BOARD OF DIRECTORS
EXECUTIVE MANAGEMENT
INVESTOR INFORMATION
THOMAS L. WILLIAMS
Chairman and Chief Executive Officer
Parker-Hannifin Corporation
LEE C. BANKS
Vice Chairman and President
Parker-Hannifin Corporation
JILLIAN C. EVANKO
President and Chief Executive Officer
Chart Industries, Inc. (cryogenic technologies)
THOMAS L. WILLIAMS
Chairman and Chief Executive Officer
LEE C. BANKS
Vice Chairman and President
JENNIFER A. PARMENTIER
Chief Operating Officer
TODD M. LEOMBRUNO
Executive Vice President and Chief
Financial Officer
LANCE M. FRITZ
Chairman, President and Chief
Executive Officer
Union Pacific Corporation (rail transport)
LINDA A. HARTY
Former Treasurer
Medtronic plc (medical technology)
WILLIAM F. LACEY
President and Chief Executive Officer
GE Lighting, a Savant company (lighting
technologies)
KEVIN A. LOBO
Chairman, Chief Executive Officer
and President
Stryker Corporation (medical technologies)
CANDY M. OBOURN
Former Chairman
Isoflux Incorporated (coating technologies)
JOSEPH SCAMINACE
Former Chairman and Chief Executive Officer
OM Group, Inc. (metal-based specialty
chemicals)
ÅKE SVENSSON
Chairman
Swedavia AB (transport infrastructure)
LAURA K. THOMPSON
Former Executive Vice President
and Chief Financial Officer
The Goodyear Tire and Rubber Company
(tire manufacturing)
JAMES R. VERRIER
Former President and Chief Executive Officer
BorgWarner Inc. (powertrain solutions)
JAMES L. WAINSCOTT
Former Chairman, Chief Executive Officer
and President
AK Steel Holding Corporation (steel producer)
MARK J. HART
Executive Vice President – Human Resources
and External Affairs
WILLIAM “SKIP” BOWMAN
Vice President and President –
Instrumentation Group
BEREND BRACHT
Vice President and President –
Motion Systems Group
MARK T. CZAJA
Vice President – Chief Technology and
Innovation Officer
ROBIN J. DAVENPORT
Vice President – Corporate Finance
THOMAS C. GENTILE
Vice President – Global Supply Chain
JOACHIM GUHE
President – Europe, Middle East and Africa
(EMEA) Group
ANGELA R. IVES
Vice President and Controller
JOSEPH R. LEONTI
Vice President, General Counsel
and Secretary
CANDIDO LIMA
President – Latin America Group
ROBERT W. MALONE
Vice President and President –
Filtration Group
MICHAEL J. O’HARA
Vice President – Global Sales and Marketing
DINU J. PAREL
Vice President – Chief Digital and
Information Officer
ANDREW D. ROSS
Vice President and President –
Fluid Connectors Group
ROGER S. SHERRARD
Vice President and President –
Aerospace Group
MICHAEL WEE
President – Asia Pacific Group
ANDREW M. WEEKS
Vice President and President –
Engineered Materials Group
ANNUAL MEETING
The 2021 Annual Meeting of Shareholders
will be held on Wednesday, October 27, 2021,
virtually via live webcast at
www.virtualshareholdermeeting.com/PH2021
at 9:00 a.m. EDT.
INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
Deloitte & Touche, LLP, Cleveland, Ohio
TRANSFER AGENT & REGISTRAR
Equiniti Trust Company
EQ Shareowner Services
P.O. Box 64854
St. Paul, Minnesota 55164-0854
Telephone 800 468 9716
www.shareowneronline.com
STOCK INFORMATION
New York Stock Exchange
Ticker symbol: PH
www.phstock.com
PARKER CORPORATE HEADQUARTERS
Parker-Hannifin Corporation
6035 Parkland Boulevard
Cleveland, Ohio 44124-4141
216 896 3000
INVESTOR CONTACT
ROBIN J. DAVENPORT
Vice President – Corporate Finance
216 896 2265
rjdavenport@parker.com
Comparison of 5-Year Cumulative Total Return*
Among Parker-Hannifin Corporation, the S&P 500 Index and the
S&P Industrials Index
Parker-Hannifin Corporation
S&P 500
S&P Industrials
$350
300
250
200
150
100
6/16
6/17
6/18
6/19
6/20
6/21
2016
2017
2018
2019
2020
2021
Parker-Hannifin Corporation 100.00
100.00
S&P 500
100.00
S&P Industrials
150.70
117.90
122.27
149.32
134.84
128.79
165.93
148.89
142.23
182.45
160.06
129.40
310.16
225.36
195.96
*$100 invested on 6/30/16 in stock or index, including reinvestment of dividends.
Fiscal year ending June 30.
Copyright© 2021 Standard & Poor’s, a division of S&P Global. All rights reserved.
PARKER
HANNIFIN
ANNUAL
REPORT
1
2
0
2
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Parker Hannifin Corporation, 6035 Parkland Boulevard, Cleveland, Ohio 44124-4141, 216 896 3000, www.parker.com
DRIVERS OF PARKER’S
PERFORMANCE
LIVING UP TO OUR PURPOSE
Our purpose, Enabling Engineering Breakthroughs that Lead to a Better
Tomorrow, provides inspiration and direction for our team members and highlights
how we can have a positive impact on the world. Parker’s team members work
alongside customers to enable technology breakthroughs that change the world
for the better. Every day we have a role to play in helping to improve the lives of
people everywhere.
GREAT GENERATORS AND
DEPLOYERS OF CASH
Parker has consistently generated strong cash flow through economic cycles and
used that cash flow to drive returns for shareholders through acquisitions and
investments that have transformed our portfolio and by maintaining our
long-standing dividend increase record. In fiscal year 2021, Parker significantly
reduced its debt and had record cash flow from operating activites of $2.58 billion
putting Parker in a strong financial position.
TOP QUARTILE PERFORMANCE
VS. PROXY PEERS
Since fiscal year 2016, Parker has focused on implementing The Win StrategyTM
and transforming our operations. Today, many important metrics such as safety,
team member engagement, earnings growth and shareholder returns are among
the top quartile when compared with our diversified industrial proxy peers.
The Global Leader in Motion & Control Technologies
Product Groups
Motion Systems
Key Markets
Agriculture
Construction
Distribution
General machinery
Machine tool
Marine
Material handling
Military
Mining
Oil & gas
Power generation
Semiconductor
Transportation
Truck & bus
Turf
© 2021 PARKER HANNIFIN CORPORATION
Aerospace
Fluid Connectors
Instrumentation
Filtration
Engineered Materials
Key Markets
Aftermarket services
Commercial transport aircraft
Engines
General & business aviation
Helicopters
Military aircraft
Missiles
Power generation (industrial gas
turbines)
Regional transport aircraft
Unmanned aerial vehicles
Key Products
Control actuation systems &
components
Engine build-up ducting
Engine exhaust nozzles & assemblies
Engine systems & components
Fluid conveyance systems &
components
Fluid metering, delivery & atomization
devices
Fuel systems & components
Fuel tank inerting systems
Hydraulic systems & components
Lubrication components
Pilot controls
Pneumatic control components
Thermal management
Wheels & brakes
Key Markets
Aerial lift
Agriculture
Bulk chemical handling
Construction
Food & beverage
Forestry
Industrial machinery
Life sciences
Material handling
Mining
Oil & gas
Renewable energy
Transportation
Key Products
Check valves
Diagnostic & IoT sensors
Hose couplings
Hose crimpers
Industrial hose
Low-pressure fittings & adapters
Polytetrafluoroethylene (PTFE)
hose & tubing
Quick couplings
Rubber & thermoplastic hose
Tube fittings & adapters
Tubing & plastic fittings
Key Products
Accumulators
Air preparation (FRL) & dryers
Cartridge valves
Clusters
Controllers & human machine
interfaces (HMI)
Coolers
Cylinders
Drive controlled pumps
Drives (AC/DC Servo)
Electric actuators & positioners
Electric motors & gearheads
Electrohydraulic actuators
Electrohydraulic pumps
Electronic displays & HMI
Fan drives
Gerotor pumps & motors
Grippers
Helical actuators
Hydraulic valves
Industrial valves
Integrated hydrostatic transmissions
IO-Link controllers
IoT
Joysticks
Mobile valves
Piston pumps & motors
Pneumatic cylinders
Pneumatic valves
Power take-offs
Rotary actuators
Screw pumps
Sensors
Software
Vane pumps & motors
Key Markets
Air conditioning
Alternative fuels
Analytical
Chemical
Food & beverage
Life sciences
Microelectronics
Oil & gas
Refining
Refrigeration
Transportation
Key Products
Analytical instruments & sample
conditioning systems
Compressed natural gas dispensers
Cryogenic valves
Diesel exhaust treatment systems
Electronic valves
Emissions
Filter driers
Fluid system & control fittings, meters,
valves, regulators & manifold valves
Fluoropolymer chemical delivery
fittings, valves & pumps
High-pressure fittings, valves,
pumps & systems
High-purity gas delivery fittings,
valves & regulators
Miniature valves & pumps
Natural gas on-board fuel systems
Pressure regulating valves
Refrigeration & air conditioning
electronic controls & monitoring
Solenoid valves
Key Markets
Aerospace & defense
Agriculture
Construction
Food & beverage
Heating, ventilation & air conditioning
(HVAC)
Industrial machinery
Life sciences
Marine
Mining
Oil & gas
Power generation
Renewable energy
Transportation
Water purification
Key Products
Aerospace filters & systems
Air pollution control & dust collection
systems & filters
Compressed air & gas treatment
solutions
Engine fuel, oil, air & closed
crankcase ventilation filtration
systems
Filtration & purification systems
Fluid condition monitoring systems
Gas turbine air inlet filters
HVAC filters
Hydraulic & lubrication filters &
systems
Industrial & analytical gas generators
Instrumentation filters
Membrane, fiber & sintered metal
filters
Natural gas filters
Process liquid, air & gas filters
Sterile air filters
Water purification filters & systems
Key Markets
Aerospace
Agriculture
Chemical processing
Construction
Defense
Information technology
Life sciences
Microelectronics
Oil & gas
Power generation
Renewable energy
Telecommunications
Transportation
Truck & bus
Key Products
Active vibration control systems
Bearings & dampers
Coatings
Dynamic seals
Elastomeric mounts & isolators
Elastomeric o-rings
Electromagnetic interference
shielding
Extrusion & fabricated seals
High-temperature metal seals
Homogeneous & inserted
elastomeric shapes
Medical products fabrication
& assembly
Metal & plastic composite
bonded seals
Precision-cut seals
Rubber-to-substrate adhesives
Specialty chemicals
Structural adhesives
Thermal management
Wireless sensing systems
UNMATCHED BREADTH OF
TECHNOLOGY & ENGINEERING EXPERTISE
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LETTER TO
SHAREHOLDERS
As we reflect on our record
performance in fiscal year 2021,
Parker’s ongoing transformation
is unmistakable.
The actions we are taking as a
global team to strengthen our
company are generating
remarkable results. With the Win
Strategy 3.0 as our guide, we have
continued to focus on living up to
our purpose, being great
generators and deployers of cash
and achieving top quartile
performance compared with
diversified industrial peer
companies.
This was never more evident than
in fiscal year 2021, when despite
extraordinary challenges due to
the global COVID-19 pandemic,
we achieved record financial
performance and continued to
deliver strong returns for
shareholders. These results
clearly demonstrate the resiliency
of Parker’s business and the
benefits of our strengthened
technology portfolio. We are in an
excellent position to accelerate
this progress and continue to
improve upon our high level of
performance.
Thomas L. Williams, Chairman and Chief Executive Officer (L)
Lee C. Banks, Vice Chairman and President (R)
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RECORD PERFORMANCE IN
THE FACE OF GREAT
CHALLENGES
Despite strong economic
headwinds brought on by the
pandemic, fiscal year 2021 was
our best year ever for sales, net
income, earnings per share,
segment operating margins and
cash flow from operations.
We have achieved our fiscal year
2023 targets two years early for
adjusted segment operating
margin, adjusted EBITDA margin,
free cash flow conversion and
adjusted EPS growth. This rapid
pace of achievement demonstrates
our commitment to continuous
improvement across our operations
and our proficiency in deploying
cash to stimulate profitable growth
and create shareholder value. In
fiscal year 2021:
• Total net sales were a record at
$14.35 billion, an increase of
5% compared with $13.70
billion in fiscal year 2020.
• Total segment operating
margin reached 18.4% as
reported, or 21.1% adjusted, a
220-basis point improvement
from fiscal year 2020.
• EBITDA margin was 21.6% as
reported, and 21.3% on an
adjusted basis, a 200-basis
point improvement in adjusted
EBITDA margin compared with
fiscal year 2020.
OUR PEOPLE, PORTFOLIO & STRATEGY TRANSFORM PERFORMANCE
ADJUSTED EPS1
$15.04
>2xEPS GROWTH
$11.57
$13.10
$12.44
$8.86
$6.99
ADJUSTED EBITDA1
21.3%
660
BPS INCREASE
16.7%
18.3%
17.5%
19.3%
14.7%
FY16
$5.89
As Reported EPS
FY17
$7.25
FY18
$7.83
FY19
$11.57
FY20
$9.26
FY21
$13.35
FY17
FY16
$0.98B
$0.81B
As Reported Net Income
FY18
$1.06B
FY19
$1.53B
FY20
$1.20B
FY21
$1.75B
1 This Annual Report contains non-GAAP financial information. These non-GAAP measures have been reconciled to the comparable GAAP
measures within a table immediately following the Form 10-K included in this Annual Report.
• Net income was a record at
$1.75 billion, an increase of
45% compared with $1.20
billion in fiscal year 2020.
• Earnings per share increased
44% to a record $13.35.
Adjusted earnings per share
were $15.04, a 21% increase
compared with $12.44 in fiscal
year 2020.
• Cash flow from operating
activities (CFOA) was a record
at $2.58 billion, or 17.9% of
sales, compared with $2.07
billion, or 15.1% of sales in
fiscal year 2020. This is the
20th consecutive fiscal year
Parker has generated cash
flow from operations, before
discretionary pension
contributions, greater than
10% of sales.
The improving macroeconomic
outlook, along with our focus on
top quartile financial performance,
creates a compelling inflection
point which we see as taking
Parker’s growth and profitability to
new heights.
FOCUSED ON THE FUTURE
In the last several years, we have
experienced two industrial
recessions and a global pandemic.
Yet, the focus of our team on the
Win Strategy 3.0 has enabled even
higher levels of performance and
has placed Parker in a position to
build on our momentum in the
years ahead.
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CAPITAL DEPLOYMENT
Parker continues to generate and
deploy cash efficiently to fuel
growth and create strong returns
for shareholders.
LORD Corporation and Exotic
Metals Forming Company bringing
the multiple of gross debt to
EBITDA to 2.1x, down from 3.6x just
one year ago.
In the fourth quarter of fiscal year
2021, we raised our quarterly
dividend per share by 17% over
the previous quarterly dividend,
which results in an annual payout
increase of 4.7% and marks 65
consecutive fiscal years of
increasing the annual dividend per
share paid. This use of cash is
aligned with our goal of
maintaining a five-year average
dividend payout in the range of
30-35% of net income.
We have continued to put our solid
balance sheet and cash flow to
work. With a strong free cash flow
conversion at 135% and CFOA at
17.9% of sales in fiscal year 2021,
we have made debt repayments
totaling $3.4 billion over the last 20
months. We have now retired all
serviceable debt issued to acquire
This debt reduction puts us in a
position to effectively deploy
capital for a stronger future. In
August 2021, we reached an
agreement on the terms of a
recommended cash acquisition of
the entire issued and to be issued
ordinary share capital of Meggitt
PLC, a global leader in aerospace
and defense motion and control
technologies, with annual revenue
of approximately $2.3 billion* in
calendar year 2020. While the
acquisition remains subject to the
satisfaction of several conditions
set out in the announcement, it
reflects an exciting opportunity to
better serve customers of both
companies through innovation,
accelerated R&D and
complementary technology
portfolios.
DIGITAL LEADERSHIP AND ADVANCED
MANUFACTURING
The rapid adoption of digital and
information technologies
continues to reshape how
business is conducted. We remain
focused on enhancing customer-
facing digital solutions, and
ongoing initiatives related to cyber
security, data analytics and digital
collaboration. We also continue to
invest in advancing the use of
robotics, additive manufacturing
and artificial intelligence (AI). To
accelerate the use of AI we have
implemented a data analytics
center of excellence with
embedded functional data
scientists focused on AI and
robotic process automation
throughout the company.
GLOBAL DISTRIBUTION
We have a deliberate strategy to
grow our global distribution
network, which is a key
differentiator among our
competitors. As a result of this
strategy, we have increased our
Th e Win Strategy TM
Our Vision: Engineering Your Success
Goals
Engaged
People
STRATEGIES
Customer
Experience
STRATEGIES
Profitable
Growth
STRATEGIES
Financial
Performance
STRATEGIES
#1 Motion & Control Company
Goals
Engaged
People
Customer
Experience
Profi table
Growth
Financial
Performance
MEASURES
MEASURES
MEASURES
MEASURES
• Zero Safety Incidents
• Composite Likelihood to
• Organic Growth 150 bps
• Top Quartile Performance
• Quality Solutions On Time
• Strategic Positioning
• Simplification
• Digital Leadership
• Market-Driven Innovation
• Lean Enterprise
• Ease of Doing Business
• System Solutions
• Strategic Supply Chain
• Speed & Agility
• 80%+ in High
Performance Teams
Recommend
> Market
• Customer Dashboards
• 20%+ Market Share
• Zero Defects
• #1, #2 Position Each
Business
• Year-over-Year Growth in:
• DNE
• EBIT
• EPS
• Cash Flow
• Environmental, Health
& Safety
• Ownership –
Entrepreneurial
• High Performance
Teams & Leaders
• Continuous
Improvement – Kaizen
• Strong Distribution
• Value Pricing
• Grow Share
• Acquisitions
Our Culture & Values
• Inclusive Environment
• 98%+ On-Time Delivery
• Engagement > 75%
• Best-in-Class Lead Times
& Services
• Grow Global Distribution
• 19% Operating Income
50% DIST
50% OEM
• Increasing New Product
Vitality & Gross Margins
• 30% MROS
• 21.4% RONA
• 17% ROIC
• >100% FCF Conversion
Enabling Engineering Breakthroughs
that Lead to a Better Tomorrow
PS-2049
* 1.39 GBP / USD exchange rate as of July 30, 2021
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percentage of sales through
international distribution at a rate
of approximately 100 basis points
per year. These actions will further
enhance Parker’s margin
performance and drive profitable
growth. In addition, we established
a digital distribution advisory
committee to accelerate digital
leadership at Parker and with our
distributors.
A BETTER TOMORROW
Parker’s commitment to
responsible operations is deeply
ingrained within the Win Strategy
3.0 and illustrates how we are
living our purpose. We have made
great progress on ESG leadership
and we recognize the need to do
even more.
HELPING THE WORLD ACHIEVE
CARBON NEUTRALITY
Our interconnected motion and
control technologies help
customers across industrial,
mobile and aerospace markets to
reduce resource consumption and
greenhouse gas emissions.
Approximately two-thirds of our
global portfolio are solutions that
enable electrification,
lightweighting, the adoption of
cleaner and more efficient energy
sources such as batteries, fuel
cells and hydrogen, and other
innovations with a positive, global
environmental impact.
Breakthroughs that make the
world cleaner, smarter and safer
ACHIEVE
carbon neutral
2040
operations by
would not be possible without
Parker technologies and create
substantial growth opportunities
for our business.
Regarding our own environmental
stewardship, since 2010, we have
reduced our energy intensity
(MWh/USD) by 42% and
greenhouse gas intensity (MT/USD)
by 50%. With this solid foundation
to build on, this year we announced
our commitment to achieve carbon
neutral operations by 2040, and
established a series of emissions
targets to ensure continued
progress. These include reducing
absolute emissions directly from
the company’s operations by 50%
by 2030, and reducing indirect
absolute emissions related to
materials sourcing, logistics and
services by 15% by 2030, and 25%
by 2040. These ambitious new
targets reflect our efforts to
protect the environment for
generations to come.
This year Parker joined the
Hydrogen Council, a global
CEO-led initiative of companies
working to accelerate the clean
energy transition.
SAFETY
Safety is our highest priority and a
core value that all team members
share. In 2021, the total number of
recordable incidents was reduced
by 29% and the rate per 100 team
members was 0.40, ranking within
the top quartile among our
industry peers. Nearly all of our
manufacturing locations have
chartered Safety High
Performance Teams (HPTs), which
are fundamental to our success in
driving safety performance, and
approximately 90% of our team
members participate in at least
one HPT. The principles we have
adopted to drive safety
improvements are being applied to
improve quality, cost, delivery and
engagement of our people.
DIVERSITY AND INCLUSION
Throughout our history, we have
been committed to building a
welcoming and inclusive
workplace that respects every
team member’s unique
perspective. We have established
four global HPTs to help advance
diversity and inclusion, focused on
talent attraction, talent
development, governance and
knowledge. Each is led by a senior
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Our team members are the
driving force behind Parker’s
outstanding fiscal year 2021
results. We thank them for their
engagement and dedication to
supporting one another, our
customers and our communities.
They are what makes Parker a
truly special company.
With the unique culture we have
created, and our purpose guiding
our path forward, there is no
challenge too great for us to
overcome and no limit to what we
can achieve together.
Sincerely,
Thomas L. Williams
Chairman and Chief Executive Officer
Lee C. Banks
Vice Chairman and President
August 2021
executive and tasked with
rethinking the way we attract and
develop diverse team members,
share knowledge and measure
our progress.
CORPORATE GOVERNANCE
We are committed to Board
diversity and inclusion, ensuring
the skills and experiences of
our Directors align with our culture
and values, support our long-term
strategy and drive shareholder
value creation. Three new
Directors were added in fiscal year
2021, increasing both the racial
and gender diversity on our Board.
Today, women make up 31% of the
Board and 62% of our Directors
are diverse based on gender (4),
race (2) or ethnicity (2). The
average tenure of our Directors is
currently 7.7 years.
Parker takes a strategic approach
to succession planning, and we
recently announced a series of
leadership changes that allow our
executives to build the
experiences and skills necessary
to continue the transformation of
our company. As Lee Banks takes
on a new role as Vice Chairman
and President, Jenny Parmentier
has been elected Chief Operating
Officer. Formerly the President of
our Motion Systems Group and
Engineered Materials Group, along
with various other operational
roles, she has a proven record of
success across Parker and we are
pleased to be working closely with
her as a key member of the Office
of the Chief Executive.
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TECHNOLOGIES ENABLING A
CARBON NEUTRAL TOMORROW
With more than a century of experience, we are often called to the table for the
collaborations that help to solve the most complex engineering challenges.
Breakthroughs that make the world cleaner, smarter and safer would not be
possible without Parker technologies.
HYDRAULICS
PNEUMATICS
ELECTROMECHANICAL
FILTRATION
FLUID & GAS HANDLING
PROCESS CONTROL
CLIMATE CONTROL
ENGINEERED MATERIALS
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☒
☐
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 2021
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 No. 1-4982
PARKER-HANNIFIN CORPORATION
(Exact name of registrant as specified in its charter)
Ohio
(State or other jurisdiction of
Incorporation or Organization)
6035 Parkland Boulevard, Cleveland, Ohio
(Address of Principal Executive Offices)
34-0451060
(I.R.S. Employer
Identification No.)
44124-4141
(Zip Code)
Registrant’s telephone number, including area code (216) 896-3000
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Common Shares, $.50 par value
Trading
Symbol
Name of Each Exchange
on which Registered
New York Stock Exchange
PH
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Securities registered pursuant to Section 12(g) of the Act: None
Yes ☒ No ☐
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act. Yes ☐ No ☒
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
Non-Accelerated Filer
Emerging Growth Company
☒
☐
☐
Accelerated Filer
Smaller Reporting 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 has filed a report on and attestation to its management's assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public
accounting firm that prepared or issued its audit report. ☒
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of the outstanding common stock held by non-affiliates of the Registrant as of December 31, 2020:
$34,984,991,426.
The number of Common Shares outstanding on July 31, 2021 was 129,101,437.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Definitive Proxy Statement for the Company’s 2021 Annual Meeting of Shareholders, to be held on October 27, 2021,
are incorporated by reference into Part III of this Annual Report on Form 10-K.
TABLE OF CONTENTS
PART I
Item 1.
Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 1C.
Information about our Executive Officers
Item 2.
Item 3.
Properties
Legal Proceedings
Item 4. Mine Safety Disclosures
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of
Item 6.
Equity Securities
[Reserved]
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8.
Item 9.
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11.
Executive Compensation
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14.
Principal Accountant Fees and Services
PART IV
Item 15.
Exhibits and Financial Statement Schedules
Signatures
2
10
17
17
19
19
19
19
20
21
32
33
72
72
72
72
72
73
73
73
74
79
1
PARKER-HANNIFIN CORPORATION
FORM 10-K
Fiscal Year Ended June 30, 2021
PART I
ITEM 1. Business. Parker-Hannifin Corporation is a leading worldwide diversified manufacturer of motion and control
technologies and systems, providing precision engineered solutions for a wide variety of mobile, industrial and aerospace
markets. The Company was incorporated in Ohio in 1938. Our principal executive offices are located at 6035 Parkland
Boulevard, Cleveland, Ohio 44124-4141, telephone (216) 896-3000. As used in this Annual Report on Form 10-K, unless the
context otherwise requires, the terms "Company", "Parker", "we" or "us" refer to Parker-Hannifin Corporation and its
subsidiaries, and the term "year" and references to specific years refer to the applicable fiscal year.
Our investor relations website address is www.phstock.com. We make available free of charge on or through our website
our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those
reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as soon as reasonably
practicable after filing or furnishing those reports electronically with the Securities and Exchange Commission. The
information contained on or accessible through our website is not part of this Annual Report on Form 10-K.
The Board of Directors has adopted a written charter for each of its committees. These charters, as well as our Global
Code of Business Conduct, Corporate Governance Guidelines and Independence Standards for Directors, are posted and
available on our investor relations website under the Corporate Governance page. Shareholders may request copies of these
corporate governance documents, free of charge, by writing to Parker-Hannifin Corporation, 6035 Parkland Boulevard,
Cleveland, Ohio 44124-4141, Attention: Secretary, or by calling (216) 896-3000.
Our manufacturing, service, sales, distribution and administrative facilities are located in 38 states within the United
States and in 44 other countries. We sell our products as original and replacement equipment through sales and distribution
centers worldwide. We market our products through direct-sales employees, independent distributors and sales representatives.
We supply products to approximately 505,000 customers in virtually every significant manufacturing, transportation and
processing industry.
We have two reporting segments: Diversified Industrial and Aerospace Systems. During 2021, our technologies and
systems were used in the products of these two reporting segments. For 2021, the Company's net sales were $14.3 billion.
Diversified Industrial Segment products accounted for 83 percent and Aerospace Systems Segment products accounted for 17
percent of those net sales.
Markets
Our technologies and systems are used throughout various industries and in various applications. The approximately
505,000 customers who purchase Parker products are found in almost every significant manufacturing, transportation and
processing industry. No single customer accounted for more than three percent of our total net sales for the year ended June 30,
2021.
2
Diversified Industrial Segment. Our Diversified Industrial Segment sells products to both original equipment
manufacturers ("OEMs") and distributors who serve the replacement markets in manufacturing, packaging, processing,
transportation, mobile construction, refrigeration and air conditioning, agricultural and military machinery and equipment
industries. The major markets served by our Diversified Industrial Segment are listed below by group:
Engineered Materials
• Aerospace
Group:
• Oil & gas
• Agriculture
• Microelectronics
Filtration
Group:
• Chemical processing
• Construction
• Defense
• Information technology
• Life sciences
• Aerospace & defense
• Agriculture
• Construction
• Food & beverage
• Heating, ventilation & air conditioning
(HVAC)
• Industrial machinery
• Life sciences
Fluid Connectors
Group:
• Aerial lift
• Agriculture
Instrumentation
Group:
Motion Systems
Group:
• Bulk chemical handling
• Construction
• Food & beverage
• Forestry
• Industrial machinery
• Air conditioning
• Alternative fuels
• Analytical
• Chemical
• Food & beverage
• Life sciences
Mobile:
• Agriculture
• Construction
• Marine
• Material handling
• Military
• Transportation
• Truck & bus
• Turf
3
• Power generation
• Renewable energy
• Telecommunications
• Transportation
• Truck & bus
• Marine
• Mining
• Oil & gas
• Power generation
• Renewable energy
• Transportation
• Water purification
• Life sciences
• Material handling
• Mining
• Oil & gas
• Renewable energy
• Transportation
• Microelectronics
• Oil & gas
• Refining
• Refrigeration
• Transportation
Industrial:
• Distribution
• General machinery
• Machine tool
• Mining
• Oil & gas
• Power generation
• Semiconductor
Aerospace Systems Segment. Our Aerospace Systems Segment sells products primarily in the commercial and military
aerospace markets to both OEMs and to end users for spares, maintenance, repair and overhaul. The major markets for
products of the Aerospace Systems Segment are listed below:
• Aftermarket services
• Commercial transport aircraft
• Engines
• General & business aviation
• Helicopters
• Military aircraft
• Missiles
• Power generation (industrial gas turbines)
• Regional transport aircraft
• Unmanned aerial vehicles
Principal Products and Methods of Distribution
We offer hundreds of thousands of individual products, and no single product contributed more than one percent to our
total net sales for the year ended June 30, 2021. Listed below are some of our principal products.
Diversified Industrial Segment. Our Diversified Industrial Segment products consist of a broad range of motion-control
and fluid systems and components, which are described below by group:
Engineered Materials Group: sealing, shielding, thermal products and systems, adhesives, coatings and noise vibration
and harshness solutions, including:
• Active vibration control systems
• Homogeneous & inserted elastomeric shapes
• Bearings & dampers
• Coatings
• Dynamic seals
• Medical products fabrication & assembly
• Metal & plastic composite bonded seals
• Precision-cut seals
• Elastomeric mounts & isolators
• Rubber-to-substrate adhesives
• Elastomeric o-rings
• Electromagnetic interference shielding
• Extrusion & fabricated seals
• High-temperature metal seals
• Specialty chemicals
• Structural adhesives
• Thermal management
• Wireless sensing systems
Filtration Group: filters, systems and diagnostics solutions to monitor and remove contaminants from fuel, air, oil, water
and other liquids and gases, including:
• Aerospace filters & systems
• Hydraulic & lubrication filters & systems
• Air pollution control & dust collection systems &
• Industrial & analytical gas generators
filters
• Compressed air & gas treatment solutions
• Engine fuel, oil, air & closed crankcase ventilation
filtration systems
• Filtration & purification systems
• Fluid condition monitoring systems
• Gas turbine air inlet filters
• Heating, ventilation & air conditioning filters
• Instrumentation filters
• Membrane, fiber, & sintered metal filters
• Natural gas filters
• Process liquid, air & gas filters
• Sterile air filters
• Water purification filters & systems
4
Fluid Connectors Group: connectors, which control, transmit and contain fluid, including:
• Check valves
• Polytetrafluoroethylene (PTFE) hose & tubing
• Diagnostic and Internet of Things ("IoT") sensors
• Quick couplings
• Hose couplings
• Hose crimpers
• Industrial hose
• Low pressure fittings & adapters
• Rubber & thermoplastic hose
• Tube fittings & adapters
• Tubing & plastic fittings
Instrumentation Group: high quality flow control solutions that are critical to a wide range of applications involving
extreme corrosion resistance, temperatures, pressures and precise flow, including:
• Analytical instruments & sample conditioning
• High pressure fittings, valves, pumps & systems
systems
• High-purity gas delivery fittings, valves &
• Compressed natural gas dispensers
regulators
• Cryogenic valves
• Miniature valves & pumps
• Diesel exhaust treatment systems
• Natural gas on-board fuel systems
• Electronic valves
• Emissions
• Filter driers
• Fluid system & control fittings, meters, valves,
regulators & manifold valves
• Fluoropolymer chemical delivery fittings, valves &
pumps
• Pressure regulating valves
• Refrigeration & air conditioning electronic
controls & monitoring
• Solenoid valves
5
Motion Systems Group: hydraulic, pneumatic, and electromechanical components and systems for builders and users
of mobile and industrial machinery and equipment, including:
Hydraulic Actuation:
• Accumulators
• Coolers
• Cylinders
• Electrohydraulic actuators
• Helical actuators
• Rotary actuators
Hydraulic Pumps & Motors:
• Drive controlled pumps
• Electrohydraulic pumps
• Fan drives
• Gerotor pumps & motors
• Integrated hydrostatic transmissions
• Piston pumps & motors
• Power take-offs
• Screw pumps
• Vane pumps & motors
Hydraulic and Electro Hydraulic Systems:
• Cartridge valves
• Hydraulic valves
• Industrial valves
• Mobile valves
Pneumatics:
• Air preparation (FRL) & dryers
• Grippers
• IO link controllers
• Pneumatic cylinders
• Pneumatic valves
Electronics:
• Clusters
• Controllers & human machine interfaces ("HMI")
• Drives (AC/DC Servo)
• Electric actuators & positioners
• Electric motors & gearheads
• Electronic displays & HMI
• IoT
• Joysticks
• Sensors
• Software
Diversified Industrial Segment products include standard products, as well as custom products which are engineered and
produced to OEM specifications for application to particular end products. Standard and custom products are also used in the
replacement of original products. We market our Diversified Industrial Segment products primarily through field sales
employees and approximately 16,900 independent distributor locations throughout the world.
Aerospace Systems Segment. Our Aerospace Systems Segment products are used in commercial and military airframe
and engine programs and include:
• Control actuation systems & components
• Fuel tank inerting systems
• Engine build-up ducting
• Hydraulic systems & components
• Engine exhaust nozzles & assemblies
• Lubrication components
• Engine systems & components
• Fluid conveyance systems & components
• Fluid metering, delivery & atomization devices
• Fuel systems & components
• Pilot controls
• Pneumatic control components
• Thermal management
• Wheels & brakes
We market our Aerospace Systems Segment products through our regional sales organizations, which sell directly to
OEMs and end users throughout the world.
6
Competition
Parker operates in highly competitive markets and industries. We offer our products over numerous, varied markets
through our divisions operating in 45 countries. Our global scope means that we have hundreds of competitors across our
various markets and product offerings. Our competitors include U.S. and non-U.S. companies. These competitors and the
degree of competition vary widely by product lines, end markets, geographic scope and/or geographic locations. Although each
of our segments has numerous competitors, given our market and product breadth, no single competitor competes with the
Company with respect to all the products we manufacture and sell.
In the Diversified Industrial Segment, Parker competes on the basis of product quality and innovation, customer service,
manufacturing and distribution capability, and price competitiveness. We believe that we are one of the market leaders in most
of the major markets for our most significant Diversified Industrial Segment products. We have comprehensive motion and
control packages for the broadest systems capabilities. While our primary global competitors include Bosch Rexroth AG,
Danaher Corporation, Danfoss A/S, Donaldson Company, Inc., Eaton Corporation plc, Emerson Climate Technologies, Inc.,
Emerson/ASCO, Festo AG & Co., Freudenberg-NOK, Gates Corporation, IMI/Norgren, SMC Corporation, Swagelok
Company, and Trelleborg AB, none of these businesses compete with every group or product in our Diversified Industrial
Segment.
In the Aerospace Systems Segment, we have developed relationships with key customers based on our advanced
technological and engineering capabilities, superior performance in quality, delivery, service, and price competitiveness. This
has enabled us to obtain significant original equipment business on new aircraft programs for our systems and components, as
well as the follow-on repair and replacement business for these programs. Further, the Aerospace Systems Segment utilizes
low-cost manufacturing techniques and best cost region strategies to achieve a lower cost producer status. Although we believe
that we are one of the market leaders in most of the major markets for our most significant Aerospace Systems Segment
products, primary global competitors for these products include Eaton Corporation plc, Honeywell International, Inc., Moog
Inc., Triumph Group, Inc., Senior plc., Raytheon Collins Aerospace, Woodward, Inc. and Safran S.A.
We believe that our platform utilizing eight core technologies, which consist of electromechanical, filtration, fluid
handling, hydraulics, pneumatics, process control, refrigeration, and sealing and shielding, is a positive factor in our ability to
compete effectively with both large and small competitors. For both of our segments, we believe that the following factors also
contribute to our ability to compete effectively:
•
•
•
•
•
•
•
decentralized business model;
technology breadth and interconnectivity;
engineered products with intellectual property;
long product life cycles;
balanced OEM vs. aftermarket;
low capital investment requirements; and
great generators and deployers of cash over the cycle.
Patents, Trademarks, Copyrights, Trade Secrets, Licenses
We own a number of patents, trademarks, copyrights, trade secrets and licenses related to our products. We also have
exclusive and non-exclusive rights to use patents, trademarks and copyrights owned by others. In addition, patent and
trademark applications are pending, although there can be no assurance that further patents and trademarks will be issued. We
do not depend on any single patent, trademark, copyright, trade secret or license or group of patents, trademarks, copyrights,
trade secrets or licenses to any material extent.
Backlog and Seasonal Nature of Business
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. Our backlog by
business segment for the past two years is included in Part II, Item 7 of this Annual Report on Form 10-K and is incorporated
herein by reference. Our backlog was $6.5 billion at June 30, 2021 and $5.1 billion at June 30, 2020. Approximately 84
percent of our backlog at June 30, 2021 is scheduled for delivery in the succeeding twelve months. Because of the breadth and
global scope of our business, our overall business is generally not seasonal in nature.
7
Environmental Regulation
Certain of our operations require the use and handling of hazardous materials and, as a result, the Company is subject to
United States federal, state, and local laws and regulations as well as non-U.S. laws and regulations designed to protect the
environment and regulate the discharge of materials into the environment. These laws impose penalties, fines and other
sanctions for non-compliance and liability for response costs, property damage and personal injury resulting from past and
current spills, disposals or other releases of, or exposures to, hazardous materials. Among other environmental laws, we are
subject to the United States federal "Superfund" law, under which we have been designated as a "potentially responsible party"
and may be liable for cleanup costs associated with various waste sites, some of which are on the United States Environmental
Protection Agency’s Superfund priority list.
As of June 30, 2021, Parker was involved in environmental remediation at various U.S. and non-U.S. manufacturing
facilities presently or formerly operated by us and as a "potentially responsible party," along with other companies, at off-site
waste disposal facilities and regional sites.
We believe that our policies, practices and procedures are properly designed to prevent unreasonable risk of
environmental damage and the consequent financial liability to the Company. Compliance with environmental laws and
regulations requires continuing management efforts and expenditures by the Company. Compliance with environmental laws
and regulations has not had in the past, and, we believe, will not have in the future, a material adverse effect on our capital
expenditures, earnings, or competitive position.
Our reserve for environmental matters is discussed in Note 17 to the Consolidated Financial Statements included in Part
II, Item 8 of this Annual Report on Form 10-K and is incorporated herein by reference.
Energy Matters and Sources and Availability of Raw Materials
Our primary energy source for both of our business segments is electric power. While we cannot predict future costs of
electric power, the primary source for production of the required electric power is expected to be coal and natural gas from coal
and natural gas reserves available to electric utilities. We are subject to governmental regulations in regard to energy supplies
in the United States and elsewhere. To date, we have not experienced any significant disruptions of our operations due to
energy curtailments.
We primarily use steel, brass, copper, aluminum, nickel, rubber and thermoplastic materials and chemicals as the
principal raw materials in our products. We expect these materials to be available from numerous sources in quantities
sufficient to meet our requirements.
Acquisitions
The Company made no acquisitions in 2021. On August 2, 2021, the Company announced that it reached an agreement
on the terms of a recommended cash acquisition of the entire issued and to be issued ordinary share capital of Meggitt plc
("Meggitt"). The proposed Meggitt acquisition and prior year acquisitions are discussed in Notes 1 and 3 to the Consolidated
Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K and are incorporated herein by reference.
Human Capital Management
At Parker, we align employment levels with the global needs of our business and our customers. As of June 30, 2021, we
employed approximately 54,640 persons that we refer to as “team members,” of whom approximately 28,290 were employed
by foreign subsidiaries.
Our talented and passionate team members are the foundation of Parker’s enduring growth, bringing new ideas and
perspectives to enhance our safety performance, improve productivity and inspire a diverse and inclusive culture. We see a
clear path to a brighter future, and it begins with providing our people the resources that enable them to find personal and
professional satisfaction in their work, responsibly move our company forward and strengthen our communities, fulfilling our
purpose of Enabling Engineering Breakthroughs that Lead to a Better Tomorrow.
The Win Strategy™ 3.0, Purpose and Values
The Win Strategy 3.0 is Parker’s business system that defines the goals and initiatives that drive growth, transformation
and 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.
8
The Win Strategy has four overarching goals: Engaged People, Customer Experience, Profitable Growth and Financial
Performance, supported by our shared values of a Winning Culture, Passionate People, Valued Customers and Engaged
Leadership. Our shared values shape our culture and our interactions with stakeholders and the communities in which we
operate and live.
Safety
The safety and well-being of Parker team members is our highest priority. Our safety goal is simple: to achieve an
incident-free workplace. We have reduced our Recordable Incident Rate by 72% from fiscal year 2015 through fiscal year
2020. In fiscal year 2021, the recordable incidents per 100 team members was 0.40, a 29% reduction from fiscal year 2020
(inclusive of recent acquisitions).
Building on the great progress we have made, we recently established new long-term safety goals. We are targeting to be
best in our peer group by 2023 and to eliminate serious safety incidents by 2025.
To help support these goals we are adopting eight standards aimed at preventing serious safety incidents or an environ-
mental impact. We also developed a new field safety program that provides guidance for team members working outside our
facilities to help them identify or anticipate safety risks.
High Performance Teams ("HPTs") are fundamental to our success in driving safety performance, and nearly all of our
manufacturing locations have an active, chartered Safety HPT. Approximately 90% of our team members participate in at least
one HPT. We will continue to encourage every team member to take action when needed to fulfill our shared responsibility to
workplace safety.
Engaged People
Engagement directly influences business performance. We strongly believe in empowering our team members to think as
owners and take action to improve their areas of the business. Engagement is deeply ingrained in our culture, and as an
overarching goal of The Win Strategy it is key to achieving top quartile financial performance.
Parker activates engagement through our HPTs, which apply the expertise and perspective of team members who are
closest to the product and customer to drive improvement throughout the company. Approximately 90% of our people
participate in these teams, and more than 6,500 HPTs have already been established worldwide. We closely track our progress
toward support of a high performing work environment through our Global Engagement Survey, and in our most recent
engagement survey our engagement scores increased to 75%, ranking within the top quartile among our proxy peers.
Diversity and Inclusion
An inclusive environment is a core tenet of Parker’s values and one of our key measures of success within our Win
Strategy. Throughout our history, we have been committed to building a welcoming and inclusive workplace that respects every
team member’s unique perspective. Our team members come from a diverse range of personal and professional backgrounds,
and their collective talent and expertise is the driving force behind the growth and success Parker has achieved.
In 2015, we launched Peer W, our first Business Resource Group focused on supporting the recruitment, development and
retention of women at Parker. Peer W has grown into a well-developed global network of 24 local chapters and established a
Mentoring Circles program in 2020. We are preparing to introduce additional Business Resource Groups that will enable team
members with common interests or backgrounds to come together, share their experiences and establish new and lasting
relationships.
We have also established four global HPTs focused on Talent Attraction, Talent Development, Governance and
Knowledge. Each team is led by a senior executive and tasked with rethinking the way we attract and develop diverse team
members, share knowledge and measure our progress in fostering an inclusive culture.
In 2020, Parker appointed its first Vice President of Diversity and Inclusion to lead our continuing journey.
9
Compensation and Benefits
As a global employer, we are committed to offering competitive compensation and benefits, tailored in form and amount
to geography, industry, experience and performance. Our programs are designed to attract team members, motivate and reward
performance, drive growth and support retention. We provide benefit programs with the goal of improving physical, mental and
financial wellness of our team members throughout their lifetime. Some examples include base and variable pay, health and
insurance benefits, paid time off, and retirement saving plans.
ITEM 1A. Risk Factors.
The following "risk factors" identify what we believe to be the risks that could materially adversely affect our financial
and/or operational performance. These risk factors should be considered and evaluated together with information
incorporated by reference or otherwise included elsewhere in this Annual Report on Form 10-K. Additional risks not currently
known to the Company or that the Company currently believes are immaterial also may impair the Company’s business,
financial condition, results of operations and cash flows.
Business and Operational Risks
The novel coronavirus ("COVID-19") pandemic has disrupted our operations and could have a material adverse effect
on our business and financial condition.
The COVID-19 pandemic, along with the response to the pandemic by governmental and other actors, has disrupted our
operations and is expected to continue to negatively impact our operations in the future, which impact may be material. We
have experienced, and may continue to experience, mandatory and voluntary facility closures in certain jurisdictions in which
we operate. Furthermore, several of our customers temporarily suspended their operations and we have experienced less
demand for our products. Disruptions to our customers in the aerospace industry, which is facing diminished demand, have
been and may continue to be challenging. Additionally, the COVID-19 outbreak has, and could further, disrupt our supply
chain. Facility closures or other restrictions, as well as supply chain disruptions, could materially adversely affect our ability to
adequately staff, supply or otherwise maintain our operations. Moreover, because certain of our employees continue to work
from home, we may be subject to increased vulnerability to cyber and other information technology risks. We have modified,
and may further modify, our business practices in response to the risks and negative impacts associated with the COVID-19
pandemic. However, there can be no assurance that these measures will be temporary or successful.
The impact of the COVID-19 pandemic continues to evolve and its ultimate duration, severity and disruption to our
business, customers and supply chain, and the related financial impact to us, cannot be accurately forecasted at this time. Should
such disruption continue for an extended period, the adverse effect on our business, results of operations and financial condition
could be more severe than previously anticipated. Additionally, weak economic conditions generally as a result of the
COVID-19 pandemic could result in impairment in value of our tangible or intangible assets. Furthermore, future public health
crises are possible and could involve some or all of the risks discussed above.
Risks arising from uncertainty in worldwide and regional economic conditions may harm our business and make it
difficult to project long-term performance.
Our business is sensitive to global macro-economic conditions. Future macroeconomic downturns may have an adverse
effect on our business, results of operations and financial condition, as well as our distributors, customers and suppliers, and on
activity in many of the industries and markets we serve. Among the economic factors which may have such an effect are
manufacturing and other end-market activity, global pandemics, currency exchange rates, air travel trends, difficulties entering
new markets, tariffs and governmental trade and monetary policies, and general economic conditions such as inflation,
deflation, interest rates and credit availability. These factors may, among other things, negatively impact our level of purchases,
capital expenditures, and creditworthiness, as well as our distributors, customers and suppliers, and, therefore, the Company’s
revenues, operating profits, margins, and order rates.
We cannot predict changes in worldwide or regional economic conditions and government policies, as such conditions
are highly volatile and beyond our control. If these conditions deteriorate or remain at depressed levels for extended periods,
however, our business, results of operations and financial condition could be materially adversely affected.
10
As a global business, we are exposed to economic, political and other risks in different countries in which we operate,
which could materially reduce our sales, profitability or cash flows, or materially increase our liabilities.
Our net sales derived from customers outside the United States were approximately 40 percent in 2021, 37 percent in
2020 and 39 percent in 2019. In addition, many of our manufacturing operations and suppliers are located outside the United
States. The Company expects net sales from non-U.S. markets to continue to represent a significant portion of its total net
sales. Our non-U.S. operations are subject to risks in addition to those facing our domestic operations, including:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
fluctuations in currency exchange rates and/or changes in monetary policy;
public health crises, including pandemics;
limitations on ownership and on repatriation of earnings;
transportation delays and interruptions;
political, social and economic instability and disruptions;
government embargoes or trade restrictions;
the imposition of duties and tariffs and other trade barriers;
import and export controls;
labor unrest and current and changing regulatory environments;
the potential for nationalization of enterprises;
difficulties in staffing and managing multi-national operations;
limitations on our ability to enforce legal rights and remedies;
potentially adverse tax consequences; and
difficulties in implementing restructuring actions on a timely basis.
If we are unable to successfully manage the risks associated with expanding our global business or adequately manage
operational fluctuations internationally, the risks could have a material adverse effect on our business, results of operations or
financial condition.
Increased cybersecurity threats and more sophisticated and targeted computer crime could pose a risk to our
information technology systems.
We rely extensively on information technology systems to manage and operate our business, some of which are managed
by third parties. The security and functionality of these information technology systems, and the processing of data by these
systems, are critical to our business operations. If these systems, or any part of the systems, are damaged, intruded upon,
attacked, shutdown or cease to function properly (whether by planned upgrades, force majeure, telecommunications failures,
criminal acts, including hardware or software break-ins or extortion attempts, or viruses, or other cybersecurity incidents) and
we suffer any resulting interruption in our ability to manage and operate our business or if our products are affected, our results
of operations and financial condition could be materially adversely affected. As a result of the COVID-19 pandemic, certain of
our employees continue to work from home, which may increase our vulnerability to cyber and other information technology
risks. In addition to existing risks, any adoption or deployment of new technologies via acquisitions or internal initiatives may
increase our exposure to risks, breaches, or failures, which could materially adversely affect our results of operations or
financial condition. Furthermore, the Company may have access to sensitive, confidential, or personal data or information that
may be subject to privacy and security laws, regulations, or other contractually-imposed controls. Despite our use of reasonable
and appropriate controls, material security breaches, theft, misplaced, lost or corrupted data, programming, or employee errors
and/or malfeasance could lead to the compromise or improper use of such sensitive, confidential, or personal data or
information, resulting in possible negative consequences, such as fines, ransom demands, penalties, loss of reputation,
competitiveness or customers, or other negative consequences resulting in adverse impacts to our results of operations or
financial condition.
11
Changes in the demand for and supply of our products may adversely affect our financial results, financial condition
and cash flow.
Demand for and supply of our products has been and may be adversely affected by numerous factors, some of which we
cannot predict or control. Such factors include:
•
•
•
•
•
•
•
•
changes in business relationships with and purchases by or from major customers, suppliers or distributors, including
delays or cancellations in shipments, disputes regarding contract terms or significant changes in financial condition,
and changes in contract cost and revenue estimates for new development programs, including changes as a result of the
COVID-19 pandemic;
changes in product mix;
changes in the market acceptance of our products;
increased competition in the markets we serve;
declines in the general level of industrial production, including as a result of the COVID-19 pandemic;
weakness in the end-markets we serve, including as a result of the COVID-19 pandemic;
fluctuations in the availability or the prices of raw materials; and
fluctuations in currency exchange rates.
If any of these factors occur, the demand for and supply of our products could suffer, which could materially adversely
affect the Company’s results of operations.
The development of new products and technologies requires substantial investment and is required to remain
competitive in the markets we serve. If we are unable to successfully introduce new commercial products, our
profitability could be adversely affected.
The markets we serve are characterized by rapidly changing technologies and frequent introductions of new products and
services. Our ability to develop new products based on technological innovation can affect our competitive position and often
requires the investment of significant resources. If we cannot develop, or have difficulties or delays developing new and
enhanced products and services, or if we fail to gain market or regulatory acceptance of new products and technologies, our
revenues may be materially reduced and our competitive position could be materially adversely affected. In addition, we may
invest in research and development of products and services, or in acquisitions or other investments, that do not lead to
significant revenue, which could adversely affect our profitability.
Price and supply fluctuations of the raw materials used in our production processes and by our suppliers of
component parts could negatively impact our financial results.
Our supply of raw materials could be interrupted for a variety of reasons, including availability and pricing. Furthermore,
changes to United States and other countries' tariff and import/export regulations have in the past and may in the future have a
negative impact on the availability and pricing of raw materials. Prices for raw materials necessary for production have
fluctuated significantly in the past and significant increases could adversely affect our results of operations and profit margins.
Our efforts to manage these fluctuations by, among other things, passing along price increases to our customers, may be subject
to a time delay between the increased raw material prices and our ability to increase the price of our products, or we may be
unable to increase the prices of our products due to pricing pressure, contract terms or other factors. Any such inability to
manage fluctuations could adversely impact our results of operations and cash flows.
Our suppliers of component parts may significantly and quickly increase their prices in response to increases in costs of
raw materials that they use to manufacture the component parts. As a result, we may not be able to increase our prices
commensurately with our increased costs. Consequently, our results of operations or financial condition could be materially
adversely affected.
Changes in the competitive environment in which we operate may eliminate any competitive advantages that we
currently have, which could adversely impact our business.
Our operations are subject to competition from a wide variety of global, regional and local competitors, which could
adversely affect our results of operations by creating downward pricing pressure and/or a decline in our margins or market
shares. To compete successfully, we must excel in terms of product quality and innovation, technological and engineering
capability, manufacturing and distribution capability, delivery, price competitiveness, and customer experience.
12
Strategic Transactions Risks
We are subject to risks relating to the pending acquisition of Meggitt.
On August 2, 2021, we announced our proposed acquisition of Meggitt. Meggitt is a leader in design, manufacturing and
aftermarket support of technically differentiated systems and equipment in aerospace, defense and selected energy markets.
The proposed acquisition of Meggitt would expand the size of our Aerospace Systems Segment relative to our other
segment, increasing our susceptibility to conditions in the end markets served by our Aerospace Systems Segment. There are
numerous risks and uncertainties associated with the proposed acquisition, including:
•
•
•
•
completion of the acquisition is subject to a number of conditions, some of which are outside of our control. Among
these conditions are the approval by Meggitt’s stockholders of the acquisition and the receipt of certain regulatory
approvals, including the expiration or termination of any applicable waiting period (and any extension thereof) under
the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended, and under the antitrust and foreign
investment/national security laws of certain other non-U.S. jurisdictions including the United Kingdom and European
Union;
the Company’s and Meggitt’s existing business relationships with third parties, including customers and service
providers, may be disrupted due to uncertainty associated with the acquisition, which could have an adverse effect on
our results of operations, cash flows and financial position or those of the combined company;
failure to complete the acquisition could negatively impact our stock price and our future business and financial
results;
both we and Meggitt will incur significant transaction costs in connection with the acquisition, which costs may
exceed those currently anticipated;
•
•
• we intend to pay for the acquisition of Meggitt and pay other fees and expenses required to be paid in connection with
the acquisition with cash on hand and proceeds of new indebtedness. There can be no assurance that we will be able to
execute such financing transactions on acceptable terms, in a timely manner or at all;
the COVID-19 pandemic may delay or prevent the completion of the acquisition;
after completion of the acquisition, we may be unable to successfully integrate our and Meggitt’s business and, as a
result, may fail to realize the anticipated benefits and cost savings of the transaction in the intended timeframe or at all,
which could adversely affect the value of our common stock;
our results after the proposed acquisition of Meggitt may suffer if we do not effectively manage our expanded
operations following the acquisition; and
•
• Meggitt may have difficulty retaining, motivating, and attracting executives and other employees in light of the
pending acquisition, and failure to do so could harm the company.
Any of the foregoing risks and uncertainties could have a material adverse effect on our earnings, cash flows and financial
condition.
We are subject to risks relating to acquisitions and joint ventures, and risks relating to the integration of acquired
companies, including risks related to the integration of Lord Corporation ("Lord") and Exotic Metals Forming
Company ("Exotic") and the potential acquisition of Meggitt.
We expect to continue our strategy of identifying and acquiring businesses with complementary products and services,
and entering into joint ventures, which we believe will enhance our operations and profitability. However, there can be no
assurance that we will be able to continue to find suitable businesses to purchase or joint venture opportunities, or that we will
be able to acquire such businesses or enter into such joint ventures on acceptable terms. Furthermore, there are no assurances
that we will be able to avoid acquiring or assuming unexpected liabilities. If we are unable to avoid these risks, our results of
operations and financial condition could be materially adversely affected.
13
In addition, we may not be able to integrate successfully any businesses that we purchase into our existing business and it
is possible that any acquired businesses or joint ventures may not be profitable. For example, we have devoted significant
management attention and resources to integrating the business and operations of Lord and Exotic. We may encounter, or have
encountered, the following difficulties during the integration process:
•
•
•
•
•
•
•
the consequences of a change in tax treatment, including the cost of integration and compliance and the possibility that
the full benefits anticipated to result from the acquisitions may not be realized;
delays in the integration of management teams, strategies, operations, products, and services;
differences in business backgrounds, corporate cultures, and management philosophies that may delay successful
integration;
the ability to retain key employees;
the ability to create and enforce uniform standards, controls, procedures, policies, and information systems;
challenges of integrating complex systems, technologies, networks, and other assets of the acquired companies in a
manner that minimizes any adverse impact or disruptions to customers, suppliers, employees, and other constituencies;
and
unknown liabilities and unforeseen increased expenses or delays associated with the integration beyond current
estimates.
The successful integration of new businesses and the success of joint ventures also depend on our ability to manage these
new businesses and cut excess costs. If we are unable to avoid these risks, our results of operations and financial condition
could be materially adversely affected.
Our results may be adversely affected if expanded operations from the acquisition of Lord and Exotic, and the potential
acquisition of Meggitt, are not effectively managed.
Our recent acquisitions have greatly expanded the size and complexity of our business. Our future success depends, in
part, on the ability to manage this expanded business, which may pose or has posed substantial challenges for management,
including challenges related to the management and monitoring of the expanded global operations and new manufacturing
processes and products, and the associated costs and complexity. There can be no assurance of successful management of these
matters or that we will realize the expected benefits of the acquisitions.
The Company may be subject to risks relating to organizational changes.
We regularly execute organizational changes such as acquisitions, divestitures and realignments to support our growth
and cost management strategies. We also engage in initiatives aimed to increase productivity, efficiencies and cash flow and to
reduce costs. The Company commits significant resources to identify, develop and retain key employees to ensure
uninterrupted leadership and direction. If we are unable to successfully manage these and other organizational changes, the
ability to complete such activities and realize anticipated synergies or cost savings as well as our results of operations and
financial condition could be materially adversely affected. We cannot offer assurances that any of these initiatives will be
beneficial to the extent anticipated, or that the estimated efficiency improvements, incremental cost savings or cash flow
improvements will be realized as anticipated or at all.
Financial Risks
Increasing costs of certain employee and retiree benefits could adversely affect our liability for such benefits.
The funding requirements and the amount of expenses recorded for our defined benefit pension plans are dependent on
changes in market interest rates and the value of plan assets, which are dependent on actual plan asset returns. Significant
changes in market interest rates and decreases in the fair value of plan assets and investment losses on plan assets would
increase funding requirements and expenses and may adversely impact our results of operations.
The Company absorbs a portion of healthcare costs for its employees. If healthcare costs rise significantly and we
continue to absorb the majority of these costs, these increasing costs may adversely impact our future results of operations.
14
Additional liabilities relating to changes in tax rates or exposure to additional income tax liabilities could adversely
impact our financial condition and cash flow.
We are subject to income taxes in the U.S. and various non-U.S. jurisdictions. Our domestic and international tax
liabilities are dependent upon the location of earnings among these different jurisdictions. Our future results of operation could
be adversely affected by changes in effective tax rate as a result of changes in tax laws and judicial or regulatory interpretation
thereof, the mix of earnings in countries with differing statutory tax rates, changes in overall profitability, changes in U.S.
generally accepted accounting principles ("GAAP"), or changes in the valuation of deferred tax assets. In addition, the amount
of income taxes paid by the Company is subject to ongoing audits by U.S. federal, state and local tax authorities and by non-
U.S. tax authorities. If these audits result in assessments different from amounts reserved, future financial results may include
unfavorable adjustments to the Company’s tax liabilities, which could have a material adverse effect on the Company’s results
of operations.
Our indebtedness and restrictive covenants under our credit facilities could limit our operational and financial
flexibility.
We have incurred significant indebtedness, and may, and expect to if the potential acquisition of Meggitt is completed,
incur additional debt for acquisitions, operations, research and development and capital expenditures, or for other reasons
related to our overall capital deployment strategy. Our ability to make interest and scheduled principal payments and meet
restrictive covenants could be adversely impacted by changes in the availability, terms and cost of capital, changes in interest
rates or changes in our credit ratings or our outlook. These changes could increase our cost of financing and limit our debt
capacity, thereby limiting our ability to pursue acquisition opportunities, react to market conditions and meet operational and
capital needs, which may place us at a competitive disadvantage.
We carry goodwill on our balance sheet, which is subject to impairment testing and could subject us to significant non-
cash charges to earnings in the future if impairment occurs.
We have goodwill recorded on our balance sheet. Goodwill is not amortized, but is tested for impairment annually in the
second quarter or more often if events or changes in circumstances indicate a potential impairment may exist. Factors that
could indicate that our goodwill is impaired include a decline in our stock price and market capitalization, lower than projected
operating results and cash flows, and slower growth rates in our industry. Declines in our stock price, lower operating results
and any decline in industry conditions in the future could increase the risk of impairment. Impairment testing incorporates our
estimates of future operating results and cash flows, estimates of allocations of certain assets and cash flows among reporting
units, estimates of future growth rates, and our judgment regarding the applicable discount rates used on estimated operating
results and cash flows. If we determine at a future time that further impairment exists, it may result in a significant non-cash
charge to earnings and lower stockholders’ equity.
Legal and Regulatory Risks
As a provider of products to the U.S. government, we are subject to additional risks related to future government
spending as well as unusual performance conditions and enhanced compliance risks.
In addition to the risks identified herein, doing business with the U.S. government subjects us to unusual risks, including
dependence on the level of government spending and compliance with and changes in governmental acquisition regulations.
Agreements relating to the sale of products to government entities may be subject to termination, reduction or modification,
either at the convenience of the government or for our failure to perform, or other unsatisfactory performance under the
applicable contract. We are subject to government investigations of our business practices and compliance with government
acquisition regulations. If the Company were charged with wrongdoing as a result of any such investigation, it could be
suspended from bidding on or receiving awards of new government contracts, and we could be subject to fines or penalties
associated with contract non-compliance or resulting from such investigations, which could have a material adverse effect on
our results of operations.
15
Litigation and legal and regulatory proceedings against the Company could decrease our liquidity, impair our financial
condition and adversely affect our results of operations.
From time to time, we are subject to litigation or other commercial disputes and other legal and regulatory proceedings
relating to our business. Due to the inherent uncertainties of any litigation, commercial disputes or other legal or regulatory
proceedings, we cannot accurately predict their ultimate outcome, including the outcome of any related appeals. An
unfavorable outcome could materially adversely impact our business, financial condition and results of operations.
Furthermore, as required by U.S. GAAP, we establish reserves based on our assessment of contingencies, including
contingencies related to legal claims asserted against us. Subsequent developments in legal proceedings may affect our
assessment and estimates of the loss contingency recorded as a reserve and require us to make payments in excess of our
reserves, which could have an adverse effect on our results of operations.
We are subject to national and international laws and regulations, such as the anti-corruption laws of the U.S. Foreign
Corrupt Practices Act and the U.K. Bribery Act, relating to our business and our employees. Despite our policies, procedures
and compliance programs, our internal controls and compliance systems may not be able to protect the Company from
prohibited acts willfully committed by our employees, agents or business partners that would violate such applicable laws and
regulations. Any such improper acts could damage the Company's reputation, subject us to civil or criminal judgments, fines or
penalties, and could otherwise disrupt the Company's business, and as a result, could materially adversely impact our business,
financial condition and results of operations.
Further, our operations are subject to certain antitrust and competition laws in the jurisdictions in which we conduct our
business, in particular the United States and Europe. These laws prohibit, among other things, anticompetitive agreements and
practices. If any of our commercial agreements or practices are found to violate or infringe such laws, we may be subject to
civil and other penalties. We may also be subject to third-party claims for damages. Further, agreements that infringe antitrust
and competition laws may be void and unenforceable, in whole or in part, or require modification in order to be lawful and
enforceable. Accordingly, any violation of these laws could harm our reputation and could have a material adverse effect on
our earnings, cash flows and financial condition.
Due to the nature of our business and products, we may be liable for damages based on product liability claims.
Our businesses expose us to potential product liability risks that are inherent in the design, manufacture and sale of our
products and the products of third-party vendors that we use or resell. Significant product liability claims could have a material
adverse effect on the Company’s financial condition, liquidity and results of operations. Although we currently maintain what
we believe to be suitable and adequate product liability insurance, there can be no assurance that we will be able to maintain our
insurance on acceptable terms or that our insurance will provide adequate protection against all potential significant liabilities.
Failure to protect our intellectual property and know-how could reduce or eliminate any competitive advantage and
reduce our sales and profitability, and the cost of protecting our intellectual property may be significant.
Protecting our intellectual property is critical to our innovation efforts. We own a number of patents, trade secrets,
copyrights, trademarks, trade names and other forms of intellectual property related to our products and services throughout the
world and the operation of our business. We also have exclusive and non-exclusive rights to intellectual property owned by
others. Our intellectual property may be challenged, stolen or otherwise infringed upon by third parties or we may be unable to
maintain, renew or enter into new license agreements with third-party owners of intellectual property on reasonable terms. In
addition, the global nature of our business increases the risk that our intellectual property may be subject to infringement, theft
or other unauthorized use or disclosure by others. In some cases, our ability to protect our intellectual property rights by legal
recourse or otherwise may be limited, particularly in countries where laws or enforcement practices are inadequate or
undeveloped. Unauthorized use or disclosure of our intellectual property rights or our inability to protect intellectual property
and preserve associated intellectual property rights could lead to reputational harm and/or adversely impact our competitive
position and results of operations.
16
We may be required to make material expenditures in order to comply with environmental laws and climate change
regulations, or incur additional liabilities under these laws and regulations.
Our operations necessitate the use and handling of hazardous materials and, as a result, subject us to various U.S. federal,
state and local laws and regulations, as well as non-U.S. laws, designed to protect the environment and to regulate the discharge
of materials into the environment. These laws impose penalties, fines and other sanctions for non-compliance and liability for
response costs, property damages and personal injury resulting from past and current spills, disposals or other releases of, or the
exposure to, hazardous materials. Among other laws, we are subject to the U.S. federal "Superfund" law, under which we have
been designated as a "potentially responsible party" and may be liable for clean-up costs associated with various waste sites,
some of which are on the United States Environmental Protection Agency’s Superfund priority list. We could incur substantial
costs as a result of non-compliance with or liability for cleanup or other costs or damages under environmental laws, including
the "Superfund" law.
In addition, increased worldwide focus on climate change issues has led to legislative and regulatory efforts to limit
greenhouse gas emissions, including regulation of such emissions through a "cap-and-trade" system globally. Increased
regulation of greenhouse gas emissions and other climate change concerns could subject us to additional costs and restrictions,
including increased energy and raw material costs. Until definitive regulations are adopted, we are not able to predict how such
regulations would affect our business, operations or financial results.
We may be subject to other more stringent environmental laws in the future. If more stringent environmental laws are
enacted in the future, these laws could have a material adverse effect on our business, results of operations and financial
condition.
ITEM 1B. Unresolved Staff Comments. None.
ITEM 1C. Information about our Executive Officers.
Our executive officers as of August 15, 2021, were as follows:
Position
Officer
Since(1)
Age as of
8/15/2021
Name
Thomas L. Williams
Lee C. Banks
Jennifer A. Parmentier
Todd M. Leombruno
Mark J. Hart
Chairman of the Board, Chief Executive Officer and Director
Vice Chairman and President and Director
Chief Operating Officer
Executive Vice President and Chief Financial Officer
Executive Vice President – Human Resources & External Affairs
William R. "Skip" Bowman
Vice President and President - Instrumentation Group
Berend Bracht
Mark T. Czaja
Angela R. Ives
Thomas C. Gentile
Joseph R. Leonti
Robert W. Malone
Dinu J. Parel
Andrew D. Ross
Roger S. Sherrard
Andrew M. Weeks
Vice President and President – Motion Systems Group
Vice President - Chief Technology and Innovation Officer
Vice President and Controller
Vice President – Global Supply Chain
Vice President, General Counsel and Secretary
Vice President and President – Filtration Group
Vice President and Chief Digital and Information Officer
Vice President and President – Fluid Connectors Group
Vice President and President – Aerospace Group
Vice President and President – Engineered Materials Group
2005
2001
2015
2017
2016
2016
2021
2021
2021
2017
2014
2014
2018
2012
2003
2015
62
58
54
51
56
63
55
59
48
49
49
57
40
54
55
58
(1)Executive officers are elected by the Board of Directors to serve for a term of one year or until their respective successors
are elected, except in the case of death, resignation or removal. Messrs. Williams, Banks, Hart, Leonti, Malone, Ross and
Sherrard have served in the executive capacities indicated above during each of the past five years.
Mr. Williams has been a Director since January 2015; Chief Executive Officer since February 2015; and Chairman of the
Board since January 2016. He was an Executive Vice President from August 2008 to February 2015 and an Operating Officer
from November 2006 to February 2015. He is also a Director of The Goodyear Tire & Rubber Company.
17
Mr. Banks has been a Director since January 2015 and Vice Chairman and President since August 2021. He was
President and Chief Operating Officer from February 2015 to August 2021. He was an Executive Vice President from August
2008 to February 2015 and an Operating Officer from November 2006 to February 2015. He is also a Director of Wabtec
Corporation.
Ms. Parmentier has been Chief Operating Officer since August 2021. She was Vice President and President of the
Motion Systems Group from February 2019 to August 2021. She was Vice President and President of the Engineered Materials
Group from September 2015 to February 2019. She was General Manager of the Hose Products Division from May 2014 to
September 2015; and General Manager of the Sporlan Division from May 2012 to May 2014. She is also a Director of Nordson
Corporation.
Mr. Hart has been Executive Vice President - Human Resources & External Affairs since January 2016. He was Vice
President - Total Rewards from August 2013 to January 2016.
Mr. Leombruno has been Executive Vice President and Chief Financial Officer since January 2021. He was Vice
President and Controller from July 2017 to January 2021. He was Vice President and Controller - Engineered Materials Group
from January 2015 to June 2017; and Director of Investor Relations from June 2012 to December 2014.
Mr. Bowman has been Vice President and President - Instrumentation Group since September 2016. He was Vice
President, Operations - Filtration Group from March 2015 to August 2016; and Vice President, Operations - Fluid Connectors
Group from November 2007 to February 2015.
Mr. Bracht has been Vice President and President of the Motion Systems Group since August 2021. He was Vice
President of Operations of the Engineered Materials Group since joining the Company in July 2018. He was President and
Chief Executive Officer of Bendix Commercial Vehicle Systems LLC from 2015 to 2018. Bendix designs, develops and
supplies products under the Bendix brand name for medium- and heavy-duty trucks, tractors, trailers, buses, and other
commercial vehicles throughout North America. Prior to Bendix, he held several executive leadership positions during his 24-
year career at Bosch Rexroth, including President and Chief Executive Officer of Bosch Rexroth Americas.
Mr. Czaja has been Vice President - Chief Technology and Innovation Officer since January 2021. He was Vice
President of Technology and Innovation - Motion Systems Group from August 2019 to December 2020; Vice President of
Technology and Innovation - Aerospace Group from August 2004 to July 2019; and Division Engineering Director from
October 2000 to July 2004.
Mr. Gentile has been Vice President - Global Supply Chain since July 2017. He was General Manager of the Company's
Process Filtration Division from December 2013 to July 2017 and was Vice President of Supply Chain - Filtration Group from
July 2008 to November 2013.
Ms. Ives has been Vice President and Controller since January 2021. She was Vice President, Assistant Controller from
September 2020 to December 2020; Group VP Controller for the Instrumentation Group from November 2019 to August 2020;
and was Division Controller for the Electromechanical and Drives Division from August 2010 to October 2019.
Mr. Leonti has been Vice President, General Counsel and Secretary since July 2014. He was Assistant Secretary from
April 2011 to July 2014; and Associate General Counsel from January 2008 to July 2014.
Mr. Malone has been Vice President and President of the Filtration Group since December 2014. He was Vice President
- Operations of the Filtration Group from January 2013 to December 2014.
Mr. Parel has been Vice President and Chief Digital and Information Officer since October 2020. He was Vice President
and Chief Information Officer from October 2018 to October 2020. He was Vice President and Chief Information Officer at
Dover Corporation from May 2016 through October 2018. Prior to Dover, he held several IT leadership roles at Baker Hughes
from March 2010 to May 2016, including IT Integration Leader and Senior Director, IT North America.
Mr. Ross has been Vice President and President - Fluid Connectors Group since September 2015. He was Vice
President and President of the Engineered Materials Group from July 2012 to September 2015.
Mr. Sherrard has been Vice President and President of the Aerospace Group since July 2012. He was President of the
Automation Group from March 2005 to July 2012. Prior to that he was President of the Instrumentation Group and has been a
Corporate Vice President since November 2003.
18
Mr. Weeks has been Vice President and President of the Engineered Materials Group since February 2019. He was Vice
President and President of the Motion Systems Group from September 2015 to February 2019. He was Vice President -
Operations of the Aerospace Group from April 2013 to September 2015.
ITEM 2. Properties. Our corporate headquarters is located in Cleveland, Ohio, and, at June 30, 2021, the Company
maintained approximately 315 manufacturing plants. We also maintain various sales and administrative offices and distribution
centers throughout the world. None of these manufacturing plants, administrative offices or distribution centers are individually
material to our operations. The facilities are situated in 38 states within the United States and in 44 other countries. We own
the majority of our manufacturing plants, and our leased properties primarily consist of sales and administrative offices and
distribution centers.
We believe that our properties have been adequately maintained, are in good condition generally and are suitable and
adequate for our business as presently conducted. The extent to which we utilize our properties varies by property and from
time to time. We believe that our restructuring efforts have brought capacity levels closer to present and anticipated needs.
Most of our manufacturing facilities remain capable of handling volume increases.
ITEM 3. Legal Proceedings. None. 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 4. Mine Safety Disclosures. Not applicable.
PART II
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities.
(a) Market for the Registrant’s Common Equity. The Company’s common stock is listed for trading on the New York
Stock Exchange ("NYSE") under the symbol "PH". As of July 31, 2021, the number of shareholders of record of the
Company was 3,292.
(b) Use of Proceeds. Not Applicable.
(c) Purchases of Equity Securities by the Issuer and Affiliated Purchasers.
ISSUER PURCHASES OF EQUITY SECURITIES
Period
April 1, 2021 through April 30, 2021
May 1, 2021 through May 31, 2021
June 1, 2021 through June 30, 2021
Total
(a) Total
Number
of Shares
Purchased
52,600
50,500
58,345
161,445
(b) Average
Price Paid
Per Share
$
$
$
317.78
311.38
300.92
(c) Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs (1)
52,600
50,500
58,345
161,445
(d) Maximum Number
(or Approximate
Dollar Value) of
Shares that May Yet
Be Purchased
Under the Plans or
Programs
9,805,825
9,755,325
9,696,980
(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. In March 2020, the Company suspended the share repurchase program in response to
business uncertainty resulting from the COVID-19 pandemic. During 2021, the Company reinitiated the share repurchase
program and began repurchasing shares under the program in February 2021.
19
ITEM 6. [Reserved]
20
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
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,” “potential,” “continues,” “plans,” “forecasts,” “estimates,” “projects,” “predicts,” “would,”
“intends,” “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 the Company 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 in this document will actually occur. The Company
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, depending on economic conditions within its mobile, industrial and aerospace markets, and the Company’s ability
to maintain and achieve anticipated benefits associated with announced realignment activities, strategic initiatives to improve
operating margins, actions taken to combat the effects of the current economic environment, and growth, innovation and global
diversification initiatives. Additionally, the actual impact of changes in tax laws in the United States and foreign jurisdictions
and any judicial or regulatory interpretation thereof on future performance and earnings projections may impact the Company’s
tax calculations. 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:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
the impact of the global outbreak of COVID-19 and governmental and other actions taken in response;
changes in business relationships with and purchases by or from major customers, suppliers or distributors, including
delays or cancellations in shipments;
disputes regarding contract terms or significant changes in financial condition, changes in contract cost and revenue
estimates for new development programs and changes in product mix;
ability to identify acceptable strategic acquisition targets; uncertainties surrounding timing, successful completion or
integration of acquisitions and similar transactions, including the integration of Lord and Exotic and the proposed
acquisition of Meggitt; and our ability to effectively manage expanded operations from the acquisitions of Lord and
Exotic and the proposed acquisition of Meggitt;
the ability to successfully divest businesses planned for divestiture and realize the anticipated benefits of such
divestitures;
the determination to undertake business realignment activities and the expected costs thereof and, if undertaken, the
ability to complete such activities and realize the anticipated cost savings from such activities;
ability to implement successfully capital allocation initiatives, including timing, price and execution of share
repurchases;
availability, limitations or cost increases of raw materials, component products and/or commodities that 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 changes;
additional liabilities relating to changes in tax rates or exposure to additional income tax liabilities;
ability to enter into, own, renew, protect and maintain intellectual property and know-how;
leverage and future debt service obligations;
potential impairment of goodwill;
compliance costs associated with environmental laws and regulations;
potential labor disruptions;
uncertainties surrounding the ultimate resolution of outstanding legal proceedings, including the outcome of any
appeals;
global competitive market conditions, including U.S. trade policies and resulting effects on sales and pricing;
global economic factors, including manufacturing activity, air travel trends, currency exchange rates, difficulties
entering new markets and general economic conditions such as inflation, deflation, interest rates, credit availability and
changes in consumer habits and preferences;
local and global political and economic conditions;
21
•
•
•
•
inability to obtain, or meet conditions imposed for, required governmental and regulatory approvals;
government actions and natural phenomena such as floods, earthquakes, hurricanes and pandemics;
increased cyber security threats and sophisticated computer crime; and
success of business and operating initiatives.
The Company makes these statements as of the date of the filing of its Annual Report on Form 10-K for the year ended
June 30, 2021, and undertakes no obligation to update them unless otherwise required by law.
Overview
The Company is a global leader in motion and control technologies. For more than a century, the Company has engineered the
success of its customers in a wide range of diversified industrial and aerospace markets.
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 drive growth, transformation and
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 energy, water, food, environment, defense, life sciences, infrastructure and transportation. 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.
In March 2020, the World Health Organization declared the outbreak of COVID-19 a pandemic. We continue to monitor the
impact of the COVID-19 pandemic, which has negatively impacted demand and continues to create economic uncertainty.
Disruption within the aerospace industry, which is facing the consequences of travel restrictions and considerably lower
demand, was significant and is expected to continue. The extent to which our business and results of operations will be
impacted by the pandemic over the long term will depend on future developments that cannot be accurately predicted at this
time. These developments include the availability, acceptance, distribution and effectiveness of vaccines; new information
concerning the severity and spread of COVID-19 and its variants; and actions by government authorities to contain the
pandemic or mitigate its economic, public health and other impacts.
We continue to prioritize the safety of our team members. To minimize the spread of COVID-19 in our workplaces, we
implemented rigorous prevention, screening and hygiene protocols. Additionally, we are strategically managing costs through
reductions in discretionary spending. We continue to prioritize capital expenditures related to safety and strategic investments.
22
At the same time, we are appropriately addressing the ongoing needs of our business so that we may continue to serve our
customers.
The discussion below is structured to separately discuss the financial statements presented in Part II, Item 8 of this Annual
Report on Form 10-K. The term "year" and references to specific years refer to the applicable fiscal year. Discussion of the
2019 financial statements is included in Part II, Item 7 of the Company's 2020 Annual Report on Form 10-K.
CONSOLIDATED STATEMENT OF INCOME
The Consolidated Statement of Income summarizes the Company's operating performance. The discussion below compares the
operating performance in 2021 and 2020.
(dollars in millions)
Net sales
Gross profit margin
Selling, general and administrative expenses
Selling, general and administrative expenses, as a percent of sales
Interest expense
Other (income), net
Gain on disposal of assets
Effective tax rate
Net income attributable to common shareholders
2021
$
14,348
$
$
27.2 %
1,527
10.6 %
250
(17)
(109)
$
$
$
2020*
13,696
24.8 %
1,657
12.1 %
308
(67)
(1)
22.3 %
20.2 %
$
1,746
$
1,202
*Year ended June 30, 2020 amounts have been adjusted to reflect the change in inventory accounting method, as described in Notes 1 and 7
to the Consolidated Financial Statements.
Net sales in 2021 increased from the 2020 amount due to higher volume in both the Diversified Industrial International and
Diversified Industrial North American businesses, partially offset by lower volume in the Aerospace Systems Segment. The
effect of currency rate changes increased net sales in 2021 by approximately $257 million, of which $244 million was
attributable to the Diversified Industrial International operations. Prior-year acquisitions contributed approximately $394
million in net sales during 2021.
Gross profit margin (calculated as net sales less cost of sales, divided by net sales) increased in 2021 primarily due to higher
margins in all businesses. Gross profit margin in 2021 included net foreign currency transaction gains of $11 million and $10
million in 2021 and 2020, respectively. Gross profit margin also benefited from the absence of acquisition-related expenses,
which were included in cost of sales in 2020, of $69 million. Cost of sales included business realignment and acquisition
integration charges of $35 million in 2021 compared to $60 million in 2020.
Selling, general and administrative expenses ("SG&A") decreased eight percent in 2021 primarily due to benefits from lower
discretionary spending and wage and salary expense resulting from actions taken in response to business conditions resulting
from the COVID-19 pandemic. During 2021, SG&A also benefited from the absence of acquisition-related expenses of $119
million, which were incurred in 2020. These benefits were partially offset by higher intangible asset amortization expense
related to prior-year acquisitions and higher stock compensation expense. SG&A also included business realignment and
acquisition integration charges of $23 million and $38 million in 2021 and 2020, respectively.
Interest expense in 2021 decreased due to both lower interest rates and lower average debt outstanding.
Other (income), net included the following:
(dollars in millions)
Expense (income)
Income related to equity method investments
Non-service components of retirement benefit cost
Interest income
Other items, net
23
2021
2020
$
$
(41) $
49
(7)
(18)
(17) $
(75)
49
(31)
(10)
(67)
Gain on disposal of assets in 2021 primarily consists of a gain of $101 million on the sale of land. In 2020, it includes gains of
$12 million on the sale of real estate, partially offset by net losses on divestitures and asset sales and writedowns.
Effective tax rate in 2021 was higher than 2020 primarily due to an overall decrease in discrete tax benefits.
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
(dollars in millions)
Net Sales
North America
International
Operating income
North America
International
Operating income as a percent of sales
North America
International
Backlog
2021
2020
6,676
5,284
1,247
988
$
6,456
4,505
986
675
18.7 %
18.7 %
3,239
$
15.3 %
15.0 %
2,117
$
$
The Diversified Industrial Segment operations experienced the following percentage changes in net sales:
Diversified Industrial North America – as reported
Acquisitions
Currency
Diversified Industrial North America – without acquisitions and currency
Diversified Industrial International – as reported
Acquisitions
Currency
Diversified Industrial International – without acquisitions and currency
Total Diversified Industrial Segment – as reported
Acquisitions
Currency
Total Diversified Industrial Segment – without acquisitions and currency
2021
3.4 %
2.9 %
0.1 %
0.4 %
17.3 %
3.0 %
5.4 %
8.9 %
9.1 %
2.9 %
2.3 %
3.9 %
The above presentation reconciles the percentage changes in net sales of the Diversified Industrial Segment reported in
accordance with U.S. GAAP to percentage changes in net sales adjusted to remove the effects of acquisitions made within the
prior four fiscal quarters as well as the effects of currency exchange rates (a non-GAAP measure). The effects of acquisitions
and 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.
Sales in 2021 for the Diversified Industrial North American operations increased 3.4 percent from 2020. Acquisitions increased
sales by $188 million, and the effect of currency exchange rates increased sales by approximately $8 million. Excluding
acquisitions and the effect of currency rate changes, sales in 2021 for the Diversified Industrial North American operations
increased 0.4 percent from prior-year levels reflecting higher demand from distributors and end users in the refrigeration, cars
and light truck, farm and agriculture and life sciences markets, partially offset by a decrease in end-user demand in the oil and
gas and general industrial machinery markets.
24
Sales in the Diversified Industrial International operations increased 17.3 percent in 2021. Acquisitions increased sales by
approximately $136 million in 2021. The effect of currency rate changes increased sales by $244 million, reflecting the
weakening of the U.S. dollar primarily against currencies in the Eurozone countries, China and the United Kingdom. Excluding
acquisitions and the effect of currency rate changes, sales in 2021 for the Diversified Industrial International operations
increased 8.9 percent from 2020 levels primarily due to higher demand from distributors and end users in both the mobile and
industrial markets. During 2021, the Asia Pacific region, Europe, and Latin America accounted for approximately 60 percent,
26 percent, and 14 percent, respectively, of the increase in sales.
Within the Asia Pacific region, the increase in sales was primarily due to higher demand from distributors and end users in the
construction equipment, semiconductor, cars and light truck, general industrial machinery, engine and life sciences markets,
partially offset by a decrease in end-user demand in the oil and gas market.
Within Europe, the increase in sales was primarily due to higher demand from distributors and end users in the construction
equipment, heavy-duty truck and power generation markets, partially offset by a decrease in end-user demand in the general
industrial machinery, oil and gas and marine markets.
Within Latin America, the increase in sales was primarily due to higher demand from distributors and end users in the farm and
agriculture, construction equipment, cars and light truck and heavy-duty truck markets, partially offset by a decrease in end-user
demand in the oil and gas market.
Operating margins in 2021 increased in both the Diversified Industrial North American and International operations primarily
due to higher sales volume and benefits from overall cost reductions, including lower discretionary spending, wage and salary
reductions, current and prior-year restructuring actions in response to business conditions resulting from the COVID-19
pandemic, the absence of acquisition-related expenses, and productivity improvements.
The following business realignment and acquisition integration charges are included in Diversified Industrial North America
and Diversified Industrial International operating income:
(dollars in millions)
Diversified Industrial North America
Diversified Industrial International
$
2021
14 $
36
2020
41
32
During 2021, business realignment charges primarily include actions taken to address the impact of COVID-19 on our business,
but also include charges related to the Company’s simplification initiative. The simplification initiative is aimed at reducing
organizational and process complexity and is being implemented by operating units around the world. During 2020, business
realignment charges primarily include charges related to the Company’s simplification initiative, but also include permanent
workforce reductions to address the impact of COVID-19 on our business. Acquisition integration charges relate to the 2020
acquisition of Lord.
The majority of the Diversified Industrial International business realignment and acquisition integration charges were incurred
in Europe. We anticipate that cost savings realized from the workforce reduction measures taken during 2021 will increase
operating income for 2022 by approximately one percent in both the Diversified Industrial North American and International
operations. In 2022, we expect to continue to take actions necessary to structure appropriately the operations of the Diversified
Industrial Segment. These actions are expected to result in approximately $40 million in business realignment and acquisition
integration charges in 2022. However, continually changing business conditions could impact the ultimate costs we incur.
The increase in Diversified Industrial Segment backlog in 2021 was primarily due to orders exceeding shipments in both the
North American and International businesses, with each business accounting for approximately 50 percent of the change.
Within the International business, this increase in backlog was primarily related to orders exceeding shipments in both Europe
and the Asia Pacific region. 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.
25
Aerospace Systems Segment
(dollars in millions)
Sales
Operating income
Operating income as a percent of sales
Backlog
2021
$
2,388
$
403
16.9 %
2020
2,735
477
17.4 %
$
3,264
$
3,021
Sales in 2021 were lower than the 2020 level primarily due to lower volume in the commercial OEM and aftermarket
businesses due to the market conditions as a result of COVID-19. This decrease was partially offset by higher volume in the
military OEM and aftermarket businesses as well as a $71 million increase in sales from prior-year acquisitions.
Operating margin decreased in 2021 primarily due to lower sales volume in the commercial OEM and aftermarket businesses
and lower aftermarket profitability. Lower sales volume and aftermarket profitability were partially offset by lower engineering
development expenses, overall cost reductions, lower business realignment and acquisition integration charges and the benefits
from such actions.
The disruption in the aerospace industry due to the COVID-19 pandemic has been significant and we have taken actions
necessary to structure appropriately the operations of the Aerospace Systems Segment. We do not currently intend to incur
significant additional business realignment and acquisition integration charges in 2022. However, continually changing
business conditions could impact the ultimate costs we incur. We anticipate that cost savings realized from the workforce
reduction measures taken during 2021 will increase segment operating income for 2022 by approximately two percent.
The increase in backlog in 2021 was primarily due to orders exceeding shipments in the military OEM business, partially offset
by shipments exceeding orders in the military aftermarket and commercial OEM and aftermarket businesses. 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
(dollars in millions)
Expense (income)
Corporate general and administrative expense
Corporate general and administrative expense, as a percent of sales
2021
2020
$
178
$
1.2 %
171
1.2 %
Corporate general and administrative expenses increased slightly in 2021 primarily due to increases in stock compensation
expense, deferred compensation expense and charitable contributions. These increases were partially offset by benefits from
lower discretionary spending and wage and salary expense as a result of actions taken in response to business conditions
resulting from the COVID-19 pandemic.
26
Other (income) expense (in the Business Segment Information)
(dollars in millions)
Expense (income)
Foreign currency transaction
Stock-based compensation
Pensions
Acquisition expenses
Gain on disposal of assets
Interest income
Other items, net
2021
2020*
$
(11) $
61
22
5
(109)
(7)
2
$
(37) $
(10)
52
30
119
(1)
(31)
(7)
152
*Year ended June 30, 2020 amounts have been adjusted to reflect the change in inventory accounting method, as described in Notes 1 and 7
to the Consolidated Financial Statements.
Foreign currency transaction primarily relates to the impact of changes in foreign exchange rates on cash, marketable securities
and other investments and intercompany transactions. Prior-year acquisition expenses primarily relate to the acquisitions of
Lord and Exotic. Gain on disposal of assets in 2021 primarily consists of a gain of $101 million on the sale of land. In 2020, it
includes gains of $12 million on the sale of real estate, partially offset by net losses on divestitures and asset sales and
writedowns.
CONSOLIDATED BALANCE SHEET
The Consolidated Balance Sheet shows the Company's financial position at year end, compared with the previous year end.
This discussion provides information to assist in assessing factors such as the Company's liquidity and financial resources.
(dollars in millions)
Cash
Trade accounts receivable, net
Inventories
Notes payable and long-term debt payable within one year
Long-term debt
Shareholders' equity
Working capital
Current ratio
$
$
2021
772 $
2,184
2,091
3
6,582
8,398
2,520 $
1.8
2020*
756
1,854
1,964
810
7,652
6,227
1,886
1.6
*Year ended June 30, 2020 amounts have been adjusted to reflect the change in inventory accounting method, as described in Notes 1 and 7
to the Consolidated Financial Statements.
Cash (comprised of cash and cash equivalents and marketable securities and other investments) includes $467 million and $726
million held by the Company's foreign subsidiaries at June 30, 2021 and 2020, 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. Refer to Note 5 to the Consolidated Financial
Statements in Part II, Item 8 of this Annual Report on Form 10-K for further discussion.
Trade accounts receivable, net are receivables due from customers for sales of product. Days sales outstanding relating to
trade receivables for the Company was 50 days in 2021 and 54 days in 2020. We believe that our receivables are collectible
and appropriate allowances for credit losses have been recorded.
Inventories as of June 30, 2021 increased by $127 million (which includes an increase of $41 million from the effect of foreign
currency translation). After consideration of the effect of foreign currency translation, inventories increased primarily due to an
increase in the Diversified Industrial Segment, partially offset by a decrease in the Aerospace Systems Segment. Days supply
of inventory on hand was 75 days in 2021 and 89 days in 2020.
27
Notes payable and long-term debt payable within one year decreased from 2020 primarily due to the repayment of
commercial paper notes outstanding. Refer to Note 9 to the Consolidated Financial Statements in Part II, Item 8 of this Annual
Report on Form 10-K for further discussion.
Long-term debt decreased from 2020 primarily due to the repayment of term loans. Refer to Note 10 to the Consolidated
Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for further discussion.
Shareholders' equity activity during 2021 included a decrease of $100 million related to share repurchases, an increase of
$664 million related to pensions and postretirement benefits resulting from investment gains on plan assets and an increase of
$328 million related to foreign currency translation adjustments.
CONSOLIDATED STATEMENT OF CASH FLOWS
The Consolidated Statement of Cash Flows reflects cash inflows and outflows from the Company's operating, investing and
financing activities.
A summary of cash flows follows:
(dollars in millions)
Cash provided by (used in):
Operating activities
Investing activities
Financing activities
Effect of exchange rates
2021
2020
$
2,575 $
—
(2,623)
96
2,071
(5,024)
449
(30)
Net increase (decrease) in cash and cash equivalents
$
48 $
(2,534)
Cash flows from operating activities in 2021 reflects an increase in net income of $545 million and an increase of $12 million
from cash provided by working capital items. We remain focused on managing our inventory and other working capital
requirements.
Cash flows from investing activities in 2021 includes net proceeds from the sale of land of approximately $111 million. Cash
flows from investing activities in 2020 includes $5,076 million of acquisition-related activity. It also includes $121 million of
proceeds from the redemption of company-owned life insurance investments associated with the Company's deferred
compensation programs as well as proceeds of $44 million related to the settlement of a cross-currency swap.
Cash flows from financing activities in 2021 includes net commercial paper repayments of $723 million and term loan
repayments of $1,210 million. Cash flows from financing activities in 2020 includes proceeds from the issuance of the $925
million and $800 million term loans and the repayment of approximately $740 million of long-term debt. Refer to Note 10 to
the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for further discussion. The
Company repurchased 0.3 million common shares for $100 million during 2021 compared to the repurchase of 0.8 million
common shares for $147 million in 2020.
Dividends have been paid for 284 consecutive quarters, including a yearly increase in dividends for the last 65 years. The
current annual dividend rate is $4.12 per common share.
Our goal is to maintain an investment-grade credit profile. The rating agencies periodically update our credit ratings as events
occur. At June 30, 2021, the long-term credit ratings assigned to the Company's senior debt securities by the credit rating
agencies engaged by the Company were as follows:
Fitch Ratings
Moody's Investor Services, Inc.
Standard & Poor's
BBB+
Baa1
BBB+
28
We continue to actively monitor our liquidity position and working capital needs and prioritize capital expenditures related to
safety and strategic investments. The Company remains in a stable overall capital resources and liquidity position that is
adequate to meet its projected needs. In March 2020, the Company suspended the share repurchase program in response to
business uncertainty resulting from the COVID-19 pandemic. During February 2021, the Company reinitiated the share
repurchase program and repurchased shares totaling $100 million during the remainder of the fiscal year.
The Company has a line of credit totaling $2,500 million through a multi-currency revolving credit agreement with a group of
banks, all of which was available as of June 30, 2021. The credit agreement expires in September 2024; however, the Company
has the right to request a one-year extension of the expiration date on an annual basis, which request may result in changes to
the current terms and conditions of the credit agreement. Advances from the credit agreement can be used for general corporate
purposes, including acquisitions, and for the refinancing of existing indebtedness. The credit agreement 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. Refer to Note 9 to the Consolidated Financial
Statements in Part II, Item 8 of this Annual Report on Form 10-K for further discussion.
The Company is currently authorized to sell up to $2,500 million of short-term commercial paper notes. There were no
outstanding commercial paper notes as of June 30, 2021, and the largest amount of commercial paper notes outstanding during
the last quarter of 2021 was $203 million.
The Company’s credit agreements 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 June 30, 2021, the most
restrictive financial covenant provides that the ratio of debt to debt-shareholders' equity cannot exceed 0.65 to 1.0. At June 30,
2021, the Company's debt to debt-shareholders' equity ratio was 0.44 to 1.0. We are in compliance and expect to remain in
compliance with all covenants set forth in the credit agreement and indentures.
On August 2, 2021, the Company announced that it reached an agreement on the terms of a recommended cash acquisition of
the entire issued and to be issued ordinary share capital of Meggitt for 800 pence per share, or approximately £6,308 million.
We intend to fund the proposed acquisition with cash and new debt. The proposed acquisition remains subject to customary
closing conditions, including regulatory clearances and approval by Meggitt’s shareholders.
In connection with the proposed acquisition, the Company entered into a bridge credit agreement (the "Bridge Credit
Agreement") on August 2, 2021. Under the Bridge Credit Agreement, lenders are committed to provide senior, unsecured
financing in the aggregate principal amount of £6,524 million. Any borrowings made under the Bridge Credit Agreement
would mature 364 days from the initial funding date. The commitments are intended to be drawn to finance the proposed
acquisition of Meggitt only to the extent that we do not arrange for alternative financing prior to closing.
Contractual Obligations - The total amount of gross unrecognized tax benefits, including interest, for uncertain tax positions
was $119 million at June 30, 2021. Payment of these obligations would result from settlements with worldwide taxing
authorities. Due to the difficulty in determining the timing of the settlements, these obligations are not included in the
following summary of the Company's fixed contractual obligations. References to Notes are to the Notes to the Consolidated
Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.
(dollars in millions)
Payments due by period
Contractual obligations
Transition tax payments related to U.S. Tax Cuts
and Jobs Act ("TCJ Act") (Note 5)
Long-term debt (Note 10)
Interest on long-term debt
Operating leases (Note 11)
Retirement benefits (Note 12)
Total
Total
Less than 1
year
1-3 years
3-5 years
More than 5
years
$
187 $
— $
59 $
128 $
6,646
3,207
142
146
3
227
42
108
879
436
49
10
1,331
363
26
9
—
4,433
2,181
25
19
$
10,328 $
380 $
1,433 $
1,857 $
6,658
OFF-BALANCE SHEET ARRANGEMENTS
The Company does not have off-balance sheet arrangements.
29
CRITICAL ACCOUNTING POLICIES
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of
America ("GAAP") requires management to make estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. The policies discussed below are considered by management to be more critical than other
policies because their application places the most significant demands on management's judgment.
Revenue Recognition - Revenues are recognized when control of performance obligations, which are distinct goods or services
within the contract, is transferred to the customer. Control is transferred when the customer has the ability to direct the use of
and obtain the benefits from the goods or services. A majority of our revenues are recognized at a point in time when control is
transferred to the customer, which is generally at the time of shipment. However, a portion of our revenues are recognized over
time if the customer simultaneously receives control as we perform work under a contract, if the customer controls the asset as
it is being produced, or if the product has no alternative use and we have a contractual right to payment.
For contracts where revenue is recognized over time, we use the cost-to-cost, efforts expended or units of delivery method
depending on the nature of the contract, including length of production time. The estimation of costs and efforts expended
requires judgment on the part of management due to the duration of the contractual agreements as well as the technical nature of
the products involved. Adjustments to these estimates are made on a consistent basis and a contract reserve is established when
the estimated costs to complete a contract exceed the expected contract revenues.
When there are multiple performance obligations within a contract, the transaction price is allocated to each performance
obligation based on its standalone selling price. The primary method used to estimate a standalone selling price is the price
observed in standalone sales to customers for the same product or service. Revenue is recognized when control of the
individual performance obligations is transferred to the customer.
We consider the contractual consideration payable by the customer and assesses variable consideration that may affect the total
transaction price. Variable consideration is included in the estimated transaction price when there is a basis to reasonably
estimate the amount, including whether the estimate should be constrained in order to avoid a significant reversal of revenue in
a future period. These estimates are based on historical experience, anticipated performance under the terms of the contract and
our best judgment at the time.
Impairment of Goodwill and Long-Lived Assets - We test goodwill for impairment at the reporting unit level on an annual
basis and between annual tests whenever events or circumstances indicate the carrying value of a reporting unit may exceed its
fair value. Our six reporting units are equivalent to our operating segments. As quoted market prices are not available for our
reporting units, determining whether an impairment occurred requires the valuation of the respective reporting unit, which is
estimated using both income-based and market-based valuation methods. The income-based valuation method utilizes a
discounted cash flow model which requires several assumptions, including future sales growth and operating margin levels as
well as assumptions regarding future industry-specific market conditions. Each reporting unit regularly prepares discrete
operating forecasts and uses these forecasts as the basis for the assumptions in the discounted cash flow analysis. Within the
discounted cash flow models, the Company uses a discount rate, commensurate with its cost of capital but adjusted for inherent
business risks, and an appropriate terminal growth factor. The market-based valuation performed for each reporting unit
includes an analysis consisting of market-adjusted multiples based on key data points for guideline public companies. We also
reconcile the estimated aggregate fair value of our reporting units resulting from these procedures to our overall market
capitalization.
At December 31, 2020, the Company performed its annual goodwill impairment test for each of its six reporting units. The
results of this test indicated the fair value substantially exceeded carrying value for all reporting units. We continually monitor
our reporting units for impairment indicators and update assumptions used in the most recent calculation of a reporting unit's
fair value as appropriate. We did not identify any events or circumstances during 2021 that required performance of an interim
impairment test.
Long-lived assets held for use, which primarily includes finite-lived intangible assets and property, plant and equipment, are
evaluated for impairment whenever events or circumstances indicate that the undiscounted net cash flows to be generated by
their use over their expected useful lives and eventual disposition are less than their carrying value. The long-term nature of
these assets requires the estimation of their cash inflows and outflows several years into the future and only takes into
consideration technological advances known at the time of the impairment test. During 2021, the Company did not record any
material impairment related to long-lived assets.
30
Pensions - The annual net periodic expense and benefit obligations related to the Company's defined benefit plans are
determined on an actuarial basis. This determination requires critical assumptions regarding the discount rate, long-term rate of
return on plan assets, increases in compensation levels and amortization periods for actuarial gains and losses. Assumptions are
determined based on Company data and appropriate market indicators and are evaluated each year as of the plans' measurement
date. Changes in the assumptions to reflect actual experience as well as the amortization of actuarial gains and losses could
result in a material change in the annual net periodic expense and benefit obligations reported in the financial statements.
For the Company's domestic qualified defined benefit plan, a 50 basis point change in the assumed long-term rate of return on
plan assets is estimated to have an $18 million increase in annual pension expense and a 50 basis point decrease in the discount
rate is estimated to increase annual pension expense by $27 million. As of June 30, 2021, $707 million of past years' net
actuarial losses related to the Company's domestic qualified defined benefit plan are subject to amortization in the future. These
losses will generally be amortized over approximately seven years and will negatively affect earnings in the future. Any
actuarial gains experienced in future years will help reduce the effect of the net actuarial loss amortization. Further information
on pensions is provided in Note 12 to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form
10-K.
Income Taxes - Significant judgment is required in determining the Company's income tax expense and in evaluating tax
positions. Deferred income tax assets and liabilities have been recorded for the differences between the financial accounting
and income tax basis of assets and liabilities. Factors considered by the Company in determining the probability of realizing
deferred income tax assets include forecasted operating earnings, available tax planning strategies and the time period over
which the temporary differences will reverse. The Company reviews its tax positions on a regular basis and adjusts the
balances as new information becomes available. For those tax positions where it is more likely than not that a tax benefit will
be sustained, the largest amount of tax benefit with a greater than 50 percent likelihood of being realized upon examination by a
taxing authority that has full knowledge of all relevant information will be recorded. For those income tax positions where it is
not more likely than not that a tax benefit will be sustained, no tax benefit has been recognized in the Consolidated Financial
Statements. Further information on income taxes is provided in Note 5 to the Consolidated Financial Statements in Part II, Item
8 of this Annual Report on Form 10-K.
Loss Contingencies - The Company has a number of loss exposures incurred in the ordinary course of business such as
environmental claims, product liability and litigation reserves. Establishing loss accruals for these matters requires
management's estimate and judgment with regards to risk exposure and ultimate liability or realization. We review these loss
accruals periodically and make adjustments to reflect the most recent facts and circumstances.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
Recently issued accounting pronouncements are described in Note 1 to the Consolidated Financial Statements, included in Part
II, Item 8 of this Annual Report on Form 10-K.
In November 2020, the SEC issued Final Rule Release No. 33-10890, Management’s Discussion and Analysis, Selected
Financial Data, and Supplementary Financial Information. This rule, which became effective on February 10, 2021, amended
certain SEC disclosure requirements in order to modernize, simplify and enhance certain financial disclosure requirements in
Regulation S-K. Specifically, the amendments eliminate the requirement for Selected Financial Data, streamline the
requirement to disclose Supplementary Financial Information, and amend Management's Discussion and Analysis. The final
rule is applicable for fiscal years ending on or after August 9, 2021, however, early adoption on an Item-by-Item basis is
permitted after February 10, 2021. We early adopted the amendments to two items resulting in the elimination of Item 301,
Selected Financial Data, from Part II, Item 6 of this report and the omission of Regulation S-K Item 302(a), Supplementary
Financial Information, from the notes to our consolidated financial statements in Part II, Item 8 of this report.
31
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk.
The Company manages foreign currency transaction and translation risk by utilizing derivative and non-derivative financial
instruments, including forward exchange contracts, costless collar contracts, cross-currency swap contracts and certain foreign
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. The Company
does 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 Part II, Item 8 of this Annual
Report on Form 10-K. 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 swaps measured using the spot method, the periodic interest
settlements are recognized directly in earnings through interest expense. The translation of the foreign denominated debt that
has been designated as a net investment hedge is recorded in accumulated other comprehensive income (loss) and remains there
until the underlying net investment is sold or substantially liquidated.
The Company's debt portfolio contains variable rate debt, inherently exposing the Company to interest rate risk. The
Company's objective is to maintain a 60/40 mix between fixed rate and variable rate debt thereby limiting its exposure to
changes in near-term interest rates. At June 30, 2021, our debt portfolio did not include any variable rate debt. However, a 100
basis point increase in near-term interest rates would increase annual interest expense on weighted average commercial paper
balances during 2021 by approximately $5 million.
As discussed elsewhere in this report, the COVID-19 pandemic is having, and likely will continue to have, an adverse effect on
our business, and its future impacts remain unpredictable. As we cannot anticipate the ultimate duration or scope of the
COVID-19 pandemic, the ultimate financial impact to our results cannot be reasonably estimated, but could be material.
32
ITEM 8. Financial Statements and Supplementary Data.
Financial Statements
Consolidated Statement of Income
Consolidated Statement of Comprehensive Income
Business Segment Information
Consolidated Balance Sheet
Consolidated Statement of Cash Flows
Consolidated Statement of Equity
Notes to Consolidated Financial Statements
Page Number
in Form 10-K
36
37
38
40
41
42
43
33
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Parker-Hannifin Corporation
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Parker-Hannifin Corporation and subsidiaries (the
"Company") as of June 30, 2021 and 2020, the related consolidated statements of income, comprehensive income, equity,
and cash flows, for each of the three years in the period ended June 30, 2021, and the related notes and the schedule listed in
the Index at Item 15 (collectively referred to as the "financial statements"). We also have audited the Company’s internal
control over financial reporting as of June 30, 2021, based on criteria established in Internal Control - Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the
Company as of June 30, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the
period ended June 30, 2021, in conformity with accounting principles generally accepted in the United States of America.
Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as
of June 30, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.
Change in Accounting Principle
As discussed in Notes 1 and 7 to the consolidated financial statements, the Company elected to change its method of
accounting for certain inventories from the last-in, first-out (“LIFO”) cost method to the first-in, first-out (“FIFO”) cost
method which has been retrospectively applied to the consolidated financial statements as of June 30, 2020 and 2019.
Basis for Opinions
The Company’s management is responsible for these financial statements, for maintaining effective internal control over
financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the
accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an
opinion on these financial statements and an opinion on the Company’s internal control over financial reporting based on
our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United
States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether
due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the
financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits
also included evaluating the accounting principles used and significant estimates made by management, as well as
evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included
obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists,
and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits
also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits
provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and
procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that
receipts and expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
34
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements
that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures
that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.
The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a
whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit
matter or on the accounts or disclosures to which it relates.
Revenue — Refer to Notes 1 and 2 to the financial statements
Critical Audit Matter Description
The Company is a highly diversified business with revenue derived from the sales of products in a variety of industrial and
aerospace markets. The Company’s business activities are carried out by numerous individual business units, which offer
unique technology and product platforms within specific geographic areas.
We identified revenue as a critical audit matter given the geographical dispersion of the Company’s operations and business
units generating revenue. This required extensive audit effort due to the volume of the underlying transactions and
distinctiveness of each individual business unit. High levels of auditor judgement were necessary to determine the nature,
timing, and extent of audit procedures performed within the Company.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the Company’s revenue transactions included the following, among others:
• We tested the design and effectiveness of internal controls within the revenue business processes, including controls over
revenue recognition and controls over the review of operating results.
• For a sample of revenue transactions, we performed detail transaction testing by agreeing the amounts recorded as
revenue to source documents and determined that revenue was recognized appropriately.
• For the revenue populations subject to detail testing, we tested the completeness of revenue by making selections from a
reciprocal population (e.g. sales order listing) and determined whether the sales order was recorded as a sale in the
general ledger.
• For revenue transactions not subject to detail transaction testing, we performed substantive analytical procedures. We
developed independent expectations of revenue based on data derived from published industry indices, market and
customer trends, and the results of our detail revenue testing and compared these expectations to the revenue recorded by
management.
/s/ DELOITTE & TOUCHE, LLP
Cleveland, Ohio
August 25, 2021
We have served as the Company's auditor since 2008.
35
CONSOLIDATED STATEMENT OF INCOME
(Dollars in thousands, except per share amounts)
Net Sales
Cost of sales
Selling, general and administrative expenses
Interest expense
Other income, net
(Gain) loss on disposal of assets
Income before income taxes
Income taxes
Net Income
Less: Noncontrolling interest in subsidiaries' earnings
For the years ended June 30,
2021
2020*
2019*
$ 14,347,640 $ 13,695,520 $ 14,320,324
10,449,680
10,292,291
10,688,970
1,527,302
1,656,553
1,543,939
250,036
308,161
(17,003)
(67,112)
(109,332)
(1,227)
190,138
(61,247)
9,049
2,246,957
1,506,854
1,949,475
500,096
304,522
424,392
1,746,861
1,202,332
1,525,083
761
362
567
Net Income Attributable to Common Shareholders
$
1,746,100 $
1,201,970 $
1,524,516
Earnings per Share Attributable to Common Shareholders
Basic earnings per share
Diluted earnings per share
$
$
13.54 $
13.35 $
9.36 $
9.26 $
11.73
11.57
*Years ended June 30, 2020 and 2019 amounts have been adjusted to reflect the change in inventory accounting method, as described in
Notes 1 and 7 to the Consolidated Financial Statements.
The accompanying notes are an integral part of the consolidated financial statements.
36
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(Dollars in thousands)
Net Income
Less: Noncontrolling interests in subsidiaries' earnings
Net income attributable to common shareholders
For the years ended June 30,
2021
2020*
2019*
$
1,746,861 $
1,202,332 $
1,525,083
761
362
567
1,746,100
1,201,970
1,524,516
Other comprehensive income (loss), net of tax
Foreign currency translation adjustment and other (net of tax of
$(3,664), $4,820 and $709 in 2021, 2020 and 2019)
Retirement benefits plan activity (net of tax of $(205,845), $97,477
and $71,821 in 2021, 2020 and 2019)
Other comprehensive income (loss)
Less: Other comprehensive income (loss) for noncontrolling interests
Other comprehensive income (loss) attributable to common
shareholders
Total Comprehensive Income Attributable to Common
Shareholders
328,792
(182,957)
(66,392)
664,076
992,868
720
(317,546)
(500,503)
(676)
(227,783)
(294,175)
53
992,148
(499,827)
(294,228)
$
2,738,248 $
702,143 $
1,230,288
*Years ended June 30, 2020 and 2019 amounts have been adjusted to reflect the change in inventory accounting method, as described in
Notes 1 and 7 to the Consolidated Financial Statements.
The accompanying notes are an integral part of the consolidated financial statements.
37
BUSINESS SEGMENT INFORMATION
(Dollars in thousands)
Net Sales:
Diversified Industrial:
North America
International
Aerospace Systems
Segment Operating Income:
Diversified Industrial:
North America
International
Aerospace Systems
Total segment operating income
Corporate administration
Income before interest expense and other expense
Interest expense
Other (income) expense
Income before income taxes
Assets:
Diversified Industrial
Aerospace Systems(a)
Corporate
Property Additions:
Diversified Industrial
Aerospace Systems
Corporate
Depreciation:
Diversified Industrial
Aerospace Systems
Corporate
Amortization:
Diversified Industrial
Aerospace Systems
2021
2020*
2019*
$
6,676,449 $
5,283,710
2,387,481
6,808,948
5,000,599
2,510,777
$ 14,347,640 $ 13,695,520 $ 14,320,324
6,456,298 $
4,504,587
2,734,635
$
$
1,247,419 $
988,054
402,895
2,638,368
178,427
2,459,941
250,036
(37,052)
2,246,957 $
985,944 $
674,763
476,900
2,137,607
170,903
1,966,704
308,161
151,689
1,506,854 $
1,138,586
804,890
487,757
2,431,233
194,994
2,236,239
190,138
96,626
1,949,475
$ 16,518,688 $ 15,973,576 $ 13,189,204
1,546,053
2,996,771
$ 20,341,200 $ 19,887,753 $ 17,732,028
3,251,522
662,655
3,077,395
745,117
$
$
$
$
$
$
186,233 $
20,705
3,019
209,957 $
183,981 $
44,546
4,064
232,591 $
172,348
20,748
1,993
195,089
229,891 $
32,151
7,901
269,943 $
218,092 $
27,749
7,058
252,899 $
203,144
16,268
6,263
225,675
274,368 $
51,079
325,447 $
243,714 $
40,918
284,632 $
196,680
3,072
199,752
38
(Dollars in thousands)
By Geographic Area(b)
Net Sales:
North America
International
Long-Lived Assets:
North America
International
2021
2020
2019
$
9,046,162 $
9,166,773 $
9,318,195
5,301,478
4,528,747
5,002,129
$ 14,347,640 $ 13,695,520 $ 14,320,324
$
1,448,109 $
1,494,858 $
1,052,263
818,367
797,877
716,024
$
2,266,476 $
2,292,735 $
1,768,287
The accounting policies of the business segments are the same as those described in the Significant Accounting Policies
footnote except that the business segment results are prepared on a basis that is consistent with the manner in which the
Company’s management disaggregates financial information for internal review and decision-making.
(a) Includes an investment in a joint venture in which ownership is 50 percent or less and in which the Company does not have
operating control (2021 - $219,081; 2020 - $237,911; 2019 - $234,703).
(b) Net sales are attributed to countries based on the location of the selling unit. North America includes the United States,
Canada and Mexico. No country other than the United States represents greater than 10 percent of consolidated sales. Long-
lived assets are comprised of property, plant and equipment based on physical location.
*Years ended June 30, 2020 and 2019 amounts have been adjusted to reflect the change in inventory accounting method, as described in
Notes 1 and 7 to the Consolidated Financial Statements.
39
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
June 30,
Assets
Current Assets
Cash and cash equivalents
Marketable securities and other investments
Trade accounts receivable, net
Non-trade and notes receivable
Inventories
Prepaid expenses and other
Total Current Assets
Property, plant and equipment
Less: Accumulated depreciation
Property, plant and equipment, net
Deferred income taxes
Investments and other assets
Intangible assets, net
Goodwill
Total Assets
2021
2020*
$
733,117 $
39,116
2,183,594
326,315
2,090,642
243,966
5,616,750
6,040,220
3,773,744
2,266,476
104,251
774,239
3,519,797
8,059,687
685,514
70,805
1,854,398
244,870
1,964,195
214,986
5,034,768
5,810,681
3,517,946
2,292,735
126,839
764,563
3,798,913
7,869,935
$ 20,341,200 $ 19,887,753
Liabilities and Equity
Current Liabilities
Notes payable and long-term debt payable within one year
Accounts payable, trade
Accrued payrolls and other compensation
Accrued domestic and foreign taxes
Other accrued liabilities
Total Current Liabilities
Long-term debt
Pensions and other postretirement benefits
Deferred income taxes
Other liabilities
Total Liabilities
Equity
Shareholders' Equity
Serial preferred stock, $.50 par value, authorized 3,000,000 shares; none issued
$
2,824 $
1,667,878
507,027
236,384
682,390
3,096,503
6,582,053
1,055,638
553,981
639,355
11,927,530
809,529
1,111,759
424,231
195,314
607,540
3,148,373
7,652,256
1,887,414
418,851
539,089
13,645,983
—
—
Common stock, $.50 par value, authorized 600,000,000 shares; issued 181,046,128 shares in 2021 and
2020
Additional capital
Retained earnings
Accumulated other comprehensive (loss)
Treasury shares at cost: 51,900,460 in 2021 and 52,490,165 in 2020
Total Shareholders' Equity
Noncontrolling interests
Total Equity
Total Liabilities and Equity
90,523
329,619
14,915,497
(1,566,727)
(5,370,605)
8,398,307
15,363
8,413,670
90,523
416,585
13,643,907
(2,558,875)
(5,364,916)
6,227,224
14,546
6,241,770
$ 20,341,200 $ 19,887,753
*Year ended June 30, 2020 amounts have been adjusted to reflect the change in inventory accounting method, as described in Notes 1 and 7
to the Consolidated Financial Statements.
The accompanying notes are an integral part of the consolidated financial statements.
40
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
Cash Flows From Operating Activities
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
For the years ended June 30,
2021
2020*
2019*
$
1,746,861 $
1,202,332 $
1,525,083
Depreciation
Amortization
Stock incentive plan compensation
Deferred income taxes
Foreign currency transaction (gain) loss
(Gain) loss on sale of property, plant and equipment
Loss on sale of businesses
Gain on sale and impairment of investments
(Gain) loss on marketable securities
Other
Changes in assets and liabilities, net of effects from acquisitions:
Accounts receivable
Inventories
Prepaid expenses and other
Other assets
Accounts payable, trade
Accrued payrolls and other compensation
Accrued domestic and foreign taxes
Other accrued liabilities
Pensions and other postretirement benefits
Other liabilities
Net cash provided by operating activities
Cash Flows From Investing Activities
Acquisitions (net of cash acquired of $82,192 in 2020 and $690 in 2019)
Capital expenditures
Proceeds from sale of property, plant and equipment
Proceeds from sale of businesses
Purchase of marketable securities and other investments
Maturities and sales of marketable securities and other investments
Other
Net cash used in investing activities
Cash Flows From Financing Activities
Proceeds from exercise of stock options
Payments for common shares
Acquisition of noncontrolling interests
(Payments of) proceeds from notes payable, net
Proceeds from long-term borrowings
Payments for long-term borrowings
Dividends paid
Net cash (used in) provided by financing activities
Effect of exchange rate changes on cash
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Supplemental Data:
Cash paid during the year for:
Interest
Income taxes
269,943
325,447
121,483
(51,500)
(10,948)
(109,332)
—
(12,616)
(11,570)
14,424
(298,511)
(85,597)
(25,508)
(8,779)
526,781
72,412
36,552
11,397
17,875
46,187
252,899
284,632
111,375
12,290
(10,018)
(1,850)
—
(2,084)
(587)
17,984
578,853
206,937
(9,312)
(23,547)
(370,765)
(62,715)
30,918
(148,531)
55,522
(53,384)
2,575,001
2,070,949
225,675
210,514
104,078
36,435
5,888
5,091
5,854
(16,749)
7,563
—
2,452
(67,867)
(33,335)
2,677
(12,397)
2,088
(30,593)
16,698
(168,368)
(90,647)
1,730,140
(2,042)
(195,089)
46,592
19,678
(181,780)
74,908
19,223
—
(209,957)
140,590
—
(34,809)
79,419
24,744
(13)
4,684
(218,818)
—
(723,496)
1,213
(1,211,748)
(475,174)
(2,623,339)
95,954
47,603
685,514
(5,076,064)
(232,591)
26,345
—
(194,742)
275,483
177,576
(5,023,993)
(218,510)
2,623
(216,049)
(1,200)
136,744
1,721,211
(740,181)
(453,838)
449,310
(30,519)
(2,534,253)
3,219,767
2,475
(860,052)
—
48,828
2,336,749
(213,226)
(412,468)
902,306
(16,306)
2,397,630
822,137
$
$
733,117 $
685,514 $
3,219,767
236,979 $
308,199 $
485,885
307,959
169,378
454,699
*Years ended June 30, 2020 and 2019 amounts have been adjusted to reflect the change in inventory accounting method, as described in Notes 1 and 7 to the
Consolidated Financial Statements.
The accompanying notes are an integral part of the consolidated financial statements.
41
CONSOLIDATED STATEMENT OF EQUITY
(Dollars in thousands)
Common
Stock
Additional
Capital
Retained
Earnings*
Accumulated
Other
Comprehensive
(Loss)
Treasury
Shares
Noncontrolling
Interests
Total*
Balance July 1, 2018 (As reported)
$
90,523 $ 496,592 $
11,625,975 $
(1,763,086) $ (4,590,138) $
5,627 $ 5,865,493
Inventory accounting method change
105,460
105,460
Balance July 1, 2018*
$
90,523 $ 496,592 $
11,731,435 $
(1,763,086) $ (4,590,138) $
5,627 $ 5,970,953
Impact of adoption of accounting
standards
Net income*
Other comprehensive income (loss)
Dividends paid ($3.16 per share)
Stock incentive plan activity
Shares purchased at cost
Balance June 30, 2019*
Net income*
Other comprehensive (loss)
Dividends paid ($3.52 per share)
Stock incentive plan activity
Acquisition activity
Shares purchased at cost
Balance June 30, 2020*
Net income
Other comprehensive income
Dividends paid ($3.67 per share)
Stock incentive plan activity
Shares purchased at cost
Balance June 30, 2021
51,603
1,524,516
(412,404)
(1,734)
(294,228)
(34,506)
81,007
(799,999)
49,869
567
1,525,083
53
(64)
(294,175)
(412,468)
46,501
(799,999)
$
90,523 $ 462,086 $
12,895,150 $
(2,059,048) $ (5,309,130) $
6,183 $ 6,085,764
1,201,970
(453,213)
(499,827)
(46,265)
764
362
1,202,332
(676)
(625)
9,302
(500,503)
(453,838)
44,716
10,066
(146,767)
90,981
(146,767)
$
90,523 $ 416,585 $
13,643,907 $
(2,558,875) $ (5,364,916) $
14,546 $ 6,241,770
1,746,100
(474,510)
992,148
(86,966)
94,311
(100,000)
761
1,746,861
720
(664)
992,868
(475,174)
7,345
(100,000)
$
90,523 $ 329,619 $
14,915,497 $
(1,566,727) $ (5,370,605) $
15,363 $ 8,413,670
*The balances at June 30, 2018 and the year ended June 30, 2020 and 2019 amounts have been revised to reflect the change in inventory
accounting method, as described in Notes 1 and 7 to the consolidated financial statements.
The accompanying notes are an integral part of the consolidated financial statements.
42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts or as otherwise noted)
The term "year" and references to specific years refer to the applicable fiscal years.
1.
Significant Accounting Policies
The significant accounting policies followed in the preparation of the accompanying consolidated financial statements
are summarized below.
Nature of Operations - The Company is a leading worldwide diversified manufacturer of motion and control
technologies and systems, providing precision engineered solutions for a wide variety of mobile, industrial and aerospace
markets. We evaluate performance based on segment operating income before corporate administrative expenses, interest
expense and income taxes.
The Diversified Industrial Segment is an aggregation of several business units, which manufacture motion-control and
fluid power system components for builders and users of various types of manufacturing, packaging, processing, transportation,
agricultural, construction, and military vehicles and equipment. Diversified Industrial Segment products are marketed primarily
through field sales employees and independent distributors. The Diversified Industrial North American operations have
manufacturing plants and distribution networks throughout the United States, Canada and Mexico and primarily service North
America. The Diversified Industrial International operations provide Parker products and services to 42 countries throughout
Europe, Asia Pacific, Latin America, the Middle East and Africa.
The Aerospace Systems Segment produces hydraulic, fuel, pneumatic and electro-mechanical systems and
components, which are utilized on virtually every domestic commercial, military and general aviation aircraft and also performs
a vital role in naval vessels and land-based weapons systems. This segment serves original equipment and maintenance, repair
and overhaul customers worldwide. Aerospace Systems Segment products are marketed by field sales employees and are sold
directly to manufacturers and end users.
There are no individual customers to whom sales are more than three percent of the Company's consolidated sales.
Due to our diverse group of customers throughout the world, we do not consider ourself exposed to any concentration of credit
risks.
The Company manufactures and markets its products throughout the world. Although certain risks and uncertainties
exist, the diversity and breadth of our products and geographic operations mitigate the risk that adverse changes with respect to
any particular product and geographic operation would materially affect our operating results.
Use of Estimates - The preparation of consolidated financial statements in conformity with U.S. GAAP requires
management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.
Change in Accounting Principle - During the fourth quarter of 2021, the Company changed its method of accounting
for certain domestic inventory previously valued by the last-in, first-out ("LIFO") method to the first-in, first-out ("FIFO")
method. All prior periods presented have been retrospectively adjusted to apply the new method of accounting. Refer to Note
7 for more information on the change in inventory accounting method.
Basis of Consolidation - The consolidated financial statements include the accounts of all majority-owned domestic
and foreign subsidiaries. All intercompany transactions and profits have been eliminated in the consolidated financial
statements. The Company does not have off-balance sheet arrangements. Within the Business Segment Information,
intersegment and interarea sales have been eliminated.
Revenue Recognition - Revenues are recognized when control of performance obligations, which are distinct goods
or services within the contract, is transferred to the customer. Control is transferred when the customer has the ability to direct
the use of and obtain the benefits from the goods or services. When revenue is recognized at a point in time, control generally
transfers at time of shipment. Revenues are recognized over time if the customer simultaneously receives control as the
Company performs work under a contract, if the customer controls the asset as it is being produced, or if the product produced
for the customer has no alternative use and the Company has a contractual right to payment.
For contracts where revenue is recognized over time, we use the cost-to-cost, efforts expended or units of delivery
method depending on the nature of the contract, including length of production time. The estimation of these costs and efforts
expended requires judgment on the part of management due to the duration of the contractual agreements as well as the
technical nature of the products involved. We make adjustments to these estimates on a consistent basis and establish a contract
reserve when the estimated costs to complete a contract exceed the expected contract revenues.
43
A contract’s transaction price is allocated to each distinct performance obligation. When there are multiple
performance obligations within a contract, the transaction price is allocated to each performance obligation based on its
standalone selling price. The primary method used to estimate a standalone selling price is the price observed in standalone
sales to customers of the same product or service. Revenue is recognized when control of the individual performance
obligations is transferred to the customer.
We consider the contractual consideration payable by the customer and assesses variable consideration that may affect
the total transaction price. Variable consideration primarily includes prompt pay discounts, rebates and volume discounts and is
included in the estimated transaction price when there is a basis to reasonably estimate the amount, including whether the
estimate should be constrained in order to avoid a significant reversal of revenue in a future period. These estimates are based
on historical experience, anticipated performance under the terms of the contract and our best judgment at the time.
Payment terms vary by customer and the geographic location of the customer. The time between when revenue is
recognized and payment is due is not significant. Our contracts with customers generally do not include significant financing
components or noncash consideration.
Taxes collected from customers and remitted to governmental authorities are excluded from revenue. Shipping and
handling costs are treated as fulfillment costs and are included in cost of sales. The costs to obtain a contract where the
amortization period for the related asset is one year or less are expensed as incurred.
There is generally no unilateral right to return products. The Company primarily offers an assurance-type standard
warranty that the product will conform to certain specifications for a defined period of time or usage after delivery. This type of
warranty does not represent a separate performance obligation.
Cash - Cash equivalents consist of short-term, highly liquid investments with a maturity of three months or less.
These investments are carried at cost plus accrued interest and are readily convertible into cash.
Marketable Securities and Other Investments - Consist of short-term, highly liquid investments with stated
maturities of greater than three months from the date of purchase, which are carried at cost plus accrued interest. Marketable
securities and other investments also include investments in equity securities which are carried at fair value. Changes in fair
value related to equity securities are recorded in net income. We have the ability to liquidate these investments after giving
appropriate notice to the issuer.
Trade Accounts Receivable, Net - Trade accounts receivable are initially recorded at their net collectible amount and
are generally recorded at the time the revenue from the sales transaction is recorded. We evaluate the collectibility of our
receivables based on historical experience and current and forecasted economic conditions based on management's judgment.
Additionally, receivables are written off to bad debt when management makes a final determination of uncollectibility.
Allowance for credit losses was $12,078 and $11,644 at June 30, 2021 and 2020, respectively.
Non-Trade and Notes Receivable - The non-trade and notes receivable caption in the Consolidated Balance Sheet is
comprised of the following components:
June 30,
Notes receivable
Accounts receivable, other
Total
2021
144,441 $
181,874
326,315 $
2020
97,370
147,500
244,870
$
$
Plant, Equipment and Depreciation - Plant and equipment are recorded at cost and are depreciated principally using
the straight-line method for financial reporting purposes. Depreciation rates are based on estimated useful lives of the assets,
generally 40 years for buildings, 15 years for land improvements and building equipment, seven to 10 years for machinery and
equipment, and three to eight years for vehicles and office equipment. Improvements, which extend the useful life of property,
are capitalized, and maintenance and repairs are expensed. We review plant and equipment for impairment whenever events or
changes in circumstances indicate that their carrying value may not be recoverable. When plant and equipment are retired or
otherwise disposed of, the cost and accumulated depreciation are removed from the appropriate accounts and any gain or loss is
included in current income.
44
The plant and equipment caption in the Consolidated Balance Sheet is comprised of the following components:
June 30,
Land and land improvements
Buildings and building equipment
Machinery and equipment
Construction in progress
Total
2021
2020
$
342,950 $
345,746
1,848,141
3,653,566
195,563
1,773,041
3,515,842
176,052
$
6,040,220 $
5,810,681
Investments and Other Assets - Investments in joint-venture companies in which ownership is 50 percent or less and
in which the Company does not have operating control are stated at cost plus the Company's equity in undistributed earnings
and amounted to $292,217 and $317,975 at June 30, 2021 and 2020, respectively. A significant portion of the underlying net
assets of the joint ventures are related to goodwill. The Company's share of earnings from investments in joint-venture
companies were $41,048, $74,517 and $93,239 in 2021, 2020 and 2019, respectively.
Intangible Assets - Intangible assets primarily include patents and technology, trademarks and customer lists and
contracts and are recorded at cost and amortized on a straight-line method. Patents and technology are amortized over the
shorter of their remaining useful or legal life. Trademarks and customer contracts are amortized over the estimated time period
over which an economic benefit is expected to be received. Customer lists are amortized over a period based on anticipated
customer attrition rates. The Company reviews intangible assets for impairment whenever events or changes in circumstances
indicate that their carrying value may not be recoverable.
Goodwill - The Company conducts a formal impairment test of goodwill on an annual basis and between annual tests
if an event occurs or circumstances change that would, more likely than not, reduce the fair value of a reporting unit below its
carrying value.
Income Taxes - Income taxes are provided based upon income for financial reporting purposes. Tax credits and
similar tax incentives are applied to reduce the provision for income taxes in the year in which the credits arise. We recognize
accrued interest related to unrecognized tax benefits in income tax expense. Penalties, if incurred, are recognized in income tax
expense. Deferred income taxes arise from temporary differences in the recognition of income and expense for tax purposes.
Income tax effects resulting from adjusting temporary differences recorded in accumulated other comprehensive (loss) are
released when the circumstances on which they are based cease to exist.
Foreign Currency Translation - Assets and liabilities of foreign subsidiaries are translated at current exchange rates,
and income and expenses are translated using weighted-average exchange rates. The effects of these translation adjustments, as
well as gains and losses from certain intercompany transactions, are reported in accumulated other comprehensive (loss). Such
adjustments will affect net income only upon sale or liquidation of the underlying foreign investments. Exchange (gains) losses
from transactions in a currency other than the local currency of the entity involved are included within the cost of sales caption
in the Consolidated Statement of Income and were $(10,948), $(10,018) and $5,888, in 2021, 2020 and 2019, respectively.
Subsequent Events - We evaluated subsequent events that have occurred through the date of filing of this Annual
Report on Form 10-K for the year ended June 30, 2021. On August 2, 2021, the Company announced that it reached an
agreement on the terms of a recommended cash acquisition of the entire issued and to be issued ordinary share capital of
Meggitt plc ("Meggitt") for 800 pence per share (the "Acquisition"), or approximately £6,308 million. We intend to fund the
proposed Acquisition with cash and new debt. The proposed Acquisition remains subject to customary closing conditions,
including regulatory clearances and approval by Meggitt’s shareholders.
In connection with the proposed Acquisition, the Company entered into a bridge credit agreement (the "Bridge Credit
Agreement") on August 2, 2021. Under the Bridge Credit Agreement, lenders are committed to provide senior, unsecured
financing in the aggregate principal amount of £6,524 million. Any borrowings made under the Bridge Credit Agreement
would mature 364 days from the initial funding date. The commitments are intended to be drawn to finance the proposed
Acquisition only to the extent that we do not arrange for alternative financing prior to closing.
45
Recent Accounting Pronouncements - In June 2016, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Update ("ASU") 2016-13, "Measurement of Credit Losses on Financial Instruments." ASU 2016-13
requires a financial asset (or a group of financial assets) measured at amortized cost to be presented at the net amount expected
to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the
financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. Credit losses
relating to available-for-sale debt securities should be recorded through an allowance for credit losses. ASU 2016-13 is
effective for fiscal years, and interim periods within those years, beginning after December 15, 2019. We adopted ASU
2016-13 on July 1, 2020. The adoption of this guidance, using the modified retrospective method, did not result in a
cumulative-effect adjustment to retained earnings and did not have a material impact on the consolidated financial statements or
related disclosures.
2.
Revenue recognition
Revenue is derived primarily from the sale of products in a variety of mobile, industrial and aerospace markets. A majority of
the Company’s revenues are recognized at a point in time. However, a portion of the Company’s revenues are recognized over
time.
Disaggregation of revenue
Revenue from contracts with customers is disaggregated by technology platforms for the Diversified Industrial Segment, by
product platforms for the Aerospace Systems Segment and by geographic location for the total Company.
The Diversified Industrial Segment is an aggregation of several business units, which manufacture motion-control and fluid
power system components for builders and users of various types of manufacturing, packaging, processing, transportation,
agricultural, construction, and military vehicles and equipment. Contracts consist of individual purchase orders for standard
product, blanket purchase orders and production contracts. Blanket purchase orders are often associated with individual
purchase orders and have terms and conditions which are subject to a master supply or distributor agreement. Individual
production contracts, some of which may include multiple performance obligations, are typically for products manufactured to
the customer's specifications. Revenue in the Diversified Industrial Segment is typically recognized at the time of product
shipment, but a portion of revenue may be recognized over time for installation services or in situations where the product has
no alternative use and we have an enforceable right to payment.
Diversified Industrial Segment revenues by technology platform:
Motion Systems
Flow and Process Control
Filtration and Engineered Materials
Total
2021
3,081,366 $
4,108,080
4,770,713
2020
2,996,645
3,795,952
4,168,288
11,960,159 $
10,960,885
$
$
The Aerospace Systems Segment produces hydraulic, fuel, pneumatic and electro-mechanical systems and components, which
are utilized on virtually every domestic commercial, military and general aviation aircraft. Aerospace Systems Segment
products also perform a vital role in naval vessels and land-based weapon systems. Contracts generally consist of blanket
purchase orders and individual long-term production contracts. Blanket purchase orders, which have terms and conditions
subject to long-term supply agreements, are typically associated with individual purchase orders. Revenue in the Aerospace
Systems Segment is typically recognized at the time of product shipment, but a portion of revenue may be recognized over time
in situations where the customer controls the asset as it is produced or the product has no alternative use and we have an
enforceable right to payment.
46
Aerospace Systems Segment revenues by product platform:
Flight Control Actuation
Fuel and Inerting
Hydraulics
Engines
Fluid Conveyance
Other
Total
2021
$
698,877 $
509,687
308,835
575,804
196,348
97,930
2020
711,017
592,543
411,823
616,747
304,769
97,736
$
2,387,481 $
2,734,635
Total revenues by geographic region based on the Company's selling operation's location:
North America
Europe
Asia Pacific
Latin America
Total
2021
$
9,046,162 $
2,919,025
2,215,686
166,767
2020
9,166,773
2,596,125
1,790,032
142,590
$
14,347,640 $
13,695,520
The majority of revenues from the Aerospace Systems Segment is generated from sales to customers within North America.
Contract balances
Contract assets and contract liabilities are reported on a contract-by-contract basis. Contract assets reflect revenue recognized
and performance obligations satisfied in advance of customer billing. Contract liabilities relate to payments received in
advance of the satisfaction of performance under the contract. Payments from customers are received based on the terms
established in the contract with the customer.
Total contract assets and contract liabilities are as follows:
Contract assets, current (included within Prepaid expenses and other)
$
34,190 $
2021
Contract assets, noncurrent (included within Investments and other assets)
Total contract assets
Contract liabilities, current (included within Other accrued liabilities)
Contract liabilities, noncurrent (included within Other liabilities)
Total contract liabilities
Net contract liabilities
1,884
36,074
(51,211)
(3,080)
(54,291)
$
(18,217) $
2020
30,827
1,497
32,324
(51,278)
(3,232)
(54,510)
(22,186)
At June 30, 2021, the change in net contract liabilities was primarily due to timing differences between when revenue was
recognized and the receipt of advance payments. During 2021, approximately $33 million of revenue was recognized that was
included in the contract liabilities at June 30, 2020.
Remaining performance obligations
Our backlog represents written firm orders from a customer to deliver products and, in the case of blanket purchase orders, only
includes the portion of the order for which a schedule or release has been agreed to with the customer. We believe our backlog
represents our unsatisfied or partially unsatisfied performance obligations. Backlog at June 30, 2021 was $6,503 million, of
which approximately 84 percent is expected to be recognized as revenue within the next 12 months and the balance thereafter.
3.
Acquisitions
Acquisitions - On October 29, 2019, we completed the acquisition of a 100 percent equity interest in LORD Corporation
("Lord") for approximately $3,455 million in cash, including the assumption of debt. On September 16, 2019, we completed
the acquisition of a 100 percent equity interest in EMFCO Holdings Incorporated, parent company of Exotic Metals Forming
Company LLC ("Exotic") for approximately $1,706 million in cash.
47
Lord is a diversified technology and manufacturing company developing highly reliable adhesives and coatings, as well as
vibration and motion control technologies, that significantly reduce risk and improve product performance. Lord’s products are
used in mission-critical applications in the aerospace, automotive and industrial markets. Lord had annual sales of
approximately $1,025 million for its fiscal 2018. For segment reporting purposes, approximately 95 percent of Lord's sales are
included in the Diversified Industrial Segment, while the remaining five percent are included in the Aerospace Systems
Segment. Lord’s unique and proprietary products, solutions and technologies for mission-critical applications are expected to
increase the Company's overall engineered materials product and solutions offerings to enable a stronger value proposition for
customers.
Exotic designs and manufactures innovative and technically demanding, high temperature, high pressure air and exhaust
management solutions for aircraft and engines. Exotic had annual sales of approximately $409 million for its fiscal 2019.
For segment reporting purposes, Exotic is included in the Aerospace Systems Segment. We believe Exotic's products and
proprietary manufacturing capabilities are complementary to our portfolio of flight control, fuel and inerting, hydraulics, fluid
conveyance and engine components.
Assets acquired and liabilities assumed are recognized at their respective fair values as of the acquisition date. The process of
estimating the fair values of certain tangible assets, identifiable intangible assets and assumed liabilities requires the use of
judgment in determining the appropriate assumptions and estimates. The following presents the estimated fair values of Lord's
and Exotic's assets acquired and liabilities assumed on the respective acquisition dates. These estimates are based on available
information and are revised during the measurement period, not to exceed 12 months from the acquisition date, as third-party
valuations are finalized, additional information becomes available and as additional analysis is performed. All measurement
period adjustments were completed within a year from the acquisition date, and such adjustments did not have a material impact
on the Company's results of operations and financial position.
The final purchase price allocations for acquisitions in 2020 is as follows:
Assets:
Cash and cash equivalents
Accounts receivable
Inventories
Prepaid expenses
Property, plant and equipment
Deferred income taxes
Other assets
Intangible assets
Goodwill
Total assets acquired
Liabilities:
Notes payable and long-term debt payable within one year
Accounts payable, trade
Accrued payrolls and other compensation
Accrued domestic and foreign taxes
Other accrued liabilities
Long-term debt
Pensions and other postretirement benefits
Deferred income taxes
Other liabilities
Noncontrolling interests
Total liabilities and noncontrolling interests assumed
Net assets acquired
Lord
Exotic
October 29, 2019
September 16, 2019
$
74,013 $
153,765
248,600
24,230
409,163
—
41,335
1,446,660
1,970,603
4,368,369
156
56,186
57,571
2,898
88,394
221,161
115,017
304,445
55,832
11,266
912,926
8,179
81,336
114,661
1,343
178,393
2,057
1,226
874,470
503,725
1,765,390
—
23,176
8,863
2,123
25,662
—
—
—
—
—
59,824
$
3,455,443 $
1,705,566
48
Goodwill is calculated as the excess of the purchase price over the net assets acquired. With respect to the Lord and Exotic
acquisitions, goodwill represents cost synergies and enhancements to our existing technologies. For tax purposes, Lord's
goodwill is not deductible, and Exotic's goodwill is deductible. Based upon an acquisition valuation, intangibles acquired as
part of the Exotic acquisition include $502,470 of customer-related intangible assets, $281,400 of patents and technology and
$90,600 of trademarks, with weighted average estimated useful lives of 18, 20 and 20 years, respectively. Similarly, the Lord
acquisition includes $869,190 of customer-related intangible assets, $458,030 of patents and technology and $119,440 of
trademarks, with weighted average estimated useful lives of 13, 21 and 20 years, respectively. These intangible assets were
valued using the income approach, which includes significant assumptions around future revenue growth and discount rates.
Such assumptions are classified as level 3 inputs within the fair value hierarchy.
Our consolidated financial statements for 2020 include the results of operations of Lord and Exotic from their respective
acquisition dates through June 30, 2020. Net sales and segment operating income attributable to these acquisitions during this
period and included in our consolidated financial statements totaled $949,066 and $22,330, respectively.
Acquisition-related transaction and integration costs totaled $119,214 in 2020. These costs are included in selling, general, and
administrative expenses in the Consolidated Statement of Income.
4.
Business Realignment and Acquisition Integration Charges
The Company incurred business realignment and acquisition integration charges in 2021, 2020 and 2019. During 2021,
business realignment charges primarily consisted of actions taken to address the impact of COVID-19 on our business. Such
charges were also incurred in 2020, especially within the Aerospace Systems Segment. In 2021, 2020, and 2019 business
realignment charges included severance costs related to actions taken under the Company's simplification initiative aimed at
reducing organizational and process complexity as well as plant closures. The 2019 acquisition integration charges relate to the
2017 acquisition of CLARCOR, Inc. ("Clarcor") and primarily consist of severance costs and expenses related to plant closures
and relocations. A majority of the business realignment charges were incurred in North America and 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 and acquisition integration charges presented in the Business Segment Information are as follows:
Diversified Industrial
Aerospace Systems
Corporate administration
Other expense
2021
2020
2019
$
38,557 $
52,288 $
27,830
6,680
1,399
1,226
22,101
1,175
50
Workforce reductions in connection with such business realignment and acquisition integration charges in the Business
Segment Information are as follows:
Diversified Industrial
Aerospace Systems
Corporate administration
2021
820
327
20
2020
2,394
1,254
31
The business realignment and acquisition integration charges are presented in the Consolidated Statement of Income as follows:
Cost of sales
Selling, general and administrative expenses
(Gain) loss on disposal of assets
2021
2020
$
33,746 $
58,791 $
12,890
1,226
16,773
50
2019
14,650
13,180
305
As of June 30, 2021, approximately $56 million in severance payments were made relating to business realignment charges.
Remaining payments related to current-year and prior-year business realignment actions of approximately $15 million, a
majority of which are expected to be paid by June 30, 2022, are primarily reflected within the other accrued liabilities caption in
49
—
—
305
2019
598
—
—
the Consolidated Balance Sheet. Additional charges may be recognized in future periods related to the business realignment
and acquisition integration actions described above, the timing and amount of which are not known at this time.
We also incurred the following acquisition integration charges related to the Lord and Exotic acquisitions:
Diversified Industrial
Aerospace Systems
$
2021
11,222 $
719
2020
20,669
1,908
These charges are primarily included in selling, general and administrative expenses within the Consolidated Statement of
Income.
5.
Income Taxes
Certain amounts below have been adjusted to reflect the retrospective application of our change in inventory accounting method
as described in Notes 1 and 7.
Income before income taxes was derived from the following sources:
United States
Foreign
Income taxes include the following:
Federal
Current
Deferred
Foreign
Current
Deferred
State and local
Current
Deferred
$
$
$
$
A reconciliation of the effective income tax rate to the statutory federal rate follows:
Statutory federal income tax rate
State and local income taxes
Tax related to international activities
Transition tax related to the TCJ Act
Remeasurement of deferred tax assets and liabilities related to the TCJ Act
Cash surrender value of life insurance
Federal manufacturing deduction
Foreign derived intangible income deduction
Research tax credit
Share-based compensation
Other
Effective income tax rate
50
2021
1,273,037 $
973,920
2,246,957 $
2020
828,160 $
678,694
1,506,854 $
2019
1,140,983
808,492
1,949,475
2021
2020
2019
247,094 $
(52,960)
105,796 $
24,905
160,858
18,133
269,607
8,851
167,680
(14,247)
206,167
3,202
34,895
(7,391)
500,096 $
18,756
1,632
304,522 $
20,932
15,100
424,392
2021
21.0 %
1.0
3.6
—
—
(0.6)
—
(1.0)
(0.4)
(1.6)
0.3
22.3 %
2020
21.0 %
1.4
1.8
(0.7)
—
(0.3)
—
(1.5)
(0.6)
(1.5)
0.6
20.2 %
2019
21.0 %
1.7
2.9
0.8
(0.9)
(0.1)
0.1
(1.0)
(0.5)
(1.7)
(0.5)
21.8 %
We made the accounting policy election to treat taxes related to Global Intangible Low-Taxed Income ("GILTI") as a current
period expense when incurred. The tax rate impact of GILTI is included with tax related to international activities in the table
above.
On March 27, 2020, the President of the United States signed into law the Coronavirus Aid, Relief, and Economic Security
("CARES") Act, a significant tax-and-spending package intended to provide economic stimulus to address the impact of the
COVID-19 pandemic. The CARES Act did not result in a material impact on our effective tax rate.
On December 27, 2020, the Consolidated Appropriations Act, 2021, was signed into law. In addition to providing funding for
the government, this law provides further COVID-19 economic relief, and extends certain expiring tax provisions. This act did
not result in a material impact on our effective tax rate.
Deferred income taxes are provided for the temporary differences between the financial reporting basis and the tax basis of
assets and liabilities. The differences comprising the net deferred taxes shown on the Consolidated Balance Sheet at June 30
were as follows:
Retirement benefits
Other liabilities and reserves
Long-term contracts
Stock-based compensation
Loss carryforwards
Unrealized currency exchange gains and losses
Inventory
Tax credit carryforwards
Undistributed foreign earnings
Depreciation and amortization
Valuation allowance
Net deferred tax (liability)
Change in net deferred tax (liability):
Provision for deferred tax
Items of other comprehensive (loss) income
Acquisitions and other
Total change in net deferred tax
2021
$
322,931 $
136,710
5,562
30,165
861,013
18,841
(11,753)
19,709
(21,722)
2020
504,747
139,872
7,392
35,483
754,655
39,256
(31,081)
33,176
(15,196)
(945,422)
(988,886)
(865,764)
(771,430)
$
(449,730) $
(292,012)
$
51,500 $
(12,290)
(209,509)
102,297
291
(301,690)
$
(157,718) $
(211,683)
As of June 30, 2021, we recorded deferred tax assets of $861,013 resulting from $3,473 million in loss carryforwards. A
valuation allowance of $841,789 related to the loss carryforwards has been established due to the uncertainty of their
realization. Of this valuation allowance, $816,388 relates to non-operating entities whose loss carryforward utilization is
considered to be remote. Some of the loss carryforwards can be carried forward indefinitely; others can be carried forward
from three years to 20 years. In addition, a valuation allowance of $23,975 related to other future deductible items has been
established due to the uncertainty of their realization.
Although future distributions of foreign earnings to the United States should not be subject to U.S. federal income taxes, other
U.S. or foreign taxes may be imposed on such earnings. We have analyzed existing factors and determined we will no longer
permanently reinvest certain foreign earnings. On these undistributed foreign earnings of approximately $712 million that are
no longer permanently reinvested outside of the United States, we have recorded a deferred tax liability of $16 million. The
remaining undistributed foreign earnings of approximately $1,609 million remain permanently reinvested outside the United
States at June 30, 2021. Of these undistributed earnings, we have recorded a deferred tax liability of $6 million where certain
foreign holding companies are not permanently reinvested in their subsidiaries. It is not practicable to estimate the additional
taxes, including applicable foreign withholding taxes, that might be payable on the potential distribution of such permanently
reinvested foreign earnings.
51
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
Balance July 1
Additions for tax positions related to current year
Additions for tax positions of prior years
Additions for acquisitions
Reductions for tax positions of prior years
Reductions for settlements
Reductions for expiration of statute of limitations
Effect of foreign currency translation
Balance June 30
2021
2020
2019
$
86,277 $
140,662 $
153,091
10,145
10,320
2,376
(1,996)
(7,165)
(2,252)
3,054
4,955
798
43,532
(41,726)
(53,520)
(3,820)
(4,604)
2,272
45
—
(927)
(832)
(9,388)
(3,599)
$
100,759 $
86,277 $
140,662
The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was $100,759, $86,277 and
$140,662 as of June 30, 2021, 2020 and 2019, respectively. The accrued interest related to the gross unrecognized tax benefits,
excluded from the amounts above, was $17,862, $14,247 and $25,214 as of June 30, 2021, 2020 and 2019, 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 $40,000 as a result of the revaluation of existing uncertain tax positions arising from developments in the
examination process or the closure of tax statutes. Any increase in the amount of unrecognized tax benefits within the next 12
months is expected to be insignificant.
We file income tax returns in the United States and in various foreign jurisdictions. In the normal course of business, we are
subject to examination by taxing authorities throughout the world. We are open to assessment of our U.S. federal income tax
returns by the Internal Revenue Service for years after 2013, and our state and local income tax returns for years after 2013.
We are open to assessment for significant foreign jurisdictions for years after 2011.
6.
Earnings Per Share
Basic earnings per share are computed using the weighted-average number of common shares outstanding during the year.
Diluted earnings per share are computed using the weighted-average number of common shares and common share equivalents
outstanding during the year. Common share equivalents represent the dilutive effect of outstanding equity-based awards. The
reconciliation of the numerator and denominator of basic and diluted earnings per share was as follows:
2021
2020*
2019*
Numerator:
Net income attributable to common shareholders
$
1,746,100 $
1,201,970 $
1,524,516
Denominator:
Basic - weighted-average common shares
Increase in weighted-average common shares from dilutive effect of
equity-based awards
Diluted - weighted-average common shares, assuming exercise of
equity-based awards
Basic earnings per share
Diluted earnings per share
128,999,879
128,418,495
129,997,640
1,834,599
1,386,539
1,783,977
130,834,478
129,805,034
131,781,617
$
$
13.54 $
13.35 $
9.36 $
9.26 $
11.73
11.57
*Years ended June 30, 2020 and 2019 amounts have been adjusted to reflect the change in inventory accounting method, as described in
Notes 1 and 7 to the Consolidated Financial Statements.
For 2021, 2020 and 2019, 0.4 million, 0.6 million and 0.9 million common shares, respectively, subject to equity-based awards
were excluded from the computation of diluted earnings per share because the effect of their exercise would be anti-dilutive.
52
7.
Inventories
Inventories are stated at the lower of cost or net realizable value. During the fourth quarter of 2021, the Company voluntarily
changed its method of accounting for certain domestic inventory previously valued by the LIFO method to the FIFO method.
The cumulative effect of this change on periods presented prior to 2019 resulted in an increase in Retained earnings of
$105,460 at July 1, 2018. The FIFO method of accounting for inventory is preferable because it conforms the Company's entire
inventory to a single method of accounting, it aligns the inventory cost flow assumption with the physical flow of goods, and
improves comparability within the industry.
The inventories caption in the Consolidated Balance Sheet is comprised of the following components:
June 30,
Finished products
Work in process
Raw materials
Total
2021
733,744 $
1,089,976
266,922
2020*
703,630
988,564
272,001
2,090,642 $
1,964,195
$
$
*Year ended June 30, 2020 amounts have been revised to reflect the change in inventory accounting method, as described above and in Note
1 to the consolidated financial statements.
As a result of the retrospective application of this change in accounting method, the following financial statement line items
within the accompanying financial statements were adjusted, as follows:
As
Computed
Under
LIFO
Dollars in thousands,
except per share amounts
Consolidated Statements of Income
2021
As
Reported
Under
FIFO
2020
2019
Effect of
Change
As
Reported
Adjusted
Effect
of
Change
As
Reported
Adjusted
Effect of
Change
Cost of sales
Income before income
taxes
$ 10,464,495 $ 10,449,680 $ (14,815) $ 10,286,518 $ 10,292,291 $ 5,773 $ 10,703,484 $ 10,688,970 $ (14,514)
2,232,142
2,246,957
14,815
1,512,627
1,506,854
(5,773) 1,933,425
1,949,475
16,050
Income tax expense
499,269
500,096
827
305,924
304,522
(1,402)
420,494
424,392
3,898
Net income
Net income
attributable to
common shareholders
1,732,873
1,746,861
13,988
1,206,703
1,202,332
(4,371) 1,512,931
1,525,083
12,152
1,732,112
1,746,100
13,988
1,206,341
1,201,970
(4,371) 1,512,364
1,524,516
12,152
Earnings per share attributable to common
shareholders:
Basic
Diluted
$
$
13.43 $
13.54 $ 0.11 $
13.24 $
13.35 $ 0.11 $
9.39 $
9.29 $
9.36 $ (0.03) $
11.63 $
11.73 $
0.10
9.26 $ (0.03) $
11.48 $
11.57 $
0.09
Consolidated Statements of Comprehensive
Income
Net income
Net income
attributable to
common shareholders
Total comprehensive
income attributable to
common shareholders
$ 1,732,873 $ 1,746,861 $ 13,988 $ 1,206,703 $ 1,202,332 $ (4,371) $ 1,512,931 $ 1,525,083 $ 12,152
1,732,112
1,746,100
13,988
1,206,341
1,201,970
(4,371) 1,512,364
1,524,516
12,152
2,724,260
2,738,248
13,988
706,514
702,143
(4,371) 1,218,136
1,230,288
12,152
53
2021
As
Reported
Under
FIFO
As
Computed
Under
LIFO
Dollars in thousands, except
per share amounts
Consolidated Balance Sheets
2020
2019
Effect of
Change
As
Reported
Adjusted
Effect
of
Change
As
Reported
Adjusted
Effect
of
Change
Inventories
Deferred income taxes
- noncurrent liability
Retained earnings
$ 1,926,263 $ 2,090,642 $ 164,379 $ 1,814,631 $ 1,964,195 $ 149,564
516,831
553,981
37,150
382,528
418,851
36,323
14,788,268
14,915,497
127,229
13,530,666
13,643,907
113,241
Consolidated Statements of Cash
Flows
Net income
Deferred income taxes
Inventories
$ 1,732,873 $ 1,746,861 $ 13,988 $ 1,206,703 $ 1,202,332 $ (4,371) $ 1,512,931 $1,525,083 $ 12,152
(52,327)
(51,500)
827
13,692
12,290
(1,402)
32,537
36,435 3,898
(70,782)
(85,597) (14,815) 201,164
206,937
5,773
(51,817)
(67,867) (16,050)
The effect of change in inventory in 2020 represents the excess of gross FIFO inventories over the cost of such inventories
valued on a LIFO basis of $219,854 less the related excess and obsolete reserve of $70,290.
As a result of the retrospective application of this change in accounting principle, the following financial statement line items
within the unaudited interim 2021 and 2020 quarterly condensed consolidated financial statements were adjusted, as follows:
(Unaudited)
September 30, 2020
Three Months Ended
December 31, 2020
March 31, 2021
Dollars in thousands, except
per share amounts
As
Reported
Adjusted
Consolidated Statements of Income
Effect
of
Change
As
Reported
Adjusted
Effect
of
Change
As
Reported
Adjusted
Effect
of
Change
Cost of sales
$ 2,384,328 $ 2,386,449 $ 2,121 $ 2,519,545 $ 2,518,165 $ (1,380) $ 2,714,773 $ 2,712,785 $ (1,988)
Income before income
taxes
415,295
413,174
(2,121)
576,512
577,892
1,380
597,352
599,340
1,988
Income tax expense
93,578
93,063
(515)
129,015
129,350
335
125,619
126,101
482
Net income
Net income attributable
to common shareholders 321,409
321,717
320,111
(1,606)
447,497
448,542
1,045
471,733
473,239
1,506
319,803
(1,606)
447,306
448,351
1,045
471,647
473,153
1,506
Earnings per share attributable to common
shareholders:
Basic
Diluted
$
$
2.50 $
2.48 $ (0.02) $
3.47 $
3.48 $ 0.01 $
3.65 $
3.67 $ 0.02
2.47 $
2.45 $ (0.02) $
3.41 $
3.42 $ 0.01 $
3.59 $
3.60 $ 0.01
54
(Unaudited)
September 30, 2019
Three Months Ended
December 31, 2019
March 31, 2020
As
Dollars in thousands, except
Reported
per share amounts
Consolidated Statements of Income
Effect
of
Change
Adjusted
As
Reported
Adjusted
Effect
of
Change
As
Reported
Adjusted
Effect
of
Change
Cost of sales
Income before income
taxes
$ 2,479,741 $ 2,480,992 $ 1,251 $ 2,682,765
$2,686,131
$ 3,366 $2,766,693
$2,759,637 $ (7,056)
433,156
431,905 (1,251)
254,746
251,380
(3,366)
454,157
461,213 7,056
Income tax expense
94,115
93,811
(304)
50,148
49,331
(817)
86,788
88,501 1,713
Net income
Net income attributable
to common shareholders 338,898
339,041
Earnings per share attributable to
common shareholders:
338,094
(947)
204,598
202,049
(2,549)
367,369
372,712 5,343
337,951
(947)
204,474
201,925
(2,549)
367,253
372,596 5,343
Basic
Diluted
$
$
2.64 $
2.63 $ (0.01) $
1.59 $
1.57 $ (0.02) $
2.86 $
2.90 $ 0.04
2.60 $
2.60 $ — $
1.57 $
1.55 $ (0.02) $
2.83 $
2.87 $ 0.04
8.
Goodwill and Intangible Assets
The changes in the carrying amount of goodwill are as follows:
Balance June 30, 2019
Acquisitions
Foreign currency translation and other
Balance June 30, 2020
Acquisitions
Foreign currency translation and other
Balance June 30, 2021
Diversified
Industrial
Segment
Aerospace
Systems Segment
Total
$
5,355,165 $
98,640 $
5,453,805
1,966,865
503,725
2,470,590
(54,457)
(3)
(54,460)
$
7,267,573 $
602,362 $
7,869,935
3,738
185,998
—
16
3,738
186,014
$
7,457,309 $
602,378 $
8,059,687
Acquisitions represent the goodwill allocation during the measurement period subsequent to the applicable acquisition dates.
Refer to Note 3 for further discussion.
We test goodwill for impairment at the reporting unit level on an annual basis and between annual tests whenever events or
circumstances indicate that the carrying value of a reporting unit may exceed its fair value. Our annual impairment tests
performed in 2021, 2020 and 2019 resulted in no impairment loss being recognized. We did not identify any events or
circumstances during 2021 that required performance of an interim impairment test.
Intangible assets are amortized on a straight-line method over their legal or estimated useful lives. The gross carrying value and
accumulated amortization for each major category of intangible asset at June 30 are as follows:
Patents and technology
Trademarks
Customer lists and other
Total
2021
2020
Gross Carrying
Amount
Accumulated
Amortization
Gross Carrying
Amount
Accumulated
Amortization
$
999,952 $
216,314 $
991,596 $
762,130
331,905
748,326
162,528
285,197
3,869,772
1,563,838
3,791,505
1,284,789
$
5,631,854 $
2,112,057 $
5,531,427 $
1,732,514
55
Total intangible asset amortization expense in 2021, 2020 and 2019 was $325,447, $284,632 and $205,164, respectively.
Estimated intangible asset amortization expense for the five years ending June 30, 2022 through 2026 is $319,900, $304,906,
$297,945, $287,617 and $282,431, respectively.
Intangible assets are evaluated for impairment whenever events or circumstances indicate that the undiscounted net cash flows
to be generated by their use over their expected useful lives and eventual disposition may be less than their net carrying value.
No material intangible asset impairments occurred in 2021, 2020 or 2019.
9.
Financing Arrangements
The Company has a line of credit totaling $2,500 million through a multi-currency revolving credit agreement with a group of
banks, of which $2,500 million was available as of June 30, 2021. The credit agreement expires in September 2024; however,
the Company has the right to request a one-year extension of the expiration date on an annual basis, which request may result in
changes to the current terms and conditions of the credit agreement. Advances from the credit agreement can be used for
general corporate purposes, including acquisitions, and for the refinancing of existing indebtedness. The credit agreement
requires the payment of an annual facility fee, the amount of which may increase in the event our credit ratings are lowered.
Although a lowering of our credit ratings would likely increase the cost of future debt, it would not limit our ability to use the
credit agreement nor would it accelerate the repayment of any outstanding borrowings.
The Company is currently authorized to sell up to $2,500 million of short-term commercial paper notes. There were no
commercial paper notes outstanding at June 30, 2021 and $723,500 outstanding at June 30, 2020. The Company had no
outstanding borrowings from foreign banks at June 30, 2021 and 2020. The weighted-average interest rate on notes payable
during 2021 and 2020 was 0.2 percent and 2.2 percent, respectively.
In the ordinary course of business, some of our locations may enter into financial guarantees through financial institutions
which enable customers to be reimbursed in the event of nonperformance by the Company.
The Company's credit agreements and indentures governing certain debt agreements contain various covenants, the violation of
which would limit or preclude the use of the applicable agreements for future borrowings, or might accelerate the maturity of
the related outstanding borrowings covered by the applicable agreements. Based on our rating level at June 30, 2021, the most
restrictive financial covenant provides that the ratio of debt to debt-shareholders' equity cannot exceed 0.65 to 1.0. As of
June 30, 2021, our debt to debt-shareholders' equity ratio was 0.44 to 1.0. We are in compliance with all covenants.
10.
Debt
June 30,
Domestic:
Fixed rate medium-term notes, 3.30% to 6.25%, due 2023 - 2045
Senior Notes, 2.70% to 4.10%, due 2024 - 2049
Term loans, Libor plus 112.5 bps, due 2023 - 2024
Foreign:
Euro Senior Notes, 1.125%, due 2025
Other long-term debt
Deferred debt issuance costs
Total long-term debt
Less: Long-term debt payable within one year
Long-term debt, net
2021
2020
$
2,125,000 $
2,125,000
3,675,000
—
3,675,000
1,210,313
830,060
15,968
786,520
12,708
(61,156)
(71,256)
6,584,872
7,738,285
2,819
86,029
$
6,582,053 $
7,652,256
During 2021, we repaid the remaining $890 million and $320 million balances related to the $925 million and $800 million
term loans, respectively.
Principal amounts of long-term debt payable in the five years ending June 30, 2022 through 2026 are $2,819, $302,396,
$576,224, $1,330,535 and $439, respectively. The principal amounts of long-term debt payable exclude the amortization of
debt issuance costs.
56
11.
Leases
We primarily enter into lease agreements for office space, distribution centers, certain manufacturing facilities and equipment.
The majority of our leases are operating leases. Finance leases are immaterial to our financial statements. In addition, leases
with an initial term of 12 months or less are not recorded on the Consolidated Balance Sheet. Certain leases contain options
that provide us with the ability to extend the lease term. Such options are included in the lease term when it is reasonably
certain that the option will be exercised. When accounting for leases, we combine payments for leased assets, related services
and other components of a lease. Payments within certain lease agreements are adjusted periodically for changes in an index or
rate.
The discount rate implicit within our leases is generally not determinable and therefore we determine the discount rate based on
our incremental borrowing rate. The incremental borrowing rate for our leases is determined based on lease term and the
currency in which lease payments are made.
The components of lease expense are as follows:
Operating lease expense
Short-term lease cost
Variable lease cost
Total lease cost
2021
2020
$
48,171 $
50,267
7,674
5,835
8,566
5,108
$
61,680 $
63,941
Supplemental cash flow information related to operating leases are as follows:
Cash paid for amounts included in the measurement of operating lease liabilities
$
47,080 $
2021
Right-of-use assets obtained in exchange for operating lease obligations
Supplemental balance sheet information related to operating leases is as follows:
41,637
2021
Operating lease right-of-use assets (included within Investments and other assets)
$ 131,880
2020
48,562
41,069
Current operating lease liabilities (included within Other accrued liabilities)
Long-term operating lease liabilities (included within Other liabilities)
Total operating lease liabilities
Weighted average remaining lease term
Weighted average discount rate
Maturities of lease liabilities at June 30, 2021 are as follows:
2022
2023
2024
2025
2026
Thereafter
Total operating lease payments
Less imputed interest
Total operating lease liabilities
Rental expense in 2019 was $126,752.
57
2020
138,601
43,327
96,446
139,773
$
$
$
$
40,193
93,904
$ 134,097
5.5 years
5.2 years
1.8 %
2.1 %
Operating Leases
$
$
$
42,101
29,349
19,633
15,068
10,700
24,715
141,566
7,469
134,097
12.
Retirement Benefits
Pensions - The Company has noncontributory defined benefit pension plans covering eligible employees, including certain
employees in foreign countries. Plans for most salaried employees provide pay-related benefits based on years of service.
Plans for hourly employees generally provide benefits based on flat-dollar amounts and years of service. We also have
arrangements for certain key employees, which provide for supplemental retirement benefits. In general, the Company's policy
is to fund these plans based on legal requirements, tax considerations, local practices and investment opportunities. We also
sponsor defined contribution plans and participate in government-sponsored programs in certain foreign countries.
A summary of the Company's defined benefit pension plans follows:
Benefit cost
Service cost
Interest cost
Expected return on plan assets
Amortization of prior service cost
Amortization of unrecognized actuarial loss
Amortization of transition obligation
Net periodic benefit cost
2021
2020
2019
$
84,188 $
82,743 $
102,475
142,479
76,647
160,542
(267,579)
(266,674)
(251,072)
5,325
207,897
18
5,633
165,815
18
6,655
121,823
18
$
132,324 $
130,014 $
114,613
Components of net pension benefit cost, other than service cost, are included in other (income), net in the Consolidated
Statement of Income.
58
Change in benefit obligation
Benefit obligation at beginning of year
Service cost
Interest cost
Acquisition
Plan amendments
Actuarial (gain) loss
Benefits paid
Foreign currency translation and other
Benefit obligation at end of year
Change in plan assets
Fair value of plan assets at beginning of year
Actual gain on plan assets
Acquisition
Employer contributions
Benefits paid
Foreign currency translation and other
Fair value of plan assets at end of year
Funded status
Amounts recognized on the Consolidated Balance Sheet
Other accrued liabilities
Pensions and other postretirement benefits
Net amount recognized
Amounts recognized in Accumulated Other Comprehensive (Loss)
Net actuarial loss
Prior service cost
Transition obligation
Net amount recognized
2021
2020
$
6,405,623 $
5,487,574
84,188
102,475
—
2,311
82,743
142,479
380,237
3,286
(91,719)
569,306
(264,062)
(232,048)
84,187
(27,954)
$
6,323,003 $
6,405,623
$
4,594,106 $
4,244,969
831,762
—
76,936
253,684
280,103
72,753
(264,062)
(232,048)
66,835
(25,355)
5,305,577 $
4,594,106
(1,017,426) $
(1,811,517)
(4,944) $
(1,423)
(1,012,482)
(1,810,094)
$
$
$
$
(1,017,426) $
(1,811,517)
$
1,090,343 $
1,921,389
15,006
8
17,184
26
$
1,105,357 $
1,938,599
The presentation of the amounts recognized on the Consolidated Balance Sheet and in accumulated other comprehensive (loss)
is on a debit (credit) basis and excludes the effect of income taxes.
At June 30, 2021, the benefit obligation decreased primarily due to slightly higher discount rates, partially offset by updated
census data and assumptions.
The benefit obligation increased in 2020 upon acquisition of the Lord pension plans. Significant reductions in the discount
rates also contributed to the increase in the benefit obligation, which was partially offset by a reduced salary scale and updated
mortality assumptions for the domestic qualified defined benefit plan.
Investment gains are the primary contributing factor for the increase in plan assets' fair value during 2021. The increase in the
plan assets' fair value in 2020 is attributable to the acquisition of the Lord pension plans and investment gains.
59
The accumulated benefit obligation for all defined benefit plans was $6,069 million and $6,102 million at June 30, 2021 and
2020, respectively.
Information for pension plans with accumulated benefit obligations in excess of plan assets:
Accumulated benefit obligation
Fair value of plan assets
Information for pension plans with projected benefit obligations in excess of plan assets:
Projected benefit obligation
Fair value of plan assets
2021
2020
$ 5,358,817 $ 6,028,952
4,546,301
4,503,316
2021
2020
$ 5,620,693 $ 6,348,500
4,568,113
4,523,545
We expect to make cash contributions of approximately $102 million to our defined benefit pension plans in 2022, the majority
of which relates to our non-U.S. plans. Estimated future benefit payments in the five years ending June 30, 2022 through 2026
are $303,856, $283,530, $327,149, $302,877 and $305,135, respectively, and $1,644,821 in the aggregate for the five years
ending June 30, 2027 through June 30, 2031.
The assumptions used to measure net periodic benefit cost for the Company's significant defined benefit plans are:
U.S. defined benefit plan
Discount rate
Average increase in compensation
Expected return on plan assets
Non-U.S. defined benefit plans
Discount rate
Average increase in compensation
Expected return on plan assets
2021
2020
2019
2.36 %
2.98 %
6.75 %
3.28 %
3.60 %
7.00 %
4.01 %
3.65 %
7.00 %
0.2 to 3.03%
0.2 to 2.96%
0.3 to 3.37%
1.75 to 4.50% 1.75 to 3.90% 1.75 to 5.50%
1.0 to 5.40%
1.0 to 5.75%
1.0 to 5.75%
The assumptions used to measure the benefit obligation for the Company's significant defined benefit plans are:
U.S. defined benefit plan
Discount rate
Average increase in compensation
Non-U.S. defined benefit plans
Discount rate
Average increase in compensation
2021
2020
2.55 %
3.05 %
2.36 %
2.98 %
0.25 to 2.95%
0.2 to 3.03%
1.75 to 4.50%
1.75 to 4.50%
The discount rate assumption is based on current rates of high-quality, long-term corporate bonds over the same estimated time
period that benefit payments will be required to be made. The expected return on plan assets assumption is based on the
weighted-average expected return of the various asset classes in the plans' portfolio. The asset class return is developed using
historical asset return performance as well as current market conditions such as inflation, interest rates and equity market
performance.
60
The weighted-average allocation of the majority of the assets related to defined benefit plans is as follows:
Equity securities
Debt securities
Other investments
2021
38 %
41 %
21 %
100 %
2020
41 %
49 %
10 %
100 %
The weighted-average target asset allocation as of June 30, 2021 is 40 percent equity securities, 43 percent debt securities and
17 percent other investments. The investment strategy for the Company's worldwide defined benefit pension plan assets
focuses on achieving prudent actuarial funding ratios while maintaining acceptable levels of risk in order to provide adequate
liquidity to meet immediate and future benefit requirements. This strategy requires investment portfolios that are broadly
diversified across various asset classes and external investment managers. Assets held in the U.S. defined benefit plan account
for approximately 75 percent of our total defined benefit plan assets. The overall investment strategy with respect to our U.S.
defined benefit plan is to use a funding strategy more heavily weighted toward liability-hedging assets as the funded status
improves. Over time, we will continue to add long duration fixed income investments to the portfolio. These securities are
highly correlated with our pension liabilities and will be managed in a liability framework.
The fair values of pension plan assets at June 30, 2021 and at June 30, 2020, by asset class, are as follows:
Cash and cash equivalents
Equity securities
U.S. based companies
Non-U.S. based companies
Fixed income securities
Corporate debt securities
Government issued securities
Mutual funds
Equity funds
Fixed income funds
Mutual funds measured at net asset value
Common/Collective trusts measured at net asset value
Limited Partnerships measured at net asset value
Miscellaneous
Total at June 30, 2021
Quoted Prices In
Active Markets
(Level 1)
Significant Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
June 30, 2021
$
248,525 $
241,421 $
7,104 $
408,301
12,834
531,497
151,458
6,768
6,506
368,340
3,161,683
126,606
283,059
408,301
12,834
1,440
105,167
6,768
6,506
—
—
530,057
46,291
—
—
—
283,059
$
5,305,577 $
782,437 $
866,511 $
—
—
—
—
—
—
—
—
—
61
Quoted Prices In
Active Markets
(Level 1)
Significant Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
June 30, 2020
Cash and cash equivalents
Equity securities
U.S. based companies
Non-U.S. based companies
Fixed income securities
Corporate debt securities
Government issued securities
Mutual funds
Equity funds
Fixed income funds
Mutual funds measured at net asset value
Common/Collective trusts
$
97,112 $
96,004 $
1,108 $
243,656
9,152
616,582
471,059
111,466
12,912
259,776
243,656
9,152
1,477
379,128
111,466
12,912
—
—
615,105
91,931
—
—
Common/Collective trusts measured at net asset value
Limited Partnerships measured at net asset value
2,711,736
104,760
Miscellaneous
Total at June 30, 2020
(44,105)
—
(44,105)
$
4,594,106 $
853,795 $
664,039 $
—
—
—
—
—
—
—
—
—
Cash and cash equivalents are valued at cost, which approximates fair value. During 2021, the U.S. defined benefit plan
implemented a new liability-hedging initiative that requires the plan to maintain a certain cash balance. At June 30, 2021, this
required cash balance totaled approximately $162 million.
Equity securities are valued at the closing price reported on the active market on which the individual securities are traded.
U.S. based companies include Parker stock with a fair value of $408,301 and $243,656 as of June 30, 2021 and 2020,
respectively.
Fixed income securities are valued using both market observable inputs for similar assets that are traded on an active market
and the closing price on the active market on which the individual securities are traded.
Mutual funds are valued using the closing market price reported on the active market on which the fund is traded or at net asset
value per share and primarily consist of equity and fixed income funds. The equity funds primarily provide exposure to U.S.
and international equities, real estate and commodities. The fixed income funds primarily provide exposure to high-yield
securities and emerging market fixed income instruments. Mutual funds measured at fair value using the net asset value per
share practical expedient have not been categorized in the fair value hierarchy and are presented in the tables above to permit
reconciliation of the fair value hierarchy to total pension plan assets. Redemption of a certain mutual fund is subject to a lock-
up period, lasting throughout its duration, scheduled to terminate July 2026. However, this mutual fund may extend its duration
up to an additional two years under certain conditions.
Common/Collective trusts primarily consist of equity, fixed income and real estate funds and are valued using the closing
market price reported on the active market on which the fund is traded or at net asset value per share. Common/Collective trust
investments can be redeemed without restriction after giving appropriate notice to the issuer. Generally, redemption of the
entire investment balance of all common/collective trusts requires no more than a 90-day notice period. The equity funds
provide exposure to large, mid and small cap U.S. equities, international large and small cap equities and emerging market
equities. The fixed income funds provide exposure to U.S., international and emerging market debt securities. Common/
Collective trusts measured at fair value using the net asset value per share practical expedient have not been categorized in the
fair value hierarchy and are presented in the tables above to permit reconciliation of the fair value hierarchy to total pension
plan assets.
Limited Partnerships' interest in venture capital investments are measured at fair value based on net asset value as determined
by the respective fund investment. A certain limited partnership investment, subject to a one year lock-up period expiring June
30, 2022, is restricted to a maximum redemption of 20 percent of its account balance every six months upon a 90-day
notification period. Limited Partnerships measured at fair value using the net asset value per share practical expedient have not
been categorized in the fair value hierarchy and are presented in the tables above to permit reconciliation of the fair value
hierarchy to total pension plan assets.
62
Miscellaneous primarily includes insurance contracts held in the asset portfolio of the Company's non-U.S. defined benefit
pension plans and net payables for securities purchased but not settled in the asset portfolio of the Company's U.S. defined
benefit pension plan. Insurance contracts are valued at the present value of future cash flows promised under the terms of the
insurance contracts.
The primary investment objective of equity securities and equity funds, within both the mutual fund and common/collective
trust asset class, is to obtain capital appreciation in an amount that at least equals various market-based benchmarks. The
primary investment objective of fixed income securities and fixed income funds, within both the mutual fund and common/
collective trust asset class, is to provide for a constant stream of income while preserving capital. The primary investment
objective of limited partnerships is to achieve capital appreciation through an investment program focused on specialized
investment strategies. The primary investment objective of the investments in the miscellaneous category is to provide a stable
rate of return over a specified period of time.
Employee Savings Plan - We sponsor an employee stock ownership plan ("ESOP") as part of our legacy savings and
investment 401(k) plan. The ESOP is available to eligible domestic employees. Company matching contributions, up to a
maximum of four percent of an employee's annual compensation, are recorded as compensation expense. Participants may
direct company matching contributions to any investment option within the savings and investment 401(k) plan.
Shares held by ESOP
Company matching contributions
2021
2020
2019
4,497,902
5,306,643
6,134,280
$
66,249 $
69,434 $
72,032
In addition to shares within the ESOP, as of June 30, 2021, employees have elected to invest in 1,258,763 shares of common
stock within a company stock fund of the savings and investment 401(k) plan.
The Company has a retirement income account ("RIA") within our legacy savings and investment 401(k) plan. We make a cash
contribution to the participant's RIA each year and participants do not contribute to the RIA. Prior to January 1, 2021, the
amount of the annual contribution was based on the participant's age and years of service. Beginning January 1, 2021, we
amended the RIA ensuring most participants receive a flat three percent annual contribution of eligible compensation with some
grandfathered participants receiving annual contribution calculated at a higher percent of eligible compensation. Under the
amended RIA, no participant will receive less than the flat three percent contribution. The Company recognized $41,680,
$38,387 and $30,603 in expense related to the RIA in 2021, 2020 and 2019, respectively.
During 2020, we acquired several defined contribution plans comprised of similar company matching contributions and RIA
features as our legacy plan. We recorded additional company matching expense of $4,623 and $4,190 and RIA expense of
$5,425 and $7,439, respectively, for these acquired plans in 2021 and 2020. During 2021, these acquired plans were merged
into our legacy savings and investment 401(k) plan.
Other Postretirement Benefits - The Company provides postretirement medical and life insurance benefits to certain retirees
and eligible dependents. Most plans are contributory, with retiree contributions adjusted annually. The plans are unfunded and
pay stated percentages of covered medically necessary expenses incurred by retirees after subtracting payments by Medicare or
other providers and after stated deductibles have been met. For most plans, the Company has established cost maximums to
more effectively control future medical costs. We have reserved the right to change these benefit plans.
The Company recognized $1,237, $1,551 and $1,838 in expense related to other postretirement benefits in 2021, 2020 and
2019, respectively. Components of net other postretirement benefit cost, other than service cost, are included in other (income),
net in the Consolidated Statement of Income.
63
Change in benefit obligation
Benefit obligation at beginning of year
Service cost
Interest cost
Acquisition
Actuarial (gain) loss
Benefits paid
Benefit obligation at end of year
Funded status
Amounts recognized on the Consolidated Balance Sheet
Other accrued liabilities
Pensions and other postretirement benefits
Net amount recognized
Amounts recognized in Accumulated Other Comprehensive (Loss)
Net actuarial gain
Prior service credit
Net amount recognized
2021
2020
$
72,130 $
60,998
328
983
—
(4,139)
(5,563)
63,739 $
250
1,686
12,638
1,276
(4,718)
72,130
(63,739) $
(72,130)
(5,634) $
(58,105)
(63,739) $
(6,374)
(65,756)
(72,130)
(4,311) $
—
(4,311) $
(173)
(73)
(246)
$
$
$
$
$
$
The presentation of the amounts recognized on the Consolidated Balance Sheet and in accumulated other comprehensive (loss)
is on a debit (credit) basis and is before the effect of income taxes.
The decrease in the benefit obligation in 2021, largely reflected in the net actuarial gain component, is primarily due to a
slightly higher discount rate and updated census data and actuarial assumptions. The increase in the benefit obligation in 2020,
primarily reflected in the acquisition component, is a result of assuming Lord's postretirement plans.
The assumptions used to measure the net periodic benefit cost for postretirement benefit obligations are:
Discount rate
Current medical cost trend rate (Pre-65 participants)
Current medical cost trend rate (Post-65 participants)
Ultimate medical cost trend rate
Medical cost trend rate decreases to ultimate in year
2021
2.14 %
6.73 %
7.03 %
4.50 %
2028
2020
3.15 %
7.09 %
7.43 %
4.50 %
2028
2019
3.92 %
7.47 %
7.87 %
4.50 %
2026
The discount rate assumption used to measure the benefit obligation was 2.36 percent and 2.14 percent in 2021 and 2020,
respectively.
Estimated future benefit payments for other postretirement benefits in the five years ending June 30, 2022 through 2026 are
$5,634, $5,155, $4,828, $4,540 and $4,317, respectively, and $18,566 in the aggregate for the five years ending June 30, 2027
through June 30, 2031.
Other - The Company has established nonqualified deferred compensation programs, which permit officers, directors and
certain management employees to annually elect to defer a portion of their compensation, on a pre-tax basis, until their
retirement. The retirement benefit to be provided is based on the amount of compensation deferred, company matching
contributions and earnings on the deferrals. In addition, we maintain a defined contribution nonqualified supplemental
executive pension plan in which the Company is the only contributor. During 2021, 2020 and 2019, we recorded expense
relating to these programs of $44,906, $5,863 and $5,916, respectively.
The Company has invested in corporate-owned life insurance policies to assist in meeting the obligations under these programs.
The policies are held in a rabbi trust and are recorded as assets of the Company.
64
13.
Equity
Changes in accumulated other comprehensive (loss) in shareholders' equity by component:
Balance June 30, 2019
Other comprehensive (loss) before reclassifications
Amounts reclassified from accumulated other comprehensive (loss)
Balance June 30, 2020
Other comprehensive income before reclassifications
Amounts reclassified from accumulated other comprehensive (loss)
Balance June 30, 2021
Foreign Currency
Translation
Adjustment and
Other
(1,011,656) $
$
Retirement
Benefit Plans
(1,047,392) $
Total
(2,059,048)
(182,281)
(447,161)
(629,442)
—
129,615
129,615
$
(1,193,937) $
(1,364,938) $
(2,558,875)
328,072
502,853
830,925
—
$
(865,865) $
161,223
(700,862) $
161,223
(1,566,727)
Significant reclassifications out of accumulated other comprehensive (loss) in shareholders' equity during 2021:
Details about Accumulated Other Comprehensive (Loss) Components
Retirement benefit plans
Amortization of prior service cost and initial net obligation
Recognized actuarial loss
Total before tax
Tax benefit
Net of tax
Income (Expense) Reclassified
from Accumulated Other
Comprehensive (Loss)
Consolidated Statement of Income
Classification
$
$
(5,270) Other (income) expense, net
(207,896) Other (income) expense, net
(213,166)
51,943
(161,223)
Significant reclassifications out of accumulated other comprehensive (loss) in shareholders' equity during 2020:
Details about Accumulated Other Comprehensive (Loss) Components
Retirement benefit plans
Amortization of prior service cost and initial net obligation
Recognized actuarial loss
Total before tax
Tax benefit
Net of tax
Income (Expense) Reclassified
from Accumulated Other
Comprehensive (Loss)
Consolidated Statement of Income
Classification
$
$
(5,531) Other (income) expense, net
(165,550) Other (income) expense, net
(171,081)
41,466
(129,615)
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. In March 2020, the Company suspended
the share repurchase program in response to business uncertainty resulting from the COVID-19 pandemic. During 2021, the
Company reinitiated the share repurchase program and began repurchasing shares under the program in February 2021.
The number of common shares repurchased at the average purchase price follows:
Shares repurchased
Average price per share including commissions
2021
2020
2019
331,259
301.88 $
818,581
179.29 $
4,755,273
168.23
$
65
14.
Stock Incentive Plans
The Company's 2016 Omnibus Stock Incentive Plan ("2016 SIP") provides for the granting of share-based incentive awards in
the form of nonqualified stock options, stock appreciation rights ("SARs"), restricted stock units ("RSUs") and restricted and
unrestricted stock to officers and key employees of the Company. On October 23, 2019, the number of shares of common stock
authorized for issuance under the 2016 SIP increased to 23.8 million shares. At June 30, 2021, 11.3 million common stock
shares were available for future issuance.
We satisfy share-based incentive award obligations by issuing shares of common stock out of treasury, which have been
repurchased pursuant to our share repurchase program described in Note 13, or through the issuance of previously unissued
common stock.
SARs - Upon exercise, SARs entitle the participant to receive shares of common stock equal to the increase in value of the
award between the grant date and the exercise date. SARs are exercisable from one to three years after the date of grant and
expire no more than 10 years after grant.
The fair value of each SAR award granted in 2021, 2020 and 2019 was estimated at the date of grant using a Black-Scholes
option pricing model with the following weighted-average assumptions:
Risk-free interest rate
Expected life of award
Expected dividend yield of stock
Expected volatility of stock
Weighted-average fair value
2021
0.4 %
2020
1.5 %
2019
2.8 %
5.4 years
5.1 years
5.1 years
2.0 %
35.2 %
2.0 %
25.9 %
1.9 %
24.2 %
$
53.92
$
31.68
$
35.09
The risk-free interest rate was based on U.S. Treasury yields with a term similar to the expected life of the award. The expected
life of the award was derived by referring to actual exercise and post-vesting employment termination experience. The
expected dividend yield was based on our historical dividend rate and stock price over a period similar to the expected life of
the award. The expected volatility of stock was derived by referring to changes in our historical common stock prices over a
time-frame similar to the expected life of the award.
SAR activity during 2021 is as follows (aggregate intrinsic value in millions):
Outstanding June 30, 2020
Granted
Exercised
Canceled
Outstanding June 30, 2021
Exercisable June 30, 2021
Number
of Shares
Weighted-
Average Exercise
Price
Weighted-Average
Remaining
Contractual Term
Aggregate
Intrinsic
Value
5,183,970 $
741,852 $
(1,741,352) $
(35,884) $
4,148,586 $
2,677,757 $
132.42
209.56
116.51
185.29
152.44
134.55
6.3 years
5.1 years
$
$
641.7
462.1
A summary of the status and changes of shares subject to SAR awards and the related average price per share follows:
Nonvested June 30, 2020
Granted
Vested
Canceled
Nonvested June 30, 2021
Number
of Shares
Weighted-
Average Grant
Date Fair Value
1,539,502 $
741,852 $
(774,721) $
(35,804) $
1,470,829 $
32.41
53.92
32.09
42.50
43.19
66
During 2021, 2020 and 2019, we recognized stock-based compensation expense of $35,212, $26,108 and $26,568, respectively,
relating to SAR awards. The Company derives a tax deduction measured by the excess of the market value over the grant price
at the date stock-based awards are exercised. The related income tax benefit was credited to income tax expense.
At June 30, 2021, $13,089 of expense with respect to nonvested SAR awards has yet to be recognized and will be amortized
into expense over a weighted-average period of approximately 16 months. The total fair value of shares vested during 2021,
2020 and 2019 was $24,857, $27,209 and $25,365, respectively.
Information related to SAR awards exercised during 2021, 2020 and 2019 is as follows:
Net cash proceeds
Intrinsic value
Income tax benefit
Number of shares surrendered
2021
2020
4,684 $
2,623 $
225,025
133,641
37,437 $
21,132 $
$
$
2019
2,475
95,502
15,584
316,330
228,986
158,610
RSUs - RSUs constitute an agreement to deliver shares of common stock to the participant at the end of a vesting period.
Generally, the RSUs granted to employees vest, and the underlying stock is issued ratably, over a three-year graded vesting
period. Nonvested RSUs may not be transferred and do not have dividend or voting rights. For each nonvested RSU, recipients
are entitled to receive a dividend equivalent, payable in cash or common shares, equal to the cash dividend per share paid to
common shareholders.
The fair value of each RSU award granted in 2021, 2020 and 2019 was based on the fair market value of our common stock on
the date of grant. A summary of the status and changes of shares subject to RSU awards for employees and the related average
price per share follows:
Nonvested June 30, 2020
Granted
Vested
Canceled
Nonvested June 30, 2021
Number
of Shares
Weighted-
Average Grant
Date Fair Value
350,573 $
137,488 $
(130,121) $
(8,354) $
349,586 $
160.66
218.17
161.75
188.20
182.22
During 2021, 2020 and 2019, we recognized stock-based compensation expense of $26,009, $25,560 and $25,258, respectively,
relating to RSU awards for employees. At June 30, 2021, $20,543 of expense with respect to nonvested RSU awards has yet to
be recognized and will be amortized into expense over a weighted-average period of approximately 20 months. The total fair
value of RSU awards vested during 2021, 2020 and 2019 was $21,048, $23,380 and $20,475, respectively. We recognized an
income tax benefit of $796, $1,037 and $1,548 relating to the issuance of common stock for RSU awards that vested during
2021, 2020 and 2019, respectively.
Additionally, we granted RSUs with a one-year vesting period to non-employee members of the Board of Directors. Recipients
receive a dividend equivalent payable in common shares, equal to the cash dividend per share paid to common shareholders. A
summary of the status and changes of shares subject to Board of Directors RSU awards and the related average price per share
follows:
Nonvested June 30, 2020
Granted
Vested
Canceled
Nonvested June 30, 2021
67
Number
of Shares
Weighted-Average
Grant Date
Fair Value
8,262 $
8,122 $
(8,298) $
(610) $
7,476 $
187.49
214.46
187.49
203.23
215.51
The fair value of each RSU award granted to the Board of Directors in 2021, 2020 and 2019 was based on the fair market value
of our common stock on the date of grant. In 2021, 2020 and 2019, we recognized stock-based compensation expense of
$1,458, $1,434, and $1,345, respectively, relating to these awards. During 2021, 2020 and 2019, we recognized an income tax
benefit (cost) of $2,115, $86 and $(82), respectively, related to the vesting of Board of Directors RSU awards. At June 30,
2021, $649 of expense with respect to nonvested RSU awards granted to the Board of Directors has yet to be recognized and
will be amortized into expense over a weighted-average period of approximately five months.
LTIP - The Company's Long Term Incentive Plans ("LTIP") provide for the issuance of unrestricted stock to certain officers
and key employees based on the attainment of certain goals relating to our revenue growth, earnings per share growth and
return on invested capital during the three-year performance period.
Stock issued and surrendered for LTIP
LTIP three-year plan
Number of shares issued
Number of shares surrendered
Share value on date of issuance
Total value of shares issued
2021
2020
2019
2018-19-20
2017-18-19
2016-17-18
210,864
105,402
279,469
132,449
$
$
317.60 $
66,970 $
134.95 $
37,714 $
293,136
134,169
183.00
53,644
Under the Company's 2019-20-21 LTIP, a payout of unrestricted stock will be issued in April 2022.
The fair value of each LTIP award granted in 2021, 2020 and 2019 was based on the fair market value of our common stock on
the date of grant. These nonvested LTIP awards entitle participants to earn a dividend equivalent unit, payable in common
shares, equal to the cash dividend per share paid to common shareholders. These dividend equivalent units do not have
dividend or voting rights and are subject to the same performance goals as the initial award granted. A summary of the status
and changes of shares relating to the LTIP and the related average price per share follows:
Nonvested June 30, 2020
Granted
Vested
Canceled
Nonvested June 30, 2021
Number
of Shares
Weighted-Average
Grant Date
Fair Value
539,059 $
141,122 $
(173,582) $
(11,548) $
495,051 $
186.75
242.80
208.83
199.95
194.68
During 2021, 2020 and 2019, we recorded stock-based compensation expense of $58,804, $58,273 and $50,908, respectively,
relating to the LTIP. During 2021, 2020 and 2019, we recognized an income tax benefit (cost) of $1,974, $(1,251) and
$14,101, respectively, relating to the LTIP.
15.
Research and Development
Research and development costs amounted to $259,039 in 2021, $293,837 in 2020 and $294,852 in 2019. These amounts
include both costs incurred by the Company related to independent research and development initiatives as well as costs
incurred in connection with research and development contracts. Costs incurred in connection with research and development
contracts amounted to $54,051 in 2021, $56,964 in 2020 and $44,484 in 2019. These costs are included in the total research
and development cost for each of the respective years.
16.
Financial Instruments
The Company’s financial instruments consist primarily of cash and cash equivalents, marketable securities and other
investments, accounts receivable and long-term investments, as well as obligations under accounts payable, trade, notes payable
and long-term debt. Due to their short-term nature, the carrying values for cash and cash equivalents, accounts receivable,
accounts payable, trade and notes payable approximate fair value.
Marketable securities and other investments include deposits and equity investments. Deposits are recorded at cost, and equity
investments are recorded at fair value. Changes in fair value of equity investments are recognized in net income.
68
The carrying value of long-term debt, which excludes the impact of net unamortized debt issuance costs, and estimated fair
value of long-term debt at June 30 are as follows:
Carrying value of long-term debt
Estimated fair value of long-term debt
2021
2020
$
6,646,029 $
7,809,541
7,527,268
8,574,401
The fair value of long-term debt is classified within level 2 of the fair value hierarchy.
The Company utilizes derivative and non-derivative financial instruments, including forward exchange contracts, costless collar
contracts, cross-currency swap contracts and certain foreign denominated debt designated as net investment hedges, 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.
The Company’s €700 million aggregate principal amount of Senior Notes due 2025 have been designated as a hedge of the
Company’s net investment in certain foreign subsidiaries. The translation of the Senior Notes due 2025 into U.S. dollars is
recorded in accumulated other comprehensive (loss) and remains there until the underlying net investment is sold or
substantially liquidated.
During 2020, we settled the cross-currency swap with an aggregate notional amount of €235 million, which was designated as a
net investment hedge, for proceeds of $44 million. These proceeds are included in cash flows from investing activities in the
Consolidated Statement of Cash Flows. Additionally, we entered into two cross-currency swaps with aggregate notional
amounts of €359 million and ¥2,149 million due June 2029. These cross-currency swaps have been designated as hedges of net
investments in certain foreign subsidiaries.
During 2021, we amended the two cross-currency swaps with aggregate notional amounts of €359 million and ¥2,149 million
due June 2029 to cross-currency swaps with aggregate notional amounts of €69 million due November 2034, €290 million due
May 2038 and ¥2,149 million due November 2034. These cross-currency swaps are each subject to a credit support annex
("CSA") where either party is obligated to post collateral if the outstanding position exceeds a certain threshold governed by the
CSA's starting in June 2029. These cross-currency swaps have been designated as hedges of net investments in certain foreign
subsidiaries.
Derivative financial instruments are recognized on the Consolidated Balance Sheet as either assets or liabilities and are
measured at fair value.
The location and fair value of derivative financial instruments reported on the Consolidated Balance Sheet are as follows:
Net investment hedges
Cross-currency swap contracts
Cash flow hedges
Forward exchange contracts
Forward exchange contracts
Costless collar contracts
Costless collar contracts
Balance Sheet Caption
2021
2020
Other liabilities $
71,798 $
30,860
Non-trade and notes receivable
Other accrued liabilities
Non-trade and notes receivable
Other accrued liabilities
5,376
9,435
110
901
5,311
3,474
2,250
661
The cross-currency swap, forward exchange contracts and costless collar contracts are reflected on a gross basis in the
Consolidated Balance Sheet. The Company has not entered into any master netting arrangements.
The cross-currency swap contracts have been designated as hedging instruments. The forward exchange and costless collar
contracts have not been designated as hedging instruments and are considered to be economic hedges of forecasted transactions.
Derivatives not designated as hedges are adjusted to fair value by recording gains and losses through the cost of sales caption in
the Consolidated Statement of Income.
Derivatives designated as hedges are adjusted to fair value by recording gains and losses through accumulated other
comprehensive (loss) on the Consolidated Balance Sheet until the hedged item is recognized in earnings. We elected to assess
the effectiveness of the €69 million, €290 million and ¥2,149 million cross-currency swap hedging instruments using the spot
method. Under this method, the periodic interest settlements are recognized directly in earnings through interest expense.
69
Net gains (losses) of $16 million and $(27) million relating to forward exchange contracts were recorded within cost of sales on
the Consolidated Statement of Income for the year ended June 30, 2021 and 2020, respectively. All other gains or losses on
derivative financial instruments that were recorded in the Consolidated Statement of Income during 2021, 2020 and 2019 were
not material.
(Losses) gains on derivative and non-derivative financial instruments that were recorded in accumulated other comprehensive
(loss) in the Consolidated Balance Sheet are as follows:
Cross-currency swap contracts
Foreign denominated debt
2021
$
(31,988) $
(32,882)
2020
(9,435)
7,205
During 2021 and 2020, the periodic interest settlements related to the cross-currency swaps were not material. No portion of
these financial instruments were excluded from the effectiveness testing during 2019.
A summary of financial assets and liabilities that were measured at fair value on a recurring basis at June 30, 2021 and 2020 are
as follows:
Assets:
Equity securities
Derivatives
Liabilities:
Derivatives
Assets:
Equity securities
Derivatives
Liabilities:
Derivatives
Quoted Prices
In
Active Markets
(Level 1)
Significant Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
June 30, 2021
$
20,517 $
20,517 $
— $
5,486
82,134
—
—
5,486
82,134
—
—
—
Quoted Prices
In
Active Markets
(Level 1)
Significant Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
June 30, 2020
$
7,901 $
7,561
7,901 $
—
— $
7,561
34,995
—
34,995
—
—
—
The fair values of the equity securities are determined using the closing market price reported in the active market in which the
fund is traded.
Derivatives consist of forward exchange, costless collar and cross-currency swap contracts, the fair values of which are
calculated using market observable inputs including both spot and forward prices for the same underlying currencies. The
calculation of fair value of the cross-currency swap contracts also utilizes a present value cash flow model that has been
adjusted to reflect the credit risk of either the Company or the counterparty.
The primary investment objective for all investments is the preservation of principal and liquidity while earning income.
There are no other financial assets or financial liabilities that are marked to market on a recurring basis.
17.
Contingencies
The Company is involved in various litigation matters arising in the normal course of business, including proceedings based on
product liability claims, workers' compensation claims and alleged violations of various environmental laws. We are self-
insured in the United States for health care, workers' compensation, general liability and product liability up to predetermined
amounts, above which third party insurance applies. Management regularly reviews the probable outcome of these
proceedings, the expenses expected to be incurred, the availability and limits of the insurance coverage and the established
accruals for liabilities. While the outcome of pending proceedings cannot be predicted with certainty, management believes
that any liabilities that may result from these proceedings will not have a material adverse effect on our liquidity, financial
condition or results of operations.
70
Environmental - The Company is currently responsible for environmental remediation at various manufacturing facilities
presently or formerly operated by the Company and has been named as a “potentially responsible party,” along with other
companies, at off-site waste disposal facilities and regional sites.
As of June 30, 2021, we had an accrual of $17,059 for environmental matters, which are probable and reasonably estimable.
The accrual is recorded based upon the best estimate of costs to be incurred in light of the progress made in determining the
magnitude of remediation costs, the timing and extent of remedial actions required by governmental authorities and the amount
of our liability in proportion to other responsible parties.
Our estimated total liability for environmental matters ranges from a minimum of $17.1 million to a maximum of $73.5 million.
The largest range for any one site is approximately $11.4 million. The actual costs we will incur are dependent on final
determination of contamination and required remedial action, negotiations with governmental authorities with respect to
cleanup levels, changes in regulatory requirements, innovations in investigatory and remedial technologies, effectiveness of
remedial technologies employed, the ability of other responsible parties to pay, and any insurance or other third-party
recoveries.
71
ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None.
ITEM 9A. 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 June 30, 2021. Based on this evaluation,
the Company’s principal executive officer and principal financial officer concluded that, as of June 30, 2021, the Company’s
disclosure controls and procedures were effective.
In response to the COVID-19 pandemic, many of our team members have been working remotely. We are continually
monitoring and assessing the changing business environment resulting from COVID-19 on our internal controls to minimize the
impact on their design and operating effectiveness. Management has taken measures to ensure that our disclosure controls and
procedures and internal controls over financial reporting remained effective and were not materially affected during this period.
There were no changes in the Company’s internal controls over financial reporting during the quarter ended June 30,
2021 that materially affected, or are reasonably likely to materially affect, its internal controls over financial reporting.
Management's Report On Internal Control Over Financial Reporting
Our management, including the principal executive officer and the principal financial officer, is responsible for
establishing and maintaining adequate internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)). We assessed the effectiveness of our internal control over financial reporting as of June 30, 2021. In making this
assessment, we used the criteria established by the Committee of Sponsoring Organizations of the Treadway Commission in
“Internal Control-Integrated Framework (2013).” We concluded that based on our assessment, the Company's internal control
over financial reporting was effective as of June 30, 2021.
Deloitte & Touche LLP, the independent registered public accounting firm that audited the Company's consolidated
financial statements, has issued an attestation report on the Company's internal control over financial reporting as of June 30,
2021, which is included in Part II, Item 8 of this Annual Report on Form 10-K.
ITEM 9B. Other Information. None.
PART III
ITEM 10. Directors, Executive Officers and Corporate Governance. Information required with respect to the
Directors of the Company is set forth under the caption "Item I – Election of Directors" in the definitive Proxy Statement for the
Company’s 2021 Annual Meeting of Shareholders, to be held October 27, 2021 (the "2021 Proxy Statement"), and is
incorporated herein by reference. Information with respect to the executive officers of the Company is included in Part I,
Item 1C of this Annual Report on Form 10-K under the caption "Information about our Executive Officers."
The information set forth under the caption "Delinquent Section 16(a) Reports" in the 2021 Proxy Statement is
incorporated herein by reference.
The Company has adopted a Global Code of Business Conduct that applies to its Chief Executive Officer, Chief Financial
Officer and Controller. The Global Code of Business Conduct is posted on the Company’s investor relations internet website at
www.phstock.com under the Corporate Governance page. Any amendment to, or waiver from, a provision of the Company’s
Global Code of Business Conduct that applies to its Chief Executive Officer, Chief Financial Officer or Controller will also be
posted at www.phstock.com under the Corporate Governance page.
The information set forth under the captions "Committees of our Board of Directors - The Audit Committee" and
"Committees of Our Board of Directors - Board Committees; Committee Charters" in the 2021 Proxy Statement is incorporated
herein by reference.
ITEM 11. Executive Compensation. The information set forth under the captions "Compensation Discussion and
Analysis," "Compensation Committee Report," and "Compensation Tables" in the 2021 Proxy Statement is incorporated herein
by reference.
72
ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The information set forth under the captions "Principal Shareholders" in the 2021 Proxy Statement is incorporated herein by
reference.
Equity Compensation Plan Information. The following table sets forth certain information regarding the Company's
equity compensation plans as of June 30, 2021, unless otherwise indicated.
Plan Category
Equity compensation plans
approved by security holders
Equity compensation plans not
approved by security holders
Total
Number of securities to be
issued upon exercise of
outstanding options, warrants
and rights
Weighted-average exercise
price of outstanding options,
warrants and rights
Number of securities
remaining available for
future issuance under
Equity compensation plans
5,498,710(1)
—
5,498,710
$154.85
—
$154.85
21,200,533(2)
—
21,200,533
(1)Includes the maximum future payouts of common stock that may be issued under the calendar year 2019-20-21,
2020-21-22 and 2021-22-23 long term incentive performance awards ("LTIP awards"). For these LTIP awards, payouts will be
determined based on achieving an average return on average equity of four percent or an average free cash flow margin of four
percent. If these performance measures are achieved, the participants will be eligible to receive the maximum payout of 200
percent. The Human Resources and Compensation Committee will then compare our performance to that of a group of our
peers and, if appropriate, apply its discretion to reduce the final payouts based on any performance measures that the Committee
determines to be appropriate.
(2)The maximum number of shares of our common stock that may be issued under the Amended and Restated 2016
Omnibus Stock Incentive Plan is 23.8 million shares, of which approximately 11.3 million shares are available for future
issuance. The maximum number of shares that may be issued under the Global Employee Stock Purchase Plan is 10 million
shares, of which approximately 9.9 million shares are still available for future issuance.
ITEM 13. Certain Relationships and Related Transactions, and Director Independence. The information set forth
under the captions "Other Governance Matters - Review and Approval of Transactions with Related Persons" and "Corporate
Governance: Board of Directors - Director Independence" in the 2021 Proxy Statement is incorporated herein by reference.
ITEM 14. Principal Accountant Fees and Services. The information set forth under the captions "Audit Fees and All
Other Fees" and "Audit Committee Pre-Approval Policies and Procedures" in the 2021 Proxy Statement is incorporated herein
by reference.
73
PART IV
ITEM 15. Exhibits and Financial Statement Schedules.
a. The following are filed as part of this report:
1. Financial Statements
Consolidated Statement of Income
Consolidated Statement of Comprehensive Income
Business Segment Information
Consolidated Balance Sheet
Consolidated Statement of Cash Flows
Consolidated Statement of Equity
Notes to Consolidated Financial Statements
2. Schedule
II - Valuation and Qualifying Accounts
Page Number
in Form 10-K
36
37
38
40
41
42
43
80
3. Exhibits
Exhibit No.
Description of Exhibit
Plans of Acquisition, Reorganization, Arrangement, Liquidation or Succession:
(2)(a)
(2)(b)
(2)(c)
(2)(d)
(3)(a)
(3)(b)
(4)(a)
Agreement and Plan of Merger among Parker-Hannifin Corporation, CLARCOR, Inc. and Parker Eagle
Corporation dated as of December 1, 2016, incorporated by reference to Exhibit 2.1 of Registrant's Report
on Form 8-K filed with the SEC on December 1, 2016 (Commission File No. 1-4982).
Agreement and Plan of Merger among Parker-Hannifin Corporation, Erie Merger Sub, Inc., LORD
Corporation and Shareholder Representative Services LLC as the shareholders' representative, dated as of
April 26, 2019, incorporated by reference to Exhibit 2.1 of Registrant's Report on Form 8-K filed with the
SEC on April 29, 2019 (Commission File No. 1-4982).
Share Purchase Agreement, among Parker-Hannifin Corporation, EMFCO Holdings Incorporated, the
shareholders of the Company, and Fortis Advisors LLC, as the Sellers' representative, dated as of July 26,
2019, incorporated by reference to Exhibit 2.1 of Registrant's Report on Form 8-K filed with the SEC on
July 29, 2019 (Commission File No. 1-4982).
Rule 2.7 Announcement in connection with Parker-Hannifin Corporation's acquisition of Meggitt plc.,
dated August 2, 2021, incorporated by reference to Exhibit 2.1 of Registrant's Report on Form 8-K filed
with the SEC on August 3, 2021 (Commission file No. 1-4982).
Articles of Incorporation and By-Laws:
Amended Articles of Incorporation, incorporated by reference to Exhibit 3(a) to Registrant's Report on
Form 10-K for the fiscal year ended June 30, 2016 (Commission File No. 1-4982).
Regulations, Amended and Restated as of April 22, 2021, incorporated by reference to Exhibit 3(a) to
Registrant’s Report on Form 10-Q for the quarterly period ended March 31, 2021 (Commission File No.
1-4982).
Instruments Defining Rights of Security Holders:
Description of Parker-Hannifin's Securities, incorporated by reference to Exhibit 4(a) to Registrant's
Report on Form 10-K for the year ended June 30, 2019 (Commission File No. 1-4982).
Material Contracts:
74
(10)(a)
(10)(b)
(10)(c)
(10)(d)
(10)(e)
(10)(f)
(10)(g)
(10)(h)
(10)(i)
(10)(j)
(10)(k)
(10)(l)
Form of Parker-Hannifin Corporation Amended and Restated Change in Control Severance Agreement
entered into by Registrant and its executive officers, incorporated by reference to Exhibit 10(a) to
Registrant’s Report on Form 10-Q for the quarterly period ended September 30, 2008 (Commission File
No. 1-4982).
Form of Parker-Hannifin Corporation Change in Control Severance Agreement for Executive Officers
elected after September 1, 2015 at or above Grade 29, incorporated by reference to Exhibit 10(c) to
Registrant's Report on Form 10-K for the fiscal year ended June 30, 2016 (Commission File No. 1-4982).
Form of Parker-Hannifin Corporation Change in Control Severance Agreement for Executive Officers
dated after September 1, 2015 below Grade 29, incorporated by reference to Exhibit 10(d) to Registrant's
Report on Form 10-K for the fiscal year ended June 30, 2016 (Commission File No. 1-4982).
Parker-Hannifin Corporation Amended and Restated Change in Control Severance Plan, incorporated by
reference to Exhibit 10(b) to Registrant’s Report on Form 10-Q for the quarterly period ended September
30, 2008 (Commission File No. 1-4982).
Form of Indemnification Agreement entered into by the Registrant and its directors and executive officers,
incorporated by reference to Exhibit 10(c) to Registrant’s Report on Form 10-K for the fiscal year ended
June 30, 2003 (Commission File No. 1-4982).
Description of the Parker-Hannifin Corporation Officer Life Insurance Plan, incorporated by reference to
Exhibit 10(h) to Registrant’s Report on Form 10-K for the fiscal year ended June 30, 2005 (Commission
File No. 1-4982).
Parker-Hannifin Corporation Amended and Restated Supplemental Executive Retirement Benefits
Program, effective July 1, 2014, incorporated by reference to Exhibit 10(a) to Registrant’s Report on
Form 10-Q for the quarterly period ended March 31, 2016 (Commission File No. 1-4982).
Parker-Hannifin Corporation Amended and Restated Defined Contribution Supplemental Executive
Retirement Program, effective January 22, 2015, incorporated by reference to Exhibit 10(c) to Registrant’s
Report on Form 10-Q for the quarterly period ended December 31, 2015 (Commission File No. 1-4982).
Summary of the Parker-Hannifin Corporation Executive Disability Insurance Plan, incorporated by
reference to Exhibit 10(j) to Registrant's Report on Form 10-K for the fiscal year ended June 30, 2016
(Commission File No. 1-4982).
Parker-Hannifin Corporation Amended and Restated 2003 Stock Incentive Plan, incorporated by reference
to Exhibit 10(b) to Registrant’s Report on Form 10-Q for the quarterly period ended September 30, 2010
(Commission File No. 1-4982).
Parker-Hannifin Corporation Amended and Restated 2009 Omnibus Stock Incentive Plan, incorporated by
reference to Appendix A to Registrant’s Definitive Proxy Statement filed with the Commission on
September 24, 2012 (Commission File No. 1-4982).
Parker-Hannifin Corporation 2016 Omnibus Stock Incentive Plan, incorporated by reference to Annex B
to Registrant's Definitive Proxy Statement on Schedule 14A, filed with the SEC on September 26, 2016
(Commission File No. 1-4982).
(10)(m)
Parker-Hannifin Corporation First Amendment to 2016 Omnibus Stock Incentive Plan, effective April 1,
2017, incorporated by reference to Exhibit 10(a) to Registrant's Report on Form 10-Q for the quarterly
period ended March 31, 2017 (Commission File No. 1-4982).
(10)(n)
(10)(o)
(10)(p)
(10)(q)
(10)(r)
Parker-Hannifin Corporation Amended and Restated 2016 Omnibus Stock Incentive Plan, effective as of
October 23, 2019, incorporated by reference to Exhibit 10.1 to Registrant's Report on Form 8-K filed with
the SEC on October 28, 2019 (Commission File No. 1-4982).
Parker-Hannifin Corporation 2015 Performance Bonus Plan incorporated by reference to Appendix B to
Registrant’s Definitive Proxy Statement filed with the Commission on September 28, 2015 (Commission
File No. 1-4982).
Form of 2010 Notice of Stock Options with Tandem Stock Appreciation Rights for Executive Officers,
incorporated by reference to Exhibit 10(d) to Registrant’s Report on Form 10-Q for the quarterly period
ended September 30, 2009 (Commission File No. 1-4982).
Form of 2011 Parker-Hannifin Corporation Stock Appreciation Rights Award Agreement for executive
officers, incorporated by reference to Exhibit 10.2 to Registrant’s Report on Form 8-K filed with the SEC
on August 17, 2010 (Commission File No. 1-4982).
2011 Parker-Hannifin Corporation Stock Appreciation Rights Terms and Conditions for executive
officers, incorporated by reference to Exhibit 10.1 to Registrant’s Report on Form 8-K filed with the SEC
on August 17, 2010 (Commission File No. 1-4982).
75
(10)(s)
(10)(t)
(10)(u)
(10)(v)
(10)(w)
(10)(x)
(10)(y)
(10)(z)
(10)(aa)
(10)(bb)
(10)(cc)
(10)(dd)
(10)(ee)
(10)(ff)
(10)(gg)
(10)(hh)
(10)(ii)
Form of Parker-Hannifin Corporation Stock Appreciation Rights Award Agreement for executive officers,
incorporated by reference to Exhibit 10(a) to Registrant’s Report on Form 10-Q for the quarterly period
ended September 30, 2011 (Commission File No. 1-4982).
Parker-Hannifin Corporation Stock Appreciation Rights Terms and Conditions for executive officers,
incorporated by reference to Exhibit 10(b) to Registrant’s Report on Form 10-Q for the quarterly period
ended September 30, 2011 (Commission File No. 1-4982).
Form of 2018 Parker-Hannifin Corporation Stock Appreciation Rights Award Agreement, incorporated by
reference to Exhibit 10(d) to Registrant's Report on Form 10-Q for the quarterly period ended December
31, 2018 (Commission File No. 1-4982).
2018 Parker-Hannifin Corporation Stock Appreciation Rights Terms and Conditions, incorporated by
reference to Exhibit 10(e) to Registrant's Report on Form 10-Q for the quarterly period ended December
31, 2018 (Commission File No. 1-4982)
Parker-Hannifin Corporation Target Incentive Plan, incorporated by reference to Exhibit 10(d) to
Registrant’s Report on Form 10-Q for the quarterly period ended September 30, 2010 (Commission File
No. 1-4982).
Parker-Hannifin Corporation Target Incentive Plan Subject to Performance Bonus Plan, incorporated by
reference to Exhibit 10(e) to Registrant’s Report on Form 10-Q for the quarterly period ended September
30, 2010 (Commission File No. 1-4982).
Parker-Hannifin Corporation Long-Term Incentive Performance Plan Under the Performance Bonus Plan,
as amended and restated, effective January 20, 2016, incorporated by reference to Exhibit 10(aa) to
Registrant's Annual Report on Form 10-K for the fiscal year ended June 30, 2016 (Commission file No.
1-4982).
Form of Notice of Award under the Parker-Hannifin Corporation Long-Term Incentive Performance Plan
Under the Performance Bonus Plan (as Amended and Restated), incorporated by reference to Exhibit
10(bb) to the Registrant's Annual Report on Form 10-K for the fiscal year ended June 30, 2016
(Commission file No. 1-4982).
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 23, 2019, incorporated by
reference to Exhibit 10(f) to the Registrant's Annual Report on Form 10-Q for the quarterly period ended
December 31, 2018 (Commission file No. 1-4982).
Parker-Hannifin Corporation Long-Term Incentive Performance Plan Under the Performance Bonus Plan
(as Amended and Restated), effective as of January 23, 2019, incorporated by reference to Exhibit 10(g)
to the Registrant's Report on Form 10-Q for the quarterly period ended December 31, 2018 (Commission
File No. 1-4982).
Form of Award under the Parker-Hannifin Corporation Long-Term Incentive Plan Under the Performance
Bonus Plan (as Amended and Restated) effective as of January 27, 2021, incorporated by reference to
Exhibit 10(a) to the Registrant's Report on Form 10-Q for the quarterly period ended March 31, 2021
(Commission File No. 1-4982).
Parker-Hannifin Corporation Restricted Stock Unit Award Agreement dated August 17, 2016 for Lee C.
Banks, incorporated by reference to Exhibit 10(a) to Registrant's Report on Form 10-Q for the quarterly
period ended September 30, 2014 (Commission File No. 1-4982).
Parker-Hannifin Corporation Restricted Stock Unit Terms and Conditions for Lee C. Banks, incorporated
by reference to Exhibit 10(b) to Registrant's Report on Form 10-Q for the quarterly period ended
September 30, 2014 (Commission File No. 1-4982).
Form of Parker-Hannifin Corporation Restricted Stock Unit Award Agreement, incorporated by reference
to Exhibit 10(a) to Registrant's Report on Form 10-Q for the quarterly period ended December 31, 2018
(Commission file No. 1-4982).
Form of Parker-Hannifin Corporation Restricted Stock Unit Award Agreement, incorporated by reference
to Exhibit 10(b) to Registrant's Report on Form 10-Q for the quarterly period ended December 31, 2018
(Commission File No. 1-4982).
Form of Parker-Hannifin Corporation Restricted Stock Unit Terms and Conditions for Awards Granted,
incorporated by reference to Exhibit 10(c) to Registrant's Report on Form 10-Q for the quarterly period
ended December 31, 2018 (Commission File No. 1-4982).
Form of 2018 Parker-Hannifin Corporation Restricted Stock Unit Award Agreement to Certain Executive
Officers, incorporated by reference to Exhibit 10(b) to Registrant's Report on Form 10-Q for the quarterly
period ended September 30, 2018 (Commission File No. 1-4982).
76
(10)(jj)
(10)(kk)
(10)(ll)
Parker-Hannifin Corporation 2018 Restricted Stock Unit Terms and Conditions for Certain Executive
Officers, incorporated by reference to Exhibit 10(c) to Registrant's Report on Form 10-Q for the quarterly
period ended September 30, 2018 (Commission File No. 1-4982).
Parker-Hannifin Corporation Profitable Growth Incentive Plan, incorporated by reference to Exhibit 10(c)
to Registrant's Report on Form 10-Q for the quarterly period ended September 30, 2014 (Commission File
No. 1-4982).
Form of Notice of RONA Bonus Award Under the Parker-Hannifin Corporation Performance Bonus Plan,
incorporated by reference to Exhibit 10(h) to Registrant’s Report on Form 10-Q for the quarterly period
ended September 30, 2009 (Commission File No. 1-4982).
(10)(mm)
Parker-Hannifin Corporation RONA Plan Subject to Performance Bonus Plan, incorporated by reference
to Exhibit 10(f) to Registrant’s Report on Form 10-Q for the quarterly period ended September 30, 2010
(Commission File No. 1-4982).
(10)(nn)
(10)(oo)
(10)(pp)
(10)(qq)
(10)(rr)
(10)(ss)
(10)(tt)
(10)(uu)
(10)(vv)
(10)(ww)
(10)(xx)
(10)(yy)
(10)(zz)
(18)
(21)
(23)
Parker-Hannifin Corporation Summary of RONA Bonus Awards in Lieu of Certain Executive Perquisites,
incorporated by reference to Exhibit 10(h) to Registrant’s Report on Form 10-Q for the quarterly period
ended September 30, 2008 (Commission File No. 1-4982).
Parker-Hannifin Corporation Savings Restoration Plan, restated as of September 1, 2004, incorporated by
reference to Exhibit 10(t) to Registrant’s Report on Form 10-K for the fiscal year ended June 30, 2004
(Commission File No. 1-4982).
Parker-Hannifin Corporation Amended and Restated Savings Restoration Plan, effective January 1, 2016,
incorporated by reference to Exhibit 10(b) to Registrant’s Report on Form 10-Q for the quarterly period
ended December 31, 2016 (Commission File No. 1-4982).
Parker-Hannifin Corporation Amended and Restated Pension Restoration Plan, effective July 1, 2016,
incorporated by reference to Exhibit 10(mm) to Registrant's Report on Form 10-K for the fiscal year
ended June 30, 2016 (Commission File No. 1-4982).
Parker-Hannifin Corporation Executive Deferral Plan, restated as of September 1, 2004, incorporated by
reference to Exhibit 10(v) to Registrant’s Report on Form 10-K for the fiscal year ended June 30, 2004
(Commission File No. 1-4982).
Parker-Hannifin Corporation Amended and Restated Executive Deferral Plan, effective September 2,
2015, incorporated by reference to Exhibit 10(pp) to Registrant's Report on Form 10-K for the fiscal year
ended June 30, 2016 (Commission File No. 1-4982).
Amendment Two to the Parker-Hannifin Corporation Amended and Restated Executive Deferral Plan
(effective September 2, 2015), dated and effective October 14, 2019, incorporated by reference to Exhibit
10.1 to Registrant's Report on Form 10-Q filed with the SEC on February 5, 2020 (Commission File No.
1-4982).
Parker-Hannifin Corporation Global Employee Stock Purchase Plan, incorporated by reference to
Appendix A to Registrant's Definitive Proxy Statement filed with the SEC on September 22, 2014
(Commission File No. 1-4982).
Parker-Hannifin Corporation Claw-back Policy, incorporated by reference to Exhibit 10.2 to Registrant’s
Report on Form 8-K filed with the SEC on August 18, 2009 (Commission File No. 1-4982).
Amended and Restated Deferred Compensation Plan for Directors of Parker-Hannifin Corporation,
effective January 22, 2015, incorporated by reference to Exhibit 10(i) to Registrant's Report on Form 10-Q
for the quarterly period ended December 31, 2015 (Commission File No. 1-4982).
Summary of the Compensation of the Non-Employee Members of the Board of Directors, effective
October 24, 2018, incorporated by reference to Exhibit 10(a) to Registrant's Report on Form 10-Q for the
quarterly period ended September 30, 2018 (Commission File No. 1-4982).
Cooperation Agreement, by and between Parker-Hannifin Corporation and Meggitt plc, dated August 2,
2021, incorporated by reference to Exhibit 10.1 to Registrant’s Report on Form 8-K filed with the SEC on
August 3, 2021 (Commission File No. 1-4982).
Bridge Credit Agreement, by and between Parker-Hannifin Corporation, Citibank, N.A., as administrative
agent, and certain financial institution parties thereto, dated August 2, 2021, incorporated by reference to
Exhibit 10.2 to Registrant’s Report on Form 8-K filed with the SEC on August 3, 2021 (Commission File
No. 1-4982).
LIFO Preferability Letter*
List of Subsidiaries of Registrant.*
Consent of Independent Registered Public Accounting Firm.*
77
(24)
(31)(a)
(31)(b)
(32)
Power of Attorney.*
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.*
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.*
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to §906 of the Sarbanes-Oxley Act
of 2002.*
101.INS
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within the Inline XBRL document.*
101.SCH
Inline XBRL Taxonomy Extension Schema Document.*
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document.*
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document.*
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document.*
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document.*
104
Cover page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension
information contained in Exhibits 101).
*
Submitted electronically herewith.
Attached as Exhibit 101 to this Annual Report are the following formatted in Inline XBRL (Extensible Business
Reporting Language): (i) Consolidated Statement of Income for the years ended June 30, 2021, 2020 and 2019, (ii)
Consolidated Statement of Comprehensive Income for the years ended June 30, 2021, 2020 and 2019, (iii) Consolidated
Balance Sheet at June 30, 2021 and 2020, (iv) Consolidated Statement of Cash Flows for the years ended June 30, 2021, 2020
and 2019, (v) Consolidated Statement of Equity for the years ended June 30, 2021, 2020 and 2019, and (vi) Notes to
Consolidated Financial Statements.
Shareholders may request a copy of any of the exhibits to this Annual Report on Form 10-K by writing to the
Secretary, Parker-Hannifin Corporation, 6035 Parkland Boulevard, Cleveland, Ohio 44124-4141.
Individual financial statements and related applicable schedules for the Registrant (separately) have been omitted because
the Registrant is primarily an operating company and its subsidiaries are considered to be wholly-owned.
78
Pursuant to the requirements of Section 13 or 15(d) 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.
SIGNATURES
PARKER-HANNIFIN CORPORATION
By:
/s/ Todd M. Leombruno
Todd M. Leombruno
Executive Vice President and Chief Financial Officer
August 25, 2021
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the date indicated.
Signature and Title
THOMAS L. WILLIAMS, Chairman of the Board of Directors and Principal Executive Officer; ANGELA R. IVES, Principal
Accounting Officer; LEE C. BANKS, Director; JILLIAN C. EVANKO, Director; LANCE M. FRITZ, Director; LINDA A.
HARTY, Director; WILLIAM F. LACEY, Director; KEVIN A. LOBO, Director; CANDY M. OBOURN, Director; JOSEPH
SCAMINACE, Director; ÅKE SVENSSON, Director; LAURA K. THOMPSON, Director; JAMES R. VERRIER, Director;
and JAMES L. WAINSCOTT, Director.
Date: August 25, 2021
/s/ Todd M. Leombruno
Todd M. Leombruno, Executive Vice President
and Chief Financial Officer (Principal Financial
Officer and Attorney-in-Fact)
79
PARKER-HANNIFIN CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED JUNE 30, 2019, 2020 AND 2021
(Dollars in Thousands)
Column A
Description
Allowance for credit losses:
Year ended June 30, 2019
Year ended June 30, 2020
Year ended June 30, 2021
Deferred tax asset valuation allowance:
Year ended June 30, 2019
Year ended June 30, 2020
Year ended June 30, 2021
Column B
Balance at
Beginning
of Period
Column C
Additions
Charged to
Costs and
Expenses
Column D
Column E
Other
(Deductions)/
Additions (A)
Balance
at End
of Period
$
$
$
$
$
$
9,672 $
8,874 $
11,644 $
2,034 $
4,860 $
4,673 $
(2,832) $
(2,090) $
(4,239) $
8,874
11,644
12,078
694,857 $
797,692 $
771,430 $
102,835 $
(42,217) $
94,781 $
— $
15,955 $
(447) $
797,692
771,430
865,764
(A)
For allowance for credit losses, net balance is comprised of deductions due to divestitures or uncollectible accounts
charged off, additions due to acquisitions or recoveries, and currency translation adjustments. For deferred tax asset
valuation allowance, the balance primarily represents adjustments due to acquisitions.
80
Exhibit 31(a)
CERTIFICATIONS
I, Thomas L. Williams, certify that:
1.
2.
3.
4.
I have reviewed this annual report on Form 10-K of Parker-Hannifin Corporation;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the
periods presented in this report;
The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
a)
b)
c)
d)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period
in which this report is being prepared;
designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred
during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal
control over financial reporting; and
5.
The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of
directors (or persons performing the equivalent functions):
a)
b)
all significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process,
summarize and report financial information; and
any fraud, whether or not material, that involves management or other employees who have a significant role
in the Registrant’s internal control over financial reporting.
Date: August 25, 2021
/s/ Thomas L. Williams
Thomas L. Williams
Chief Executive Officer
Exhibit 31(b)
CERTIFICATIONS
I, Todd M. Leombruno, certify that:
1.
2.
3.
4.
I have reviewed this annual report on Form 10-K of Parker-Hannifin Corporation;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the
periods presented in this report;
The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
a)
b)
c)
d)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period
in which this report is being prepared;
designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred
during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal
control over financial reporting; and
5.
The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of
directors (or persons performing the equivalent functions):
a)
b)
all significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process,
summarize and report financial information; and
any fraud, whether or not material, that involves management or other employees who have a significant role
in the Registrant’s internal control over financial reporting.
Date: August 25, 2021
/s/ Todd M. Leombruno
Todd M. Leombruno
Executive Vice President and Chief Financial Officer
Certification Pursuant to
18 U.S.C. Section 1350,
As Adopted Pursuant to
§ 906 of the Sarbanes-Oxley Act of 2002
Exhibit 32
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, in
connection with the filing of the Annual Report on Form 10-K of Parker-Hannifin Corporation (the “Company”) for the fiscal
year ended June 30, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the
undersigned officers of the Company certifies, that, to such officer’s knowledge:
(1)
(2)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934; and
The information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Company as of the dates and for the periods expressed in the Report.
Dated: August 25, 2021
/s/ Thomas L. Williams
Name: Thomas L. Williams
Title: Chief Executive Officer
/s/ Todd M. Leombruno
Name: Todd M. Leombruno
Title: Executive Vice President and Chief Financial Officer
This Page is Not Part of Parker-Hannifin Corporation's Form 10-K Filing
RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION
To supplement the financial information presented in accordance with U.S. generally accepted accounting principles (“GAAP”) in this Annual Report, certain non-GAAP financial
measures as defined by the SEC rules are used. The non-GAAP measures included in this Annual Report have been reconciled to the comparable GAAP measures within the
tables shown below:
RECONCILIATION OF EBITDA TO ADJUSTED EBITDA
(Unaudited)
(Dollars in millions)
Net sales
Net income
Income taxes
Depreciation and amortization
Interest expense
EBITDA*
Adjustments:
Voluntary retirement expense
Business realignment charges
Acquisition-related expenses & Costs to Achieve
Loss / (Gain) on Sale and Writedown of Assets or Land
Adjusted EBITDA*
Twelve Months Ended
June 30,
2016
$ 11,361
2017
$ 12,029
2018
$ 14,302
2019 1
$ 14,320
2020 1
$ 13,696
2021
$ 14,348
807
308
307
137
984
345
355
162
1,061
641
466
214
1,525
424
436
190
1,202
305
538
308
1,747
500
595
250
$
1,558
$
1,846
$
2,382
$
2,576
$
2,353
$
3,092
12
97
56
103
$
1,667
$
2,006
46
37
32
2,497
$
16
30
76
211
$
2,621
$
2,639
48
15
(101)
3,055
$
EBITDA margin
Adjusted EBITDA margin
13.7%
14.7%
15.3%
16.7%
16.7%
17.5%
18.0%
18.3%
17.2%
19.3%
21.6%
21.3%
1Amounts have been adjusted to reflect the change in inventory accounting method.
*Totals may not foot due to rounding
RECONCILIATION OF EARNINGS PER DILUTED SHARE TO ADJUSTED EARNINGS PER DILUTED SHARE
(Unaudited)
(Amounts in dollars)
Twelve Months Ended
June 30,
Earnings per diluted share
Adjustments:
Acquisition-related intangible asset amortization expense
Business realignment charges
Acquisition-related expenses & Costs to achieve
(Gain) / loss on sale and writedown of assets or land
Tax effect of adjustments2
Favorable tax settlement
2016
$
5.89
2017
$
7.25
2018
$
7.83
2019 1
$
11.57
2020 1
9.26
$
2021
$
13.35
0.74
0.80
1.02
0.42
0.76
1.59
0.34
0.27
0.24
1.51
0.12
0.23
(0.44)
(0.59)
(0.42)
(0.44)
2.19
0.59
1.62
(1.03)
(0.19)
2.49
0.36
0.11
(0.77)
(0.50)
Tax expense related to U.S. Tax Reform
Adjusted earnings per diluted share
$
6.99
$
8.86
1.72
11.57
$
0.11
13.10
$
$
12.44
$
15.04
1Amounts have been adjusted to reflect the change in inventory accounting method.
2This line item reflects the aggregate tax effect of all non-tax adjustments reflected in the preceding line items of the table. We estimate the tax effect of each
adjustment item by applying our overall effective tax rate for continuing operations to the pre-tax amount, unless the nature of the item and/or the tax jurisdiction in
which the item has been recorded requires application of a specific tax rate or tax treatment, in which case the tax effect of such item is estimated by applying such
specific tax rate or tax treatment.
RECONCILIATION OF TOTAL SEGMENT OPERATING MARGIN TO ADJUSTED TOTAL SEGMENT OPERATING MARGIN
(Unaudited)
(Dollars in millions)
Net sales
Total segment operating income
Adjustments:
Business realignment charges
Acquisition-related expenses & Costs to achieve
Acquisition-related intangible asset amortization expense
Adjusted total segment operating income*
Total segment operating margin
Adjusted total segment operating margin
*Totals may not foot due to rounding
Twelve Months
Ended
June 30, 2021
$
14,348
Twelve Months
Ended
June 30, 2020
$
13,696
$
2,638
$
2,138
45
12
325
3,021
$
74
92
285
2,589
$
18.4%
21.1%
15.6%
18.9%
RECONCILIATION OF CASH FLOW FROM OPERATIONS TO ADJUSTED CASH FLOW FROM OPERATIONS AND FREE CASH FLOW
(Unaudited)
(Dollars in millions)
Cash Provided by Operating Activities
Year-to-Date
Cash Provided by Operating Activities
Discretionary Pension Contribution
Cash Provided by Operating Activities - Adjusted*
FY02
FY03
$
631
$
558
$
-
631
$
106
663
FY04
$
662
$
75
737
FY05
$
854
83
936
$
FY06
$
951
101
1,051
$
FY07
$
957
161
1,118
$
FY08
FY09
FY10
FY11
$
1,317
$
1,129
$
1,219
$
1,167
12
1,329
$
-
1,129
$
100
1,319
$
400
1,567
$
Cash Provided by Operating Activities
Discretionary Pension Contribution
Cash Provided by Operating Activities - Adjusted*
$
1,530
$
1,191
$
1,388
$
1,363
$
1,211
$
1,302
$
1,597
$
1,730
$
2,071
$
2,575
-
1,530
$
226
1,417
$
75
1,463
$
-
1,363
$
200
1,411
$
220
1,522
$
-
1,597
$
200
1,930
$
-
2,071
$
-
2,575
$
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
Free Cash Flow
Year-to-Date
Cash Provided by Operating Activities
Capital Expenditures
Free Cash Flow
Discretionary Pension Contribution
FY21
$
2,575
210
2,365
-
Free Cash Flow - Adjusted for Discretionary Pension*
$
2,365
*Totals may not foot due to rounding
These non-GAAP measures are not measures of financial performance under U.S. GAAP and should not be considered as an alternative to the U.S. GAAP measures. Parker-Hannifin's calculation of these non-GAAP measures may not
be comparable to the calculations of similarly titled measures reported by other companies.
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Our purpose, Enabling Engineering
Breakthroughs that Lead to a Better
Tomorrow, resonates with our team
members and represents a higher calling
to each person’s work. Despite the
challenges of the last year, it has acted
as a north star that each of us can
follow with the understanding that our
products are essential today and vital
for a better tomorrow.
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With Appreciation
Executive Management
M. CRAIG MAXWELL
The Board of Directors and Management of Parker Hannifin acknowledge the
retirement of M. Craig Maxwell after 24 years of dedicated service. Mr. Maxwell
joined Parker in 1996 as a Manager of New Business Development, eventually
becoming Business Unit Manager for the Fluid Control Division in 2002 before being
elected Chief Technology and Innovation Officer in 2003. In this role, he had
responsibility for global product development and growth in new and emerging
markets. He was instrumental in the establishment of the Winovation system, which
applies a stage gate structure to the research and development of new products,
and Simple by Design™ which significantly improves customer value and design
excellence. He also championed the creation of the Parker Technology Center and
Motion Technology Center, to facilitate cross group collaboration and leverage
technologies for a more sustainable world. He will be remembered for his
transformational leadership and for the lasting impact his contributions have left on
Parker and those around him.
CATHERINE A. SUEVER
The Board of Directors and Management of Parker Hannifin acknowledge the
retirement of Catherine A. Suever after 33 years of dedicated service. Ms. Suever
leveraged her extensive knowledge and financial expertise to help effectively
guide Parker through several periods of economic recession and expansion, drive
implementation of the Win Strategy, manage major acquisitions, and ultimately
achieve record financial performance. Ms. Suever joined Parker in 1987 as the
Assistant Manager of External Reporting and held finance and operations positions
of increasing responsibility, becoming an Officer of the company as Vice President
and Controller in 2010. She was elected Chief Financial Officer in 2017. Ms. Suever
also championed Parker’s participation in an annual Bike MS fundraiser, leading
Parker team members in a cycling group that has raised more than $100,000 to
help make the world a better place for people living with Multiple Sclerosis. She will
be remembered for her skillful leadership and distinguished character, which has
served as an example of Parker’s values and leading with purpose.
Board of Directors
ROBERT G. BOHN
The Board of Directors and Management of Parker Hannifin acknowledge the
retirement of Robert G. Bohn, retired Chairman of the Board and Chief Executive
Officer of Oshkosh Corporation, who served on Parker Hannifin’s Board of Directors
for 11 years. Mr. Bohn provided Parker valuable leadership and strategic insights
through his extensive experience leading a global industrial company, helping to
drive Parker shareholder value for over a decade.
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DRIVERS OF PARKER’S
PERFORMANCE
LIVING UP TO OUR PURPOSE
Our purpose, Enabling Engineering Breakthroughs that Lead to a Better
Tomorrow, provides inspiration and direction for our team members and highlights
how we can have a positive impact on the world. Parker’s team members work
alongside customers to enable technology breakthroughs that change the world
for the better. Every day we have a role to play in helping to improve the lives of
people everywhere.
GREAT GENERATORS AND
DEPLOYERS OF CASH
Parker has consistently generated strong cash flow through economic cycles and
used that cash flow to drive returns for shareholders through acquisitions and
investments that have transformed our portfolio and by maintaining our
long-standing dividend increase record. In fiscal year 2021, Parker significantly
reduced its debt and had record cash flow from operating activites of $2.58 billion
putting Parker in a strong financial position.
TOP QUARTILE PERFORMANCE
VS. PROXY PEERS
Since fiscal year 2016, Parker has focused on implementing The Win StrategyTM
and transforming our operations. Today, many important metrics such as safety,
team member engagement, earnings growth and shareholder returns are among
the top quartile when compared with our diversified industrial proxy peers.
The Global Leader in Motion & Control Technologies
Product Groups
Motion Systems
Key Markets
Agriculture
Construction
Distribution
General machinery
Machine tool
Marine
Material handling
Military
Mining
Oil & gas
Power generation
Semiconductor
Transportation
Truck & bus
Turf
© 2021 PARKER HANNIFIN CORPORATION
Aerospace
Fluid Connectors
Instrumentation
Filtration
Engineered Materials
Key Markets
Aftermarket services
Commercial transport aircraft
Engines
General & business aviation
Helicopters
Military aircraft
Missiles
Power generation (industrial gas
turbines)
Regional transport aircraft
Unmanned aerial vehicles
Key Products
Control actuation systems &
components
Engine build-up ducting
Engine exhaust nozzles & assemblies
Engine systems & components
Fluid conveyance systems &
components
Fluid metering, delivery & atomization
devices
Fuel systems & components
Fuel tank inerting systems
Hydraulic systems & components
Lubrication components
Pilot controls
Pneumatic control components
Thermal management
Wheels & brakes
Key Markets
Aerial lift
Agriculture
Bulk chemical handling
Construction
Food & beverage
Forestry
Industrial machinery
Life sciences
Material handling
Mining
Oil & gas
Renewable energy
Transportation
Key Products
Check valves
Diagnostic & IoT sensors
Hose couplings
Hose crimpers
Industrial hose
Low-pressure fittings & adapters
Polytetrafluoroethylene (PTFE)
hose & tubing
Quick couplings
Rubber & thermoplastic hose
Tube fittings & adapters
Tubing & plastic fittings
Key Products
Accumulators
Air preparation (FRL) & dryers
Cartridge valves
Clusters
Controllers & human machine
interfaces (HMI)
Coolers
Cylinders
Drive controlled pumps
Drives (AC/DC Servo)
Electric actuators & positioners
Electric motors & gearheads
Electrohydraulic actuators
Electrohydraulic pumps
Electronic displays & HMI
Fan drives
Gerotor pumps & motors
Grippers
Helical actuators
Hydraulic valves
Industrial valves
Integrated hydrostatic transmissions
IO-Link controllers
IoT
Joysticks
Mobile valves
Piston pumps & motors
Pneumatic cylinders
Pneumatic valves
Power take-offs
Rotary actuators
Screw pumps
Sensors
Software
Vane pumps & motors
Key Markets
Air conditioning
Alternative fuels
Analytical
Chemical
Food & beverage
Life sciences
Microelectronics
Oil & gas
Refining
Refrigeration
Transportation
Key Products
Analytical instruments & sample
conditioning systems
Compressed natural gas dispensers
Cryogenic valves
Diesel exhaust treatment systems
Electronic valves
Emissions
Filter driers
Fluid system & control fittings, meters,
valves, regulators & manifold valves
Fluoropolymer chemical delivery
fittings, valves & pumps
High-pressure fittings, valves,
pumps & systems
High-purity gas delivery fittings,
valves & regulators
Miniature valves & pumps
Natural gas on-board fuel systems
Pressure regulating valves
Refrigeration & air conditioning
electronic controls & monitoring
Solenoid valves
Key Markets
Aerospace & defense
Agriculture
Construction
Food & beverage
Heating, ventilation & air conditioning
(HVAC)
Industrial machinery
Life sciences
Marine
Mining
Oil & gas
Power generation
Renewable energy
Transportation
Water purification
Key Products
Aerospace filters & systems
Air pollution control & dust collection
systems & filters
Compressed air & gas treatment
solutions
Engine fuel, oil, air & closed
crankcase ventilation filtration
systems
Filtration & purification systems
Fluid condition monitoring systems
Gas turbine air inlet filters
HVAC filters
Hydraulic & lubrication filters &
systems
Industrial & analytical gas generators
Instrumentation filters
Membrane, fiber & sintered metal
filters
Natural gas filters
Process liquid, air & gas filters
Sterile air filters
Water purification filters & systems
Key Markets
Aerospace
Agriculture
Chemical processing
Construction
Defense
Information technology
Life sciences
Microelectronics
Oil & gas
Power generation
Renewable energy
Telecommunications
Transportation
Truck & bus
Key Products
Active vibration control systems
Bearings & dampers
Coatings
Dynamic seals
Elastomeric mounts & isolators
Elastomeric o-rings
Electromagnetic interference
shielding
Extrusion & fabricated seals
High-temperature metal seals
Homogeneous & inserted
elastomeric shapes
Medical products fabrication
& assembly
Metal & plastic composite
bonded seals
Precision-cut seals
Rubber-to-substrate adhesives
Specialty chemicals
Structural adhesives
Thermal management
Wireless sensing systems
UNMATCHED BREADTH OF
TECHNOLOGY & ENGINEERING EXPERTISE
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DRIVERS OF PARKER’S
PERFORMANCE
LIVING UP TO OUR PURPOSE
Our purpose, Enabling Engineering Breakthroughs that Lead to a Better
Tomorrow, provides inspiration and direction for our team members and highlights
how we can have a positive impact on the world. Parker’s team members work
alongside customers to enable technology breakthroughs that change the world
for the better. Every day we have a role to play in helping to improve the lives of
people everywhere.
GREAT GENERATORS AND
DEPLOYERS OF CASH
Parker has consistently generated strong cash flow through economic cycles and
used that cash flow to drive returns for shareholders through acquisitions and
investments that have transformed our portfolio and by maintaining our
long-standing dividend increase record. In fiscal year 2021, Parker significantly
reduced its debt and had record cash flow from operating activites of $2.58 billion
putting Parker in a strong financial position.
TOP QUARTILE PERFORMANCE
VS. PROXY PEERS
Since fiscal year 2016, Parker has focused on implementing The Win StrategyTM
and transforming our operations. Today, many important metrics such as safety,
team member engagement, earnings growth and shareholder returns are among
the top quartile when compared with our diversified industrial proxy peers.
The Global Leader in Motion & Control Technologies
Product Groups
Motion Systems
Key Markets
Agriculture
Construction
Distribution
General machinery
Machine tool
Marine
Material handling
Military
Mining
Oil & gas
Power generation
Semiconductor
Transportation
Truck & bus
Turf
© 2021 PARKER HANNIFIN CORPORATION
Aerospace
Fluid Connectors
Instrumentation
Filtration
Engineered Materials
Key Markets
Aftermarket services
Commercial transport aircraft
Engines
General & business aviation
Helicopters
Military aircraft
Missiles
Power generation (industrial gas
turbines)
Regional transport aircraft
Unmanned aerial vehicles
Key Products
Control actuation systems &
components
Engine build-up ducting
Engine exhaust nozzles & assemblies
Engine systems & components
Fluid conveyance systems &
components
Fluid metering, delivery & atomization
devices
Fuel systems & components
Fuel tank inerting systems
Hydraulic systems & components
Lubrication components
Pilot controls
Pneumatic control components
Thermal management
Wheels & brakes
Key Markets
Aerial lift
Agriculture
Bulk chemical handling
Construction
Food & beverage
Forestry
Industrial machinery
Life sciences
Material handling
Mining
Oil & gas
Renewable energy
Transportation
Key Products
Check valves
Diagnostic & IoT sensors
Hose couplings
Hose crimpers
Industrial hose
Low-pressure fittings & adapters
Polytetrafluoroethylene (PTFE)
hose & tubing
Quick couplings
Rubber & thermoplastic hose
Tube fittings & adapters
Tubing & plastic fittings
Key Products
Accumulators
Air preparation (FRL) & dryers
Cartridge valves
Clusters
Controllers & human machine
interfaces (HMI)
Coolers
Cylinders
Drive controlled pumps
Drives (AC/DC Servo)
Electric actuators & positioners
Electric motors & gearheads
Electrohydraulic actuators
Electrohydraulic pumps
Electronic displays & HMI
Fan drives
Gerotor pumps & motors
Grippers
Helical actuators
Hydraulic valves
Industrial valves
Integrated hydrostatic transmissions
IO-Link controllers
IoT
Joysticks
Mobile valves
Piston pumps & motors
Pneumatic cylinders
Pneumatic valves
Power take-offs
Rotary actuators
Screw pumps
Sensors
Software
Vane pumps & motors
Key Markets
Air conditioning
Alternative fuels
Analytical
Chemical
Food & beverage
Life sciences
Microelectronics
Oil & gas
Refining
Refrigeration
Transportation
Key Products
Analytical instruments & sample
conditioning systems
Compressed natural gas dispensers
Cryogenic valves
Diesel exhaust treatment systems
Electronic valves
Emissions
Filter driers
Fluid system & control fittings, meters,
valves, regulators & manifold valves
Fluoropolymer chemical delivery
fittings, valves & pumps
High-pressure fittings, valves,
pumps & systems
High-purity gas delivery fittings,
valves & regulators
Miniature valves & pumps
Natural gas on-board fuel systems
Pressure regulating valves
Refrigeration & air conditioning
electronic controls & monitoring
Solenoid valves
Key Markets
Aerospace & defense
Agriculture
Construction
Food & beverage
Heating, ventilation & air conditioning
(HVAC)
Industrial machinery
Life sciences
Marine
Mining
Oil & gas
Power generation
Renewable energy
Transportation
Water purification
Key Products
Aerospace filters & systems
Air pollution control & dust collection
systems & filters
Compressed air & gas treatment
solutions
Engine fuel, oil, air & closed
crankcase ventilation filtration
systems
Filtration & purification systems
Fluid condition monitoring systems
Gas turbine air inlet filters
HVAC filters
Hydraulic & lubrication filters &
systems
Industrial & analytical gas generators
Instrumentation filters
Membrane, fiber & sintered metal
filters
Natural gas filters
Process liquid, air & gas filters
Sterile air filters
Water purification filters & systems
Key Markets
Aerospace
Agriculture
Chemical processing
Construction
Defense
Information technology
Life sciences
Microelectronics
Oil & gas
Power generation
Renewable energy
Telecommunications
Transportation
Truck & bus
Key Products
Active vibration control systems
Bearings & dampers
Coatings
Dynamic seals
Elastomeric mounts & isolators
Elastomeric o-rings
Electromagnetic interference
shielding
Extrusion & fabricated seals
High-temperature metal seals
Homogeneous & inserted
elastomeric shapes
Medical products fabrication
& assembly
Metal & plastic composite
bonded seals
Precision-cut seals
Rubber-to-substrate adhesives
Specialty chemicals
Structural adhesives
Thermal management
Wireless sensing systems
UNMATCHED BREADTH OF
TECHNOLOGY & ENGINEERING EXPERTISE
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BOARD OF DIRECTORS
EXECUTIVE MANAGEMENT
INVESTOR INFORMATION
THOMAS L. WILLIAMS
Chairman and Chief Executive Officer
Parker-Hannifin Corporation
LEE C. BANKS
Vice Chairman and President
Parker-Hannifin Corporation
JILLIAN C. EVANKO
President and Chief Executive Officer
Chart Industries, Inc. (cryogenic technologies)
THOMAS L. WILLIAMS
Chairman and Chief Executive Officer
LEE C. BANKS
Vice Chairman and President
JENNIFER A. PARMENTIER
Chief Operating Officer
TODD M. LEOMBRUNO
Executive Vice President and Chief
Financial Officer
LANCE M. FRITZ
Chairman, President and Chief
Executive Officer
Union Pacific Corporation (rail transport)
LINDA A. HARTY
Former Treasurer
Medtronic plc (medical technology)
WILLIAM F. LACEY
President and Chief Executive Officer
GE Lighting, a Savant company (lighting
technologies)
KEVIN A. LOBO
Chairman, Chief Executive Officer
and President
Stryker Corporation (medical technologies)
CANDY M. OBOURN
Former Chairman
Isoflux Incorporated (coating technologies)
JOSEPH SCAMINACE
Former Chairman and Chief Executive Officer
OM Group, Inc. (metal-based specialty
chemicals)
ÅKE SVENSSON
Chairman
Swedavia AB (transport infrastructure)
LAURA K. THOMPSON
Former Executive Vice President
and Chief Financial Officer
The Goodyear Tire and Rubber Company
(tire manufacturing)
JAMES R. VERRIER
Former President and Chief Executive Officer
BorgWarner Inc. (powertrain solutions)
JAMES L. WAINSCOTT
Former Chairman, Chief Executive Officer
and President
AK Steel Holding Corporation (steel producer)
MARK J. HART
Executive Vice President – Human Resources
and External Affairs
WILLIAM “SKIP” BOWMAN
Vice President and President –
Instrumentation Group
BEREND BRACHT
Vice President and President –
Motion Systems Group
MARK T. CZAJA
Vice President – Chief Technology and
Innovation Officer
ROBIN J. DAVENPORT
Vice President – Corporate Finance
THOMAS C. GENTILE
Vice President – Global Supply Chain
JOACHIM GUHE
President – Europe, Middle East and Africa
(EMEA) Group
ANGELA R. IVES
Vice President and Controller
JOSEPH R. LEONTI
Vice President, General Counsel
and Secretary
CANDIDO LIMA
President – Latin America Group
ROBERT W. MALONE
Vice President and President –
Filtration Group
MICHAEL J. O’HARA
Vice President – Global Sales and Marketing
DINU J. PAREL
Vice President – Chief Digital and
Information Officer
ANDREW D. ROSS
Vice President and President –
Fluid Connectors Group
ROGER S. SHERRARD
Vice President and President –
Aerospace Group
MICHAEL WEE
President – Asia Pacific Group
ANDREW M. WEEKS
Vice President and President –
Engineered Materials Group
ANNUAL MEETING
The 2021 Annual Meeting of Shareholders
will be held on Wednesday, October 27, 2021,
virtually via live webcast at
www.virtualshareholdermeeting.com/PH2021
at 9:00 a.m. EDT.
INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
Deloitte & Touche, LLP, Cleveland, Ohio
TRANSFER AGENT & REGISTRAR
Equiniti Trust Company
EQ Shareowner Services
P.O. Box 64854
St. Paul, Minnesota 55164-0854
Telephone 800 468 9716
www.shareowneronline.com
STOCK INFORMATION
New York Stock Exchange
Ticker symbol: PH
www.phstock.com
PARKER CORPORATE HEADQUARTERS
Parker-Hannifin Corporation
6035 Parkland Boulevard
Cleveland, Ohio 44124-4141
216 896 3000
INVESTOR CONTACT
ROBIN J. DAVENPORT
Vice President – Corporate Finance
216 896 2265
rjdavenport@parker.com
Comparison of 5-Year Cumulative Total Return*
Among Parker-Hannifin Corporation, the S&P 500 Index and the
S&P Industrials Index
Parker-Hannifin Corporation
S&P 500
S&P Industrials
$350
300
250
200
150
100
6/16
6/17
6/18
6/19
6/20
6/21
2016
2017
2018
2019
2020
2021
Parker-Hannifin Corporation 100.00
100.00
S&P 500
100.00
S&P Industrials
150.70
117.90
122.27
149.32
134.84
128.79
165.93
148.89
142.23
182.45
160.06
129.40
310.16
225.36
195.96
*$100 invested on 6/30/16 in stock or index, including reinvestment of dividends.
Fiscal year ending June 30.
Copyright© 2021 Standard & Poor’s, a division of S&P Global. All rights reserved.
PARKER
HANNIFIN
ANNUAL
REPORT
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Parker Hannifin Corporation, 6035 Parkland Boulevard, Cleveland, Ohio 44124-4141, 216 896 3000, www.parker.com
BOARD OF DIRECTORS
EXECUTIVE MANAGEMENT
INVESTOR INFORMATION
THOMAS L. WILLIAMS
Chairman and Chief Executive Officer
Parker-Hannifin Corporation
LEE C. BANKS
Vice Chairman and President
Parker-Hannifin Corporation
JILLIAN C. EVANKO
President and Chief Executive Officer
Chart Industries, Inc. (cryogenic technologies)
THOMAS L. WILLIAMS
Chairman and Chief Executive Officer
LEE C. BANKS
Vice Chairman and President
JENNIFER A. PARMENTIER
Chief Operating Officer
TODD M. LEOMBRUNO
Executive Vice President and Chief
Financial Officer
LANCE M. FRITZ
Chairman, President and Chief
Executive Officer
Union Pacific Corporation (rail transport)
LINDA A. HARTY
Former Treasurer
Medtronic plc (medical technology)
WILLIAM F. LACEY
President and Chief Executive Officer
GE Lighting, a Savant company (lighting
technologies)
KEVIN A. LOBO
Chairman, Chief Executive Officer
and President
Stryker Corporation (medical technologies)
CANDY M. OBOURN
Former Chairman
Isoflux Incorporated (coating technologies)
JOSEPH SCAMINACE
Former Chairman and Chief Executive Officer
OM Group, Inc. (metal-based specialty
chemicals)
ÅKE SVENSSON
Chairman
Swedavia AB (transport infrastructure)
LAURA K. THOMPSON
Former Executive Vice President
and Chief Financial Officer
The Goodyear Tire and Rubber Company
(tire manufacturing)
JAMES R. VERRIER
Former President and Chief Executive Officer
BorgWarner Inc. (powertrain solutions)
JAMES L. WAINSCOTT
Former Chairman, Chief Executive Officer
and President
AK Steel Holding Corporation (steel producer)
MARK J. HART
Executive Vice President – Human Resources
and External Affairs
WILLIAM “SKIP” BOWMAN
Vice President and President –
Instrumentation Group
BEREND BRACHT
Vice President and President –
Motion Systems Group
MARK T. CZAJA
Vice President – Chief Technology and
Innovation Officer
ROBIN J. DAVENPORT
Vice President – Corporate Finance
THOMAS C. GENTILE
Vice President – Global Supply Chain
JOACHIM GUHE
President – Europe, Middle East and Africa
(EMEA) Group
ANGELA R. IVES
Vice President and Controller
JOSEPH R. LEONTI
Vice President, General Counsel
and Secretary
CANDIDO LIMA
President – Latin America Group
ROBERT W. MALONE
Vice President and President –
Filtration Group
MICHAEL J. O’HARA
Vice President – Global Sales and Marketing
DINU J. PAREL
Vice President – Chief Digital and
Information Officer
ANDREW D. ROSS
Vice President and President –
Fluid Connectors Group
ROGER S. SHERRARD
Vice President and President –
Aerospace Group
MICHAEL WEE
President – Asia Pacific Group
ANDREW M. WEEKS
Vice President and President –
Engineered Materials Group
ANNUAL MEETING
The 2021 Annual Meeting of Shareholders
will be held on Wednesday, October 27, 2021,
virtually via live webcast at
www.virtualshareholdermeeting.com/PH2021
at 9:00 a.m. EDT.
INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
Deloitte & Touche, LLP, Cleveland, Ohio
TRANSFER AGENT & REGISTRAR
Equiniti Trust Company
EQ Shareowner Services
P.O. Box 64854
St. Paul, Minnesota 55164-0854
Telephone 800 468 9716
www.shareowneronline.com
STOCK INFORMATION
New York Stock Exchange
Ticker symbol: PH
www.phstock.com
PARKER CORPORATE HEADQUARTERS
Parker-Hannifin Corporation
6035 Parkland Boulevard
Cleveland, Ohio 44124-4141
216 896 3000
INVESTOR CONTACT
ROBIN J. DAVENPORT
Vice President – Corporate Finance
216 896 2265
rjdavenport@parker.com
Comparison of 5-Year Cumulative Total Return*
Among Parker-Hannifin Corporation, the S&P 500 Index and the
S&P Industrials Index
Parker-Hannifin Corporation
S&P 500
S&P Industrials
$350
300
250
200
150
100
6/16
6/17
6/18
6/19
6/20
6/21
2016
2017
2018
2019
2020
2021
Parker-Hannifin Corporation 100.00
100.00
S&P 500
100.00
S&P Industrials
150.70
117.90
122.27
149.32
134.84
128.79
165.93
148.89
142.23
182.45
160.06
129.40
310.16
225.36
195.96
*$100 invested on 6/30/16 in stock or index, including reinvestment of dividends.
Fiscal year ending June 30.
Copyright© 2021 Standard & Poor’s, a division of S&P Global. All rights reserved.
PARKER
HANNIFIN
ANNUAL
REPORT
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Parker Hannifin Corporation, 6035 Parkland Boulevard, Cleveland, Ohio 44124-4141, 216 896 3000, www.parker.com