Parker-Hannifin 10-Q 2025-03-31

Filed 2025-05-06. 7 sections, 144K characters. Original on sec.gov · Markdown · JSON

Cover and table of contents

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 March 31, 2025

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)

Ohio34-0451060
(State or other jurisdiction of Incorporation or Organization)(I.R.S. Employer Identification No.)
6035 Parkland Boulevard,Cleveland,Ohio44124-4141
(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 ClassTrading SymbolName of Each Exchange on which Registered
Common Shares, $.50 par valuePHNew 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 March 31, 2025: 127,778,004

PART I - FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

PARKER-HANNIFIN CORPORATION

CONSOLIDATED STATEMENT OF INCOME

(Dollars in thousands, except per share amounts)

(Unaudited)

Three Months EndedNine Months Ended
March 31,March 31,
2025202420252024
Net sales$4,960,349$5,074,356$14,606,926$14,742,791
Cost of sales3,129,9513,279,6509,249,8999,478,961
Selling, general and administrative expenses784,355816,3372,415,5652,496,830
Interest expense95,942123,732309,835387,229
Other income, net(44,713)(65,406)(404,230)(228,872)
Income before income taxes994,814920,0433,035,8572,608,643
Income taxes33,628193,309427,494548,780
Net income961,186726,7342,608,3632,059,863
Less: Noncontrolling interest in subsidiaries' earnings320160535611
Net income attributable to common shareholders$960,866$726,574$2,607,828$2,059,252
Earnings per share attributable to common shareholders:
Basic$7.48$5.65$20.28$16.03
Diluted$7.37$5.56$19.97$15.82

See accompanying notes to consolidated financial statements.

- 2 -

PARKER-HANNIFIN CORPORATION

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(Dollars in thousands)

(Unaudited)

Three Months EndedNine Months Ended
March 31,March 31,
2025202420252024
Net income$961,186$726,734$2,608,363$2,059,863
Less: Noncontrolling interests in subsidiaries' earnings320160535611
Net income attributable to common shareholders960,866726,5742,607,8282,059,252
Other comprehensive income (loss), net of tax
Foreign currency translation adjustment167,432(168,919)62,826(119,216)
Retirement benefits plan activity3,3361,36910,1974,098
Other comprehensive income (loss)170,768(167,550)73,023(115,118)
Less: Other comprehensive income (loss) for noncontrolling interests23(392)(605)384
Other comprehensive income (loss) attributable to common shareholders170,745(167,158)73,628(115,502)
Total comprehensive income attributable to common shareholders$1,131,611$559,416$2,681,456$1,943,750

See accompanying notes to consolidated financial statements.

- 3 -

PARKER-HANNIFIN CORPORATION

CONSOLIDATED BALANCE SHEET

(Dollars in thousands)

(Unaudited)

March 31, 2025June 30, 2024
ASSETS
Current assets:
Cash and cash equivalents$408,735$422,027
Trade accounts receivable, net2,852,8332,865,546
Non-trade and notes receivable281,789331,429
Inventories2,822,5472,786,800
Prepaid expenses253,436252,618
Other current assets157,800140,204
Total current assets6,777,1406,798,624
Property, plant and equipment7,159,7837,074,574
Less: Accumulated depreciation4,338,2174,198,906
Property, plant and equipment, net2,821,5662,875,668
Deferred income taxes271,43192,704
Investments and other assets1,215,2011,207,232
Intangible assets, net7,370,5247,816,181
Goodwill10,461,94610,507,433
Total assets$28,917,808$29,297,842
LIABILITIES
Current liabilities:
Notes payable and long-term debt payable within one year$1,951,543$3,403,065
Accounts payable, trade1,980,9671,991,639
Accrued payrolls and other compensation473,725581,251
Accrued domestic and foreign taxes356,506354,659
Other accrued liabilities851,725982,695
Total current liabilities5,614,4667,313,309
Long-term debt7,421,3707,157,034
Pensions and other postretirement benefits389,891437,490
Deferred income taxes1,399,6121,583,923
Other liabilities692,644725,193
Total liabilities15,517,98317,216,949
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 March 31 and June 3090,523

Showing the first 8K of 82K characters. Open the full section

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2025

AND COMPARABLE PERIODS ENDED MARCH 31, 2024

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 actively monitor global trade policies and inflation, managing their impact through a variety of cost and pricing measures. In addition, continuous improvement and lean initiatives, along with disciplined workforce and discretionary spending management, further enhance our ability to mitigate these impacts. At the same time, we are appropriately addressing the ongoing needs of our business so that we continue to serve our customers.

- 19 -

Over the long term, the extent to which our business and results of operations will be impacted by global 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.

On February 9, 2025, a fire damaged a portion of our Saegertown, Pennsylvania facility, causing a pause in production. Some production and operations were re-established within days of the event and global resources have been deployed to restore capacity to minimize customer disruption. Full capacity is expected to be restored during the fourth quarter of fiscal 2025. There was no material impact as a result of this disruption during the third quarter of fiscal 2025 and none are expected during future periods.

We maintain third-party insurance coverage for property damage, clean-up, replacement and business interruption, subject to an $8 million deductible and liability retention for the event, which was recorded in other income, net during the third quarter. While we expect to be reimbursed for a significant portion of our business interruption impacts by our third-party insurance coverage, we will not record any associated gain until realized.

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 EndedNine Months Ended
March 31,March 31,
(dollars in millions)2025202420252024
Net sales$4,960$5,074$14,607$14,743
Gross profit margin36.9%35.4%36.7%35.7%
Selling, general and administrative expenses$784$816$2,416$2,497
Selling, general and administrative expenses, as a percent of sales15.8%16.1%16.5%16.9%
Interest expense$96$124$310$387
Other income, net$(45)$(65)$(404)$(229)
Effective tax rate3.4%21.0%14.1%21.0%
Net income$961$727$2,608$2,060
Net income, as a percent of sales19.4%14.3%17.9%14.0%

Net sales decreased in the current-year quarter due to lower sales in the Diversified Industrial Segment, partially offset by higher sales in the Aerospace Systems Segment. The effect of currency exchange rate changes decreased net sales during the current-year quarter by approximately $57 million, which was primarily attributable to the Diversified Industrial Segment. The impact of divestiture activity decreased net sales by approximately $105 million during the current-year quarter.

Net sales decreased in the first nine months of fiscal 2025 due to lower sales in the Diversified Industrial Segment, partially offset by higher sales in the Aerospace Systems Segment. The effect of currency exchange rate changes decreased net sales during the first nine months of fiscal 2025 by approximately $105 million, of which $110 million was attributable to the Diversified Industrial Segment, partially offset by an increase of $5 million in the Aerospace Systems Segment. The impact of divestiture activity decreased net sales by approximately $180 million during the first nine months of fiscal 2025.

Gross profit margin (calculated as net sales minus cost of sales, divided by net sales) increased in the current-year quarter and first nine months of fiscal 2025 due to higher margins in both segments primarily resulting from price increases, favorable product mix and cost containment, as well as benefits from prior-year business realignment activities, partially offset by decreased volume within the Diversified Industrial Segment.

Cost of sales also included business realignment and acquisition integration charges of $5 million and $4 million for the current and prior-year quarter, respectively, and $21 million for both the first nine months of fiscal 2025 and 2024.

- 20 -

Selling, general and administrative expenses ("SG&A") decreased in the current-year quarter and first nine months of fiscal 2025 primarily due to lower research and development expenses and benefits from prior-year restructuring and acquisition-integration activities, as well as cost containment. In the first nine months of fiscal 2025 lower intangible asset amortization also contributed to the decrease in SG&A.

SG&A also included business realignment and acquisition integration charges of $11 million and $16 million for the current and prior-year quarter, respectively, and $37 million and $42 million for the first nine months of fiscal 2025 and 2024, respectively.

Interest expense decreased during the current-year quarter and the first nine months of fiscal 2025 primarily due to lower average debt outstanding.

Other income, net included the following:

Three Months EndedNine Months Ended
March 31,March 31,
(dollars in millions)2025202420252024
Expense (income)
Foreign currency transaction loss (gain)$9$(11)$15$(27)
Income related to equity method investments(49)(39)(126)(114)
Non-service components of retirement benefit cost(13)(18)(37)(53)
(Gain) loss on disposal of assets and divestitures(4)3(262)(18)
Interest income(3)(3)(9)(8)
Saegertown incident8—8—
Other items, net727(9)
$(45)$(65)$(404)$(229)

Foreign currency transaction loss (gain) primarily relates to the impact of exchange rates on intercompany transactions, forward contracts, cash, as well as accounts and notes payables and receivables. (Gain) loss on disposal of assets and divestitures during the first nine months of fiscal 2025 primarily relates to the divestiture of the composites and fuel containment ("CFC") business. Refer to Note 4 to the Consolidated Financial Statements for further discussion.

Effective tax rate for the current-year quarter of fiscal 2025 was lower than the U.S. Federal statutory rate of 21 percent due to tax benefits from the release of a foreign valuation allowance, share-based compensation, and foreign-derived intangible income, which were partially offset by U.S. state and local taxes and taxes related to international activities. Refer to Note 16 to the Consolidated Financial Statements for further discussion.

The effective tax rate for the first nine months of fiscal 2025 was lower than the U.S. Federal statutory rate of 21 percent for the same reasons as those listed above for the current-year quarter, plus a tax benefit from a lower taxable gain on divestitures than gain under accounting principles generally accepted in the United States of America ("GAAP").

The effective tax rate for the comparable prior-year periods was equal to the U.S. Federal statutory rate of 21 percent due to tax benefits from share-based compensation and foreign-derived intangible income, which were offset by U.S. state and local taxes and taxes related to international activities.

The fiscal 2025 effective tax rate is expected to be approximately 16 percent.

- 21 -

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 EndedNine Months Ended
March 31,March 31,
(dollars in millions)2025202420252024
Net sales
North America businesses$2,031$2,231$6,059$6,572
International businesses1,3581,4344,0384,227
Diversified Industrial Segment3,3893,66610,09810,799
Operating income
North America businesses4674901,3781,458
International businesses312310895901
Diversified Industrial Segment$779$800$2,273$2,359
Operating margin
North America businesses23.0%22.0%22.7%22.2%
International businesses23.0%21.6%22.2%21.3%
Diversified Industrial Segment23.0%21.8%22.5%21.8%
Backlog$3,748$4,364$3,748$4,364

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

Period Ending March 31, 2025
Three MonthsNine Months
North America businesses – as reported(9.0)%(7.8)%
Divestitures(4.7)%(2.7)%
Currency(0.8)%(0.6)%
North America businesses – without divestitures and currency1(3.5)%(4.5)%
International businesses– as reported(5.3)%(4.5)%
Currency(2.5)%(1.8)%
International businesses – without currency1(2.8)%(2.7)%
Diversified Industrial Segment – as reported(7.6)%(6.5)%
Divestitures(2.9)%(1.7)%
Currency(1.5)%(1.0)%
Diversified Industrial Segment – without divestitures and currency1(3.2)%(3.8)%

1This table reconciles the percentage changes in net sales of the Diversified Industrial Segment reported in accordance with 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 decreased $277 million and $701 million from the prior-year quarter and first nine months of fiscal 2024, respectively. The effect of changes in currency exchange rates decreased sales by approximately $54 million and $110 million in the current-year quarter and first nine months of fiscal 2025, respectively. The impact of divestiture activity decreased sales by approximately $105 million and $180 million in the current-year quarter and first nine months of fiscal 2025, respectively. Excluding the effects of the changes in currency exchange rates and divestiture activity, sales decreased $118 million and $411 million from the prior-year quarter and first nine months of fiscal 2024, respectively.

- 22 -

North America businesses - Sales decreased $201 million and $512 million from the prior-year quarter and first nine months of fiscal 2024, respectively. The effect of changes in currency exchange rates decreased sales by approximately $17 million and $37 million in the current-year quarter and first nine months of fiscal 2025, respectively. The effects of divestiture activity decreased sales by approximately $105 million and $180 million in the current-year quarter and first nine months of fiscal 2025, respectively. Excluding the effects of changes in currency exchange rates and divestiture activity, sales in the North America businesses decreased $78 million and $296 million in the current-year quarter and first nine months of fiscal 2025, respectively. In the current-year quarter and first nine months of fiscal 2025, the decrease in sales is primarily due to lower demand from end users in the in-plant and industrial equipment, off-highway, transportation and energy markets, partially offset by an increase in end-user demand in the HVAC and refrigeration and aerospace and defense markets.

International businesses - Sales decreased $76 million and $189 million from the prior-year quarter and first nine months of fiscal 2024, respectively. The effect of changes in currency exchange rates decreased sales by approximately $37 million and $73 million in the current-year quarter and first nine months of fiscal 2025. Excluding the effects of changes in currency exchange rates, sales in the International businesses decreased $40 million and $115 million in the current-year quarter and first nine months of fiscal 2025, respectively. In both the current-year quarter and first nine months of fiscal 2025, this 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 and first nine months of fiscal 2025 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 and first nine months of fiscal 2025 increased primarily due to higher end-user demand in the electronics and semiconductor and in-plant and industrial equipment markets, partially offset by lower demand from end users in the transportation, energy and off-highway 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. In the first nine months of fiscal 2025, sales increased primarily due to higher end-user demand in the in-plant and industrial equipment, transportation, off-highway and energy markets.

Operating Margin

Diversified Industrial Segment operating margin increased during the current-year quarter and first nine months of fiscal 2025 in both the North America and International businesses due to favorable product mix, price increases and benefits related to prior- year restructuring activities as well as cost containment, partially offset by decreased sales volume. Also, during the current-year quarter and first nine months of fiscal 2025, operating margin in the North America businesses benefited from divestiture activity.

Business Realignment

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

Three Months EndedNine Months Ended
March 31,March 31,
(dollars in millions)2025202420252024
North America businesses$5$4$15$11
International businesses742725
Diversified Industrial Segment$12$8$42$36

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 nine months of fiscal 2025 will not materially impact operating income in fiscal 2025 and will increase operating income by approximately two percent in fiscal 2026 for both the North America and International businesses. We expect to continue to take actions necessary to appropriately structure the operations of the Diversified Industrial Segment. We currently anticipate incurring approximately $20 million of additional business realignment charges in the remainder of fiscal 2025. However, continually changing business conditions could impact the ultimate costs we incur.

- 23 -

Backlog

Diversified Industrial Segment backlog, as of March 31, 2025, decreased from the prior-year quarter. Approximately 95 percent of the decrease in backlog was related to the CFC divestiture in the North America businesses. Approximately five percent of the decrease was due to shipments exceeding orders in the International businesses. Within the International businesses, Latin America, Europe and the Asia Pacific region accounted for approximately 60 percent, 30 percent and 10 percent of the decrease, respectively.

Diversified Industrial Segment backlog decreased from the June 30, 2024 amount of $4.2 billion. The decrease in backlog was related to the CFC divestiture in the North America businesses, partially offset by an increase in backlog in the International businesses. Within the International businesses, the increase in backlog from the June 30, 2024 amount was primarily attributable to Europe and the Asia Pacific region, partially offset by a decrease in backlog in Latin America.

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 EndedNine Months Ended
March 31,March 31,
(dollars in millions)2025202420252024
Net sales$1,572$1,409$4,509$3,944
Operating income$373$289$1,034$779
Operating margin23.7%20.5%22.9%19.7%
Backlog$7,292$6,465$7,292$6,465

Net Sales

Aerospace Systems Segment sales increased in both the current-year quarter and first nine months of fiscal 2025 primarily due to higher volume in the commercial and defense aftermarket. Higher volume in the commercial and defense original equipment manufacturer ("OEM") market segments also contributed to the sales increase.

Operating Margin

Aerospace Systems Segment operating margin increased during both the current-year quarter and first nine months of fiscal 2025 due to higher sales volume and favorable aftermarket mix, as well as benefits from cost containment initiatives and prior-year acquisition integration activities.

Business Realignment

Within the Aerospace Systems Segment, we incurred acquisition integration and business realignment charges of $3 million and $12 million in the current and prior-year quarter, respectively, and $16 million and $27 million in the first nine months of fiscal 2025 and 2024, 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.

- 24 -

Backlog

Aerospace Systems Segment backlog, as of March 31, 2025, increased from the prior-year quarter primarily due to orders exceeding shipments in the defense and commercial OEM market segments. The increase in backlog from the June 30, 2024 amount of $6.7 billion is primarily due to orders exceeding shipments in the commercial and defense OEM market segments. Commercial and defense aftermarket backlog at March 31, 2025 remained relatively flat when compared to the June 30, 2024 amount.

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 EndedNine Months Ended
March 31,March 31,
(dollars in millions)2025202420252024
Expense
Corporate general and administrative expense$44$57$149$162
Corporate general and administrative expense, as a percent of sales0.9%1.1%1.0%1.1%

Corporate general and administrative expenses decreased in the current-year quarter primarily due to lower benefits and incentive compensation expense, net expense associated with the Company's deferred compensation plan and related investments, charitable contributions and professional service fees.

Corporate general and administrative expenses decreased in the first nine months of fiscal 2025 primarily due to lower incentive compensation expense, lower net expense associated with the Company's deferred compensation plan and related investments, information technology expenses and discretionary spend, partially offset by an increase in professional service fees.

Other expense (income), net

Three Months EndedNine Months Ended
March 31,March 31,
(dollars in millions)2025202420252024
Expense (income)
Foreign currency transaction loss (gain)$9$(11)$15$(27)
Stock-based compensation12118584
Non-service components of retirement benefit cost(13)(18)(37)(53)
(Gain) loss on disposal of assets and divestitures(4)3(262)(18)
Interest income(3)(3)(9)(8)
Saegertown incident8—8—
Other items, net97132
$18$(11)$(187)$(20)

Foreign currency transaction loss (gain) primarily relates to the impact of exchange rates on intercompany transactions, forward contracts, cash, as well as accounts and notes payables and receivables. (Gain) loss on disposal of assets and divestitures during the first nine months of fiscal 2025 primarily relates to the divestiture of the CFC business. Refer to Note 4 to the Consolidated Financial Statements for further discussion.

- 25 -

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

  • Share repurchases, including repurchases under the 10b5-1 share repurchase program

Cash Flows

A summary of cash flows follows:

Nine Months Ended
March 31,
(dollars in millions)20252024
Cash provided by (used in):
Operating activities$2,309$2,147
Investing activities345(194)
Financing activities(2,681)(2,006)
Effect of exchange rates14(17)
Net decrease in cash and cash equivalents$(13)$(70)

Cash flows from operating activities for the first nine months of fiscal 2025 were $2,309 million compared to $2,147 million for the first nine months of fiscal 2024. This increase of $162 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 53 days at March 31, 2025, 51 days at June 30, 2024 and 53 days at March 31, 2024.

  • Days supply of inventory on hand was 85 days at March 31, 2025, 80 days at June 30, 2024 and 87 days at March 31, 2024.

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

  • Capital expenditures of $304 million in fiscal 2025 compared to $283 million in fiscal 2024.

  • Net proceeds totaling $621 million from the sale of the CFC and non-core filtration businesses in fiscal 2025.

  • Proceeds totaling $74 million from the sale of the MicroStrain sensing systems and Filter Resources businesses in fiscal 2024.

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

  • Net commercial paper repayments of $213 million in fiscal 2025 compared to net commercial paper repayments of $941 million in fiscal 2024.

  • Principal payments totaling $490 million related to borrowings under the term loan facility ("Term Loan Facility") in fiscal 2025 compared to principal payments totaling $250 million related to the Term Loan Facility in fiscal 2024.

  • Aggregate principal payment of $500 million related to the maturity of medium-term notes during fiscal 2025.

  • Repurchases under the Company's share repurchase program amounted to 1.2 million common shares for $750 million during fiscal 2025, compared to 0.3 million common shares for $149 million during fiscal 2024.

  • Issuance of €700 million aggregate principal amount of 2.90 percent Senior Notes due 2030 (the "Notes") for which the proceeds were used to repay the €700 million aggregate principal amount of 1.125 percent Senior Notes due 2025 in fiscal 2025.

- 26 -

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 January 23, 2025, which was paid on March 7, 2025. Dividends have been paid for 299 consecutive quarters. Additionally, we declared a quarterly cash dividend of $1.80 per share on April 24, 2025, payable on June 6, 2025, increasing our annual dividend per share paid to shareholders for 69 consecutive fiscal years.

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 $329 million and $311 million held by the Company's foreign subsidiaries at March 31, 2025 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 March 31, 2025, $1.9 billion of commercial paper notes were outstanding, and the largest amount of commercial paper notes outstanding during the current-year quarter was $2.2 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 $1.1 billion was available as of March 31, 2025. 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.

In February 2025, the Company issued €700 million aggregate principal amount of 2.90 percent Senior Notes due March 1, 2030. Interest on the Notes will be paid annually on March 1 of each year, commencing March 1, 2026. We used the net proceeds from the issuance of the Notes, together with cash on hand, to repay the €700 million aggregate principal amount of 1.125 percent Senior Notes upon maturity in March 2025. Refer to Notes 15 and 17 to the Consolidated Financial Statements for further discussion.

Our debt portfolio included a Term Loan Facility. During the nine months ended March 31, 2025, we repaid the remaining principal balance of $490 million of 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 March 31, 2025, the most restrictive financial covenant provides that the ratio of debt to debt-shareholders' equity cannot exceed 0.65 to 1.0. At March 31, 2025, the Company's debt to debt-shareholders' equity ratio was 0.41 to 1.0. We are in compliance and expect to remain in compliance with all covenants set forth in the credit agreement and indentures.

- 27 -

Our goal is to maintain an investment-grade credit profile. The rating agencies periodically update the Company's credit ratings as events occur. At March 31, 2025, 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 RatingsA-
Moody's Investors Services, Inc.A3
Standard & Poor'sBBB+

Supply Chain Financing

We continue to identify opportunities to improve our liquidity and working capital efficiency, which include 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 CFC business within the North America businesses of the Diversified Industrial Segment, which was acquired as part of the Meggitt acquisition. This divestiture closed on November 1, 2024 for net proceeds of $555 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.

- 28 -

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 tariffs and 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 March 31, 2025, and undertakes no obligation to update them unless otherwise required by law.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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 the translation of foreign currency-denominated assets and

- 29 -

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.

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, consisting of commercial paper, inherently exposing the Company to interest rate risk. The Term Loan Facility, which had a variable interest rate, was repaid as of December 31, 2024. 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. A 100 basis point increase in near-term interest rates would increase annual interest expense on variable rate debt, consisting of weighted-average commercial paper borrowings for the nine months ended March 31, 2025, by approximately $18 million.

Item 4. CONTROLS AND PROCEDURES

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 March 31, 2025. Based on this evaluation, the Company's principal executive officer and principal financial officer concluded that, as of March 31, 2025, the Company’s disclosure controls and procedures were effective.

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

- 30 -

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)
January 1, 2025 through January 31, 202525,700$654.8025,7007,123,049
February 1, 2025 through February 28, 202522,600$683.9822,6007,100,449
March 1, 2025 through March 31, 2025995,847$620.29995,8476,104,602
Total:1,044,1471,044,147

(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.

Item 5. Other Information

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 March 31, 2025.

- 31 -

Item 6. Exhibits.

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 Notice of Award under the Parker-Hannifin Corporation Long-Term Incentive Plan Under the Performance Bonus Plan, as Amended and Restated, effective as of January 22, 2025.*
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.*
32Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to §906 of the Sarbanes-Oxley Act of 2002.*
101.INSInline XBRL Instance Document.*
101.SCHInline XBRL Taxonomy Extension Schema Document.*
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document.*
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document. *
101.LABInline XBRL Taxonomy Extension Label Linkbase Document.*
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document.*
104Cover 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 and nine months ended March 31, 2025 and 2024, (ii) Consolidated Statement of Comprehensive Income for the three and nine months ended March 31, 2025 and 2024, (iii) Consolidated Balance Sheet at March 31, 2025 and June 30, 2024, (iv) Consolidated Statement of Cash Flows for the nine months ended March 31, 2025 and 2024, and (v) Notes to Consolidated Financial Statements for the nine months ended March 31, 2025.

- 32 -

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:May 6, 2025

- 33 -