filings.toolsItem 1. FINANCIAL STATEMENTS
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Item 1. FINANCIAL STATEMENTS
PARKER-HANNIFIN CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share amounts)
(Unaudited)
| Three Months Ended | |||||||||||||||||||||||
| September 30, | |||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||
| Net sales | $ | 5,084 | $ | 4,904 | |||||||||||||||||||
| Cost of sales | 3,177 | 3,098 | |||||||||||||||||||||
| Selling, general and administrative expenses | 873 | 849 | |||||||||||||||||||||
| Interest expense | 101 | 113 | |||||||||||||||||||||
| Other income, net | (107) | (31) | |||||||||||||||||||||
| Income before income taxes | 1,040 | 875 | |||||||||||||||||||||
| Income taxes | 232 | 177 | |||||||||||||||||||||
| Net income | $ | 808 | $ | 698 | |||||||||||||||||||
| Earnings per share: | |||||||||||||||||||||||
| Basic | $ | 6.39 | $ | 5.43 | |||||||||||||||||||
| Diluted | $ | 6.29 | $ | 5.34 | |||||||||||||||||||
See accompanying notes to consolidated financial statements.
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PARKER-HANNIFIN CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)
(Unaudited)
| Three Months Ended | |||||||||||||||||||||||
| September 30, | |||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||
| Net income | $ | 808 | $ | 698 | |||||||||||||||||||
| Other comprehensive (loss) income, net of tax | |||||||||||||||||||||||
| Foreign currency translation adjustment and other | (45) | 345 | |||||||||||||||||||||
| Retirement benefits plan activity | 4 | 3 | |||||||||||||||||||||
| Other comprehensive (loss) income | (41) | 348 | |||||||||||||||||||||
| Total comprehensive income | $ | 767 | $ | 1,046 | |||||||||||||||||||
See accompanying notes to consolidated financial statements.
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PARKER-HANNIFIN CORPORATION
CONSOLIDATED BALANCE SHEETS
(In millions, except par value)
(Unaudited)
| September 30, 2025 | June 30, 2025 | ||||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 473 | $ | 467 | |||||||
| Trade accounts receivable, net of allowances of $9 and $10 | 2,873 | 2,910 | |||||||||
| Non-trade and notes receivable | 331 | 318 | |||||||||
| Inventories | 3,081 | 2,839 | |||||||||
| Prepaid expenses | 296 | 263 | |||||||||
| Other current assets | 173 | 153 | |||||||||
| Total current assets | 7,227 | 6,950 | |||||||||
| Property, plant and equipment, net of accumulated depreciation of $4,528 and $4,480 | 2,972 | 2,937 | |||||||||
| Deferred income taxes | 271 | 270 | |||||||||
| Other long-term assets | 1,306 | 1,269 | |||||||||
| Intangible assets, net | 7,760 | 7,374 | |||||||||
| Goodwill | 11,141 | 10,694 | |||||||||
| Total assets | $ | 30,677 | $ | 29,494 | |||||||
| Liabilities and Equity | |||||||||||
| Current liabilities: | |||||||||||
| Notes payable and long-term debt payable within one year | $ | 2,848 | $ | 1,791 | |||||||
| Accounts payable, trade | 2,150 | 2,126 | |||||||||
| Accrued payrolls and other compensation | 432 | 587 | |||||||||
| Accrued domestic and foreign taxes | 411 | 382 | |||||||||
| Other current liabilities | 938 | 933 | |||||||||
| Total current liabilities | 6,779 | 5,819 | |||||||||
| Long-term debt | 7,485 | 7,494 | |||||||||
| Pensions and other postretirement benefits | 253 | 267 | |||||||||
| Deferred income taxes | 1,621 | 1,490 | |||||||||
| Other long-term liabilities | 753 | 733 | |||||||||
| Total liabilities | 16,891 | 15,803 | |||||||||
| Shareholders’ equity: | |||||||||||
| Serial preferred stock, $.50 par value; authorized 3.0 shares; none issued | — | — | |||||||||
| Common stock, $.50 par value; authorized 600.0 shares; issued 181.0 shares | 91 | 91 | |||||||||
| Additional paid-in capital | 823 | 194 | |||||||||
| Retained earnings | 22,355 | 21,775 | |||||||||
| Accumulated other comprehensive loss | (924) | (883) | |||||||||
| Treasury shares, at cost; 54.9 shares and 54.4 shares | (8,568) | (7,495) | |||||||||
| Total shareholders’ equity | 13,777 | 13,682 | |||||||||
| Noncontrolling interests | 9 | 9 | |||||||||
| Total equity | 13,786 | 13,691 | |||||||||
| Total liabilities and equity | $ | 30,677 | $ | 29,494 |
See accompanying notes to consolidated financial statements.
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PARKER-HANNIFIN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
| Three Months Ended | |||||||||||
| September 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| Cash flows from operating activities | |||||||||||
| Net income | $ | 808 | $ | 698 | |||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Depreciation | 92 | 89 | |||||||||
| Amortization | 140 | 140 | |||||||||
| Stock-based compensation expense | 80 | 76 | |||||||||
| Deferred income taxes | 3 | (27) | |||||||||
| Foreign currency transaction (gain) loss | (7) | 37 | |||||||||
| Loss (gain) on property, plant and equipment | 1 | (8) | |||||||||
| Other, net | (16) | 3 | |||||||||
| Changes in assets and liabilities, net of effect of acquisitions and divestitures: | |||||||||||
| Accounts receivable, net | 76 | 138 | |||||||||
| Inventories | (163) | (136) | |||||||||
| Prepaid expenses | (29) | 4 | |||||||||
| Other current assets | (20) | (13) | |||||||||
| Other long-term assets | (22) | (51) | |||||||||
| Accounts payable, trade | (6) | (42) | |||||||||
| Accrued payrolls and other compensation | (168) | (172) | |||||||||
| Accrued domestic and foreign taxes | 28 | 93 | |||||||||
| Other current liabilities | (10) | (46) | |||||||||
| Pensions and other postretirement benefits | (13) | (8) | |||||||||
| Other long-term liabilities | 8 | (31) | |||||||||
| Net cash provided by operating activities | 782 | 744 | |||||||||
| Cash flows from investing activities | |||||||||||
| Acquisitions, net of cash acquired | (1,013) | — | |||||||||
| Capital expenditures | (89) | (95) | |||||||||
| Proceeds from sale of property, plant and equipment | 6 | 13 | |||||||||
| Other, net | 18 | (5) | |||||||||
| Net cash used in investing activities | (1,078) | (87) | |||||||||
| Cash flows from financing activities | |||||||||||
| Payments for common shares | (522) | (94) | |||||||||
| Proceeds from (payments for) notes payable, net | 1,057 | (367) | |||||||||
| Payments for long-term borrowings | (1) | (42) | |||||||||
| Dividends paid | (228) | (210) | |||||||||
| Other, net | — | 2 | |||||||||
| Net cash provided by (used in) financing activities | 306 | (711) | |||||||||
| Effect of exchange rate changes on cash | (4) | 3 | |||||||||
| Net increase (decrease) in cash and cash equivalents | 6 | (51) | |||||||||
| Cash and cash equivalents at beginning of year | 467 | 422 | |||||||||
| Cash and cash equivalents at end of period | $ | 473 | $ | 371 |
See accompanying notes to consolidated financial statements.
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PARKER-HANNIFIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions, except per share amounts or as otherwise noted)
1. Basis of presentation
In the opinion of the management of the Company, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the Company's financial position as of September 30, 2025, the results of operations for the three months ended September 30, 2025 and 2024 and cash flows for the three months then ended. These financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company’s 2025 Annual Report on Form 10-K.
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.
The Company has changed its presentation from thousands to millions and, as a result, any necessary rounding adjustments have been made to prior period disclosed amounts.
2. New accounting pronouncements
In September 2025, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2025-06, “Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software," which modernizes the accounting for costs related to internal-use software by removing all references to prescriptive and sequential software development stages. The amendments are effective for fiscal years beginning after December 15, 2027, and interim reporting periods within those annual reporting periods, with early adoption permitted. The Company is currently evaluating the ASU to determine its impact on the Company's disclosures and financial statements.
In November 2024, the FASB issued ASU 2024-03, “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses,” which requires expanded interim and annual disclosures of expense information, including the amounts of inventory purchases, employee compensation, depreciation, amortization and depletion within commonly presented expense captions during the period. The amendments are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The amendments should be applied either (1) prospectively to financial statements issued for reporting periods after the effective date or (2) retrospectively to any or all prior periods presented in the financial statements. The Company is currently evaluating the ASU to determine its impact on the Company's disclosures.
In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures," which enhances the disclosure requirements for income taxes primarily related to the rate reconciliation and income taxes paid information. The amendments are effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The amendment should be applied on a prospective basis. Retrospective application is permitted. The Company is currently evaluating the impact this guidance will have on the Company's disclosures.
In November 2023, the FASB issued ASU 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures," which updates reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. The amendments should be applied retrospectively to all prior periods presented in the financial statements. The Company adopted the standard for annual disclosures in the fourth quarter of fiscal 2025, and interim disclosures for the first quarter of 2026. Refer to Note 16 for further discussion.
3. Revenue recognition
Revenue is derived primarily from the sale of products in the aerospace and defense, in-plant and industrial equipment, transportation, off-highway, energy and HVAC and refrigeration markets. A majority of the Company’s revenues are recognized at a point in time. However, a portion of the Company’s revenues are recognized over time.
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Diversified Industrial Segment revenues by technology platform:
| Three Months Ended | ||||||||||||||||||||||||||
| September 30, | ||||||||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||||||||
| Motion Systems | $ | 824 | $ | 849 | ||||||||||||||||||||||
| Flow and Process Control | 1,158 | 1,126 | ||||||||||||||||||||||||
| Filtration and Engineered Materials | 1,461 | 1,481 | ||||||||||||||||||||||||
| Total | $ | 3,443 | $ | 3,456 |
Aerospace Systems Segment revenues by market segment:
| Three Months Ended | ||||||||||||||||||||||||||
| September 30, | ||||||||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||||||||
| Commercial original equipment manufacturer ("OEM") | $ | 539 | $ | 434 | ||||||||||||||||||||||
| Commercial aftermarket | 594 | 521 | ||||||||||||||||||||||||
| Defense OEM | 294 | 262 | ||||||||||||||||||||||||
| Defense aftermarket | 214 | 231 | ||||||||||||||||||||||||
| Total | $ | 1,641 | $ | 1,448 |
Total Company revenues by geographic region based on the Company's selling operation's location:
| Three Months Ended | ||||||||||||||||||||||||||
| September 30, | ||||||||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||||||||
| North America | $ | 3,450 | $ | 3,333 | ||||||||||||||||||||||
| Europe | 960 | 935 | ||||||||||||||||||||||||
| Asia Pacific | 616 | 580 | ||||||||||||||||||||||||
| Latin America | 58 | 56 | ||||||||||||||||||||||||
| Total | $ | 5,084 | $ | 4,904 |
The majority of revenues from the Aerospace Systems Segment are generated from sales within North America.
Contract balances
Contract assets and contract liabilities are reported on a contract-by-contract basis. Contract assets reflect revenue recognized and performance obligations satisfied in advance of customer billing. Contract liabilities relate to payments received in advance of the satisfaction of performance under the contract. Payments from customers are received based on the terms established in the contract with the customer.
Total contract assets and contract liabilities are as follows:
| September 30, 2025 | June 30, 2025 | |||||||||||||
| Contract assets, current (included within Other current assets) | $ | 168 | $ | 149 | ||||||||||
| Contract assets, noncurrent (included within Other long-term assets) | 16 | 16 | ||||||||||||
| Total contract assets | 184 | 165 | ||||||||||||
| Contract liabilities, current (included within Other current liabilities) | (211) | (211) | ||||||||||||
| Contract liabilities, noncurrent (included within Other long-term liabilities) | (67) | (71) | ||||||||||||
| Total contract liabilities | (278) | (282) | ||||||||||||
| Net contract liabilities | $ | (94) | $ | (117) |
Net contract liabilities at September 30, 2025 decreased from the June 30, 2025 amount primarily due to timing differences between when revenue was recognized and the receipt of advance payments. During the three months ended September 30, 2025, approximately $75 million of revenue was recognized that was included in the contract liabilities at June 30, 2025.
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Remaining performance obligations
Our backlog represents written firm orders from a customer to deliver products and, in the case of blanket purchase orders, only includes the portion of the order for which a schedule or release has been agreed to with the customer. We believe our backlog represents our unsatisfied or partially unsatisfied performance obligations. Backlog at September 30, 2025 was $11.3 billion, of which approximately 70 percent is expected to be recognized as revenue within the next 12 months and the balance thereafter.
4. Acquisitions and divestitures
Acquisitions
On September 18, 2025, we acquired all outstanding stock of Curtis Instruments, Inc. ("Curtis") from Rehlko, for approximately $1.0 billion, net of cash acquired. Curtis designs and manufactures motor speed controllers, instrumentation, power conversion and input devices that complement Parker’s capabilities in electric and hybrid vehicle motors and controls, as well as hydraulic and pneumatic technologies for the mobile machinery market. For segment reporting purposes, Curtis is included within the Diversified Industrial Segment.
The acquisition of Curtis has been accounted for using the acquisition method of accounting, which requires the assets acquired and liabilities assumed to be recognized at their respective fair values as of the acquisition date. The following table presents the preliminary estimated fair values of Curtis's assets acquired and liabilities assumed on the acquisition date. These preliminary estimates are subject to revision during the measurement period, not to exceed 12 months from the date of the acquisition, as third-party valuations are finalized, additional information becomes available and as additional analysis is performed. Such revisions may have a material impact on the preliminary purchase price allocation.
| September 18, 2025 | |||||||||||||||||
| Cash and cash equivalents | $ | 53 | |||||||||||||||
| Accounts receivable | 38 | ||||||||||||||||
| Inventories | 82 | ||||||||||||||||
| Prepaid expenses | 5 | ||||||||||||||||
| Intangible assets | 551 | ||||||||||||||||
| Property, plant and equipment | 54 | ||||||||||||||||
| Other long-term assets | 20 | ||||||||||||||||
| Accounts payable, trade | (32) | ||||||||||||||||
| Other current liabilities | (19) | ||||||||||||||||
| Deferred income taxes | (139) | ||||||||||||||||
| Other long-term liabilities | (20) | ||||||||||||||||
| Net assets acquired | $ | 593 | |||||||||||||||
| Goodwill | 472 | ||||||||||||||||
| Total purchase price | $ | 1,065 |
Goodwill is calculated as the excess of the purchase price over the net assets acquired and represents cost synergies and enhancements to our existing technologies. For tax purposes, Curtis's goodwill is not deductible. The intangible assets primarily include $275 million of customer relationships, $220 million of patents and technology and $56 million of trademarks, with weighted-average estimated useful lives of 18, 10 and 13 years, respectively. These intangible assets were valued using the income approach, which includes significant assumptions around future revenue growth, earnings before interest, taxes, depreciation and amortization, royalty rates and discount rates. Such assumptions are classified as level 3 inputs within the fair value hierarchy.
Our Consolidated Statements of Income for the first three months of fiscal 2026 include the results of operations of Curtis from the date of acquisition. Net sales attributable to Curtis during this period were $11 million and segment operating results were immaterial.
Acquisition-related transaction costs totaled $13 million for the current-year quarter. These costs are included in selling, general and administrative expenses in the Consolidated Statements of Income.
Unaudited pro forma financial information is not provided, as the impact of the acquisition did not have a material effect on the Company's consolidated financial statements.
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Divestitures
We continually assess our existing businesses and may divest those that are not considered to be a good long-term strategic fit for the Company. There were no significant divestitures completed during the three months ended September 30, 2025 and 2024.
5. Earnings per share
The following table presents a reconciliation of the numerator and denominator of basic and diluted earnings per share.
| Three Months Ended | |||||||||||||||||||||||
| September 30, | |||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||
| Numerator: | |||||||||||||||||||||||
| Net income | $ | 808 | $ | 698 | |||||||||||||||||||
| Denominator: | |||||||||||||||||||||||
| Basic - weighted average common shares | 126.5 | 128.7 | |||||||||||||||||||||
| Dilutive effect of equity-based awards | 1.9 | 2.0 | |||||||||||||||||||||
| Diluted - weighted-average common shares | 128.4 | 130.7 | |||||||||||||||||||||
| Basic earnings per share(1) | $ | 6.39 | $ | 5.43 | |||||||||||||||||||
| Diluted earnings per share(1) | $ | 6.29 | $ | 5.34 | |||||||||||||||||||
| (1) Figures in the table may not recalculate exactly due to rounding. Earnings per share is calculated using unrounded numbers. |
For the three months ended September 30, 2025 and 2024, 0.1 million and 0.2 million common shares subject to equity-based awards, respectively, were excluded from the computation of diluted earnings per share because the effect of their exercise would be anti-dilutive.
6. Non-trade and notes receivable
The non-trade and notes receivable caption in the Consolidated Balance Sheets is comprised of the following components:
| September 30, 2025 | June 30, 2025 | |||||||||||||
| Notes receivable | $ | 80 | $ | 84 | ||||||||||
| Accounts receivable, other | 251 | 234 | ||||||||||||
| Total | $ | 331 | $ | 318 |
7. Inventories
The inventories caption in the Consolidated Balance Sheets is comprised of the following components:
| September 30, 2025 | June 30, 2025 | |||||||||||||
| Finished products | $ | 843 | $ | 778 | ||||||||||
| Work in process | 1,585 | 1,485 | ||||||||||||
| Raw materials | 653 | 576 | ||||||||||||
| Total | $ | 3,081 | $ | 2,839 |
8. Supply chain financing
We have supply chain financing ("SCF") programs with financial intermediaries, which provide certain suppliers the option to be paid by the financial intermediaries earlier than the due date on the applicable invoice. We are not a party to the agreements between the participating financial intermediaries and the suppliers in connection with the programs. The range of payment terms we negotiate with our suppliers is consistent, irrespective of whether a supplier participates in the SCF programs. We do not reimburse suppliers for any costs they incur for participation in the SCF programs and their participation is voluntary.
Amounts due to our suppliers that elected to participate in the SCF programs are included in accounts payable, trade on the Consolidated Balance Sheets and payments made under the SCF programs are included within operating activities on the Consolidated Statements of Cash Flows. Accounts payable, trade included approximately $190 million and $175 million
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payable to suppliers who have elected to participate in the SCF programs as of September 30, 2025 and June 30, 2025, respectively. The amounts settled through the SCF programs and paid to the participating financial intermediaries totaled $147 million and $107 million during the first three months of fiscal 2026 and 2025, respectively.
9. Business realignment
We incurred business realignment charges in the first three months of fiscal 2026 and 2025, which included severance costs related to actions taken under the Company's simplification initiative aimed at reducing organizational and process complexity, as well as plant closures. In both fiscal 2026 and 2025, a majority of the business realignment charges were incurred in Europe. We believe the realignment actions will positively impact future results of operations, but will not have a material effect on liquidity and sources and uses of capital.
Business realignment charges by business segment are as follows:
| Three Months Ended | |||||||||||||||||||||||
| September 30, | |||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||
| Diversified Industrial | $ | 14 | $ | 9 | |||||||||||||||||||
| Aerospace Systems | 1 | — | |||||||||||||||||||||
| Other expense, net | — | 1 |
Reductions to our workforce made in connection with such business realignment charges by business segment are as follows:
| Three Months Ended | |||||||||||||||||||||||
| September 30, | |||||||||||||||||||||||
| (Headcount in single units) | 2025 | 2024 | |||||||||||||||||||||
| Diversified Industrial | 190 | 327 | |||||||||||||||||||||
| Aerospace Systems | 25 | — | |||||||||||||||||||||
The business realignment charges are presented in the Consolidated Statements of Income as follows:
| Three Months Ended | |||||||||||||||||||||||
| September 30, | |||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||
| Cost of sales | $ | 9 | $ | 5 | |||||||||||||||||||
| Selling, general and administrative expenses | 6 | 4 | |||||||||||||||||||||
| Other income, net | — | 1 |
During the first three months of fiscal 2026, approximately $15 million in payments were made relating to business realignment charges. Remaining payments related to business realignment actions of approximately $27 million, a majority of which are expected to be paid by March 31, 2026, are primarily reflected within the accrued payrolls and other compensation and other current liabilities captions in the Consolidated Balance Sheets. Additional charges may be recognized in future periods related to the business realignment actions described above, the timing and amount of which are not known at this time.
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10. Equity
Changes in equity for the three months ended September 30, 2025 and 2024 are as follows:
| Common Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Treasury Shares | Noncontrolling Interests | Total Equity | |||||||||||||||||||||||||||||||||||
| Balance at June 30, 2025 | $ | 91 | $ | 194 | $ | 21,775 | $ | (883) | $ | (7,495) | $ | 9 | $ | 13,691 | |||||||||||||||||||||||||||
| Net income | — | — | 808 | — | — | — | 808 | ||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | (41) | — | — | (41) | ||||||||||||||||||||||||||||||||||
| Dividends paid ($1.80 per share) | — | — | (228) | — | — | — | (228) | ||||||||||||||||||||||||||||||||||
| Stock incentive plan activity(1) | — | 629 | — | — | (594) | — | 35 | ||||||||||||||||||||||||||||||||||
| Shares purchased at cost, including excise tax | — | — | — | — | (479) | — | (479) | ||||||||||||||||||||||||||||||||||
| Balance at September 30, 2025 | $ | 91 | $ | 823 | $ | 22,355 | $ | (924) | $ | (8,568) | $ | 9 | $ | 13,786 | |||||||||||||||||||||||||||
| (1) During the three months ended September 30, 2025, the Company recorded a $578 million reclassification between Treasury Shares and Additional Paid-in Capital to correct the historical accounting for shares withheld for taxes related to equity compensation issuances. The Company concluded the out-of-period adjustment was not material to the current period or any prior periods. |
| Common Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Treasury Shares | Noncontrolling Interests | Total Equity | |||||||||||||||||||||||||||||||||||
| Balance at June 30, 2024 | $ | 91 | $ | 264 | $ | 19,105 | $ | (1,438) | $ | (5,950) | $ | 9 | $ | 12,081 | |||||||||||||||||||||||||||
| Net income | — | — | 698 | — | — | — | 698 | ||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | 348 | — | — | 348 | ||||||||||||||||||||||||||||||||||
| Dividends paid ($1.63 per share) | — | — | (210) | — | — | — | (210) | ||||||||||||||||||||||||||||||||||
| Stock incentive plan activity | — | 11 | — | — | 23 | — | 34 | ||||||||||||||||||||||||||||||||||
| Shares purchased at cost | — | — | — | — | (50) | — | (50) | ||||||||||||||||||||||||||||||||||
| Balance at September 30, 2024 | $ | 91 | $ | 275 | $ | 19,593 | $ | (1,090) | $ | (5,977) | $ | 9 | $ | 12,901 |
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Changes in accumulated other comprehensive loss in shareholders' equity by component are as follows:
| Three Months Ended | ||||||||||||||
| September 30, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| Foreign Currency Translation Adjustment and Other | ||||||||||||||
| Beginning balance | $ | (717) | $ | (1,130) | ||||||||||
| Other comprehensive income (loss) before reclassifications | (49) | 339 | ||||||||||||
| Income tax | 4 | 6 | ||||||||||||
| Other comprehensive income (loss), net of tax | (45) | 345 | ||||||||||||
| Ending balance | $ | (762) | $ | (785) | ||||||||||
| Retirement Benefit Plans | ||||||||||||||
| Beginning balance | $ | (166) | $ | (308) | ||||||||||
| Other comprehensive income (loss) before reclassifications | 2 | (1) | ||||||||||||
| Reclassified from accumulated other comprehensive loss: | ||||||||||||||
| Amortization of net actuarial loss and other(1) | 3 | 5 | ||||||||||||
| Tax benefit | (1) | (1) | ||||||||||||
| Other comprehensive income (loss), net of tax | 4 | 3 | ||||||||||||
| Ending balance | $ | (162) | $ | (305) | ||||||||||
| Total accumulated other comprehensive loss ending balance | $ | (924) | $ | (1,090) | ||||||||||
| (1) The amounts reclassified include the amortization of net actuarial loss and amortization of prior service cost. These costs are included in the computation of net periodic benefit cost (income) which is recorded in other income, net. Refer to Note 12 for additional information. |
Share repurchase program
On October 22, 2014, the Board of Directors approved a share repurchase program authorizing the repurchase of up to 35.0 million of the Company's common shares. On August 21, 2025, the Board of Directors approved an update to the number of shares available under the Company's existing share repurchase authorization so that the aggregate number of shares available for repurchase as of such date was 20.0 million. There is no limitation on the number of shares that can be repurchased in a fiscal year and there is no expiration date for the program. Repurchases may be funded primarily from operating cash flows and commercial paper borrowings and the shares are initially held as treasury shares.
Under our share repurchase programs, the Company repurchased 0.6 million and 0.1 million shares for $475 million and $50 million during the three months ended September 30, 2025 and 2024, respectively. As of September 30, 2025, 19.4 million shares remained available under the repurchase authorization.
11. Goodwill and intangible assets
The changes in the carrying amount of goodwill for the three months ended September 30, 2025 are as follows:
| Diversified Industrial Segment | Aerospace Systems Segment | Total | |||||||||||||||
| Balance at June 30, 2025 | $ | 7,728 | $ | 2,966 | $ | 10,694 | |||||||||||
| Acquisition | 472 | — | 472 | ||||||||||||||
| Foreign currency translation | (19) | (6) | (25) | ||||||||||||||
| Balance at September 30, 2025 | $ | 8,181 | $ | 2,960 | $ | 11,141 | |||||||||||
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Intangible assets are amortized using the straight-line method over their legal or estimated useful lives. The following summarizes the gross carrying value and accumulated amortization for each major category of intangible assets:
| September 30, 2025 | June 30, 2025 | ||||||||||||||||||||||
| Gross Carrying Amount | Accumulated Amortization | Gross Carrying Amount | Accumulated Amortization | ||||||||||||||||||||
| Patents and technology | $ | 2,349 | $ | 580 | $ | 2,134 | $ | 556 | |||||||||||||||
| Trade names | 1,090 | 512 | 1,037 | 499 | |||||||||||||||||||
| Customer relationships and other | 8,446 | 3,033 | 8,194 | 2,936 | |||||||||||||||||||
| Total | $ | 11,885 | $ | 4,125 | $ | 11,365 | $ | 3,991 |
Total intangible asset amortization expense for both the three months ended September 30, 2025 and 2024 was $140 million. The estimated amortization expense for the five years ending June 30, 2026 through 2030 is $584 million, $587 million, $578 million, $558 million and $529 million, respectively.
The increase in goodwill and intangible assets in fiscal 2026 relates to the acquisition of Curtis. Refer to Note 4 for more information.
12. Retirement benefits
The components of net periodic benefit cost (income) for our defined benefit pension and other postretirement plans were as follows:
| U.S. Pension Benefits | Non-U.S. Pension Benefits | Other Postretirement Benefits | |||||||||||||||||||||||||||||||||
| Three Months Ended | Three Months Ended | Three Months Ended | |||||||||||||||||||||||||||||||||
| September 30, | September 30, | September 30, | |||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||||||||||
| Service cost | $ | 6 | $ | 7 | $ | 6 | $ | 6 | $ | — | $ | — | |||||||||||||||||||||||
| Interest cost | 42 | 46 | 18 | 19 | 1 | 1 | |||||||||||||||||||||||||||||
| Expected return on plan assets | (58) | (61) | (23) | (22) | — | — | |||||||||||||||||||||||||||||
| Amortization of prior service cost | 1 | 1 | — | — | — | — | |||||||||||||||||||||||||||||
| Amortization of net actuarial loss (gain) | 1 | 2 | 2 | 2 | (1) | — | |||||||||||||||||||||||||||||
| Net periodic benefit cost (income) | $ | (8) | $ | (5) | $ | 3 | $ | 5 | $ | — | $ | 1 |
Components of net periodic benefit cost (income), other than service cost, are included in other income, net in the Consolidated Statements of Income.
13. Debt
During the three months ended September 30, 2025, we amended our existing multi-currency revolving credit agreement, increasing the total line of credit by $750 million to $3.75 billion. Additionally, during the three months ended September 30, 2025, the authorization limit for short-term commercial paper notes was increased to $3.75 billion. Commercial paper notes outstanding at September 30, 2025 and June 30, 2025 were $2.8 billion and $1.8 billion, respectively.
Based on the Company’s rating level at September 30, 2025, the most restrictive financial covenant provides that the ratio of debt to debt-shareholders' equity cannot exceed 0.65 to 1.0. At September 30, 2025, our debt to debt-shareholders' equity ratio was 0.43 to 1.0. We are in compliance, and expect to remain in compliance, with all covenants set forth in the credit agreement and indentures governing certain debt securities.
14. Income taxes
On July 4, 2025, H.R. 1, commonly referred to as the One Big Beautiful Bill Act, (the "Act"), was signed into law. The Act makes various provisions of the 2017 Tax Cuts and Jobs Act permanent while restoring full expensing of research and development costs and capital investments. The Act did not have a significant impact on our current period financial statements.
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Unrecognized tax benefits reflect the difference between positions taken or expected to be taken on income tax returns and the amounts reflected in the financial statements. As of September 30, 2025, we had gross unrecognized tax benefits of $104 million, all of which, if recognized, would impact the effective tax rate. The accrued interest and accrued penalties related to the gross unrecognized tax benefits, excluded from the amount above, is $30 million and $2 million, respectively. It is reasonably possible that within the next 12 months the amount of gross unrecognized tax benefits could be reduced by up to approximately $60 million as a result of the revaluation of existing uncertain tax positions arising from developments in the examination process or the closure of tax statutes. Any increase in the amount of gross unrecognized tax benefits within the next 12 months is expected to be insignificant.
We file income tax returns in the United States and in various foreign jurisdictions. In the normal course of business, we are subject to examination by taxing authorities throughout the world. We are open to assessment on our U.S. federal income tax returns by the Internal Revenue Service for fiscal years after 2013, and our state and local returns for fiscal years after 2018. We are also open to assessment for significant foreign jurisdictions for fiscal years after 2013.
15. Financial instruments
The Company utilizes derivative and non-derivative financial instruments, including forward exchange contracts, costless collar contracts, cross-currency swap contracts and certain foreign currency denominated debt, to manage foreign currency transaction and translation risk. The derivative financial instrument contracts are with major investment grade financial institutions, and the Company does not anticipate any material non-performance by any of the counterparties. The Company does not hold or issue derivative financial instruments for trading purposes.
Net Investment Hedges
The Company uses cross-currency swap contracts and foreign currency denominated debt, a non-derivative financial instrument, to hedge portions of the Company's investments in foreign subsidiaries and manage foreign exchange risk. The effect of translating the debt into U.S. dollars is recorded in foreign currency translation within accumulated other comprehensive loss and remains there until the underlying net investment is sold or substantially liquidated. For the cross-currency swap contracts that are designated as, and qualify as, net investment hedges, we assess the effectiveness using the spot method and the net gains or losses attributable to changes in the spot rate are recorded in foreign currency translation within accumulated other comprehensive loss. Any ineffective portions of the net investment hedges are reclassified from accumulated other comprehensive loss into earnings through interest expense during the period of change. During the three months ended September 30, 2025 and 2024, the periodic interest settlements related to the cross-currency swaps were not material.
The notional amounts for the cross-currency swap contracts designated as hedging instruments were €69 million, €290 million and ¥2.1 billion as of September 30, 2025 and 2024, respectively.
The Company’s €700 million aggregate principal amount of 2.90 percent Senior Notes due 2030 have been designated as a hedge of the Company’s net investment in certain foreign subsidiaries.
Non-Designated Derivative Contracts
In addition to the net investment hedges, the Company utilizes forward exchange contracts that are not designated as hedging instruments but serve as economic hedges of forecasted transactions. These derivatives are used to mitigate foreign exchange risk. Changes in the fair value of these instruments are recorded in other income, net in the Consolidated Statements of Income.
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Financial Statement Impact
Derivative financial instruments are recognized on the Consolidated Balance Sheets as either assets or liabilities and are measured at fair value. The location and fair value of derivative financial instruments reported on the Consolidated Balance Sheets are as follows:
| Balance Sheet Caption | September 30, 2025 | June 30, 2025 | |||||||||||||||
| Net investment hedges | |||||||||||||||||
| Cross-currency swap contracts | Other long-term assets | $ | 5 | $ | 4 | ||||||||||||
| Cross-currency swap contracts | Other long-term liabilities | 23 | 26 | ||||||||||||||
| Non-designated derivative contracts | |||||||||||||||||
| Forward exchange contracts | Non-trade and notes receivable | 4 | 3 | ||||||||||||||
| Forward exchange contracts | Other current liabilities | 19 | 38 |
The cross-currency swap and forward exchange contracts are reflected on a gross basis in the Consolidated Balance Sheets. The Company has not entered into any master netting arrangements.
Gains (losses) on derivative financial instruments were recorded in the Consolidated Statements of Income as follows:
| Three Months Ended | |||||||||||
| September 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| Forward exchange contracts | $ | 8 | $ | (13) | |||||||
Gains (losses) on derivative and non-derivative financial instruments that were recorded in accumulated other comprehensive loss in the Consolidated Balance Sheets are as follows:
| Three Months Ended | |||||||||||
| September 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| Cross-currency swap contracts | $ | 2 | $ | (10) | |||||||
| Foreign currency denominated debt | (1) | (22) |
Fair Values of Financial Instruments
The Company’s financial instruments include cash and cash equivalents, accounts receivable, accounts payable, notes payable and long-term debt. The carrying values for cash and cash equivalents, accounts receivable, accounts payable and notes payable approximate fair value due to their short-term nature.
The carrying value of long-term debt, which excludes the impact of net unamortized debt issuance costs, and estimated fair value of long-term debt are as follows:
| September 30, 2025 | June 30, 2025 | |||||||||||||
| Carrying value of long-term debt | $ | 7,543 | $ | 7,555 | ||||||||||
| Estimated fair value of long-term debt | 7,237 | 7,174 |
The fair value of long-term debt is classified within level 2 of the fair value hierarchy.
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A summary of derivative assets and liabilities that were measured at fair value on a recurring basis at September 30, 2025 and June 30, 2025 are as follows:
| September 30, 2025 | Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||
| Derivative assets | $ | 9 | $ | — | $ | 9 | $ | — | ||||||||||||||||||
| Derivative liabilities | 42 | — | 42 | — |
| June 30, 2025 | Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||
| Derivative assets | $ | 7 | $ | — | $ | 7 | $ | — | ||||||||||||||||||
| Derivative liabilities | 64 | — | 64 | — |
The calculation of fair value for cross-currency swaps and forward contracts utilizes market observable inputs including both spot and forward prices for the same underlying currencies. The calculation of fair value of the cross-currency swap contracts also utilizes a present value cash flow model.
16. Business segment information
The Company operates in two reportable business segments: Diversified Industrial and Aerospace Systems. Both segments utilize eight core technologies, including hydraulics, pneumatics, electromechanical, filtration, fluid and gas handling, process control, engineered materials and climate control, to drive superior customer problem solving and value creation.
Diversified Industrial - This segment is an aggregation of several business units that design, manufacture, and provide aftermarket support for highly engineered solutions that create value for customers primarily in aerospace and defense, in-plant and industrial equipment, transportation, off-highway, energy, and HVAC and refrigeration markets around the world. Diversified Industrial Segment products are marketed direct to OEMs and independent distributors through field sales employees.
Aerospace Systems - This segment designs, manufactures, and provides aftermarket support for highly engineered airframe and engine solutions for both OEMs and end users. Our components and systems are utilized across commercial transport, defense fixed wing, business jets, regional transport, helicopter and energy applications. Aerospace Systems Segment products are marketed by field sales employees and are sold directly to manufacturers and end users.
The Company’s Chief Operating Decision Maker (“CODM”) is the Chief Executive Officer. The CODM uses Segment Operating Income as a measure to assess performance, drive decisions and allocate human and financial capital to our reportable segments. Annual plan, monthly forecasts and prior year results are continually compared to this measure when evaluating performance. Other segment items are managed on a consolidated basis for the CODM’s review.
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| Three Months Ended | ||||||||||||||||||||||||||
| September 30, | ||||||||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||||||||
| Net sales | ||||||||||||||||||||||||||
| Diversified Industrial | $ | 3,443 | $ | 3,456 | ||||||||||||||||||||||
| Aerospace Systems | 1,641 | 1,448 | ||||||||||||||||||||||||
| Total net sales | $ | 5,084 | $ | 4,904 | ||||||||||||||||||||||
| Other Segment Items:(1) | ||||||||||||||||||||||||||
| Diversified Industrial | $ | 2,622 | $ | 2,672 | ||||||||||||||||||||||
| Aerospace Systems | 1,230 | 1,125 | ||||||||||||||||||||||||
| $ | 3,852 | $ | 3,797 | |||||||||||||||||||||||
| Segment operating income | ||||||||||||||||||||||||||
| Diversified Industrial | $ | 821 | $ | 784 | ||||||||||||||||||||||
| Aerospace Systems | 411 | 323 | ||||||||||||||||||||||||
| Total segment operating income | 1,232 | 1,107 | ||||||||||||||||||||||||
| Corporate general and administrative expenses | 49 | 49 | ||||||||||||||||||||||||
| Income before interest expense and other expense, net | 1,183 | 1,058 | ||||||||||||||||||||||||
| Interest expense | 101 | 113 | ||||||||||||||||||||||||
| Other expense, net | 42 | 70 | ||||||||||||||||||||||||
| Income before income taxes | $ | 1,040 | $ | 875 | ||||||||||||||||||||||
| (1) Other segment items are primarily comprised of cost of sales; selling, general and administrative expenses; and income related to equity method investments. |
| Assets | ||||||||||||||
| September 30, 2025 | June 30, 2025 | |||||||||||||
| Diversified Industrial | $ | 17,079 | $ | 15,953 | ||||||||||
| Aerospace Systems(1) | 12,220 | 12,218 | ||||||||||||
| Corporate | 1,378 | 1,323 | ||||||||||||
| Total | $ | 30,677 | $ | 29,494 | ||||||||||
| (1) Assets include an investment in a joint venture in which ownership is 50 percent or less and in which the Company does not have operating control ($225 million as of September 30, 2025 and $226 million as of June 30, 2025). |
| Property Additions | Depreciation | Amortization | |||||||||||||||||||||||||||||||||
| Three Months Ended September 30, | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||||||||||
| Diversified Industrial | $ | 74 | $ | 75 | $ | 59 | $ | 59 | $ | 64 | $ | 65 | |||||||||||||||||||||||
| Aerospace Systems | 12 | 14 | 30 | 28 | 76 | 75 | |||||||||||||||||||||||||||||
| Corporate | 3 | 6 | 3 | 2 | — | — | |||||||||||||||||||||||||||||
| Total | $ | 89 | $ | 95 | $ | 92 | $ | 89 | $ | 140 | $ | 140 |
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17. Other income, net
The table below includes the components of other income, net in the Consolidated Statements of Income:
| Three Months Ended | ||||||||||||||||||||||||||
| September 30, | ||||||||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||||||||
| Foreign currency transaction (gain) loss(1) | $ | (7) | $ | 37 | ||||||||||||||||||||||
| Income related to equity method investments(2) | (58) | (38) | ||||||||||||||||||||||||
| Non-service components of retirement benefit cost (income)(3) | (17) | (12) | ||||||||||||||||||||||||
| Loss (gain) on disposal of assets and divestitures | 1 | (9) | ||||||||||||||||||||||||
| Interest income | (5) | (3) | ||||||||||||||||||||||||
| Gain on insurance recoveries(4) | (20) | — | ||||||||||||||||||||||||
| Other items, net | (1) | (6) | ||||||||||||||||||||||||
| Total other income, net | $ | (107) | $ | (31) | ||||||||||||||||||||||
| (1) Foreign currency transaction (gain) loss primarily relates to the impact of exchange rates on cash, forward contracts and intercompany transactions. | ||||||||||||||||||||||||||
| (2) Equity method investments consist of investments in joint venture companies in which ownership is 50 percent or less and in which the Company does not have operating control. Sales to and services performed for joint venture companies totaled $27 million and $20 million for the three months ended September 30, 2025 and 2024, respectively. We received cash dividends from joint venture companies of $59 million and $32 million during the three months ended September 30, 2025 and 2024, respectively. | ||||||||||||||||||||||||||
| (3) For further discussion of non-service components of retirement benefit cost (income) refer to Note 12. | ||||||||||||||||||||||||||
| (4) Gain on insurance recoveries for damaged property associated with a fire at one of our U.S. facilities within the Diversified Industrial segment that occurred in the third quarter of fiscal 2025. |
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PARKER-HANNIFIN CORPORATION
FORM 10-Q
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