonds and fixed income securities categorized as Level 2 are valued using observable inputs for similar assets that are traded on an active market. The fair value of government issued securities categorized in Level 1 are primarily based on observable quoted prices on the active markets on which the security trades.

Commingled equity and fixed income funds consist of common/collective trusts or other investment vehicles. Most of these funds are valued using the NAV provided by the fund administrator and are based on the fair value of the underlying assets. Commingled funds classified within Level 1 are valued using the closing market price reported on the active market. When quoted market prices for funds are not available in an active market, they are classified as Level 2. Most of these funds have no redemption restrictions or lock-up periods and can be liquidated within 90 days.

Alternatives include investments in real estate, hedge funds, and private debt, which are valued using the fund's NAV based on the fair value of the underlying investments. Funds within this asset class may be subject to redemption restrictions, and valuations for certain real estate and private debt funds may be lagged up to 6 months. For these funds, the NAV is adjusted for cash flows through year end.

Other investments primarily include insurance contracts within the Non-U.S. pension plans' asset portfolio. Insurance contracts, which are categorized as Level 3, are valued as reported by the insurer which include adjustments for changes in the underlying assets, or are valued using other pricing sources which use unobservable inputs. Other investments also includes derivative instruments which are generally associated with our liability hedging strategies and are valued based on the closing prices of contracts or market observable inputs.

Defined Contribution Plans

We sponsor various defined contribution plans both in the U.S. and internationally, including in the United Kingdom, Germany, Sweden, Canada and South Korea.

Under our primary U.S. 401(k) plan, the Company matches employee contributions up to a maximum of five percent of eligible compensation. Participants may direct the matching contributions among various investment choices, including our common stock held within an employee stock ownership plan ("ESOP"). In addition to shares within the ESOP, employees may elect to invest in our common stock through a company stock fund offered within the primary U.S. 401(k) plan. As of June 30, 2025 and 2024, the plan held 4.0 million and 4.5 million shares of our common stock. The Company also maintains a retirement income account ("RIA") within the primary U.S. 401(k) plan. We make annual cash contributions to eligible participant's RIA, with most participants receiving a flat three percent contribution of eligible compensation. Some grandfathered participants receive contributions calculated at a higher percentage, but no participant receives less than the flat three percent. Participants do not contribute to the RIA.

Matching and other contributions under all defined contribution plans are expensed as incurred. Expense recognized under the U.S. plans was $187 million, $194 million, and $167 million in 2025, 2024 and 2023, respectively. Expense recognized under the international plans was $33 million, $31 million and $30 million in 2025, 2024 and 2023, respectively.

Other

The Company has established unfunded nonqualified deferred compensation programs, that allow officers, directors and certain management employees to annually elect to defer a portion of their compensation on a pre-tax basis until retirement. The retirement benefit to be provided is based on the amount of compensation deferred, company matching contributions and earnings on the deferrals. 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 considered general corporate assets. Net gains and losses related to these assets and liabilities are reflected in selling, general and administrative expenses on the Consolidated Statement of Income and are immaterial in total.

As of June 30, 2025 and 2024, the cash surrender values of the corporate-owned life insurance policies were $260 million and $238 million, and the balances of the deferred compensation liabilities were $171 million and $164 million, respectively. These amounts are included in other assets and other liabilities on the Consolidated Balance Sheet.

14. Equity

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

						2025						2024						2023
Foreign Currency Translation Adjustment and Other
Beginning balance						$	(1,130)					$	(962)					$	(1,149)
Other comprehensive income (loss) before reclassifications						418						(153)						225
Income tax						(5)						(15)						(38)
Other comprehensive income (loss), net of tax						413						(168)						187
Ending balance						$	(717)					$	(1,130)					$	(962)
Retirement Benefit Plans
Beginning balance						$	(308)					$	(331)					$	(394)
Other comprehensive income (loss) before reclassifications						163						23						75
Income tax						(34)						(6)						(22)
Reclassified from accumulated other comprehensive loss:
Amortization of net actuarial loss and other(1)						18						8						14
Tax benefit						(5)						(2)						(4)
Other comprehensive income (loss), net of tax						142						23						63
Ending balance						$	(166)					$	(308)					$	(331)
Total accumulated other comprehensive loss ending balance						$	(883)					$	(1,438)					$	(1,293)
(1) The amounts reclassified include the amortization of net actuarial loss, amortization of prior service cost and gains or losses related to settlements and divestitures. These costs are included in the computation of net periodic benefit cost which is recorded in other income, net. Refer to Note 13 for additional information.

Share Repurchases - On October 22, 2014, the Board of Directors approved a share repurchase program authorizing the repurchase of up to 35.0 million of the Company's common shares. Under this program, we repurchased 2.5 million, 0.4 million, and 0.7 million shares for $1.6 billion, $200 million and $200 million during 2025, 2024 and 2023, respectively. As of June 30, 2025, we had 4.8 million shares available under this repurchase authorization. On August 21, 2025, the Board of Directors approved an update to the number of shares available under the Company's existing share repurchase authorization so that the aggregate number of shares available for repurchase as of such date was 20.0 million. There is no limitation on the number of shares that can be repurchased in a year and there is no expiration date for the program. Repurchases may be funded primarily from operating cash flows and commercial paper borrowings and the shares are initially held as treasury shares.

15. Stock Incentive Plans

The Company's 2023 Omnibus Stock Incentive Plan ("2023 SIP") provides for the granting of stock-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. The aggregate number of shares of common stock authorized for issuance under the 2023 SIP is 11.3 million. At June 30, 2025, 7.2 million common stock shares were available for future issuance.

The Company also maintains a Global Employee Stock Purchase Plan ("ESPP"), which is offered in a limited number of international countries. The ESPP is intended to provide eligible employees with the opportunity to acquire interest in the Company's common shares for 90 percent of the fair market value per share. The maximum number of shares that may be issued under the ESPP is 10.0 million shares, of which approximately 9.9 million shares are still available for future issuance. Activity under this plan is not material.

We satisfy stock-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 14, or through the issuance of previously unissued common stock.

Total stock-based compensation expense and the related tax benefits were as follows:

			2025						2024						2023
Stock-based compensation expense			$	159					$	156					$	143
Income tax benefits			$	23					$	20					$	20

At June 30, 2025, $142 million of total unrecognized compensation costs related to stock-incentive awards has yet to be recognized and will be amortized into expense over a weighted-average period of approximately 1.8 years. The Company also realized income tax benefits related to the exercise and issuance of awards for $54 million, $52 million and $33 million during 2025, 2024 and 2023, respectively.

SARs - SARs vest ratably over a three-year service period and expire ten years from the grant date. 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.

The fair value of each SAR award granted in 2025, 2024 and 2023 was estimated at the date of grant using a Black-Scholes option pricing model.

			2025						2024						2023
Weighted-average grant date fair value			$	205.79					$	146.72					$	97.70
Assumptions:
Risk-free interest rate			3.7		%				4.4		%				3.0		%
Expected life of award			5.7 years						5.5 years						5.6 years
Expected dividend yield of stock			1.1		%				1.8		%				1.8		%
Expected volatility of stock			35.7		%				39.0		%				37.1		%

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 the annual rate of dividends per share over the market value of the stock on the grant date. 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 2025 is as follows:

(Shares in thousands)			Number of Shares						Weighted-Average Exercise Price						Weighted-Average Remaining Contractual Term						Aggregate Intrinsic Value
Outstanding June 30, 2024			3,495						$	238.15
Granted			347						$	578.39
Exercised			(733)						$	180.74
Canceled and forfeited			(21)						$	445.30
Outstanding June 30, 2025			3,088						$	288.60					5.8 years						$	1,266
Exercisable June 30, 2025			2,230						$	226.33					4.9 years						$	1,053

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

(Shares in thousands)			Number of Shares						Weighted-Average Grant Date Fair Value
Nonvested June 30, 2024			1,050						$	119.05
Granted			347						$	205.79
Vested			(519)						$	109.06
Canceled and forfeited			(21)						$	155.39
Nonvested June 30, 2025			857						$	159.29

The total fair value of shares vested during 2025, 2024 and 2023 was $57 million, $45 million and $34 million, respectively. The total intrinsic value of SAR awards exercised during 2025, 2024 and 2023 was $340 million, $270 million and $158 million, respectively.

RSU & LTIP Awards - RSUs constitute an agreement to deliver shares of common stock to the participant at the end of a vesting period. Generally, the RSUs vest ratably over a three-year service period. 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.

We also 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.

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 a three-year performance period. The number of shares earned at the end of the performance period could vary, based on actual performance, between zero and 200 percent of the target LTIP awards granted. These nonvested LTIP awards entitle participants to earn dividend equivalent units, payable in common shares, equal to the cash dividend per share paid to common shareholders and are subject to the same performance goals as the initial award granted.

A summary of the status and changes of shares subject to RSU and LTIP awards for employees and the related average price per share follows:

			RSU												LTIP Awards
(Shares in thousands)			Number of Shares						Weighted-Average Grant Date Fair Value						Number of Shares						Weighted-Average Grant Date Fair Value
Nonvested June 30, 2024			182						$	345.45					348						$	350.75
Granted(1)			60						$	582.76					146						$	465.01
Vested			(91)						$	329.00					(213)						$	313.89
Canceled			(5)						$	462.19					(6)						$	436.67
Nonvested June 30, 2025			146						$	449.11					275						$	438.35
(1) LTIP awards granted includes an adjustment for actual performance achieved.

The fair value of each RSU and LTIP award granted in 2025, 2024 and 2023 was based on the fair market value of our common stock on the date of grant. A summary of the fair value information for awards vested and granted were as follows:

			Fair Value of Awards Vested																		Weighted-Average Grant Date Fair Value
			2025						2024						2023						2025						2024						2023
RSU			$	30					$	29					$	32					$	582.76					$	401.86					$	297.43
LTIP awards			$	64					$	45					$	58					$	465.01					$	380.97					$	301.64

16. Research and Development

Independent research and development costs amounted to $240 million in 2025, $253 million in 2024 and $258 million in 2023. Pre-production expense incurred in connection with development contracts amounted to $58 million in 2025, $45 million in 2024 and $73 million in 2023.

17. Financial Instruments

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, to manage foreign currency transaction and translation risk. 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.

Net Investment Hedges

The Company uses cross-currency swap contracts and foreign currency denominated debt, a non-derivative financial instrument, to hedge portions of the Company's investments in foreign subsidiaries and manage foreign exchange risk. The effect of translating the debt into U.S. dollars is recorded in foreign currency translation within accumulated other comprehensive loss and remains there until the underlying net investment is sold or substantially liquidated. For the cross-currency swap contracts that are designated and qualify as a net investment hedges, we assess the effectiveness using the spot method and the net gains or losses attributable to changes in the spot rate are recorded in foreign currency translation within accumulated other comprehensive loss. Any ineffective portions of the net investment hedges are reclassified from accumulated other comprehensive loss into earnings through interest expense during the period of change. During 2025, 2024, and 2023, the periodic interest settlements related to the cross-currency swaps were not material.

The notional amounts for the cross-currency swap contracts designated as hedging instruments were €69 million, €290 million and ¥2.1 billion as of June 30, 2025 and 2024.

During 2025, the Company issued €700 million aggregate principal amount of 2.90 percent Senior Notes due 2030. We used the net proceeds from the issuance, together with cash on hand, to repay the €700 million aggregate principal amount of 1.125 percent Senior Notes due 2025. The Company’s €700 million aggregate principal amount of 2.90 percent Senior Notes due 2030 have been designated as a hedge of the Company’s net investment in certain foreign subsidiaries.

Non-Designated Derivative Contracts

In addition to the net investment hedges, the Company utilizes derivatives that are not designated as hedging instruments but serve as economic hedges of forecasted transactions. These include forward exchange, cross-currency swap, deal-contingent forward and costless collar contracts, which are used to mitigate foreign exchange risk. Changes in the fair value of these instruments are recorded in other (income) expense, net in the Consolidated Statement of Income.

In connection with the acquisition of Meggitt, 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 of Meggitt. In June 2022, we amended the agreement to include a credit support annex obligating Parker to post $250 million of cash collateral. In July 2022, the Company received 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.

Financial Statement Impact

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						2025						2024
Net investment hedges
Cross-currency swap contracts			Other assets						$	4					$	16
Cross-currency swap contracts			Other liabilities						26						—
Non-designated derivative contracts
Forward exchange contracts			Non-trade and notes receivable						3						8
Forward exchange contracts			Other accrued liabilities						38						—

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

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

			2025						2024						2023
Deal-contingent forward contracts			$	—					$	—					$	(390)
Forward exchange contracts			(63)						11						(7)
Costless collar contracts			—						—						12
Cross-currency swap contracts			—						—						(19)

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

			2025						2024
Cross-currency swap contracts			$	(30)					$	(4)
Foreign currency denominated debt			(56)						10

Fair Values of Financial Instruments

The Company’s financial instruments consist primarily of cash and cash equivalents, 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.

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:

						2025						2024
Carrying value of long-term debt						$	7,555					$	8,470
Estimated fair value of long-term debt						7,174						7,885

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

A summary of derivative assets and liabilities that were measured at fair value on a recurring basis at June 30, 2025 and 2024 are as follows:

						June 30, 2025						Level 1						Level 2						Level 3
Derivative assets						$	7					$	—					$	7					$	—
Derivative liabilities						64						—						64						—

						June 30, 2024						Level 1						Level 2						Level 3
Derivative assets						$	24					$	—					$	24					$	—

The calculation of fair value for cross-currency swaps and forward contracts utilizes 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.

18. 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, 2025, we had an accrual of $88 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 $88 million to a maximum of $290 million. The largest range for any one site is approximately $85 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.

19. 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 & 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 that design, manufacture, and provide aftermarket support for highly engineered solutions that create value for customers primarily in aerospace and defense, in-plant and industrial equipment, transportation, off-highway, energy, and HVAC and refrigeration markets around the world. Diversified Industrial Segment products are marketed direct to OEMs and independent distributors through field sales employees. The Diversified Industrial North America businesses have manufacturing plants and distribution networks throughout the United States, Canada and Mexico and primarily service North America. The Diversified Industrial International businesses provide Parker products and services to 40 countries throughout Europe, Asia Pacific, Latin America, the Middle East and Africa.

The Aerospace Systems Segment designs, manufactures and provides aftermarket support for highly engineered airframe and engine solutions for both OEMs and end users. Our components and systems are utilized across commercial transport, defense fixed wing, business jets, regional transport, helicopter and energy applications. 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. 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.

The Company’s Chief Operating Decision Maker (“CODM”) is the Chief Executive Officer. The CODM uses Segment Operating Income as a measure to assess performance, drive decisions and allocate human and financial capital to our reportable segments. Annual plan, monthly forecasts and prior year results are continually compared to these measures when evaluating performance. Other segment items are managed on a consolidated basis for the CODM’s review.

						2025						2024						2023
Net Sales:
Diversified Industrial						$	13,665					$	14,458					$	14,705
Aerospace Systems						6,185						5,472						4,360
						$	19,850					$	19,930					$	19,065
Other Segment Items:****(1)
Diversified Industrial						$	10,545					$	11,282					$	11,634
Aerospace Systems						4,744						4,361						3,797
						$	15,289					$	15,643					$	15,431
Segment Operating Income:
Diversified Industrial						$	3,120					$	3,176					$	3,071
Aerospace Systems						1,441						1,111						563
Total segment operating income						4,561						4,287						3,634
Corporate general and administrative expenses						214						218						230
Income before interest expense and other (income) expense, net						4,347						4,069						3,404
Interest expense						409						506						574
Other (income) expense, net						(169)						(32)						150
Income before income taxes						$	4,107					$	3,595					$	2,680
(1) Other segment items are primarily comprised of cost of sales; selling, general and administrative expenses; and income related to equity method investments.

						Assets																		Property Additions
						2025						2024						2023						2025						2024						2023
Diversified Industrial						$	15,953					$	16,174					$	15,573					$	310					$	303					$	293
Aerospace Systems(1)						12,218						12,016						13,661						88						90						81
Corporate						1,323						1,108						730						37						7						7
Total						$	29,494					$	29,298					$	29,964					$	435					$	400					$	381
(1) Assets include an investment in a joint venture in which ownership is 50 percent or less and in which the Company does not have operating control (2025 - $226 million; 2024 - $218 million; 2023 - $216 million).

						Depreciation																		Amortization
						2025						2024						2023						2025						2024						2023
Diversified Industrial						$	228					$	232					$	205					$	253					$	266					$	268
Aerospace Systems						114						108						104						300						312						233
Corporate						12						9						8						—						—						—
Total						$	354					$	349					$	317					$	553					$	578					$	501

Geographic Area - 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.

						Net Sales																		Long-Lived Assets
						2025						2024						2023						2025						2024						2023
North America						$	13,406					$	13,512					$	12,690					$	1,874					$	1,864					$	1,828
International						6,444						6,418						6,375						1,063						1,012						1,037
Total						$	19,850					$	19,930					$	19,065					$	2,937					$	2,876					$	2,865

20. Other (income) expense, net

The table below includes the components of other (income) expense, net in the Consolidated Statement of Income:

						2025						2024						2023
Foreign currency transaction loss (gain)(1)						$	46					$	(38)					$	46
Income related to equity method investments(2)						(178)						(152)						(124)
Non-service components of retirement benefit cost(3)						(51)						(73)						(67)
Interest income						(11)						(15)						(46)
Saegertown incident(4)						8						—						—
Loss on deal-contingent forward contracts(5)						—						—						390
Other items, net						3						2						(15)
Total other (income) expense, net						$	(183)					$	(276)					$	184
(1) Foreign currency transaction loss (gain) primarily relates to the impact of exchange rates on cash, forward contracts and intercompany transactions.
(2) Equity method investments consist of investments in joint venture companies in which ownership is 50 percent or less and in which the Company does not have operating control. The Company's share of earnings from investments in joint venture companies are reflected in other (income) expense, net. Sales to and services performed for joint venture companies totaled $96 million, $74 million and $64 million in 2025, 2024 and 2023, respectively. We received cash dividends from joint venture companies of $167 million, $148 million and $114 million in 2025, 2024 and 2023, respectively.
(3) For further discussion of the non-service components of retirement benefit cost refer to Note 13.
(4) The Saegertown incident represents the deductible and retained liability expense associated with a fire at our plant in Saegertown, Pennsylvania in February 2025.
(5) Loss on deal-contingent forward contracts includes a loss on the deal-contingent forward contracts related to the acquisition of Meggitt. Refer to Note 17 for further discussion.