Parker-Hannifin 10-Q 2024-09-30

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2024

OR

☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File number 1-4982

PARKER-HANNIFIN CORPORATION

(Exact name of registrant as specified in its charter)

Ohio									34-0451060
(State or other jurisdiction of Incorporation or Organization)									(I.R.S. Employer Identification No.)
6035 Parkland Boulevard,			Cleveland,			Ohio			44124-4141
(Address of Principal Executive Offices)									(Zip Code)

Registrant’s telephone number, including area code: (216) 896-3000

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class						Trading Symbol						Name of Each Exchange on which Registered
Common Shares, $.50 par value						PH						New York Stock Exchange

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act:

Large accelerated filer						☒						Accelerated filer						☐
Non-accelerated filer						☐						Smaller reporting company						☐
												Emerging growth company						☐

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

Number of Common Shares outstanding at September 30, 2024: 128,720,433

PART I - FINANCIAL INFORMATION

PARKER-HANNIFIN CORPORATION

CONSOLIDATED STATEMENT OF INCOME

(Dollars in thousands, except per share amounts)

(Unaudited)

			Three Months Ended
			September 30,
			2024						2023
Net sales			$	4,903,984					$	4,847,488
Cost of sales			3,097,719						3,097,349
Selling, general and administrative expenses			848,789						873,691
Interest expense			113,091						134,468
Other income, net			(30,801)						(78,455)
Income before income taxes			875,186						820,435
Income taxes			176,658						169,363
Net income			698,528						651,072
Less: Noncontrolling interest in subsidiaries' earnings			108						245
Net income attributable to common shareholders			$	698,420					$	650,827
Earnings per share attributable to common shareholders:
Basic			$	5.43					$	5.07
Diluted			$	5.34					$	4.99

See accompanying notes to consolidated financial statements.

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PARKER-HANNIFIN CORPORATION

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(Dollars in thousands)

(Unaudited)

			Three Months Ended
			September 30,
			2024						2023
Net income			$	698,528					$	651,072
Less: Noncontrolling interests in subsidiaries' earnings			108						245
Net income attributable to common shareholders			698,420						650,827
Other comprehensive income (loss), net of tax
Foreign currency translation adjustment			344,546						(222,532)
Retirement benefits plan activity			3,451						818
Other comprehensive income (loss)			347,997						(221,714)
Less: Other comprehensive income for noncontrolling interests			420						361
Other comprehensive income (loss) attributable to common shareholders			347,577						(222,075)
Total comprehensive income attributable to common shareholders			$	1,045,997					$	428,752

See accompanying notes to consolidated financial statements.

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PARKER-HANNIFIN CORPORATION

CONSOLIDATED BALANCE SHEET

(Dollars in thousands)

(Unaudited)

			September 30, 2024						June 30, 2024
ASSETS
Current assets:
Cash and cash equivalents			$	371,068					$	422,027
Trade accounts receivable, net			2,712,656						2,865,546
Non-trade and notes receivable			317,381						331,429
Inventories			2,872,250						2,786,800
Prepaid expenses			249,148						252,618
Other current assets			511,198						140,204
Total current assets			7,033,701						6,798,624
Property, plant and equipment			7,111,027						7,074,574
Less: Accumulated depreciation			4,271,485						4,198,906
Property, plant and equipment, net			2,839,542						2,875,668
Deferred income taxes			91,882						92,704
Investments and other assets			1,263,190						1,207,232
Intangible assets, net			7,747,233						7,816,181
Goodwill			10,625,287						10,507,433
Total assets			$	29,600,835					$	29,297,842
LIABILITIES
Current liabilities:
Notes payable and long-term debt payable within one year			$	3,515,613					$	3,403,065
Accounts payable, trade			1,953,477						1,991,639
Accrued payrolls and other compensation			407,106						581,251
Accrued domestic and foreign taxes			457,761						354,659
Other accrued liabilities			1,004,073						982,695
Total current liabilities			7,338,030						7,313,309
Long-term debt			6,673,303						7,157,034
Pensions and other postretirement benefits			427,702						437,490
Deferred income taxes			1,544,503						1,583,923
Other liabilities			715,948						725,193
Total liabilities			16,699,486						17,216,949
EQUITY
Shareholders’ equity:
Serial preferred stock, $.50 par value; authorized 3,000,000 shares; none issued			—						—
Common stock, $.50 par value; authorized 600,000,000 shares; issued 181,046,128 shares at September 30 and June 30			90,523						90,523
Additional paid-in capital			275,019						264,508
Retained earnings			19,593,082						19,104,599
Accumulated other comprehensive (loss)			(1,090,435)						(1,438,012)
Treasury shares, at cost; 52,325,695 shares at September 30 and 52,442,162 shares at June 30			(5,976,289)						(5,949,

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FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2024

AND COMPARABLE PERIOD ENDED SEPTEMBER 30, 2023

OVERVIEW

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 and defense, in-plant and industrial equipment, transportation, off-highway, energy, and HVAC and refrigeration markets around the world.

By aligning around our purpose, Enabling Engineering Breakthroughs that Lead to a Better Tomorrow, Parker is better positioned for the challenges and opportunities of tomorrow.

The Win Strategy 3.0 is Parker's business system that defines the goals and initiatives that create responsible, sustainable growth and enable Parker's long-term success. It works with our purpose, which is a foundational element of The Win Strategy, to engage team members and create responsible and sustainable growth. Our shared values shape our culture and our interactions with stakeholders and the communities in which we operate and live.

We believe many opportunities for profitable growth are available. The Company intends to focus primarily on business opportunities in the areas of aerospace and defense, in-plant and industrial equipment, transportation, off-highway, energy, and HVAC and refrigeration. We believe we can meet our strategic objectives by:

• serving the customer and continuously enhancing its experience with the Company;

• successfully executing The Win Strategy initiatives relating to engaged people, premier customer experience, profitable growth and financial performance;

• maintaining a decentralized division and sales company structure;

• fostering a safety-first and entrepreneurial culture;

• engineering innovative systems and products to provide superior customer value through improved service, efficiency and productivity;

• delivering products, systems and services that have demonstrable savings to customers and are priced by the value they deliver;

• enabling a sustainable future by providing innovative technology solutions that offer a positive global environmental impact and operating responsibly by reducing our energy use and emissions;

• acquiring strategic businesses;

• organizing around targeted regions, technologies and markets;

• driving efficiency by implementing lean enterprise principles; and

• creating a culture of empowerment through our values, inclusion and diversity, accountability and teamwork.

Our order rates provide a near-term perspective of the Company’s outlook particularly when viewed in the context of prior and future order rates. The Company publishes its order rates on a quarterly basis. The lead time between the time an order is received and revenue is realized generally ranges from one day to 12 weeks for mobile and industrial orders and from one day to 18 months for aerospace orders.

We manage our supply chain through our "local for local" manufacturing strategy, ongoing supplier management process, and broadened supply base. We are monitoring inflation and manage its impact through a variety of cost and pricing measures, including continuous improvement and lean initiatives. Additionally, we strategically manage our workforce and discretionary spending. At the same time, we are appropriately addressing the ongoing needs of our business so that we continue to serve our customers.

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Over the long term, the extent to which our business and results of operations will be impacted by economic and political uncertainty, geopolitical risks and public health crises depends on future developments that remain uncertain. We will continue to monitor the global environment and manage our business with the goal to minimize unfavorable impacts on operations and financial results.

The discussion below is structured to separately discuss the Consolidated Statement of Income, Business Segments, and Liquidity and Capital Resources. As used in this Quarterly Report on Form 10-Q, unless the context otherwise requires, the terms "Company", "Parker", "we" or "us" refer to Parker-Hannifin Corporation and its subsidiaries. Dollars are presented in millions (except per share amounts or as otherwise noted) and computed based on the amounts in thousands; therefore, totals may not sum due to rounding.

CONSOLIDATED STATEMENT OF INCOME

						Three Months Ended
						September 30,
(dollars in millions)						2024						2023
Net sales						$	4,904					$	4,847
Gross profit margin						36.8		%				36.1		%
Selling, general and administrative expenses						$	849					$	874
Selling, general and administrative expenses, as a percent of sales						17.3		%				18.0		%
Interest expense						$	113					$	134
Other income, net						$	(31)					$	(78)
Effective tax rate						20.2		%				20.6		%
Net income						$	699					$	651
Net income, as a percent of sales						14.2		%				13.4		%

Net sales increased in the current-year quarter due to higher sales in the Aerospace Systems Segment, partially offset by lower sales in the Diversified Industrial Segment. The effect of currency exchange rate changes decreased net sales during the current-year quarter by approximately $3 million. The change was driven by a decrease of approximately $9 million in the Diversified Industrial Segment, partially offset by an increase of approximately $7 million within the Aerospace Systems Segment. The impact of divestiture activity decreased net sales by approximately $7 million during the current-year quarter.

Gross profit margin (calculated as net sales minus cost of sales, divided by net sales) increased in the current-year quarter due to higher margins in both segments primarily resulting from price increases and favorable product mix, partially offset by decreased volume.

Cost of sales also included business realignment and acquisition integration charges of $6 million and $8 million for the current and prior-year quarter, respectively.

Selling, general and administrative expenses ("SG&A") decreased in the current-year quarter primarily due to lower intangible asset amortization, stock-based compensation expense and research and development expense.

SG&A also included business realignment and acquisition integration charges of $10 million and $11 million for the current and prior-year quarter, respectively.

Interest expense decreased during the current-year quarter primarily due to lower average debt outstanding.

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Other income, net included the following:

						Three Months Ended
						September 30,
(dollars in millions)						2024						2023
Expense (income)
Foreign currency transaction (gain) loss						$	37					$	(2)
Income related to equity method investments						(38)						(38)
Non-service components of retirement benefit cost						(12)						(18)
Gain on disposal of assets and divestitures						(9)						(12)
Interest income						(3)						(4)
Other items, net						(6)						(4)
						$	(31)					$	(78)

Foreign currency transaction (gain) loss primarily relates to the impact of exchange rates on cash, forward contracts and intercompany transactions.

Effective tax rate for the current-year quarter was lower than the U.S. Federal statutory rate of 21 percent due to tax benefits from share-based compensation and foreign-derived intangible income, which were partially offset by U.S. state and local taxes and taxes on international activities.

The effective tax rate for the comparable prior-year period was lower than the U.S. Federal statutory rate of 21 percent due to tax benefits from share-based compensation and foreign-derived intangible income, which were partially offset by taxes on international activities.

The fiscal 2025 effective tax rate is expected to be approximately 22.5 percent.

BUSINESS SEGMENT INFORMATION

The Business Segment information presents sales and operating income on a basis that is consistent with the manner in which the Company's various businesses are managed for internal review and decision-making.

Diversified Industrial Segment

						Three Months Ended
						September 30,
(dollars in millions)						2024						2023
Net sales
North America businesses						$	2,100					$	2,230
International businesses						1,356						1,389
Diversified Industrial Segment						3,456						3,619
Operating income
North America businesses						485						506
International businesses						299						301
Diversified Industrial Segment						$	784					$	807
Operating margin
North America businesses						23.1		%				22.7		%
International businesses						22.1		%				21.7		%
Diversified Industrial Segment						22.7		%				22.3		%
Backlog						$	4,197					$	4,538

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The Diversified Industrial Segment operations experienced the following percentage changes in net sales in the current-year period versus the comparable prior-year period:

						Period Ending September 30, 2024
						Three Months
North America businesses – as reported						(5.8)		%
Divestitures						(0.3)		%
Currency						(0.5)		%
North America businesses – without divestitures and currency1						(5.0)		%
International businesses– as reported						(2.4)		%
Currency						—		%
International businesses – without currency1						(2.4)		%
Diversified Industrial Segment – as reported						(4.5)		%
Divestitures						(0.2)		%
Currency						(0.3)		%
Diversified Industrial Segment – without divestitures and currency1						(4.0)		%

1This table reconciles the percentage changes in net sales of the Diversified Industrial Segment reported in accordance with accounting principles generally accepted in the United States of America ("GAAP") to percentage changes in net sales adjusted to remove the effects of divestitures for 12 months after their completion as well as changes in currency exchange rates (a non-GAAP measure). The effects of divestitures and changes in currency exchange rates are removed to allow investors and the Company to meaningfully evaluate the percentage changes in net sales on a comparable basis from period to period.

Net Sales

Diversified Industrial Segment sales in the current-year quarter decreased $162 million from the prior-year quarter. The effect of changes in currency exchange rates decreased sales by approximately $9 million. The impact of divestiture activity decreased sales by approximately $7 million. Excluding the effects of the changes in currency exchange rates and divestiture activity, sales decreased $146 million from prior-year levels.

North America businesses - Sales decreased $130 million during the current-year quarter. The effect of changes in currency exchange rates decreased sales by approximately $10 million in the current-year quarter. The effects of divestiture activity decreased sales by approximately $7 million in the current-year quarter. Excluding the effects of changes in currency exchange rates and divestiture activity, sales in the North America businesses decreased $112 million in the current-year quarter primarily due to lower demand from end users in the energy, in-plant and industrial equipment, off-highway and transportation markets, partially offset by an increase in end-user demand in the aerospace and defense and HVAC and refrigeration markets.

International businesses - Sales decreased $33 million from the prior-year quarter. The effect of changes in currency exchange rates increased sales by approximately $1 million in the current-year quarter. Excluding the effects of changes in currency exchange rates, sales in the International businesses decreased $34 million in the current-year quarter. In the current-year quarter, the decrease in sales was due to lower sales in Europe, partially offset by an increase in sales in the Asia Pacific region and Latin America.

Within Europe, sales in the current-year quarter decreased primarily due to lower demand from end users across the in-plant and industrial equipment, off-highway, and transportation markets.

Within the Asia Pacific region, sales in the current-year quarter increased primarily due to higher end-user demand in the electronics and semiconductor, in-plant and industrial equipment and transportation markets.

Within Latin America, sales in the current-year quarter increased primarily due to higher end-user demand in the in-plant and industrial equipment, off-highway and transportation markets, partially offset by lower demand from end users in the energy market.

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Operating Margin

Diversified Industrial Segment operating margin increased in both the North America and International businesses due to price increases, favorable product mix and benefits from prior-year business realignment activities as well as cost containment initiatives, partially offset by a decrease in volume.

Business Realignment

The following business realignment and acquisition integration charges are included in the Diversified Industrial Segment operating income:

						Three Months Ended
						September 30,
(dollars in millions)						2024						2023
North America businesses						$	4					$	4
International businesses						6						10
Diversified Industrial Segment						$	10					$	14

The business realignment charges primarily consist of severance costs related to actions taken under the Company's simplification initiative aimed at reducing organizational and process complexity, as well as plant closures. Acquisition integration charges relate to the acquisition of Meggitt plc ("Meggitt"). Business realignment and acquisition integration charges within the International businesses were primarily incurred in Europe.

We anticipate that cost savings realized from the workforce reduction measures taken in the first three months of fiscal 2025 will not materially impact operating income in fiscal 2025 and 2026. We expect to continue to take actions necessary to integrate acquisitions and appropriately structure the operations of the Diversified Industrial Segment. We currently anticipate incurring approximately $41 million of additional business realignment and acquisition integration charges in the remainder of fiscal 2025. However, continually changing business conditions could impact the ultimate costs we incur.

Backlog

Diversified Industrial Segment backlog, as of September 30, 2024, decreased from the prior-year quarter due to shipments exceeding orders in both the North America and International businesses. The decrease in backlog was split evenly between the North America and International businesses. Within the International businesses, Europe and the Asia Pacific region accounted for approximately 90 percent and 10 percent, respectively, of the decrease from the prior-year quarter.

Diversified Industrial Segment backlog increased from the June 30, 2024 amount of $4.2 billion due to orders exceeding shipments in the International businesses, partially offset by shipments exceeding orders in the North America businesses. Within the International businesses, the increase in backlog from the June 30, 2024 amount was primarily attributable to both the Asia Pacific region and Latin America, partially offset by a decrease in backlog in Europe.

Backlog consists of 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 date has been agreed to with the customer. The dollar value of backlog is equal to the amount that is expected to be billed to the customer and reported as a sale.

Aerospace Systems Segment

						Three Months Ended
						September 30,
(dollars in millions)						2024						2023
Net sales						$	1,448					$	1,229
Operating income						$	323					$	226
Operating margin						22.3		%				18.4		%
Backlog						$	6,852					$	6,270

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Net Sales

Aerospace Systems Segment sales increased $219 million in the current-year quarter. The effect of currency exchange rates increased sales by approximately $7 million. Excluding the effects of changes in currency exchange rates, sales during the current-year quarter increased $212 million from prior-year levels. The increase in sales is primarily due to higher volume in the commercial and defense aftermarket, as well as the commercial original equipment manufacturer ("OEM") market segment.

Operating Margin

Aerospace Systems Segment operating margin increased during the current-year quarter due to higher sales volume and favorable aftermarket mix, as well as benefits of cost containment initiatives and prior-year business realignment and acquisition integration activities, partially offset by higher material costs.

Business Realignment

Within the Aerospace Systems Segment, we incurred acquisition integration and business realignment charges of $6 million in both the current and prior-year quarter, respectively. We do not expect to incur material business realignment and acquisition integration charges in the remainder of fiscal 2025. However, continually changing business conditions could impact the ultimate costs we incur.

Backlog

Aerospace Systems Segment backlog, as of September 30, 2024, increased from the prior-year quarter due to orders exceeding shipments in all market segments, especially the commercial and defense OEM market segments.

The increase in backlog from the June 30, 2024 amount of $6.7 billion was due to orders exceeding shipments in the commercial and defense OEM market segments, partially offset by shipments exceeding orders within the commercial and defense aftermarket market segments.

Backlog consists of 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 date has been agreed to with the customer. The dollar value of backlog is equal to the amount that is expected to be billed to the customer and reported as a sale.

Corporate general & administrative expenses

						Three Months Ended
						September 30,
(dollars in millions)						2024						2023
Expense
Corporate general and administrative expense						$	49					$	56
Corporate general and administrative expense, as a percent of sales						1.0		%				1.1		%

Corporate general and administrative expenses decreased in the current-year quarter primarily due to lower net expense associated with the Company's deferred compensation plan and related investments, partially offset by an increase in professional service fees and salaries and benefits.

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Other expense, net

						Three Months Ended
						September 30,
(dollars in millions)						2024						2023
Expense (income)
Foreign currency transaction (gain) loss						$	37					$	(2)
Stock-based compensation						58						62
Non-service components of retirement benefit cost						(12)						(18)
Gain on disposal of assets and divestitures						(9)						(12)
Interest income						(3)						(4)
Other items, net						(2)						(4)
						$	69					$	22

Foreign currency transaction (gain) loss primarily relates to the impact of exchange rates on cash, forward contracts and intercompany transactions.

LIQUIDITY AND CAPITAL RESOURCES

We believe that we are great generators and deployers of cash. We assess our liquidity in terms of our ability to generate cash to fund our operations and meet our strategic capital deployment objectives, which include the following:

• Continuing our record annual dividend increases

• Investing in organic growth and productivity

• Strategic acquisitions that strengthen our portfolio

• Offset share dilution through 10b5-1 share repurchase program

Cash Flows

A summary of cash flows follows:

						Three Months Ended
						September 30,
(dollars in millions)						2024						2023
Cash provided by (used in):
Operating activities						$	744					$	650
Investing activities						(87)						(56)
Financing activities						(711)						(618)
Effect of exchange rates						3						(2)
Net decrease in cash and cash equivalents						$	(51)					$	(26)

Cash flows from operating activities for the first three months of fiscal 2025 were $744 million compared to $650 million for the first three months of fiscal 2024. This increase of $94 million was primarily related to an increase in earnings combined with strong management of working capital items. We continue to focus on managing inventory and other working capital requirements.

• Days sales outstanding relating to trade accounts receivable was 52 days at September 30, 2024, 51 days at June 30, 2024 and 52 days at September 30, 2023.

• Days supply of inventory on hand was 91 days at September 30, 2024, 80 days at June 30, 2024 and 96 days at September 30, 2023.

Cash flows from investing activities for the first three months of fiscal 2025 and 2024 were impacted by the following factors:

• Capital expenditures of $95 million in fiscal 2025 compared to $98 million in fiscal 2024.

• Net proceeds from the sale of the MicroStrain sensing systems business of approximately $37 million in fiscal 2024.

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Cash flows from financing activities for the first three months of fiscal 2025 and 2024 were impacted by the following factors:

• Net commercial paper repayments of $377 million in fiscal 2025 compared to net commercial paper repayments of $170 million in fiscal 2024.

• Principal payments totaling $40 million related to borrowings under the term loan facility ("Term Loan Facility") in fiscal 2025 compared to principal payments totaling $175 million related to the Term Loan Facility in fiscal 2024.

Cash Requirements

We are actively monitoring our liquidity position and remain focused on managing our inventory and other working capital requirements. We are continuing to target two percent of sales for capital expenditures and are prioritizing those related to safety, strategic investments and sustainability initiatives. We believe that cash generated from operations and our commercial paper program will satisfy our operating needs for the foreseeable future.

Dividends

We declared a quarterly cash dividend of $1.63 per share on August 15, 2024, which was paid on September 13, 2024. Dividends have been paid for 297 consecutive quarters, including a yearly increase in dividends for the last 68 years. Additionally, we declared a quarterly cash dividend of $1.63 per share on October 23, 2024, payable on December 6, 2024.

Share Repurchases

The Company has a program to repurchase its common shares. On October 22, 2014, the Board of Directors of the Company approved an increase in the overall number of shares authorized to repurchase under the program so that, beginning on such date, the aggregate number of shares authorized for repurchase was 35 million. There is no limitation on the number of shares that can be repurchased in a year. Repurchases may be funded primarily from operating cash flows and commercial paper borrowings and the shares are initially held as treasury shares. Refer to Note 6 to the Consolidated Financial Statements for further discussion of share repurchases.

Liquidity

Cash, comprised of cash and cash equivalents and marketable securities and other investments, includes $327 million and $311 million held by the Company's foreign subsidiaries at September 30, 2024 and June 30, 2024, respectively. The Company does not permanently reinvest certain foreign earnings. The distribution of these earnings could result in non-federal U.S. or foreign taxes. All other undistributed foreign earnings remain permanently reinvested.

We are currently authorized to sell up to $3.0 billion of short-term commercial paper notes. As of September 30, 2024, $1.8 billion of commercial paper notes were outstanding, and the largest amount of commercial paper notes outstanding during the current-year quarter was $2.1 billion.

The Company has a line of credit totaling $3.0 billion through a multi-currency revolving credit agreement with a group of banks, of which $1.2 billion was available as of September 30, 2024. 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 credit agreement. The credit agreement expires in 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. The credit agreement requires the payment of an annual facility fee, the amount of which is dependent upon the Company’s credit ratings. Although a lowering of the Company’s credit ratings would increase the cost of future debt, it would not limit the Company’s ability to use the credit agreement, nor would it accelerate the repayment of any outstanding borrowings.

We primarily utilize unsecured medium-term notes and senior notes to meet our financing needs and we expect to continue to borrow funds at reasonable rates over the long term. Refer to the Cash flows from financing activities section above and Note 15 to the Consolidated Financial Statements for further discussion.

Our debt portfolio includes the Term Loan Facility. During the three months ended September 30, 2024, we made principal payments totaling $40 million related to the Term Loan Facility. Refer to Note 15 to the Consolidated Financial Statements for further discussion.

The Company’s credit agreement and indentures governing certain debt securities contain various covenants, the violation of which would limit or preclude the use of the credit agreements for future borrowings, or might accelerate the maturity of the related outstanding borrowings covered by the indentures. Based on the Company’s rating level at September 30, 2024, the

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most restrictive financial covenant provides that the ratio of debt to debt-shareholders' equity cannot exceed 0.65 to 1.0. At September 30, 2024, the Company's debt to debt-shareholders' equity ratio was 0.44 to 1.0. We are in compliance and expect to remain in compliance with all covenants set forth in the credit agreement and indentures.

Our goal is to maintain an investment-grade credit profile. At September 30, 2024, the long-term credit ratings assigned to the Company's senior debt securities by the credit rating agencies engaged by the Company were as follows:

Fitch Ratings						BBB+
Moody's Investors Services, Inc.						Baa1
Standard & Poor's						BBB+

The rating agencies periodically update the Company's credit ratings as events occur. On October 21, 2024, Fitch Ratings upgraded the Company's credit rating to A- from BBB+.

Supply Chain Financing

We continue to identify opportunities to improve our liquidity and working capital efficiency, which includes the extension of payment terms with our suppliers. We have supply chain financing 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 do not believe that changes in the availability of supply chain financing will have a significant impact on our liquidity. Refer to Note 10 to the Consolidated Financial Statements for further discussion.

Strategic Acquisitions and Divestitures

Acquisitions will be considered from time to time to the extent there is a strong strategic fit, while at the same time maintaining the Company’s strong financial position. In addition, we will continue to assess our existing businesses and initiate efforts to divest businesses that are not considered to be a good long-term strategic fit for the Company. On July 28, 2024, the Company signed an agreement to divest its composites and fuel containment ("CFC") business within the North America businesses of the Diversified Industrial Segment. CFC was acquired as part of the Meggitt acquisition. This divestiture closed on November 1, 2024 for proceeds of $560 million. Refer to Note 4 to the Consolidated Financial Statements for further discussion. Additionally, we divested a non-core filtration business within the North America businesses of the Diversified Industrial Segment for proceeds of $66 million on November 1, 2024.

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Forward-Looking Statements

Forward-looking statements contained in this and other written and oral reports are made based on known events and circumstances at the time of release, and as such, are subject in the future to unforeseen uncertainties and risks. Often but not always, these statements may be identified from the use of forward-looking terminology such as “anticipates,” “believes,” “may,” “should,” “could,” “expects,” “targets,” “is likely,” “will,” or the negative of these terms and similar expressions, and include all statements regarding future performance, earnings projections, events or developments. Neither Parker nor any of its respective associates or directors, officers or advisers, provides any representation, assurance or guarantee that the occurrence of the events expressed or implied in any forward-looking statements will actually occur. Parker cautions readers not to place undue reliance on these statements. It is possible that the future performance and earnings projections of the company, including its individual segments, may differ materially from past performance or current expectations. A change in the economic conditions in individual markets may have a particularly volatile effect on segment performance.

Among other factors which may affect future performance are:

• changes in business relationships with and orders by or from major customers, suppliers or distributors, including delays or cancellations in shipments;

• disputes regarding contract terms, changes in contract costs and revenue estimates for new development programs;

• changes in product mix;

• ability to identify acceptable strategic acquisition targets;

• uncertainties surrounding timing, successful completion or integration of acquisitions and similar transactions;

• ability to successfully divest businesses planned for divestiture and realize the anticipated benefits of such divestitures;

• the determination and ability to successfully undertake business realignment activities and the expected costs, including cost savings, thereof;

• ability to implement successfully business and operating initiatives, including the timing, price and execution of share repurchases and other capital initiatives;

• availability, cost increases of or other limitations on our access to raw materials, component products and/or commodities if associated costs cannot be recovered in product pricing;

• ability to manage costs related to insurance and employee retirement and health care benefits;

• legal and regulatory developments and other government actions, including related to environmental protection, and associated compliance costs; supply chain and labor disruptions, including as a result of labor shortages;

• threats associated with international conflicts and cybersecurity risks and risks associated with protecting our intellectual property;

• uncertainties surrounding the ultimate resolution of outstanding legal proceedings, including the outcome of any appeals;

• effects on market conditions, including sales and pricing, resulting from global reactions to U.S. trade policies;

• manufacturing activity, air travel trends, currency exchange rates, difficulties entering new markets and economic conditions such as inflation, deflation, interest rates and credit availability; inability to obtain, or meet conditions imposed for, required governmental and regulatory approvals;

• changes in the tax laws in the United States and foreign jurisdictions and judicial or regulatory interpretations thereof; and

• large scale disasters, such as floods, earthquakes, hurricanes, industrial accidents and pandemics.

Readers should consider these forward-looking statements in light of risk factors discussed in Parker’s Annual Report on Form 10-K for the fiscal year ended June 30, 2024 and other periodic filings made with the Securities and Exchange Commission.

The Company makes these statements as of the date of the filing of this Quarterly Report on Form 10-Q for the quarter ended September 30, 2024, and undertakes no obligation to update them unless otherwise required by law.

A substantial portion of our operations are conducted by our subsidiaries outside of the U.S. in currencies other than the U.S. dollar. Most of our non-U.S. subsidiaries conduct their business primarily in their local currencies, which are also their functional currencies. Foreign currency exposures arise from translation of foreign-denominated assets and liabilities into U.S. dollars and from transactions denominated in a currency other than the subsidiary’s functional currency. We continue to manage the associated foreign currency transaction and translation risk using existing processes.

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The Company manages foreign currency transaction and translation risk by utilizing derivative and non-derivative financial instruments, including forward exchange contracts, cross-currency swap contracts and certain foreign currency denominated debt designated as net investment hedges. The derivative financial instrument contracts are with major investment grade financial institutions and we do not anticipate any material non-performance by any of the counterparties. We do not hold or issue derivative financial instruments for trading purposes.

Derivative financial instruments are recognized on the Consolidated Balance Sheet as either assets or liabilities and are measured at fair value. Further information on the fair value of these contracts is provided in Note 17 to the Consolidated Financial Statements. Derivatives that are not designated as hedges are adjusted to fair value by recording gains and losses through the Consolidated Statement of Income. Derivatives that are designated as hedges are adjusted to fair value by recording gains and losses through accumulated other comprehensive income (loss) in the Consolidated Balance Sheet until the hedged item is recognized in earnings. For cross-currency swap contracts measured using the spot method, the periodic interest settlements are recognized directly in earnings through interest expense. The translation of the foreign currency denominated debt that has been designated as a net investment hedge is recorded in accumulated other comprehensive income (loss) and remains there until the underlying net investment is sold or substantially liquidated.

The Company’s debt portfolio contains variable rate debt, inherently exposing the Company to interest rate risk. Our objective is to maintain a 60/40 mix between fixed rate and variable rate debt thereby limiting our exposure to changes in near-term interest rates. At September 30, 2024, our debt portfolio included $450 million of variable rate debt, exclusive of commercial paper borrowings. A 100 basis point increase in near-term interest rates would increase annual interest expense on variable rate debt, including weighted-average commercial paper borrowings for the three months ended September 30, 2024, by approximately $23 million.

The Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s principal executive officer and principal financial officer, of the effectiveness of the Company’s disclosure controls and procedures as of September 30, 2024. Based on this evaluation, the Company's principal executive officer and principal financial officer concluded that, as of September 30, 2024, the Company’s disclosure controls and procedures were effective.

There was no change to our internal control over financial reporting during the first quarter of fiscal 2025 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PARKER-HANNIFIN CORPORATION

PART II - OTHER INFORMATION

ITEM 1. Legal Proceedings.

From time to time we are involved in matters that involve governmental authorities as a party under federal, state and local laws that have been enacted or adopted regulating the discharge of materials into the environment or primarily for the purpose of protecting the environment. We will report such matters that exceed, or that we reasonably believe may exceed, $1.0 million or more in monetary sanctions.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds.

(a)Unregistered Sales of Equity Securities. Not applicable.

(b)Use of Proceeds. Not applicable.

(c)Issuer Purchases of Equity Securities.

Period						(a) Total Number of Shares Purchased						(b) Average Price Paid Per Share						(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)						(d) Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (1)
July 1, 2024 through July 31, 2024						32,900						$	533.31					32,900						7,280,434
August 1, 2024 through August 31, 2024						31,600						$	565.86					31,600						7,248,834
September 1, 2024 through September 30, 2024						24,321						$	599.10					24,321						7,224,513
Total:						88,821												88,821

(1)On October 22, 2014, the Company publicly announced that the Board of Directors increased the overall maximum number of shares authorized for repurchase under the Company's share repurchase program, first announced on August 16, 1990, so that, beginning on October 22, 2014, the maximum aggregate number of shares authorized for repurchase was 35 million shares. There is no limitation on the amount of shares that can be repurchased in a fiscal year. There is no expiration date for this program.

None of the Company's directors or officers adopted, modified or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the Company's fiscal quarter ended September 30, 2024.

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The following documents are furnished as exhibits and are numbered pursuant to Item 601 of Regulation S-K:

Exhibit No.						Description of Exhibit
10(a)						Form of 2024 Parker-Hannifin Corporation Stock Appreciation Rights Award Agreement.*
10(b)						2024 Parker-Hannifin Corporation Stock Appreciation Rights Terms and Conditions.*
31(a)						Certification of the Principal Executive Officer Pursuant to 17 CFR 240.13a-14(a), as Adopted Pursuant to §302 of the Sarbanes-Oxley Act of 2002.*
31(b)						Certification of the Principal Financial Officer Pursuant to 17 CFR 240.13a-14(a), as Adopted Pursuant to §302 of the Sarbanes-Oxley Act of 2002.*
32						Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to §906 of the Sarbanes-Oxley Act of 2002.*
101.INS						Inline XBRL Instance Document.*
101.SCH						Inline XBRL Taxonomy Extension Schema Document.*
101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document.*
101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document. *
101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document.*
101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document.*
104						Cover page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101).

*			Submitted electronically herewith.

Attached as Exhibit 101 to this report are the following formatted in Inline XBRL (Extensible Business Reporting Language): (i) Consolidated Statement of Income for the three months ended September 30, 2024 and 2023, (ii) Consolidated Statement of Comprehensive Income for the three months ended September 30, 2024 and 2023, (iii) Consolidated Balance Sheet at September 30, 2024 and June 30, 2024, (iv) Consolidated Statement of Cash Flows for the three months ended September 30, 2024 and 2023, and (v) Notes to Consolidated Financial Statements for the three months ended September 30, 2024.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

						PARKER-HANNIFIN CORPORATION
						(Registrant)
						/s/ Todd M. Leombruno
						Todd M. Leombruno
						Executive Vice President and Chief Financial Officer
Date:			November 5, 2024

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