PARKER HANNIFIN
ANNUAL REPORT
2023
Parker Hannifin Corporation, 6035 Parkland Boulevard, Cleveland, Ohio 44124-4141, 216 896 3000, www.parker.com
TOP QUARTILE PERFORMANCE
• Top quartile safety driven by engaged team members
• Continue performance acceleration from The Win Strategy™ 3.0
• Proven track record of performance through cycles
PORTFOLIO TRANSFORMATION
• Integration of Meggitt ahead of schedule
• ~30% exposure to Aerospace & Defense markets
• Longer cycle & more resilient revenue mix
A PROMISING FUTURE
• Well positioned to capitalize on the growth from secular trends
• Committed to FY27 financial targets
• Continue to be great generators and deployers of cash
BOARD OF DIRECTORS
EXECUTIVE MANAGEMENT
INVESTOR INFORMATION
THOMAS L. WILLIAMS
Executive Chairman
Parker-Hannifin Corporation
JENNIFER A. PARMENTIER
Chief Executive Officer
Parker-Hannifin Corporation
LEE C. BANKS
Vice Chairman and President
Parker-Hannifin Corporation
THOMAS L. WILLIAMS
Executive Chairman
JENNIFER A. PARMENTIER
Chief Executive Officer
LEE C. BANKS
Vice Chairman and President
ANDREW D. ROSS
Chief Operating Officer
JILLIAN C. EVANKO
President and Chief Executive Officer
Chart Industries, Inc. (cryogenic technologies)
TODD M. LEOMBRUNO
Executive Vice President and Chief
Financial Officer
DENISE RUSSELL FLEMING
Executive Vice President, Technology and
Global Services and Chief Information Officer
Becton, Dickinson and Company
(medical technologies)
LANCE M. FRITZ
Former Chairman, President and Chief
Executive Officer
Union Pacific Corporation (rail transport)
LINDA A. HARTY
Former Treasurer
Medtronic plc (medical technology)
KEVIN A. LOBO
Chairman, Chief Executive Officer
and President
Stryker Corporation (medical 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 Chief Executive Officer and President
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
RACHID BENDALI
Vice President and President –
Engineered Materials Group
WILLIAM “SKIP” BOWMAN
Vice President and President –
Fluid Connectors Group
BEREND BRACHT
Vice President and President –
Motion Systems Group
MARK T. CZAJA
Vice President – Chief Technology and
Innovation Officer
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
ROGER S. SHERRARD
Vice President and President –
Aerospace Group
MICHAEL WEE
President – Asia Pacific Group
ANNUAL MEETING
The 2023 Annual Meeting of Shareholders
will be held on Wednesday, October 25, 2023
at Parker-Hannifin Global Headquarters
6035 Parkland Blvd., Cleveland, Ohio 44124-4141,
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
JEFF MILLER
Vice President, Investor Relations
216 896 2708
jeffery.miller@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
$300
250
200
150
100
6/18
6/19
6/20
6/21
6/22
6/23
2018
2019
2020
2021
2022
2023
Parker-Hannifin Corporation 100.00
100.00
S&P 500
100.00
S&P Industrials
111.13
110.42
110.43
122.19
118.70
100.47
207.72
167.13
152.15
168.93
149.39
131.74
272.52
178.66
164.89
*$100 invested on 6/30/18 in stock or index, including reinvestment of dividends.
Fiscal year ending June 30.
Copyright© 2023 Standard & Poor’s, a division of S&P Global. All rights reserved.
© 2023 PARKER HANNIFIN CORPORATION
LETTER TO SHAREHOLDERS
Fiscal 2023 was a year that
encapsulated Parker’s ability to
drive shareholder value. We
achieved record performance
through the execution of The Win
Strategy™, our business system;
we acquired and are integrating
another great company to
strengthen our portfolio; and we
advanced our position to address
emerging secular trends that are
expected to drive organic growth
for many years. Sustaining this
level of momentum also takes
highly engaged team members
who are always ready to make
improvements to our business
and fulfill our purpose: Enabling
Engineering Breakthroughs that
Lead to a Better Tomorrow.
This formula has fueled a
transformation of our company
that has led to consistent
performance across cycles and
landed us another outstanding
year.
The year also marked a transition
at the top of the organization as
Jenny Parmentier became
Parker’s new Chief Executive
Officer and Andy Ross succeeded
Jenny as Chief Operating Officer,
while Lee Banks continued as
Vice Chairman and President. As
part of this change, we celebrate
Thomas L. Williams, Executive Chairman
Lee C. Banks, Vice Chairman and President
Jennifer A. Parmentier, Chief Executive Officer
• For safety, we reduced our
• Net income reached $2.1
the career of our former CEO Tom
Williams, who continues as
Executive Chairman and will retire
on December 31, 2023. On behalf
of the entire leadership team and
all our team members we thank
Tom for his many outstanding
years of service to the company
and to our shareholders.
Above all, this change signals
continuity of leadership with a
shared belief in the power of what
has enabled Parker’s past success
and promises growth well into the
future - continued execution of
The Win Strategy.
PARKER: A COMPANY
TRANSFORMED
Amid substantial change in our
portfolio and ongoing
macroeconomic challenges such
as inflation, supply chain backlogs,
labor shortages and geopolitical
instability, our team members
delivered the best year in Parker’s
history.
recordable incident rate 20% in
fiscal year 2023, and 45% over
the past five years. We aspire to
be the safest industrial
company in the world by
pursuing a goal to achieve zero
incidents by 2030.
• Net sales were a record $19.1
billion, up 20% from $15.9
billion in fiscal year 2022. The
acquisition of Meggitt PLC
contributed to the improvement
in sales while organic growth
increased 11%.
• Total segment operating margin
was 19.1% as reported, or a
record 22.9% adjusted, a
60-basis point improvement
from the prior year.
• EBITDA margin was 21.4% as
reported, and 23.6% on an
adjusted basis, a 100-basis
point improvement year-over-
year.
ADJUSTED EPS1
ADJUSTED SEGMENT
OPERATING MARGIN1
$30.00
25%
~40%
Growth
+210
bps
$21.55
22.9%
FY23
FY27F
FY23
FY27F
1 Adjusted numbers include certain non-GAAP financial measures.
billion, and adjusted net income
was a record at $2.8 billion, a
15% increase compared with
the prior year.
• Earnings per share were $16.04
as reported. Adjusted earnings
per share increased 15% to a
record $21.55.
• Cash flow from operating
activities increased 22% to a
record $3.0 billion, or 15.6% of
sales.
• We used our strong cash flow to
reduce our debt by $1.4 billion
since the close of the Meggitt
acquisition and have now
reduced debt associated with
the acquisition by
approximately 35% since we
announced the transaction in
August 2021.
With many compelling drivers of
future financial performance on
the horizon, fiscal year 2023
reinforces our confidence in
achieving our fiscal year 2027
financial targets as we pursue top
quartile financial performance
among our peer group. Parker has
a very promising future ahead.
GROWTH DRIVERS TO IGNITE
PERFORMANCE
Parker is a company built to
perform. Our financial results over
the past seven years demonstrate
our remarkable improvement and
transformation.
The Win Strategy 3.0 will only help
accelerate our progress. It is the
business system that allows our
60,000-plus people to align
around common goals as one
global team, which we refine
through periodic, thoughtful
iteration. Just as Parker transforms
itself over time to best serve our
customers and stakeholders,
The Win Strategy evolves in
parallel. While it has driven much
of our improvement so far, it points
the way for much greater
opportunity ahead.
The progress we have made
around safety, for example, has
been remarkable. By employing
similar principles, training, tools
and resources of our safety
program, we can also improve
other critical areas of our business
such as quality, delivery, supply
chain and productivity. Doing so
will help further drive margin
expansion and increased organic
growth as we improve our
customer experience. To drive
returns from our investments in
innovation and engineering, we
continue to increase our Product
Vitality Index which measures the
health of our new product pipeline,
and deploy Simple by Design™
principles to reduce cost and
complexity across our operations.
Beyond these self-help measures,
our portfolio has changed
substantially, providing Parker with
more exposure to long-cycle and
aftermarket revenue streams that
build resiliency and better position
us with emerging secular growth
EXPANDING LONGER CYCLE & SECULAR
TREND EXPOSURE
LONGER
CYCLE
FY15
INDUSTRIAL
AFTERMARKET
SHORTER CYCLE
INDUSTRIAL
AFTERMARKET
LONGER
CYCLE +
SECULAR
TRENDS
FY23 UPDATE
SHORTER CYCLE
FY27
ILLUSTRATION
INDUSTRIAL
AFTERMARKET
SHORTER
CYCLE
LONGER
CYCLE +
SECULAR
TRENDS
trends. By fiscal year 2027, we
anticipate that Parker’s portfolio
could be 85% long-cycle or
aftermarket exposure creating
greater balance and stability in our
business.
This transformation is most evident
in our acquisition of Meggitt which
almost doubled our aerospace and
defense sales. In fiscal year 2023,
when industrial growth was
modest, our aerospace business
benefited from the continuing
post-pandemic rebound in the
aerospace market and grew 11%
organically. This growth trend in
aerospace and defense markets is
expected to continue driving
demand into 2024 and beyond.
STRATEGIES
STRATEGIES
• Strategic Positioning
• Market-Driven Innovation
Profitable
Growth
Financial
Performance
Our integration of Meggitt is
accretive to organic sales growth,
margins and earnings per share
and holds the promise of added
Goals
synergies. The integration is ahead
of schedule as we target a total of
$300 million in synergies from the
Meggitt acquisition by fiscal year
2026. While our immediate focus is
to strengthen our balance sheet
through debt reduction, we fully
intend to continue investing in
portfolio-transforming
acquisitions, afforded by our
consistent cash generation and
ability to integrate efficiently to
realize synergies.
Win Strategy 3.0
June 2022
• Strategic Supply Chain
• Strong Distribution
• System Solutions
• Lean Enterprise
• Simplification
• Value Pricing
• Acquisitions
• Grow Share
The Win Strategy TM
Our Vision: Engineering Your Success
Customer
Experience
STRATEGIES
• Quality Solutions On Time
• Ease of Doing Business
• Environment, Social
• Digital Leadership
Engaged
People
STRATEGIES
• Safety #1
& Governance
• Ownership –
Entrepreneurial
• High Performance
Teams & Leaders
• Culture of Kaizen
Parker Values
Our Culture & Values
The 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
MEASURES
Customer
Experience
Profitable
Growth
Financial
Performance
MEASURES
MEASURES
MEASURES
• Zero Safety Incidents
• Likelihood to Recommend
• Organic Growth 4-6%
• Top Quartile Performance
• Safety #1
• Quality Solutions On Time
• Strategic Positioning
• Simplification
• Carbon Neutral 2040
• Customer Dashboards
• 20%+ Market Share
• Year-over-Year Growth in:
• Environment, Social
• Digital Leadership
• Market-Driven Innovation
• Lean Enterprise
• Speed & Agility
• Zero Defects
• Ease of Doing Business
• System Solutions
• Strategic Supply Chain
• High Performance Teams
• 98%+ On-Time Delivery
• Strong Distribution
• Value Pricing
• Grow Share
• Acquisitions
Diversity, Equity &
Inclusion
• Engagement > 75%
• Best-in-Class Lead Times
Our Culture & Values
Win Strategy 3.0
June 2022
Enabling Engineering Breakthroughs
that Lead to a Better Tomorrow
PS-2049
• #1, #2 Position Each
Business
• Grow Global Distribution
50% DIST
50% OEM
• Increasing New Product
Vitality & Gross Margins
• DNE
• EPS
• 25% Operating Margin
• 30% MROS
• 15% ROIC
• >100% FCF Conversion
• 16% FCF Margin
& Governance
• Ownership –
Entrepreneurial
• High Performance
Teams & Leaders
• Culture of Kaizen
Parker Values
#1 Motion & Control Company
Winning Culture
Goals
Passionate People
We insist on integrity and ethical behavior
and we value compassion, respect and inclusion
in all aspects of our global business. We seek
to raise the quality of life through responsible,
Customer
global stewardship.
Experience
Engaged
People
MEASURES
MEASURES
We are empowered – every idea counts and
every role has a voice. We are committed to
safety and realize the value of our collective
efforts. We believe our strength comes from the
relationships and trust we establish with each
Profitable
other, our customers, suppliers, distributors
Growth
and the world we serve.
Financial
Performance
MEASURES
MEASURES
• Zero Safety Incidents
• Likelihood to Recommend
• Organic Growth 4-6%
• Top Quartile Performance
• Carbon Neutral 2040
• Customer Dashboards
• 20%+ Market Share
• Year-over-Year Growth in:
• Speed & Agility
• Zero Defects
• High Performance Teams
• 98%+ On-Time Delivery
Diversity, Equity &
Inclusion
• Engagement > 75%
• Best-in-Class Lead Times
• #1, #2 Position Each
Business
• Grow Global Distribution
50% DIST
50% OEM
• Increasing New Product
Vitality & Gross Margins
• DNE
• EPS
• 25% Operating Margin
• 30% MROS
• 15% ROIC
• >100% FCF Conversion
• 16% FCF Margin
Enabling Engineering Breakthroughs
that Lead to a Better Tomorrow
PS-2049
Valued Customers
We partner with our customers to increase
their productivity and profitability, ensuring
their success as well as ours. We are committed
to serving our customers through innovation,
value creation and the highest quality
system solutions.
Engaged Leadership
We lead by example, demonstrating our values
in all circumstances and at all times. Our
character, experience and abilities are the
foundation of Parker’s operational excellence.
We hold ourselves accountable for achieving the
results our stakeholders expect. We listen to and
encourage one another, and take pride in our
growth and accomplishments.
Winning Culture
We insist on integrity and ethical behavior
and we value compassion, respect and inclusion
in all aspects of our global business. We seek
to raise the quality of life through responsible,
global stewardship.
Passionate People
CAPEX INVESTMENT WAVE
We are seeing large-scale capital
expenditures from businesses and
We are empowered – every idea counts and
every role has a voice. We are committed to
governments around the world to
safety and realize the value of our collective
upgrade and automate factories
efforts. We believe our strength comes from the
relationships and trust we establish with each
with advanced manufacturing
other, our customers, suppliers, distributors
and the world we serve.
equipment and modernize vast
Valued Customers
infrastructure systems to support
We partner with our customers to increase
their productivity and profitability, ensuring
a future powered by clean
their success as well as ours. We are committed
energy. Contributing to this
to serving our customers through innovation,
value creation and the highest quality
increase in investment is an
system solutions.
emerging trend of reshoring
Engaged Leadership
related to supply chain
disruptions. These
developments have the
potential to be a reliable organic
We lead by example, demonstrating our values
in all circumstances and at all times. Our
character, experience and abilities are the
foundation of Parker’s operational excellence.
We hold ourselves accountable for achieving the
results our stakeholders expect. We listen to and
encourage one another, and take pride in our
growth and accomplishments.
among the best performing
industrial companies in the world.
Thank you to all our team members
for leading with purpose every day,
and to our shareholders for your
confidence as we have
transformed our company. We are
honored to be on this journey with
you as we look ahead to Parker’s
promising future.
Sincerely,
Jennifer A. Parmentier
Chief Executive Officer
Thomas L. Williams
Executive Chairman
Lee C. Banks
Vice Chairman and President
September 2023
growth driver for Parker in the form
of increased demand for
construction, transportation,
energy and factory automation
equipment. The combined global
investment in these projects is
estimated to be in the trillions of
dollars in the decade ahead.
SECULAR GROWTH
MEGATRENDS
In addition to the growth we see in
the aerospace and defense
markets and in capital
expenditures for infrastructure,
several other key trends hold great
promise for Parker’s growth
profile. Many are tied to the
advancement of clean
technologies in support of carbon
reduction targets. Today, we
estimate that two-thirds of Parker’s
highly integrated portfolio are
solutions that enable clean
technologies.
Regardless of the direction or
speed in which our markets
transition to a cleaner future,
Parker can provide the
technologies our customers need
such as more efficient carbon-
based energy or the landmark shift
underway in how energy is
generated, stored and delivered
around the world. Through our
cross-industry partnerships with
OEM customers, energy providers
and governments, Parker is at the
center of advancing clean energy
and we see tremendous growth
opportunity as industries transition
to clean power.
From heavy-duty trucks and
mobile equipment to cars and
SUVs, each year more consumers
and OEMs are moving to electric
power for vehicles where Parker’s
bill-of-material often increases
1.5-2x compared with vehicles
using a combustion engine. Parker
continues to closely partner with
our OEM customers on their
technology shift to electrification.
Our technologies are also critical
to the advancement of hydrogen,
wind, solar and other clean energy
sources; the manufacturing of
semiconductors that remain in
extremely high demand; 5G towers
and large-scale data centers; and
the cleaner and faster extraction of
lithium for batteries.
We are excited by the
opportunities we see to sustain
Parker’s positive trajectory and
help improve the quality of life for
generations to come.
GUIDED BY PURPOSE
From the investments we have
made over the years in
transforming our technology
portfolio and streamlining our
operations, Parker is now in the
advantageous position to support
key industries being reshaped by
secular growth trends and rapid
technology advancement.
We closed the year with record
performance, powerful momentum
and great confidence in achieving
our fiscal year 2027 financial
targets, which would place Parker
Enabling
Engineering
Breakthroughs
that Lead to
a Better
Tomorrow
☒
☐
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, 2023
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. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the
registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based
compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
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, 2022:
$37,131,474,472.
The number of Common Shares outstanding on July 31, 2023 was 128,431,401.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Definitive Proxy Statement for the Company’s 2023 Annual Meeting of Shareholders, to be held on October 25, 2023,
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.
Financial Statements and Supplementary Data
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
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
11
17
18
19
20
20
20
20
21
35
36
75
75
75
75
75
76
76
76
76
77
82
1
PARKER-HANNIFIN CORPORATION
FORM 10-K
Fiscal Year Ended June 30, 2023
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 39 states within the United
States and in 43 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 548,000 customers in virtually every significant manufacturing, transportation and
processing industry.
We have two reporting segments: Diversified Industrial and Aerospace Systems. During 2023, our technologies and
systems were used in the products of these two reporting segments. For 2023, the Company's net sales were $19.1 billion.
Diversified Industrial Segment products accounted for 77 percent and Aerospace Systems Segment products accounted for 23
percent of those net sales.
Markets
Our technologies and systems are used across industries and in various applications. The approximately 548,000
customers who purchase Parker products are found in almost every significant manufacturing, transportation and processing
industry. No single customer accounted for more than four percent of our total net sales for the year ended June 30, 2023.
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
Group:
Filtration
Group:
Fluid Connectors
Group:
Motion Systems
Group:
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Aerospace
Agriculture
Chemical processing
Construction
Defense
Information technology
Life sciences
Aerospace & defense
Agriculture
Clean & Renewable Energy
Construction
Food & beverage
• Microelectronics
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Oil & gas
Power generation
Renewable energy
Telecommunications
Transportation
Truck & bus
Life sciences
• Marine
• Mining
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Oil & gas
Power generation
Heating, ventilation & air conditioning
(HVAC)
Industrial plant & equipment
• Medium & Heavy Duty Truck
• Water purification
Aerial lift
Agriculture
Clean & Renewable Energy
Construction
Food & beverage
Forestry
Heating, ventilation, air conditioning &
refrigeration (HVACR)
Industrial machinery
Life sciences
• Material handling
• Microelectronics
• Military
• Mining
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Oil & Gas, Chemical, Petrochemical
Refining
Renewable energy
Transportation
Mobile:
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Agriculture
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Construction
• Marine
• Material handling
• Military
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Transportation
Truck & bus
Turf
Industrial:
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Distribution
General machinery
• Machine Tool
• Metal Forming
• Mining
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Oil & gas
Power generation
Semiconductor
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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:
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Aftermarket services
Business and general aviation
Commercial transport aircraft
Engines
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Helicopters
• Military aircraft
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Regional transport aircraft
Principal Products and Methods of Distribution
We offer hundreds of thousands of individual part numbers, and no single product contributed more than one percent to
our total net sales for the year ended June 30, 2023. 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:
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Active vibration control systems
Bearings & dampers
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High-temperature metal seals
Homogeneous & inserted elastomeric shapes
Coatings
Composites
Dynamic seals
Elastomeric mounts & isolators
Elastomeric o-rings
Electromagnetic interference shielding
Extrusion & fabricated seals
Fabric reinforced seals
Fuel cell sealing systems
• Medical products fabrication & assembly
• Metal & plastic composite bonded seals
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Precision-cut seals
Rubber-to-substrate adhesives
Specialty chemicals
Structural adhesives
Thermal management
• Wireless sensing systems
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Filtration Group: filters, systems and diagnostics solutions to ensure purity in critical process chemicals and to remove
contaminants from fuel, air, oil, water and other liquids and gases, including:
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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
Heating, ventilation & air conditioning filters
Hydrogen and alternative energy filters
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Hydraulic & lubrication filters & systems
Industrial & analytical gas generators
• Membrane, fiber, & sintered metal filters
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Natural gas filters
Process liquid, air & gas filters
Sterile air filters
Thermal Management
• Water purification filters & systems
Fluid Connectors Group: high quality fluid conveyance and flow control solutions that are critical to a wide range of
applications involving fluid and gas handling, process control, and climate controls:
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Analytical instruments
Ball & check valves
Compressed natural gas dispensers
Cryogenic valves
Diagnostic and sensors
Diesel exhaust treatment systems
Elastomeric, thermoplastic, and industrial hose &
couplings
Electronic valves
Filter driers
Fluid system & control fittings, meters valves,
regulators, & manifold valves
Fluoropolymer chemical delivery fittings, valves, &
pumps
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High pressure fittings, valves, & regulators
High purity gas delivery fittings, valves, & regulators
HVACR controls & monitoring
Low pressure fittings & adapters
• Miniature valves and pumps
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Natural gas on-board fuel systems
PTFE hose & tubing
Pressure regulating valves
Quick couplings
Solenoid Valves
Tube fittings & adapters
Tubing & plastic fittings
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:
Pneumatics:
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Accumulators
Coolers
Cylinders
Electrohydraulic actuators
Helical actuators
Rotary actuators
Hydraulic Pumps & Motors:
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Drive controlled pumps
Electrohydraulic pumps ("ePumps")
Fan drives
Gerotor pumps & motors
Integrated hydrostatic transmissions
Piston pumps & motors
Power take-offs ("PTO")
Screw pumps
Vane pumps & motors
Hydraulic and Electro Hydraulic Systems:
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Cartridge valves
Industrial Hydraulic valves
• Mobile Hydraulic valves
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ePTO's
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Air preparation (FRL) & dryers
Grippers
IO link controllers
Pneumatic cylinders
Pneumatic valves
Electronics:
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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 independent distributors located throughout the world.
During 2023, the Company consolidated the Instrumentation Group with the Fluid Connectors Group. The consolidated
group continues to service the major markets and offers the principal products provided by the former Instrumentation Group
and Former Fluid Connectors Group. The combined group is designed to leverage the strength of Parker's fluid and gas
handling, process control and climate control technologies into a single organization that can better address the emerging needs
of customers across common end markets and applications. The realignment is expected to bring added growth opportunities
and is a further step towards organizational simplification and alignment.
6
Aerospace Systems Segment. Our Aerospace Systems Segment products are used in commercial and military airframe
and engine programs and include:
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Actuation systems & components
Avionics
Electric power components
Engine build-up ducting
Engine exhaust nozzles & assemblies
Engine systems & components
Fire detection and suppression systems and
components
Fluid conveyance systems & components
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Fluid metering, delivery & atomization devices
Fuel systems & components
Fuel tank inerting systems
Hydraulic systems & components
Lubrication components
Pneumatic control components
Sensors
Thermal management
• Wheels, brakes and brake control systems
We market our Aerospace Systems Segment products through our regional sales organizations, which sell directly to
OEMs and end users throughout the world.
Competition
Parker operates in highly competitive markets and industries. We offer our products over numerous, varied markets
through our divisions operating in 44 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
experience, 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., 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, 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 design
and manufacturing techniques as well as best cost region and supply chain management strategies to reduce cost. 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, Crane Co., 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:
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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.
7
Patents, Trademarks, Trade Names, Copyrights, Trade Secrets, Licenses
We own a number of patents, trademarks, trade names, copyrights, trade secrets and licenses related to our products. We
also have exclusive and non-exclusive rights to use patents, trademarks, trade names, copyrights and trade secrets 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 $11.0 billion at June 30, 2023 and $7.9 billion at June 30, 2022. Approximately 79
percent of our backlog at June 30, 2023 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.
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, 2023, Parker was involved in environmental remediation and litigation 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, which is incorporated herein by reference.
Government Regulation
In addition to the environmental regulations discussed above, we are subject to various federal, state, local, and foreign
government regulations relating to the development, manufacture, marketing, sale and distribution of our products and services
in the countries where we conduct business. Compliance with these laws and regulations often requires the dedication of time
and effort of our team members, as well as financial resources. Additional information about the impact of government
regulations on our business is included in “Item 1A. Risk Factors.”
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.
8
Acquisitions
The Company completed the acquisition (the "Acquisition") of Meggitt plc ("Meggitt") in 2023. The Acquisition is
discussed in Note 3 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.
Human Capital Management
At Parker, we align employment levels with the global needs of our business and our customers. As of June 30, 2023, we
employed approximately 62,730 persons that we refer to as “team members,” of whom approximately 30,940 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.
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. Over the last five years, we have reduced our Recordable Incident Rate by 45% and our Lost Time
Incident Rate by 33% from fiscal year 2019 through fiscal year 2023. In fiscal year 2023, the recordable incident rate per 100
team members was 0.31, compared to a recordable incident rate of 0.39 in fiscal year 2022. Our Lost Time Incident Rate in
fiscal year 2023 was 0.12, compared to 0.15 per 100 team members in fiscal year 2022 (rates exclude Meggitt acquisition).
Building on the great progress we have made, in 2021 we established long-term safety goals. We intend to reach our goal
of zero recordable incidents by 2030 through our continued focus on team member engagement and accountability, coupled
with a strong framework of systems and procedures.
To help support this goal we adopted eight standards aimed at preventing serious safety incidents or an environmental
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. Further, for leading indicator corrective action we leverage a globally deployed
Gensuite® operating platform in which proactive corrective action is managed and monitored and data analytics are employed to
look for trends that can be proactively addressed to eliminate potential injury risk.
We engage team members in improving safety performance through High Performance Teams ("HPTs"). All Parker
manufacturing locations have an active, chartered Safety HPT and every value stream has a representative who is responsible
for safety within their area of the business. This ownership culture at the manufacturing level is an integral component of our
safety program.
9
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 93% of our people
participate in these teams, and more than 7,116 HPTs have already been established worldwide. We closely track our progress
toward support of a high performing work environment through our Global Engagement Survey. Our last completed survey, in
fiscal year 2022, achieved a 91% response rate with an overall engagement score of 73%, a score which exceeded our key
benchmarking data by 2%.
Talent Development
We have a well-defined talent development program managed through our Talent Central system, which connects all
business units globally on a common platform and provides team members with visibility to skill development, career planning
and learning opportunities. This shared platform is the catalyst for talent management at Parker.
Our review process enables us to assess talent globally, from early-in-career roles through senior leaders. This review
facilitates the identification of key talent and allows us to build meaningful development plans and align career growth
opportunities. The talent process is also supported by our Integrated Career System program which illustrates career paths for
various roles and the steps to advance through the organization.
Supplementing the talent development process are Parker’s learning offerings, which help team members expand their
professional skills and take ownership of their learning and development. Examples of center-led programs are our annual
ethics and compliance training and cyber security training that all team members are required to complete, in addition to
programs for developing supervisory and leadership skills. Functional-specific programs include HPT training, lean bootcamps
and kaizen event orientations. Local and regional training includes site safety, equipment safety and site quality requirements.
In addition to formal training programs, there are a host of development tools available which include mentoring
relationships, coaching and feedback, job shadowing, project bubble assignments and other stretch projects.
Diversity, Equity and Inclusion ("DEI")
An inclusive environment is a core tenet of Parker’s values and one of our key measures of success within The 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 we have achieved.
A component of our DEI focus is to support the development and deployment of Business Resource Groups ("BRGs").
In 2015, we launched Peer W, our first BRG focused on supporting the recruitment, development and retention of women at
Parker. Peer W has grown into a well-developed global network of over 30 chapters and established a Mentoring Circles
program in 2020. In 2021, we introduced and launched two additional BRGs which are the Nia Network, supporting the
attraction, development and retention of Black team members, and Parker Next, dedicated to our team members’ professional
growth and personal development.
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.
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.
10
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
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. 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, currency exchange rates, air travel trends, difficulties entering new markets,
tariffs and governmental trade and monetary policies, global pandemics, 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.
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 37 percent in 2023, 39 percent in
2022 and 40 percent in 2021. 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:
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fluctuations in currency exchange rates and/or changes in monetary policy;
limitations on ownership and on repatriation of earnings;
transportation delays and other supply chain disruptions;
political, social and economic instability and disruptions, including armed conflicts such as the current conflict
between Russia and Ukraine;
government embargoes, sanctions 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;
public health crises, including pandemics;
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.
11
For example, the global nature of our business and our operations exposes us to political, economic, and other conditions
in foreign countries and regions, including geopolitical risks such as the current conflict between Russia and Ukraine. The
broader consequences of this conflict, which may include further sanctions, embargoes, regional instability, and geopolitical
shifts; potential retaliatory action by the Russian government against companies, including possible nationalization of foreign
businesses in Russia; increased tensions between the United States and countries in which we operate; and the extent of the
conflict’s effect on our business and results of operations as well as the global economy, cannot be predicted. To the extent the
current conflict between Russia and Ukraine adversely affects our business, it may also have the effect of heightening many
other risks, any of which could materially and adversely affect our business and results of operations. Such risks include, but
are not limited to, adverse effects on macroeconomic conditions, including inflation, particularly with regard to raw material,
transportation and labor price fluctuations; disruptions to our information technology environment, including through
cyberattack, ransom attack, or cyber-intrusion; adverse changes in international trade policies and relations; disruptions in
global supply chains; and our exposure to foreign currency exchange rate changes.
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 have posed and could
continue to pose a risk to our information technology systems and a disruption to or breach in the security of such
systems, if material, could have adverse effects on our result of operations and financial condition.
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. Additionally, certain of our employees work
remotely at times, 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 has access to sensitive, confidential, or personal data or information that is subject to privacy and
security laws, regulations, or other contractually-imposed controls. Despite our use of reasonable and appropriate controls,
security breaches, theft, misplaced, lost or corrupted data, programming, or employee errors and/or malfeasance have led and
could in the future lead to the compromise or improper use of such sensitive, confidential, or personal data or information.
Such events may result in possible negative consequences, such as fines, ransom demands, penalties, failure to comply with
laws governing sensitive data, loss of reputation, intellectual property, competitiveness or customers, increased security and
compliance costs or other negative consequences. Further, the amount of insurance coverage that we maintain may be
inadequate to cover claims or liabilities relating to a cybersecurity incident. Depending on the nature and magnitude of these
events, they may have an adverse impact on our results of operations or financial condition.
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.
Unexpected events may increase our cost of doing business or disrupt our operations.
The occurrence of one or more unexpected events, including war, acts of terrorism or violence, civil unrest, fires,
tornadoes, hurricanes, earthquakes, floods and other forms of severe weather in the United States or in other countries in which
12
we operate or in which our suppliers are located could adversely affect our operations and financial performance. Natural
disasters, pandemics, such as the COVID-19 pandemic, equipment failures, power outages or other unexpected events could
result in physical damage to and complete or partial closure of one or more of our manufacturing facilities or distribution
centers, temporary or long-term disruption in the supply of component products from some local and international suppliers,
and disruption and delay in the transport of our products to dealers, end-users and distribution centers. Existing insurance
coverage may not provide protection for all of the costs that may arise from such events.
For example, during the COVID-19 pandemic we experienced mandatory and voluntary facility closures in certain
jurisdictions in which we operate. Furthermore, several of our customers temporarily suspended their operations and we
experienced less demand for our products. Facility closures or other restrictions, as well as supply chain disruptions, did
negatively impact and could in the future materially adversely affect our ability to adequately staff, supply or otherwise
maintain our operations. The impact of unexpected events such as the COVID-19 pandemic are difficult to predict, but could
have a material adverse effect on our business, results of operations or financial condition.
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;
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;
weakness in the end-markets we serve;
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.
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.
13
We may be required to make material expenditures in order to comply with environmental laws and regulations,
to address the effects of climate change and to respond to customer needs and investor expectations regarding climate-
related goals, each of which may negatively impact our business.
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. 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. We are not able to predict how such
regulations would affect our business, operations or financial results, but increased regulation could have a material adverse
effect on our business, operations and financial condition.
Further, climate change resulting from increased concentrations of carbon dioxide and other greenhouse gases in the
atmosphere could present risks to our operations. Extreme weather events linked to climate change, including hurricanes,
flooding, wildfires, high heat and water scarcity, among others, create physical risks to our operating locations and supply
chains. Although we are working towards and intend to meet our goal of making our own operations carbon neutral by 2040,
we may be required to expend significant resources to do so, which could increase our operational costs. Further, there can be
no assurance of the extent to which any of our climate-related goals will be achieved, if at all, including on the timeline
expected by customers or investors, or that any future investments we make in furtherance of achieving our goals will meet
customer expectations and needs, investor expectations or market standards regarding sustainability, including reducing
greenhouse gas emissions. Any failure, or perceived failure, by us to achieve our climate-related goals, further our initiatives,
adhere to our public statements, comply with federal, state or international climate-related laws and regulations or meet
evolving and varied customer and investor expectations and standards could result in legal and regulatory proceedings against
us or could cause our customers to find other suppliers, each of which could adversely affect our reputation, the market price of
our common shares, our results of operations, our financial condition or our cash flows.
We operate in challenging markets for talent and may fail to attract, develop and retain key personnel.
We depend on the skills, institutional knowledge, working relationships, and continued services and contributions of key
personnel, including our leadership team and others at all levels of the company, as a critical part of our human capital
resources. In addition, our ability to achieve our operating and strategic goals depends on our ability to identify, hire, train and
retain qualified individuals. We compete with other companies both within and outside of our industry for talented personnel in
a highly competitive labor market, and we may lose key personnel or fail to attract other talented personnel or otherwise
identify and retain suitable replacements. Any such loss or failure could have material adverse effects on our results of
operations, financial condition and cash flows.
Strategic Transactions Risks
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 Meggitt plc ("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.
14
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 Meggitt. 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 acquisitions 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.
15
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 financial condition and
cash flow 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 non-U.S. and U.S. federal,
state and local tax authorities. If these audits result in assessments different from estimated amounts, future financial results
may include unfavorable adjustments to the Company’s tax liabilities, which could have a material adverse effect on the
Company’s financial condition and cash flow.
Our indebtedness and restrictive covenants under our credit facilities could limit our operational and financial
flexibility.
We have incurred significant indebtedness, and may 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 as of
December 31, in the third 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 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.
16
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 in 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. And the cost of enforcing our rights may be significant. Unauthorized use or disclosure of our intellectual
property rights or our inability to protect our intellectual property rights could lead to reputational harm and/or adversely impact
our competitive position and results of operations.
ITEM 1B. Unresolved Staff Comments. None.
17
ITEM 1C. Information about our Executive Officers.
Our executive officers as of August 15, 2023, were as follows:
Name
Jennifer A. Parmentier
Thomas L. Williams
Todd M. Leombruno
Lee C. Banks
Andrew D. Ross
Mark J. Hart
Position
Chief Executive Officer and Director
Executive Chairman of the Board and Director
Executive Vice President and Chief Financial Officer
Vice Chairman and President and Director
Chief Operating Officer
Executive Vice President – Human Resources & External Affairs
Rachid Bendali
William R. "Skip" Bowman
Berend Bracht
Vice President and President – Engineered Materials Group
Vice President and President – Fluid Connectors Group
Vice President and President – Motion Systems Group
Mark T. Czaja
Angela R. Ives
Thomas C. Gentile
Joseph R. Leonti
Robert W. Malone
Dinu J. Parel
Roger S. Sherrard
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 – Chief Digital and Information Officer
Vice President and President – Aerospace Group
Officer
Since(1)
Age as of
8/15/23
2015
2005
2017
2001
2012
2016
2022
2016
2021
2021
2021
2017
2014
2014
2018
2003
56
64
53
60
56
58
46
65
57
61
50
51
51
59
42
57
(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. Banks, Bowman, Gentile, Hart, Leonti, Malone, and
Sherrard have served in the executive capacities indicated above during each of the past five years.
Ms. Parmentier has been Chief Executive Officer since January 1, 2023. She was previously 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. Williams has been a Director since January 2015 and has been Executive Chairman of the Board since January 1,
2023. He was previously Chief Executive Officer from February 2015 to January 1, 2023; 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 and The Sherwin-Williams
Company.
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. 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.
Mr. Ross has been Chief Operating Officer since January 1, 2023. He was previously 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. 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.
18
Mr. Bendali has been Vice President and President of the Engineered Materials Group since August 2022. He joined the
Company as part of the LORD Corporation ("Lord") acquisition in October 2019, when he was named General Manager of the
Noise, Vibration and Harshness Division. In September 2021, he was named Vice President of Operations for the Engineered
Materials Group with responsibility for multiple divisions. Prior to joining Parker, in 2015 he became leader of Lord's global
Aerospace and Defense commercial function based in Cary, North Carolina and was later named Vice President with
responsibility for Aerospace and Defense sales, marketing and programs. Lord was a diversified technology and manufacturing
company developing highly reliable adhesives and coatings as well as vibration and motion control technologies.
Mr. Bowman has been Vice President and President - Fluid Connectors Group since January 2023. He was previously
Vice President and President - Instrumentation Group from September 2016 to December 2022. 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. He is also a Director of The Manitowoc Company.
Mr. Parel has been Vice President – 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. Dover is a diversified global manufacturer that delivers equipment
and components, consumable supplies, aftermarket parts, software and digital solutions and support services.
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.
ITEM 2. Properties. Our corporate headquarters is located in Cleveland, Ohio, and, at June 30, 2023, the Company
maintained approximately 335 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 39 states within the United States and in 43 other countries. We own
the majority of our manufacturing plants, and our leased properties consist of manufacturing plants, 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.
19
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, 2023, the number of shareholders of record of the
Company was 3,114.
(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, 2023 through April 30, 2023
May 1, 2023 through May 31, 2023
June 1, 2023 through June 30, 2023
Total
(a) Total
Number
of Shares
Purchased
47,200
53,900
47,887
148,987
(b) Average
Price Paid
Per Share
$
$
$
322.04
328.15
357.28
(c) Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs (1)
47,200
53,900
47,887
148,987
(d) Maximum Number
(or Approximate
Dollar Value) of
Shares that May Yet
Be Purchased
Under the Plans or
Programs
7,853,350
7,799,450
7,751,563
(1) On October 22, 2014, the Company publicly announced that the Board of Directors increased the overall maximum number
of shares authorized for repurchase under the Company's share repurchase program, first announced on August 16, 1990,
so that, beginning on October 22, 2014, the maximum aggregate number of shares authorized for repurchase was 35
million shares. There is no limitation on the amount of shares that can be repurchased in a fiscal year. There is no
expiration date for this program.
ITEM 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:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
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;
the impact of political, social and economic instability and disruptions, including public health crises such as the
COVID-19 pandemic;
ability to identify acceptable strategic acquisition targets; uncertainties surrounding timing, successful completion or
integration of acquisitions and similar transactions, including the integration of Meggitt; and our ability to effectively
manage expanded operations from acquisitions;
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;
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;
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 or shortages and the ability to attract and retain key personnel;
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;
local and global political and economic conditions, including the Russia-Ukraine war and its residual effects;
21
•
•
•
•
inability to obtain, or meet conditions imposed for, required governmental and regulatory approvals;
government actions and natural phenomena such as pandemics, floods, earthquakes, hurricanes or other natural
phenomena that may be related to climate change;
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,
2023, 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 which defines the goals and initiatives that create responsible, sustainable
growth and enable Parker's long-term success. It works with our purpose, which is a foundational element of The Win Strategy,
to engage team members and create responsible and sustainable growth. Our shared values shape our culture and our
interactions with stakeholders and the communities in which we operate and live.
We believe many opportunities for profitable growth are available. The Company intends to focus primarily on business
opportunities in the areas of 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 clean 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.
The continuing residual effects of the Russia-Ukraine war and the COVID-19 pandemic, including the inflationary cost
environment as well as disruption within the global supply chain and labor markets, have impacted our business. We continue
to manage the challenging supply chain environment through our "local for local" manufacturing strategy, ongoing supplier
management process, and broadened supply base. We continue to manage the impact of the inflationary cost environment
through a variety of cost and pricing measures, including continuous improvement and lean initiatives. Additionally, we
strategically manage our workforce and discretionary spending. At the same time, we are appropriately addressing the ongoing
needs of our business so that we continue to serve our customers.
Over the long-term, the extent to which our business and results of operations will be impacted by economic and political
uncertainty depends on future developments that remain uncertain. We will continue to monitor the environment and manage
our business with the goal to minimize the impact on operations and financial results.
22
As previously announced, on March 14, 2022, we detected that an unauthorized party gained access to our systems. After
securing our network and concluding our investigation, we found that the data exfiltrated during the incident included personal
information of our team members. We have notified individuals whose personal information was involved and offered them
credit monitoring services. We have also provided notification regarding the incident to the appropriate regulatory authorities.
A consolidated class action lawsuit has been filed in the United States District Court for the Northern District of Ohio against
the Company over the incident. The parties have reached a settlement in principle in the lawsuit, which the district court
preliminarily approved on March 14, 2023, and finally approved on August 2, 2023. Based on our ongoing assessments, the
incident has not had a significant financial or operational impact and has not had a material impact on our business, operations
or financial results.
The discussion below is structured to separately discuss the Consolidated Statement of Income, Business Segments, and
Liquidity and Capital Resources. The term "year" and references to specific years refer to the applicable fiscal year.
CONSOLIDATED STATEMENT OF INCOME
The Consolidated Statement of Income summarizes the Company's operating performance. The discussion below compares the
operating performance in 2023, 2022, and 2021.
(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 expense (income), net
Gain on disposal of assets
Effective tax rate
$
$
$
2023
$
19,065
$
$
33.7 %
3,354
17.6 %
574
184
(363)
22.2 %
2022*
15,862
33.5 %
2,504
15.8 %
255
945
(7)
$
$
$
2021*
14,348
33.1 %
2,383
16.6 %
250
(28)
(109)
18.5 %
22.3 %
Net income attributable to common shareholders
*Years ended June 30, 2022 and 2021 amounts have been reclassified to reflect the income statement reclassification, as described in Note 1
to the Consolidated Financial Statements.
1,316
1,746
2,083
$
$
$
Net sales in 2023 increased from the 2022 amount due to higher volume in both the Diversified Industrial and Aerospace
Systems Segments. The Acquisition completed within the last 12 months increased sales by approximately $2.1 billion during
the current year. The effect of currency rate changes decreased net sales in 2023 by approximately $470 million, substantially
all of which is attributable to the Diversified Industrial International businesses. Divestitures completed within the last 12
months decreased sales by approximately $69 million in 2023.
Net sales in 2022 increased from the 2021 amount due to higher volume in both the Diversified Industrial and Aerospace
Systems Segments. The effect of currency rate changes decreased net sales in 2022 by approximately $255 million,
substantially all of which is attributable to the Diversified Industrial International businesses.
Gross profit margin (calculated as net sales less cost of sales, divided by net sales) increased slightly in 2023 primarily due to
higher margins in both the Aerospace Systems and Diversified Industrial Segments. The increase in gross profit margin is
primarily due to higher sales volume and benefits from continuous improvement initiatives, as well as price increases. The
increase was partially offset by the step-up in inventory to fair value of $110 million, related to the Acquisition, within the
Aerospace Systems Segment. Additionally, increased freight, material and labor costs resulting from the ongoing inflationary
environment and disruption within the global supply chain and labor markets impacted margin. Cost of sales also included
business realignment and acquisition integration charges of $29 million in 2023 compared to $5 million in 2022.
Gross profit margin increased in 2022 primarily due to higher margins in both the Aerospace and Diversified Industrial
Segments. The increase in gross profit margin is primarily due to higher sales volume and benefits from continuous
improvement initiatives, as well as price increases, partially offset by increased freight, material and labor costs resulting from
ongoing inflationary environment and disruption within the global supply chain and labor markets. Cost of sales also included
business realignment and acquisition integration charges of $5 million in 2022 compared to $27 million in 2021.
23
Selling, general and administrative expenses ("SG&A") increased in 2023 primarily due to higher amortization expense,
research and development expense, information technology charges, as well as increased general and administrative charges
associated with the Acquisition. Additionally, acquisition-related transaction costs for the year totaled $115 million. SG&A
also included business realignment and acquisition integration charges of $94 million and $14 million in 2023 and 2022,
respectively.
SG&A increased in 2022 primarily due to acquisition-related transaction costs of $44 million as well as higher net expense
from the Company's deferred compensation plan and related investments and higher professional fees and related expenses.
SG&A also included business realignment and acquisition integration charges of $14 million and $31 million in 2022 and 2021,
respectively.
Interest expense in 2023 increased compared to 2022 primarily due to higher average interest rates and higher average debt
outstanding. Interest expense in 2022 increased compared to 2021 primarily due to higher average debt outstanding, partially
offset by lower average interest rates.
Other expense (income), net included the following:
(dollars in millions)
Expense (income)
Foreign currency transaction loss (gain)
Income related to equity method investments
Non-service components of retirement benefit cost
Interest income
Acquisition-related financing fees
Loss on deal-contingent forward contracts
Russia liquidation
Other items, net
2023
2022*
2021*
$
$
46 $
(124)
(67)
(46)
—
390
—
(15)
184 $
(40) $
(76)
4
(10)
52
1,015
8
(8)
945 $
(11)
(41)
49
(7)
—
—
—
(18)
(28)
*Years ended June 30, 2022 and 2021 amounts have been reclassified to reflect the income statement reclassification, as described in Note 1
to the Consolidated Financial Statements.
Foreign currency transaction loss (gain) primarily relates to the impact of exchange rates on cash, forward contracts, certain
cross-currency swap contracts and intercompany transactions. During 2023, it also includes foreign currency transaction loss
associated with completing the Acquisition.
Acquisition-related financing fees in 2022 relate to the bridge credit agreement (the "Bridge Credit Agreement") fees associated
with the Acquisition. 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.
Loss on deal-contingent forward contracts in 2023 and 2022 includes a loss on the deal-contingent forward contracts related to
the Acquisition. Refer to Note 16 to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-
K for further discussion.
Gain on disposal of assets in 2023 includes a gain on the sale of the aircraft wheel and brake business within the Aerospace
Systems Segment of $374 million. Refer to Note 3 to the Consolidated Financial Statements in Part II, Item 8 of this Annual
Report on Form 10-K for further discussion. In 2021 it primarily consists of a gain of $101 million on the sale of land.
Effective tax rate in 2023 was higher than 2022, primarily due to an overall decrease in discrete tax benefits along with a
reduction in the benefit from the foreign derived intangible income deduction. Effective tax rate in 2022 was lower than 2021
primarily due to an overall increase in discrete tax benefits.
24
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
2023
2022
2021
$
$
8,916
5,789
1,853
1,218
$
$
7,703
5,639
1,515
1,178
$
$
20.8 %
21.0 %
$
4,786
$
19.7 %
20.9 %
4,510
$
3,239
6,676
5,284
1,247
988
18.7 %
18.7 %
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 currency1
Diversified Industrial International – as reported
Acquisitions
Currency
Diversified Industrial International – without acquisitions and currency1
Total Diversified Industrial Segment – as reported
Acquisitions
Currency
Total Diversified Industrial Segment – without acquisitions and currency1
2023
15.7 %
4.0 %
— %
11.7 %
2.7 %
2.3 %
(8.3) %
8.7 %
10.2 %
3.3 %
(3.5) %
10.4 %
2022
15.4 %
— %
0.1 %
15.3 %
6.7 %
— %
(4.9) %
11.6 %
11.6 %
— %
(2.0) %
13.6 %
1The above presentation reconciles the percentage changes in net sales of the Diversified Industrial Segment reported in accordance with U.S.
generally accepted accounting principles ("GAAP") to percentage changes in net sales adjusted to remove the effects of the Acquisition made
within the last 12 months as well as currency exchange rates (a non-GAAP measure). The effects of the Acquisition 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.
Net Sales
Diversified Industrial North America - Sales in 2023 for the Diversified Industrial North American businesses increased 15.7
percent from 2022. The effect of the Acquisition increased sales by approximately $311 million. Currency exchange rates did
not materially impact sales during the year. Excluding the effects of the Acquisition and changes in the currency exchange
rates, sales in 2023 for the Diversified Industrial North American businesses increased 11.7 percent from prior-year levels
reflecting higher demand from distributors and end users across most markets, including, the cars and light trucks, farm and
agriculture, construction equipment, heavy-duty truck, oil and gas, lawn and turf, metal fabrication, industrial machinery,
semiconductor, and material handling markets, partially offset by lower end user demand in the life sciences market.
Sales in 2022 for the Diversified Industrial North American businesses increased 15.4 percent from 2021. The effect of
currency exchange rates increased sales by approximately $7 million. Excluding the effect of currency rate changes, sales in
2022 for the Diversified Industrial North American businesses increased 15.3 percent from prior-year levels reflecting higher
25
demand from distributors and end users in virtually all markets, including, the farm and agriculture, life sciences, heavy-duty
truck, construction equipment, engines, refrigeration, material handling, metal fabrication, and semiconductor markets.
Diversified Industrial International - Sales in the Diversified Industrial International businesses increased 2.7 percent in 2023.
The effect of the Acquisition increased sales by approximately $128 million. Currency exchange rates decreased sales by
approximately $465 million, reflecting the strengthening of the U.S. dollar primarily against currencies in the Eurozone
countries, China and Japan. Excluding the effects of the Acquisition and changes in the currency exchange rates, sales in 2023
for the Diversified Industrial International businesses increased 8.7 percent from 2022 levels. During 2023, Europe, the Asia
Pacific region, and Latin America accounted for approximately 75 percent, 10 percent, and 15 percent, respectively, of the
increase in sales.
Within Europe, the increase in sales was primarily due to higher demand from distributors and end users in the construction
equipment, cars and light trucks, heavy-duty truck, oil and gas, industrial machinery, material handling, metal fabrication, farm
and agriculture, and semiconductor markets, partially offset by a decrease in end-user demand in the power generation market.
Within the Asia Pacific region, the increase in sales was primarily due to higher demand from distributors and end users in the
construction equipment, cars and light trucks, marine, heavy-duty truck, telecommunications, engines, and mining markets,
partially offset by a decrease in end-user demand in the life sciences, refrigeration, and semiconductor markets.
Within Latin America, the increase in sales was primarily due to higher demand from distributors and end users in the cars and
light trucks, oil and gas, farm and agriculture, railroad, and metal fabrication markets, partially offset by a decrease in end-user
demand in the construction equipment and industrial machinery markets.
Sales in the Diversified Industrial International businesses increased 6.7 percent in 2022. The effect of currency rate changes
decreased sales by $256 million, reflecting the strengthening of the U.S. dollar primarily against currencies in the Eurozone
countries, Turkey and Japan. Excluding the effect of currency rate changes, sales in 2022 for the Diversified Industrial
International businesses increased 11.6 percent from 2021 levels. During 2022, Europe, the Asia Pacific region, and Latin
America accounted for approximately 70 percent, 20 percent, and 10 percent, respectively, of the increase in sales.
Within Europe, the increase in sales was primarily due to higher demand from distributors and end users in the construction
equipment, heavy-duty truck, industrial machinery, life sciences, machine tool, mining, material handling, engines, and forestry
markets, partially offset by a decrease in end-user demand in the cars and light trucks, semiconductor, telecommunications, and
oil and gas markets.
Within the Asia Pacific region, the increase in sales was primarily due to higher demand from distributors and end users in the
semiconductor, refrigeration, industrial machinery, life sciences, and machine tool markets, partially offset by a decrease in
end-user demand in the engines, power generation, heavy-duty truck, railroad equipment, and material handling markets.
Within Latin America, the increase in sales was primarily due to higher demand from distributors and end users in the farm and
agriculture, cars and light trucks, mining, heavy-duty truck, construction equipment, and industrial machinery markets, partially
offset by a decrease in end-user demand in the power generation and life sciences markets.
Operating Margin
Diversified Industrial North America - Operating margins in 2023 increased from 2022 primarily due to benefits from higher
sales volume, continuous improvement initiatives and price increases, partially offset by higher material and operating costs
resulting from the inflationary environment, as well as unfavorable product mix.
Diversified Industrial International - Operating margins in 2023 increased from 2022 primarily due to benefits from continuous
improvement initiatives and price increases, partially offset by higher material and operating costs resulting from the
inflationary environment, as well as unfavorable product mix.
Operating margins in 2022 increased from 2021 in both the North American and International businesses primarily due to
higher sales volume and benefits from continuous improvement initiatives, as well as price increases. These increases were
partially offset by increased operating costs, including higher freight, material, and labor costs resulting from the ongoing
disruption within the current supply chain environment and labor market. In addition, within the International businesses,
operating margin in 2022 benefited from savings related to prior-year restructuring actions.
26
Business Realignment
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
$
2023
2022
9 $
23
4 $
14
2021
14
36
Business realignment charges include severance costs related to actions taken under the Company's simplification initiative
aimed at reducing organizational and process complexity, as well as plant closures. Acquisition integration charges in the
current year relate to the acquisition of Meggitt, and charges in both 2022 and 2021 relate to the 2020 acquisition of Lord.
During 2021, business realignment charges primarily consisted of actions taken to address the impact of the COVID-19
pandemic on our business. Business realignment and acquisition integration charges within the Diversified Industrial
International businesses were primarily incurred in Europe.
During 2022, we also incurred $6 million of expense within the Diversified Industrial International businesses as a result of our
exit of business operations in Russia. These charges primarily consist of write-downs of inventory and other working capital
items.
We anticipate that cost savings realized from the workforce reduction measures taken during 2023 will increase operating
income in 2024 by approximately one percent in the Diversified Industrial International businesses and will not materially
impact operating income in the Diversified Industrial North American businesses. 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 $78 million in business realignment and acquisition integration charges in 2024. However, continually changing
business conditions could impact the ultimate costs we incur.
Backlog
The increase in Diversified Industrial Segment backlog in 2023 was primarily due to the addition of Meggitt backlog, partially
offset by shipments exceeding orders in both the North American and International businesses. Excluding the addition of
Meggitt backlog, North American and International businesses accounted for approximately 60 percent and 40 percent of the
change, respectively. Within the International business, the Asia Pacific region, Europe and Latin America accounted for
approximately 80 percent, 15 percent, and five percent of the change, respectively.
The increase in Diversified Industrial Segment backlog in 2022 was primarily due to orders exceeding shipments in both the
North American and International businesses. Backlog within the North American and International businesses accounted for
approximately 75 percent and 25 percent of the change, respectively. Within the International business, the Asia Pacific region,
Europe and Latin America accounted for approximately 60 percent, 30 percent, and 10 percent of the change, respectively.
Backlog consists of written firm orders from a customer to deliver products and, in the case of blanket purchase orders, only
includes the portion of the order for which a schedule or release date has been agreed to with the customer. The dollar value of
backlog is equal to the amount that is expected to be billed to the customer and reported as a sale.
Aerospace Systems Segment
(dollars in millions)
Sales
Operating income
Operating income as a percent of sales
Backlog
Sales
2023
2022
$
4,360
$
2,520
$
562
12.9 %
501
19.9 %
2021
2,388
403
16.9 %
$
6,201
$
3,340
$
3,264
Aerospace Systems Segment sales in 2023 increased compared to prior-year primarily due to the addition of Meggitt sales of
$1.6 billion. Sales also increased compared to 2022 due to higher volume in the commercial OEM and aftermarket businesses,
partially offset by lower military OEM and aftermarket volume. The increase in sales was partially offset by divestitures during
2023.
27
Sales in 2022 were higher than the 2021 level primarily due to higher commercial aftermarket and OEM volume, partially
offset by lower military OEM and aftermarket volume.
Operating Margin
Aerospace Systems Segment operating margin decreased in 2023 primarily due to acquisition-related expenses, including
higher estimated amortization and depreciation expense associated with the preliminary fair value estimates of intangible assets,
plant and equipment, and inventory, as well as acquisition integration charges. Additionally, higher commercial OEM volume,
an increase in contract loss reserves related to certain commercial OEM programs, challenges created by the disruption within
the supply chain and labor markets and higher engineering development expenses also contributed to the lower operating
margin. These factors were partially offset by higher commercial aftermarket volume and cost containment initiatives.
Aerospace Systems Segment operating margin increased in 2022 primarily due to higher sales volume, favorable commercial
aftermarket product mix, higher aftermarket profitability as well as lower unfunded engineering development expenses. These
benefits were partially offset by challenges created by the ongoing inflationary environment, disruption within the supply chain
and labor markets as well as unfavorable commercial OEM product mix.
Business Realignment
Within the Aerospace Systems Segment, we incurred acquisition integration and business realignment charges of $90 million in
2023. We expect to incur approximately $27 million in business realignment and acquisition integration charges in 2024.
However, continually changing business conditions could impact the ultimate costs we incur.
During 2022, we incurred $7 million of expense within the Aerospace Systems Segment as a result of our exit of business
operations in Russia. These charges primarily consist of write-downs of inventory and other working capital items.
Backlog
The increase in Aerospace Systems Segment backlog in 2023 was primarily due to the addition of Meggitt backlog as well as
orders exceeding shipments in the commercial OEM and aftermarket businesses and the military OEM and aftermarket
businesses.
The increase in backlog in 2022 was primarily due to orders exceeding shipments in the commercial OEM and aftermarket
businesses, partially offset by shipments exceeding orders in the military 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
2023
2022
2021
Corporate general and administrative expense, as a percent of sales
1.2 %
1.4 %
$
230
$
220
$
178
1.2 %
Corporate general and administrative expenses increased in 2023 primarily due to higher net expense from the Company's
incentive compensation programs and higher professional fees. These expenses were partially offset by lower expenses relating
to the Company's deferred compensation plan and related investments. The increase in 2022 was primarily due to higher net
expense from the Company's deferred compensation plan and related investments, higher professional fees and related expenses
as well as higher incentive compensation expense. These expenses were partially offset by lower pension expense.
28
Other expense (income) (in Business Segments)
(dollars in millions)
Expense (income)
Foreign currency transaction loss (gain)
Stock-based compensation
Pensions
Acquisition-related expenses
Loss on deal-contingent forward contracts
Gain on disposal of assets
Interest income
Russia liquidation
Other items, net
2023
2022
2021
46 $
78
(67)
114
390
(363)
(46)
—
(1)
151 $
(40) $
63
(16)
96
1,015
(11)
61
22
5
—
(7)
(109)
(10)
7
(2)
1,106 $
(7)
—
2
(37)
$
$
Foreign currency transaction loss (gain) primarily relates to the impact of exchange rates on cash, forward contracts, certain
cross currency swap contracts and intercompany transactions. During 2023, it also includes foreign currency transaction loss
associated with completing the Acquisition.
Acquisition-related expenses include Bridge Credit Agreement financing fees and transaction costs related to the Acquisition.
Refer to Notes 3 and 10 to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for
further discussion.
Loss on deal-contingent forward contracts includes losses on the deal-contingent forward contracts related to the Acquisition.
Refer to Note 16 to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for further
discussion.
Gain on disposal of assets includes a gain on the sale of the aircraft wheel and brake business within the Aerospace Systems
Segment of approximately $374 million in 2023 and a gain of $101 million on the sale of land in 2021. Refer to Note 3 to the
Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for further discussion.
LIQUIDITY AND CAPITAL RESOURCES
We believe that we are great generators and deployers of cash. We assess our liquidity in terms of our ability to generate cash
to fund our operations and meet our strategic capital deployment objectives, which include the following:
•
•
•
•
Continuing our record annual dividend increases
Investing in organic growth and productivity
Strategic acquisitions that strengthen our portfolio
Offset share dilution through 10b5-1 share repurchase program
Cash Flows
A summary of cash flows follows:
(dollars in millions)
Cash provided by (used in):
Operating activities
Investing activities
Financing activities
Effect of exchange rates
2023
2022
2021
$
2,980 $
2,442 $
(8,177)
(971)
(5)
(419)
3,916
(24)
2,575
—
(2,623)
96
48
Net (decrease) increase in cash and cash equivalents and restricted cash
$
(6,173) $
5,915 $
29
Cash flows from operating activities were $2,980 million in 2023, $2,442 million in 2022 and $2,575 million in 2021. The
increase of $538 million in 2023 and decrease of $133 million in 2022 were primarily related to net changes in cash provided
by accounts receivable, inventories, and accounts payable, trade. We continue to focus on managing inventory and other
working capital requirements. Cash flows from operating activities for 2023 were negatively impacted by acquisition-
transaction expenses.
•
•
Days sales outstanding relating to trade receivables for the Company was 51 days in 2023, 51 days in 2022, and 50
days in 2021.
Days supply of inventory on hand was 85 days in 2023, 77 days in 2022, and 75 days in 2021.
Cash flows from investing activities in 2023, 2022, and 2021 were impacted by the following factors:
•
•
•
•
•
•
•
Payment for the Acquisition, net of cash acquired, of $7.1 billion in 2023.
Payments to settle the deal-contingent forward contracts of $1.4 billion in 2023.
Net maturities of marketable securities of $19 million in 2023 compared to $4 million in 2022 and $45 million in
2021.
Capital expenditures of $381 million in 2023 compared to $230 million in 2022 and $210 million in 2021.
Net proceeds from the sale of the aircraft wheel and brake business of approximately $443 million in 2023.
Net proceeds from the sale of land of approximately $111 million in 2021.
Cash collateral received of $250 million in 2023 that was paid in 2022 per the credit support annex ("CSA") attached
to the deal-contingent forward contracts. Refer to Note 16 to the Consolidated Financial Statements in Part II, Item 8
of this Annual Report on Form 10-K for further discussion.
Cash flows from financing activities in 2023, 2022, and 2021 were impacted by the following factors:
•
•
•
•
•
•
Repurchases of 0.7 million common shares for $200 million during 2023 compared to repurchases of 1.3 million and
0.3 million common shares for $380 million and $100 million during 2022 and 2021, respectively.
Proceeds of $2.0 billion from borrowings under the term loan facility (the "Term Loan Facility") in fiscal 2023.
Subsequently in fiscal 2023, we made payments totaling $1.1 billion towards the outstanding balance under the Term
Loan Facility. 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.
Payments related to maturity of $300 million aggregate principal amounts of medium term notes in 2023.
Payments to retire $900 million aggregate principal amount of private placement notes assumed in the Acquisition in
Fiscal 2023. Refer to Note 3 to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form
10-K for further discussion.
Net proceeds from Senior Notes issuances of $3.6 billion in 2022 compared to term loan repayments of $1.2 billion in
2021.
Net commercial paper borrowings of $358 million in 2023 compared to net commercial paper borrowings of $1.4
billion in 2022 and net commercial paper repayments of $723 million in 2021.
30
Cash Requirements
We are actively monitoring our liquidity position and remain focused on managing our inventory and other working capital
requirements. We are continuing to target two percent of sales for capital expenditures and are prioritizing those related to
safety, strategic investments, and sustainability initiatives. We believe that cash generated from operations and our commercial
paper program will satisfy our operating needs for the foreseeable future.
We have committed cash outflow related to long-term debt, operating and financing lease agreements, and postretirement
benefit obligations. Refer to Notes 10, 11, and 12 respectively, of Part II, Item 8 of this Annual Report on Form 10-K for
further discussion.
Dividends
Dividends have been paid for 292 consecutive quarters, including a yearly increase in dividends for the last 67 years. The
current annual dividend rate is $5.92 per common share.
Share Repurchases
The Company has a program to repurchase its common shares. On October 22, 2014, the Board of Directors of the Company
approved an increase in the overall number of shares authorized to repurchase under the program so that, beginning on such
date, the aggregate number of shares authorized for repurchase was 35 million. There is no limitation on the number of shares
that can be repurchased in a year. Repurchases may be funded primarily from operating cash flows and commercial paper
borrowings and the shares are initially held as treasury shares. Refer to Note 13 to the Consolidated Financial Statements in
Part II, Item 8 of this Annual Report on Form 10-K for further discussion.
Liquidity
Cash, comprised of cash and cash equivalents and marketable securities and other investments, includes $422 million, $465
million, and $467 million held by the Company's foreign subsidiaries at June 30, 2023, 2022, and 2021, respectively. The
Company does not permanently reinvest certain foreign earnings. The distribution of these earnings could result in non-federal
U.S. or foreign taxes. All other undistributed foreign earnings remain permanently reinvested.
We are currently authorized to sell up to $3.0 billion of short-term commercial paper notes. There were $1.8 billion
outstanding commercial paper notes as of June 30, 2023, and the largest amount of commercial paper notes outstanding during
the fourth quarter of 2023 was $2.1 billion.
The Company has a line of credit totaling $3.0 billion through a multi-currency revolving credit agreement with a group of
banks. As of June 30, 2023, $1.2 billion was available for borrowing under the credit agreement. Advances from the credit
agreement can be used for general corporate purposes, including acquisitions, and for the refinancing of existing indebtedness.
The credit agreement supports our commercial paper program, and issuances of commercial paper reduce the amount of credit
available under the agreement. During 2023, the Company amended its credit agreement and extended the expiration to June
2028. 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. 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.
We primarily utilize unsecured medium-term notes and senior notes to meet our financing needs and we expect to continue to
borrow funds at reasonable rates over the long term. During 2022, the Company issued $1.4 billion aggregate principal amount
of 3.65 percent Senior Notes due June 15, 2024, $1.2 billion aggregate principal amount of 4.25 percent Senior Notes due
September 15, 2027, and $1.0 billion aggregate principal amount of 4.50 percent Senior Notes due September 15, 2029
(collectively, the "Senior Notes"). We used proceeds of the Senior Notes to finance a portion of the Acquisition.
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, 2023, 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,
2023, the Company's debt to debt-shareholders' equity ratio was 0.55 to 1.0. We are in compliance, and expect to remain in
compliance, with all covenants set forth in the credit agreement and indentures.
31
Our goal is to maintain an investment-grade credit profile. The rating agencies periodically update our credit ratings as events
occur. At June 30, 2023, 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
Supply Chain Financing
BBB+
Baa1
BBB+
We continue to identify opportunities to improve our liquidity and working capital efficiency, which includes the extension of
payment terms with our suppliers. We currently have supply chain financing ("SCF") programs with financial intermediaries,
which provide certain suppliers the option to be paid by the financial intermediaries earlier than the due date on the applicable
invoice. We are not a party to the agreements between the participating financial intermediaries and the suppliers in connection
with the programs. The range of payment terms we negotiate with our suppliers is consistent, irrespective of whether a supplier
participates in the programs. We do not reimburse suppliers for any costs they incur for participation in the programs and their
participation is completely voluntary. Amounts due to our suppliers that elected to participate in the SCF programs are
included in accounts payable on the Consolidated Balance Sheet. Accounts payable included approximately $85 million and
$46 million payable to suppliers who have elected to participate in the SCF programs as of June 30, 2023 and June 30, 2022,
respectively. In 2023 and 2022, the amount settled through the SCF programs and paid to participating financial institutions
totaled $284 million and $35 million, respectively. The increase in the amount outstanding in the programs from the June 30,
2022 balance is primarily due to the addition of Meggitt's SCF program. We account for payments made under the programs in
the same manner as our other accounts payable, which is a reduction to our cash flows from operations. We do not believe that
changes in the availability of supply chain financing will have a significant impact on our liquidity.
Strategic Acquisitions
Upon announcing the Acquisition on August 2, 2021, the Company entered into the Bridge Credit Agreement where lenders
committed to provide senior, unsecured financing in the aggregate principal amount of £6.5 billion. In July 2022, after
consideration of an escrow balance designated for the Acquisition and funds available under the $2.0 billion Term Loan
Facility, we reduced the aggregate committed principal amount of the Bridge Credit Agreement to zero, and the Bridge Credit
Agreement was terminated.
During September 2022, the Company fully drew against the $2.0 billion Term Loan Facility, which will mature in September
2025, to finance a portion of the Acquisition. Subsequently, during the year we made principal payments totaling $1.1 billion
related to the Term Loan Facility. Refer to Note 10 of the Consolidated Financial Statements in Part II, Item 8 of this Annual
Report on Form 10-K for further discussion.
On September 12, 2022, we completed the acquisition of all outstanding ordinary shares of Meggitt for 800 pence per share,
resulting in an aggregate cash purchase price of $7.2 billion, including the assumption of debt. We funded the purchase using
cash and net proceeds from the issuance of senior notes and commercial paper and the Term Loan Facility, which were
accumulated in an escrow account designated for the Acquisition. Refer to Note 3 to the Consolidated Financial Statements in
Part II, Item 8 of this Annual Report on Form 10-K for further discussion.
Upon closing the Acquisition, we settled the deal-contingent forward contracts entered into during October 2021 to mitigate the
risk of appreciation in the GBP-denominated purchase price. These deal-contingent forward contracts had an aggregate
notional amount of £6.4 billion. Refer to the Cash Flows section above and Note 16 to the Consolidated Financial Statements
in Part II, Item 8 of this Annual Report on Form 10-K for further discussion.
On April 11, 2022, the European Commission cleared the Acquisition, conditional on full compliance with commitments
offered by Parker, including a commitment to divest its aircraft wheel and brake business within the Aerospace Systems
Segment. In accordance with these commitments, we sold the aircraft wheel and brake business in September 2022 for
proceeds of $443 million. Refer to Note 3 to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on
Form 10-K for further discussion.
CRITICAL ACCOUNTING POLICIES
The preparation of financial statements in conformity with 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.
32
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 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 management's
judgment 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 assess 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 five 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, 2022, the Company performed its annual goodwill impairment test for each of its five 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.
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 2023, the Company did not record any
material impairments related to long-lived assets.
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.
33
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 effect on annual pension expense and a 50 basis point decrease in the discount
rate is estimated to decrease annual pension expense by $3 million. As of June 30, 2023, $342 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 offset 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.
Business Combinations - From time to time, we may enter into business combinations. Business acquisitions are accounted
for using the acquisition method of accounting, which allocates the fair value of the purchase consideration to the tangible and
intangible assets acquired and liabilities assumed based on their estimated fair values. In the fair value evaluation of intangible
assets acquired, there are significant estimates and assumptions, including forecasts of future cash flows, revenues; and earnings
before interest, taxes, depreciation and amortization; as well as the selection of the royalty rates and discount rates. The excess
of the purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. The
acquisition method of accounting also requires us to refine these estimates over a measurement period not to exceed one year to
reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have
affected the measurement of the amounts recognized as of that date. If we are required to adjust provisional amounts that we
have recorded for the fair values of assets and liabilities in connection with acquisitions, these adjustments could have a
material impact on our financial condition and results of operations.
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.
34
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk.
A substantial portion of our operations are conducted by our subsidiaries outside of the U.S. in currencies other than the U.S.
dollar. Most of our non-U.S. subsidiaries conduct their business primarily in their local currencies, which are also their
functional currencies. Foreign currency exposures arise from translation of foreign-denominated assets and liabilities into U.S.
dollars and from transactions denominated in a currency other than the subsidiary’s functional currency. Although the amount
of this activity has increased with the Acquisition, we expect to continue to manage the associated foreign currency transaction
and translation risk using existing processes.
The Company manages foreign currency transaction and translation risk by utilizing derivative and non-derivative financial
instruments, including forward exchange contracts, deal-contingent forward contracts, costless collar contracts, cross-currency
swap contracts and certain foreign currency denominated debt designated as net investment hedges. The derivative financial
instrument contracts are with major investment grade financial institutions and we do not anticipate any material non-
performance by any of the counterparties. We do not hold or issue derivative financial instruments for trading purposes.
Derivative financial instruments are recognized on the Consolidated Balance Sheet as either assets or liabilities and are
measured at fair value. Further information on the fair value of these contracts is provided in Note 16 to the Consolidated
Financial Statements 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 (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 currency denominated debt that has been designated as a net investment hedge is recorded in accumulated other
comprehensive (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, 2023, our debt portfolio included $875 million of variable rate debt, exclusive
of commercial paper borrowings. A 100 basis point increase in near-term interest rates would increase annual interest expense
on variable rate debt, including weighted-average commercial paper borrowings during 2023, by approximately $25 million.
35
ITEM 8. Financial Statements and Supplementary Data.
Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34)
Financial Statements
Consolidated Statement of Income
Consolidated Statement of Comprehensive Income
Consolidated Balance Sheet
Consolidated Statement of Cash Flows
Consolidated Statement of Equity
Notes to Consolidated Financial Statements
Page Number
in Form 10-K
37
40
41
42
43
44
45
36
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of Parker-Hannifin Corporation
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Parker-Hannifin Corporation and subsidiaries (the
"Company") as of June 30, 2023 and 2022, the related consolidated statements of income, comprehensive income, cash
flows, and equity, for each of the three years in the period ended June 30, 2023, 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, 2023, 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, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the
period ended June 30, 2023, 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, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.
As described in Management’s Report on Internal Control Over Financial Reporting, management excluded from its
assessment the internal control over financial reporting at Meggitt plc ("Meggitt"), which was acquired on September 12,
2022, and whose financial statements constitute approximately 36% of total assets and 11% of net sales of the consolidated
financial statement amounts as of and for the year ended June 30, 2023. Accordingly, our audit did not include the internal
control over financial reporting at Meggitt.
Basis for Opinions
The Company’s management is responsible for these financial statements, for maintaining effective internal control over
financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the
accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an
opinion on these financial statements and an opinion on the Company’s internal control over financial reporting based on
our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United
States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement,
whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material
respects.
Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the
financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits
also included evaluating the accounting principles used and significant estimates made by management, as well as
evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included
obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists,
and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits
also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits
provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and
procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that
receipts and expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
37
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current-period audit of the financial statements
that were communicated or required to be communicated to the audit committee and that (1) relate 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 matters below, providing separate opinions on the critical audit
matters or on the accounts or disclosures to which they relate.
Revenue — Refer to Notes 1 and 2 to the financial statements
Critical Audit Matter Description
The Company is a highly diversified manufacturer 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 in over forty countries globally to more than 500,000 customers.
We identified revenue recorded as a result of product shipments as a critical audit matter due to the geographic dispersion of
the Company’s operations and business units generating revenue. Extensive audit effort is performed due to the volume of
the underlying transactions and number of individual business units. High levels of auditor judgment were necessary to
determine the nature, timing, and extent of audit procedures performed to audit revenue recorded as a result of product
shipments.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the Company’s revenue transactions generated from product shipments 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.
• We performed transaction testing for revenue populations subject to detail testing by agreeing the amounts recorded as
revenue to source documents and determined that revenue was recognized appropriately.
• We tested the completeness of revenue for revenue populations subject to detail testing, by making selections from a
reciprocal population such as a sales order listing and determined whether the product included in the sales order was
appropriately recorded as a sale in the general ledger.
• We performed substantive analytical procedures to extend our testing from an interim date to the end of the fiscal year
for revenue transactions not subject to detail transaction testing. We developed independent expectations of revenue
based on data derived from the results of our detail revenue testing and compared these expectations to the revenue
recorded by management.
Acquisition — Meggitt — Valuation of intangible assets — Refer to Note 3 to the financial statements
Critical Audit Matter Description
The Company completed the acquisition of Meggitt for $7.2 billion on September 12, 2022. The Company accounted for
the acquisition under the acquisition method of accounting for business combinations. Accordingly, the Company allocated
the purchase price, on a preliminary basis, to the assets acquired and liabilities assumed based on their estimated fair value
and recorded $5.7 billion of intangible assets composed of customer-related intangible assets, technology, and trade names.
Management estimated the fair value of these intangible assets utilizing an income approach. The fair value determination
of the customer-related intangible assets, technology, and trade names required management to make several significant
assumptions related to the forecasts of revenue growth rates, and earnings before interest, taxes, depreciation, and
amortization ("EBITDA") margins as well as the selection of royalty and discount rates.
We identified the valuation of Meggitt acquisition customer-related intangible assets, technology, and trade names as a
critical audit matter because of the significant assumptions management makes to estimate the fair value of these assets.
This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair
value specialists.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the forecasts of revenue growth rates and EBITDA margins, the selection of valuation
methodologies utilized, and the selection of royalty rates and discount rates for the intangible assets included the following,
among others:
• We evaluated the design and operating effectiveness of controls over the valuation of the intangible assets acquired,
including management’s controls over the forecasts of revenue growth rates and EBITDA margins and selection of the
royalty and discount rates.
38
• We assessed the reasonableness of management’s forecasts of revenue growth rates and EBITDA margins by comparing
the projections to historical results, actual results to date and external market sources, and evaluated whether the
estimated revenue growth rates were consistent with evidence obtained in other areas of the audit.
• We performed qualitative and quantitative analyses to identify the assumptions that would significantly impact the
overall valuation of the intangible assets acquired. The assumptions identified included (1) revenue growth rates, (2)
EBITDA margins, (3) royalty rates and (4) discount rates.
• With the assistance of our fair value specialists, we evaluated the reasonableness of the (1) valuation methodologies and
(2) the selection of the royalty and discount rates selected by:
•
•
•
•
•
Testing the source information underlying the determination of the royalty and discount rates.
Comparing the selected royalty and discount rates to market data for comparable rates.
Testing the mathematical accuracy of the calculations.
Developing a range of independent estimates and comparing those to the royalty and discount rates selected by
management.
Comparing the valuation methodologies applied to acceptable valuation methodologies for the valuation of
intangible assets
/s/ DELOITTE & TOUCHE LLP
Cleveland, Ohio
August 24, 2023
We have served as the Company's auditor since 2008.
39
CONSOLIDATED STATEMENT OF INCOME
(Dollars in thousands, except per share amounts)
Net Sales
Cost of sales
Selling, general and administrative expenses
Interest expense
Other expense (income), net
Gain on disposal of assets
Income before income taxes
Income taxes
Net Income
Less: Noncontrolling interest in subsidiaries' earnings
For the years ended June 30,
2023
2022*
2021*
$ 19,065,194 $ 15,861,608 $ 14,347,640
12,635,892
10,550,309
3,354,103
2,504,061
573,894
184,167
255,252
944,881
9,604,522
2,383,407
250,036
(27,950)
(362,526)
(7,121)
(109,332)
2,679,664
1,614,226
2,246,957
596,128
298,040
500,096
2,083,536
1,316,186
1,746,861
600
581
761
Net Income Attributable to Common Shareholders
$
2,082,936 $
1,315,605 $
1,746,100
Earnings per Share Attributable to Common Shareholders
Basic earnings per share
Diluted earnings per share
$
$
16.23 $
16.04 $
10.24 $
10.09 $
13.54
13.35
*Years ended June 30, 2022 and 2021 amounts have been reclassified to reflect the income statement reclassification, as described in Note 1
to the Consolidated Financial Statements.
The accompanying notes are an integral part of the consolidated financial statements.
40
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,
2023
2022
2021
$
2,083,536 $
1,316,186 $
1,746,861
600
581
761
2,082,936
1,315,605
1,746,100
Other comprehensive income (loss), net of tax
Foreign currency translation adjustment and other (net of tax of
$(38,322), $(3,236) and $(3,664) in 2023, 2022 and 2021,
respectively)
Retirement benefits plan activity (net of tax of $(26,019), $(95,574)
and $(205,845) in 2023, 2022 and 2021, respectively)
Other comprehensive income (loss)
Less: Other comprehensive (loss) income for noncontrolling interests
Other comprehensive income (loss) attributable to common
shareholders
Total Comprehensive Income Attributable to Common
Shareholders
186,721
(284,732)
328,792
63,299
250,020
306,735
22,003
(306)
(1,526)
664,076
992,868
720
250,326
23,529
992,148
$
2,333,262 $
1,339,134 $
2,738,248
The accompanying notes are an integral part of the consolidated financial statements.
41
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
2023
2022
$
475,182 $
8,390
2,827,297
309,167
2,907,879
306,314
6,834,229
6,865,545
4,000,515
2,865,030
81,429
1,104,576
8,450,614
10,628,594
535,799
27,862
2,341,504
543,757
2,214,553
6,383,169
12,046,644
5,897,955
3,775,197
2,122,758
110,585
788,057
3,135,817
7,740,082
$ 29,964,472 $ 25,943,943
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
$
3,763,175 $
2,050,934
651,319
374,571
895,371
7,735,370
8,796,284
551,510
1,649,674
893,355
19,626,193
1,724,310
1,731,925
470,132
250,292
1,682,659
5,859,318
9,755,825
639,939
307,044
521,897
17,084,023
—
—
Common stock, $.50 par value, authorized 600,000,000 shares; issued 181,046,128 shares in 2023 and
2022
Additional capital
Retained earnings
Accumulated other comprehensive (loss)
Treasury shares at cost: 52,613,046 in 2023 and 52,594,956 in 2022
Total Shareholders' Equity
Noncontrolling interests
Total Equity
Total Liabilities and Equity
90,523
305,522
17,041,502
(1,292,872)
(5,817,787)
10,326,888
11,391
10,338,279
90,523
327,307
15,661,808
(1,543,198)
(5,688,429)
8,848,011
11,909
8,859,920
$ 29,964,472 $ 25,943,943
The accompanying notes are an integral part of the consolidated financial statements.
42
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,
2023
2022
2021
$
2,083,536 $
1,316,186 $
1,746,861
Depreciation
Amortization
Stock incentive plan compensation
Deferred income taxes
Foreign currency transaction loss (gain)
Loss (gain) on disposal of property, plant and equipment
Gain on sale of businesses
Gain on investments
(Gain) loss on marketable securities
Other
Changes in assets and liabilities, net of effects from acquisitions and divestitures:
Accounts receivable, net
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 $89,704 in 2023)
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
Payments of deal-contingent forward contracts
Other
Net cash used in investing activities
Cash Flows From Financing Activities
Proceeds from exercise of stock options
Payments for common shares
Proceeds from (payments of) notes payable, net
Proceeds from long-term borrowings
Payments for long-term borrowings
Financing fees paid
Dividends paid
Net cash (used in) provided by financing activities
Effect of exchange rate changes on cash
Net (decrease) increase in cash and cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at beginning of year
Cash, cash equivalents and restricted cash at end of year
Supplemental Data:
Cash paid during the year for:
Interest
Income taxes
$
$
317,416
500,713
142,720
91,865
45,647
3,819
(366,345)
(4,690)
(1,486)
25,524
(16,675)
53,124
1,550
(109,032)
91,551
87,375
102,476
112,822
(109,481)
(72,499)
2,979,930
(7,146,110)
(380,747)
13,244
473,207
(37,791)
56,786
(1,405,418)
250,017
(8,176,812)
3,476
(297,323)
357,636
2,023,400
(2,340,566)
(13,605)
(704,054)
(971,036)
(4,776)
(6,172,694)
6,647,876
257,314
314,450
137,093
(351,201)
(39,987)
(5,727)
(1,394)
(3,972)
5,131
70,443
(179,126)
(212,134)
37,630
(11,167)
131,384
(15,524)
32,514
999,831
1,822
(41,836)
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
2,441,730
2,575,001
—
(230,044)
39,353
3,366
(27,895)
31,809
—
(235,426)
(418,837)
2,831
(460,056)
1,422,026
3,598,056
(18,737)
(58,629)
(569,855)
3,915,636
(23,770)
5,914,759
733,117
—
(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
733,117
475,182 $
6,647,876 $
464,701 $
240,313 $
411,440
549,223
236,979
485,885
The accompanying notes are an integral part of the consolidated financial statements.
43
CONSOLIDATED STATEMENT OF EQUITY
(Dollars in thousands)
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
Net income
Other comprehensive income (loss)
Dividends paid ($4.42 per share)
Stock incentive plan activity
Liquidation activity
Shares purchased at cost
Balance June 30, 2022
Net income
Other comprehensive income (loss)
Dividends paid ($5.47 per share)
Stock incentive plan activity
Shares purchased at cost
Balance June 30, 2023
Common
Stock
Additional
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
(Loss)
Treasury
Shares
Noncontrolling
Interests
Total
$
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
1,315,605
(569,294)
23,529
(2,312)
581
1,316,186
(1,526)
22,003
(561)
(569,855)
(1,948)
60,198
(1,948)
(380,334)
62,510
(380,334)
$
90,523 $ 327,307 $
15,661,808 $
(1,543,198) $ (5,688,429) $
11,909 $ 8,859,920
2,082,936
(703,242)
250,326
(21,785)
70,641
(199,999)
600
2,083,536
(306)
(812)
250,020
(704,054)
48,856
(199,999)
$
90,523 $ 305,522 $
17,041,502 $
(1,292,872) $ (5,817,787) $
11,391 $ 10,338,279
The accompanying notes are an integral part of the consolidated financial statements.
44
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.
There are no individual customers to whom sales are more than four 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.
Reclassification - Certain prior-year amounts in the Consolidated Statement of Income have been reclassified to
conform to the current-year presentation. Effective July 1, 2022, we began classifying certain expenses, previously classified as
cost of sales, as selling, general and administrative expenses ("SG&A") or within other expense (income), net. During the
integration of recently acquired businesses, the Company has seen diversity in practice of the classification of certain expenses,
and the reclassification was made to better align the presentation of expenses on the Consolidated Statement of Income with
management’s internal reporting. The expenses reclassified from cost of sales to SG&A relate to certain administrative
activities conducted in production facilities and research and development. Foreign currency transaction expense was also
reclassified from cost of sales to other expense (income), net on the Consolidated Statement of Income. These reclassifications
had no impact on net income, earnings per share, cash flows, segment reporting or the financial position of the Company.
For the year ended June 30, 2022, the reclassification resulted in a decrease of $837 million to cost of sales, an
increase of $877 million to SG&A, and a decrease of $40 million to other expense (income), net. For the year ended June 30,
2021 the reclassification resulted in a decrease of $845 million to cost of sales, an increase of $856 million to SG&A, and a
decrease of $11 million to other expense (income), net.
Basis of Consolidation - The consolidated financial statements include the accounts of all majority-owned domestic
and foreign subsidiaries. All intercompany transactions and profits have been eliminated in the consolidated financial
statements. The Company does not have off-balance sheet arrangements. Within the business segment information, inter-
segment and inter-area sales have been eliminated.
Revenue Recognition - Revenues are recognized when control of performance obligations, which are distinct goods
or services within the contract, is transferred to the customer. Control is transferred when the customer has the ability to direct
the use of and obtain the benefits from the goods or services. When revenue is recognized at a point in time, control generally
transfers at time of shipment. Revenues are recognized over time if the customer simultaneously receives control as the
Company performs work under a contract, if the customer controls the asset as it is being produced, or if the product produced
for the customer has no alternative use and the Company has a contractual right to payment.
For contracts where revenue is recognized over time, we use the cost-to-cost, efforts expended or units of delivery
method depending on the nature of the contract, including length of production time. The estimation of these costs and efforts
expended requires judgment on the part of management due to the duration of the contractual agreements as well as the
technical nature of the products involved. We make adjustments to these estimates on a consistent basis and establish a contract
reserve when the estimated costs to complete a contract exceed the expected contract revenues.
A contract’s transaction price is allocated to each distinct performance obligation. When there are multiple
performance obligations within a contract, the transaction price is allocated to each performance obligation based on its
standalone selling price. The primary method used to estimate a standalone selling price is the price observed in standalone
sales to customers of the same product or service. Revenue is recognized when control of the individual performance
obligations is transferred to the customer.
45
We consider the contractual consideration payable by the customer and assess variable consideration that may affect
the total transaction price. Variable consideration primarily includes prompt pay discounts, rebates and volume discounts and is
included in the estimated transaction price when there is a basis to reasonably estimate the amount, including whether the
estimate should be constrained in order to avoid a significant reversal of revenue in a future period. These estimates are based
on historical experience, anticipated performance under the terms of the contract and our best judgment at the time.
Payment terms vary by customer and the geographic location of the customer. The time between when revenue is
recognized and payment is due is not significant. Our contracts with customers generally do not include significant financing
components or noncash consideration.
Taxes collected from customers and remitted to governmental authorities are excluded from revenue. Shipping and
handling costs are treated as fulfillment costs and are included in cost of sales. The costs to obtain a contract where the
amortization period for the related asset is one year or less are expensed as incurred.
There is generally no unilateral right to return products. The Company primarily offers an assurance-type standard
warranty that the product will conform to certain specifications for a defined period of time or usage after delivery. This type of
warranty does not represent a separate performance obligation.
Cash - 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 $32 million and $10 million at June 30, 2023 and 2022, respectively. The increase in the
allowance for credit losses from the June 30, 2022 amount is primarily due to the Acquisition.
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
Cash collateral receivable(a)
Accounts receivable, other
Total
2023
$
102,288 $
—
206,879
$
309,167 $
2022
103,558
250,000
190,199
543,757
(a) The cash collateral receivable relates to the deal-contingent forward contracts. Refer to Note 16 for further discussion.
Property, Plant and Equipment and Depreciation - Property, plant and equipment are recorded at cost and are
depreciated principally using the straight-line method for financial reporting purposes. Depreciation rates are based on
estimated useful lives of the assets, generally 40 years for buildings, 15 years for land improvements and building equipment,
seven to 10 years for machinery and equipment, and three to eight years for vehicles and office equipment. Improvements,
which extend the useful life of property, are capitalized, and maintenance and repairs are expensed. We review property, plant
and equipment for impairment whenever events or changes in circumstances indicate that their carrying value may not be
recoverable. When property, plant and equipment are retired or otherwise disposed of, the cost and accumulated depreciation
are removed from the appropriate accounts and any gain or loss is included in current income.
46
The property, 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
2023
2022
$
385,376 $
322,024
2,051,546
4,086,334
342,289
1,783,805
3,588,106
204,020
$
6,865,545 $
5,897,955
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 $297 million and $314 million at June 30, 2023 and 2022, 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 $124 million, $76 million and $41 million in 2023, 2022 and 2021, respectively.
Intangible Assets - Intangible assets primarily include patents and technology, trade names and customer relationships
and contracts and are recorded at cost and amortized on a straight-line method. Patents and technology are amortized over the
shorter of their remaining useful or legal life. Trade names are amortized over the estimated time period over which an
economic benefit is expected to be received. Customer relationships are amortized over a period based on anticipated customer
attrition rates or contractual lives. The Company reviews intangible assets for impairment whenever events or changes in
circumstances indicate that their carrying value may not be recoverable.
Goodwill - The Company conducts a formal impairment test of goodwill on an annual basis and between annual tests
if an event occurs or circumstances change that would, more likely than not, reduce the fair value of a reporting unit below its
carrying value.
Income Taxes - Income taxes are provided based upon income for financial reporting purposes. Taxes related to
Global Intangible Low-Taxed Income ("GILTI") are treated as a current period expense when incurred. Tax credits and similar
tax incentives are applied to reduce the provision for income taxes in the year in which the credits arise. We recognize accrued
interest related to unrecognized tax benefits in income tax expense. Penalties, if incurred, are recognized in income tax
expense. Deferred income taxes arise from temporary differences in the recognition of income and expense for tax purposes.
Income tax effects resulting from adjusting temporary differences recorded in accumulated other comprehensive (loss) are
released when the circumstances on which they are based cease to exist.
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 other expense
(income), net caption in the Consolidated Statement of Income and were $46 million, $(40) million and $(11) million, in 2023,
2022 and 2021, respectively.
Business Combinations - From time to time, we may enter into business combinations. Business acquisitions are
accounted for using the acquisition method of accounting, which allocates the fair value of the purchase consideration to the
tangible and intangible assets acquired and liabilities assumed based on their estimated fair values. The excess of the purchase
consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. The acquisition method of
accounting also requires us to refine these estimates over a measurement period not to exceed one year to reflect new
information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected
the measurement of the amounts recognized as of that date. Transaction costs associated with these acquisitions are expensed
as incurred.
Subsequent Events - We evaluated subsequent events that have occurred through the date of filing of this Annual
Report on Form 10-K for the year ended June 30, 2023. No subsequent events occurred that required adjustment to or
disclosure in these financial statements.
47
Recent Accounting Pronouncements - In November 2021, the Financial Accounting Standards Board ("FASB")
issued Accounting Standards Update ("ASU") 2021-10, "Government Assistance (Topic 832), Disclosures by Business Entities
about Government Assistance", which requires entities to provide disclosures on material government assistance transactions
for annual reporting periods. The disclosures include information around the nature of the assistance, the related accounting
policies used to account for government assistance, the effect of government assistance on the entity’s financial statements, and
any significant terms and conditions of the agreements, including commitments and contingencies. The new guidance is
effective for all entities for annual reporting periods beginning after December 15, 2021; however, early adoption is permitted.
The guidance may be applied either prospectively to all in-scope transactions that are reflected in the financial statements at the
date of initial application and to new transactions that are entered into after the date of initial application, or retrospectively.
The Company prospectively adopted this standard during the fourth quarter of fiscal 2023 with no material impact on its
consolidated financial statements and related disclosures.
In September 2022, the FASB issued ASU 2022-04, "Liabilities—Supplier Finance Programs (Topic 405-50), Disclosure of
Supplier Finance Program Obligations" ("ASU 2022-04"). ASU 2022-04 requires quantitative and qualitative disclosures about
the key terms of supplier finance programs, an annual rollforward of obligations to finance providers, and interim disclosure of
obligations as of each reporting period presented. ASU 2022-04 is effective for all entities for fiscal years beginning after
December 15, 2022, on a retrospective basis, including interim periods within those fiscal years, except for the requirement to
disclose rollforward information, which is effective prospectively for fiscal years beginning after December 15, 2023. Early
adoption is permitted. The Company is currently evaluating the impact this guidance will have on its consolidated financial
statements and does not expect it to be material.
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
2023
2022
$
3,830,062 $
3,489,431 $
4,939,356
5,936,275
4,616,270
5,236,345
2021
3,081,366
4,108,080
4,770,713
$
14,705,693 $
13,342,046 $
11,960,159
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. 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.
48
Aerospace Systems Segment revenues by product platform:
Commercial original equipment manufacturer ("OEM")
$
1,461,279 $
889,649 $
2023
2022
1,363,965
905,328
628,929
514,727
705,988
409,198
$
4,359,501 $
2,519,562 $
2,387,481
2021
761,679
379,438
791,245
455,119
Commercial aftermarket
Military OEM
Military aftermarket
Total
Upon completing the Acquisition, we reviewed the disaggregation of revenue disclosure for the Aerospace Systems Segment
and believe that disaggregation by primary market provides more meaningful information than disaggregation by product
platform.
Total revenues by geographic region based on the Company's selling operation's location:
North America
Europe
Asia Pacific
Latin America
Total
2023
2022
$
12,689,719 $
10,216,292 $
3,777,507
2,379,791
3,156,024
2,290,557
218,177
19,065,194 $
198,735
15,861,608 $
$
2021
9,046,162
2,919,025
2,215,686
166,767
14,347,640
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)
$
123,705 $
2023
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
23,708
147,413
(244,799)
(78,239)
(323,038)
$
(175,625) $
2022
28,546
794
29,340
(60,472)
(2,225)
(62,697)
(33,357)
Net contract liabilities at June 30, 2023 increased from the prior year amount due to timing differences between when revenue
was recognized and the receipt of advance payments as well as acquiring Meggitt's contract liabilities in excess of Meggitt's
contract assets. During 2023, approximately $47 million of revenue was recognized that was included in the contract liabilities
at June 30, 2022.
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, 2023 was $11.0 billion, of
which approximately 79 percent is expected to be recognized as revenue within the next 12 months and the balance thereafter.
49
3.
Acquisitions and Divestitures
Acquisitions
On September 12, 2022, we completed the Acquisition of all the outstanding ordinary shares of Meggitt for 800 pence per
share, resulting in an aggregate cash purchase price of $7.2 billion, including the assumption of debt.
Meggitt is a leader in design, manufacturing and aftermarket support of technologically differentiated systems and equipment in
aerospace, defense and selected energy markets with annual sales of approximately $2.1 billion for the year ended December
31, 2021. For segment reporting purposes, approximately 82 percent of Meggitt's sales are included in the Aerospace Systems
Segment, while the remaining 18 percent are included in the Diversified Industrial Segment.
Assets acquired and liabilities assumed are recognized at their respective fair values as of the date of the Acquisition. 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 table presents the preliminary
estimated fair values of Meggitt's assets acquired and liabilities assumed on the date of the Acquisition. These preliminary
estimates are based on available information and may be revised during the measurement period, not to exceed 12 months from
the date of the Acquisition, as third-party valuations are finalized, additional information becomes available or as additional
analysis is performed. Such revisions may have a material impact on our results of operations and financial position within the
measurement period.
Assets:
Cash and cash equivalents
Accounts receivable
Inventories
Prepaid expenses and other
Property, plant and equipment, net
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
Total liabilities assumed
Net assets acquired
September 12, 2022
(previously reported)
Measurement Period
Adjustments
September 12, 2022
$
89,704 $
— $
427,255
833,602
125,763
675,232
5,720
219,472
5,418,795
2,830,845
(17,613)
(94,298)
(23,731)
(16,235)
28,478
(38,481)
260,405
(41,765)
89,704
409,642
739,304
102,032
658,997
34,198
180,991
5,679,200
2,789,080
10,626,388 $
56,760 $
10,683,148
$
$
306,266 $
1,910 $
219,780
89,226
—
367,605
669,321
85,899
1,274,726
377,751
3,390,574
62
(2,152)
21,068
(45,565)
42,382
13,654
308,176
219,842
87,074
21,068
322,040
711,703
99,553
(15,309)
1,259,417
40,710
56,760
418,461
3,447,334
$
7,235,814 $
— $
7,235,814
Goodwill is calculated as the excess of the purchase price over the net assets acquired and represents cost synergies and
enhancements to our existing technologies. For tax purposes, Meggitt's goodwill is not deductible. Based upon a preliminary
acquisition valuation, we acquired $4.3 billion of customer-related intangible assets, $1.1 billion of technology and $304
million of trade names, each with weighted average estimated useful lives of 22, 21 and 18 years, respectively. These
intangible assets were valued using the income approach, which includes significant assumptions around future revenue growth,
earnings before interest, taxes, depreciation and amortization, royalty rates and discount rates. Such assumptions are classified
as level 3 inputs within the fair value hierarchy.
50
The fair value of the assets acquired includes $116 million and $91 million of operating and finance lease right-of-use assets,
respectively. The fair value of liabilities assumed includes $118 million and $90 million of operating and finance lease
liabilities, respectively, of which, $19 million and $1 million of operating and finance lease liabilities, respectively, are current
liabilities.
Debt assumed includes $900 million aggregate principal amount of private placement notes with fixed interest rates ranging
from 2.78 percent to 3.60 percent, and maturity dates ranging from July 2023 to July 2026. The private placement notes were
recorded at fair value at acquisition. In October 2022, we paid off $300 million aggregate principal amount of private
placement notes in two tranches pursuant to an offer to noteholders according to change in control provisions. In June 2023,
the Company paid the remaining $600 million aggregate principal amount of private placement notes assumed in the
Acquisition, which resulted in a $10 million charge recorded in interest expense in the Consolidated Statement of Income
associated with the fair value discount.
Upon acquiring Meggitt, we also assumed $134 million of liabilities associated with environmental matters, the liabilities are
included within other liabilities. The environmental matters primarily relate to known exposures arising from environmental
litigation, investigations and remediation of certain sites for which Meggitt has been identified as a potentially responsible
party. The liabilities are based on outcomes of litigation and estimates of the level and timing of remediation costs, including
the period of operating and monitoring activities required.
Our consolidated financial statements include the results of operations of Meggitt from the date of acquisition through June 30,
2023. Net sales and segment operating income attributable to Meggitt during 2023 was $2.1 billion and $23 million,
respectively. Segment operating income attributable to Meggitt includes estimated amortization and depreciation expense
associated with the preliminary fair value estimates of intangible assets, plant and equipment, inventory, as well as acquisition
integration charges. Refer to Note 4 for further discussion of acquisition integration charges.
Acquisition-related transaction costs totaled $115 million in 2023. These costs are included in SG&A in the Consolidated
Statement of Income.
The following table presents unaudited pro forma information for 2023 and 2022 as if the Acquisition had occurred on July 1,
2021.
(Unaudited)
Net sales
Net income attributable to common shareholders
2023
2022
$ 19,446,524 $ 17,911,409
1,956,813
1,529,970
The historical consolidated financial information of Parker and Meggitt has been adjusted in the pro forma information in the
table above to give effect to events that are directly attributable to the Acquisition and factually supportable. To reflect the
occurrence of the Acquisition on July 1, 2021, the unaudited pro forma information includes adjustments for the amortization of
the step-up inventory to fair value and incremental depreciation and amortization expense resulting from the fair value
adjustments to property, plant and equipment and intangible assets. These adjustments were based upon a preliminary purchase
price allocation. Additionally, adjustments to financing costs and income tax expense were also made to reflect the capital
structure and anticipated effective tax rate of the combined entity. Additionally, the pro forma information includes
adjustments for non-recurring transactions directly related to the Acquisition, including the gain on the divestiture of the aircraft
wheel and brake business, loss on deal-contingent forward contracts, and transaction costs. These non-recurring adjustments
totaled $199 million and $654 million in 2023 and 2022, respectively. The resulting pro forma amounts are not necessarily
indicative of the results that would have been obtained if the Acquisition had occurred as of the beginning of the period
presented or that may occur in the future, and do not reflect future synergies, integration costs or other such costs or savings.
Divestitures
During September 2022, we divested our aircraft wheel and brake business, which was part of the Aerospace Systems Segment,
for proceeds of $443 million. The resulting pre-tax gain of $374 million is included in other expense (income), net in the
Consolidated Statement of Income. The operating results and net assets of the aircraft wheel and brake business were
immaterial to the Company's consolidated results of operations and financial position. As of June 30, 2022, the aggregate
carrying amount of aircraft wheel and brake assets held for sale was $66 million. These assets primarily included goodwill and
inventory and were recorded within prepaid expenses and other assets in the Consolidated Balance Sheet. Goodwill was
allocated to the aircraft wheel and brake business using the relative fair value method.
51
During March 2023, we divested a French aerospace business, which was part of the Aerospace Systems Segment, for proceeds
of $27 million. The resulting pre-tax loss of $12 million is included in other expense (income), net in the Consolidated
Statement of Income. The operating results and net assets of the French aerospace business were immaterial to the Company's
consolidated results of operations and financial position.
Restricted Cash
At June 30, 2022, prepaid expenses and other in the Consolidated Balance Sheet included a $6.1 billion balance in an escrow
account restricted to payments for the Acquisition. These funds were used to finance a portion of the Acquisition, and there
was no restricted cash at June 30, 2023.
4.
Business Realignment and Acquisition Integration Charges
The Company incurred business realignment and acquisition integration charges in 2023, 2022 and 2021. Business realignment
charges in 2023, 2022, and 2021 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. During 2021, business realignment charges
primarily consisted of actions taken to address the impact of COVID-19 on our business. A majority of the business
realignment charges were incurred in Europe. We believe the realignment actions will positively impact future results of
operations but will not have a material effect on liquidity and sources and uses of capital.
Business realignment charges by business segment are as follows:
Diversified Industrial
Aerospace Systems
Corporate administration
Other expense
2023
2022
2021
$
23,641 $
13,787 $
38,557
3,065
—
—
967
—
3
6,680
1,399
1,226
2021
820
327
20
Workforce reductions in connection with such business realignment charges by business segment are as follows:
Diversified Industrial
Aerospace Systems
Corporate administration
2023
728
30
—
2022
300
10
—
The business realignment charges are presented in the Consolidated Statement of Income as follows:
Cost of sales
Selling, general and administrative expenses
Loss on disposal of assets
$
2023
15,993 $
10,713
—
2022*
5,007 $
9,747
3
2021*
27,276
19,360
1,226
*Years ended June 30, 2022 and 2021 amounts have been reclassified to reflect the income statement reclassification, as described in Note 1
to the Consolidated Financial Statements.
During 2023, approximately $22 million in payments were made relating to business realignment charges. Remaining
payments related to current-year and prior-year business realignment actions of approximately $14 million, a majority of which
are expected to be paid by December 31, 2023, are primarily reflected within the other accrued liabilities caption in the
Consolidated Balance Sheet. Additional charges may be recognized in future periods related to the business realignment and
acquisition integration actions described above, the timing and amount of which are not known at this time.
In addition to the business realignment charges discussed above, in 2022, we also incurred $20 million of expense as a result of
our exit of business operations in Russia. These charges primarily consist of write-downs of inventory and other working
capital items and $8 million of foreign currency translation expense reclassified from accumulated other comprehensive
income. Within the business segment information in Note 18, $7 million of expense was recorded in the other expense
(income), net, while the remainder of the charge was split evenly between the Aerospace Systems Segment and the Diversified
Industrial International businesses.
52
We also incurred the following acquisition integration charges related to the Meggitt, Lord and Exotic Metals Forming
Company LLC ("Exotic") acquisitions:
Diversified Industrial
Aerospace Systems
$
2023
8,511 $
86,928
2022
3,589 $
1,177
2021
11,222
719
In 2023, acquisition integration charges relate to the acquisition of Meggitt. In 2022, charges within the Diversified Industrial
and Aerospace Systems Segment relate to the acquisitions of Lord and Meggitt, respectively. Acquisition integration charges in
2021 within the Diversified Industrial and Aerospace Systems Segment relate to the acquisitions of Lord and Exotic,
respectively. These charges were primarily included in selling, general and administrative expenses within the Consolidated
Statement of Income.
5.
Income Taxes
Income before income taxes was derived from the following sources:
2023
1,408,206 $
1,271,458
2,679,664 $
2022
646,364 $
967,862
1,614,226 $
2021
1,273,037
973,920
2,246,957
2023
2022
2021
161,465 $
81,426
297,672 $
(253,123)
247,094
(52,960)
297,199
(13,509)
303,089
(45,977)
269,607
8,851
45,599
23,948
596,128 $
48,479
(52,100)
298,040 $
34,895
(7,391)
500,096
2023
21.0 %
2.1
1.2
(0.1)
(1.1)
(0.7)
(1.0)
0.8
22.2 %
2022
21.0 %
(0.2)
2.7
0.5
(3.7)
(0.8)
(1.3)
0.3
18.5 %
2021
21.0 %
1.0
3.6
(0.6)
(1.0)
(0.4)
(1.6)
0.3
22.3 %
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
Cash surrender value of life insurance
Foreign derived intangible income deduction
Research tax credit
Share-based compensation
Other
Effective income tax rate
53
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
2023
$
158,560 $
333,012
37,747
33,374
1,083,732
(1,680)
96,501
18,773
2022
207,147
180,624
8,739
31,490
888,552
254,334
14,649
17,326
(21,304)
(21,822)
(2,228,606)
(875,623)
(1,078,354)
(901,875)
$
(1,568,245) $
(196,459)
$
(91,865) $
351,201
(64,342)
(98,810)
(1,215,579)
880
$
(1,371,786) $
253,271
As of June 30, 2023, we recorded deferred tax assets of $1,084 million resulting from $4,350 million in loss carryforwards. A
valuation allowance of $1,059 million related to the loss carryforwards has been established due to the uncertainty of their
realization. Of this valuation allowance, $1,030 million relates to non-operating entities whose loss carryforward utilization is
considered to be remote. Some of the loss carryforwards can be carried forward indefinitely; others can be carried forward
from three to 20 years. In addition, a valuation allowance of $20 million related to other future deductible items has been
established due to the uncertainty of their realization.
Although future distributions of foreign earnings to the United States should not be subject to U.S. federal income taxes, other
U.S. or foreign taxes may be imposed on such earnings. We have analyzed existing factors and determined we will no longer
permanently reinvest certain foreign earnings. On these undistributed foreign earnings of approximately $754 million that are
no longer permanently reinvested outside of the United States, we have recorded a deferred tax liability of $13 million. The
remaining undistributed foreign earnings of approximately $1,130 million remain permanently reinvested outside the United
States at June 30, 2023. Of these undistributed earnings, we have recorded a deferred tax liability of $8 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.
54
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
2023
2022
$
90,669 $
100,759 $
9,389
6,171
25,957
(3,063)
(6,923)
(11,199)
2,502
7,039
1,415
—
(140)
(3,127)
(6,647)
(8,630)
2021
86,277
10,145
10,320
2,376
(1,996)
(7,165)
(2,252)
3,054
$
113,503 $
90,669 $
100,759
The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was $114 million,
$91 million and $101 million as of June 30, 2023, 2022 and 2021, respectively. The accrued interest related to the gross
unrecognized tax benefits, excluded from the amounts above, was $21 million, $18 million, and $18 million as of June 30,
2023, 2022 and 2021, respectively. The accrued penalties related to the gross unrecognized tax benefits, excluded from the
amounts above, was $2 million as of June 30, 2023. There were no accrued penalties related to the gross unrecognized tax
benefits as of June 30, 2022 and 2021.
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 million as a result of the revaluation of existing uncertain tax positions arising from developments in the
examination process or the closure of tax statutes. Any increase in the amount of unrecognized tax benefits within the next 12
months is expected to be insignificant.
We file income tax returns in the United States and in various foreign jurisdictions. In the normal course of business, we are
subject to examination by taxing authorities throughout the world. We are open to assessment of our U.S. federal income tax
returns by the Internal Revenue Service for years after 2013, and our state and local income tax returns for years after 2016.
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:
Numerator:
Net income attributable to common shareholders
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
2023
2022
2021
$
2,082,936 $
1,315,605 $
1,746,100
128,367,842
128,539,387
128,999,879
1,454,243
1,816,556
1,834,599
129,822,085
130,355,943
130,834,478
$
$
16.23 $
16.04 $
10.24 $
10.09 $
13.54
13.35
For 2023, 2022 and 2021, 1.0 million, 0.4 million and 0.4 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.
55
7.
Inventories
Inventories are stated at the lower of cost or net realizable value using the first-in, first-out ("FIFO") method.
The inventories caption in the Consolidated Balance Sheet is comprised of the following components:
June 30,
Finished products
Work in process
Raw materials
Total
8.
Goodwill and Intangible Assets
The changes in the carrying amount of goodwill are as follows:
Balance June 30, 2021
Divestitures
Goodwill reclassified to held for sale
Foreign currency translation
Balance June 30, 2022
Acquisitions
Divestitures
Foreign currency translation
Balance June 30, 2023
2023
794,128 $
1,488,665
625,086
2,907,879 $
2022
811,702
1,128,501
274,350
2,214,553
$
$
Diversified
Industrial
Segment
Aerospace
Systems Segment
Total
$
7,457,309 $
602,378 $
8,059,687
(164)
—
—
(48,242)
(164)
(48,242)
(271,164)
(35)
(271,199)
$
7,185,981 $
554,101 $
7,740,082
452,008
2,337,072
2,789,080
(1,064)
(2,232)
45,830
56,898
(3,296)
102,728
$
7,682,755 $
2,945,839 $ 10,628,594
Acquisitions represent goodwill resulting from the preliminary purchase price allocation for the
Acquisition during the measurement period. Refer to Note 3 for further discussion.
Divestitures represent goodwill associated with the sale of businesses during 2023 and 2022.
Goodwill reclassified to held for sale, which was allocated using the relative fair value method, relates to the aircraft wheel and
brake business. Refer to Note 3 for further discussion.
Goodwill is tested for impairment at the reporting unit level annually and between annual tests whenever events or
circumstances indicate that the carrying value of a reporting unit may exceed its fair value. Our annual impairment tests
performed in 2023, 2022 and 2021 resulted in no impairment loss being recognized.
Intangible assets are amortized on a straight-line method over their legal or estimated useful lives. The gross carrying value and
accumulated amortization for each major category of intangible asset at June 30 are as follows:
2023
2022
Gross Carrying
Amount
Accumulated
Amortization
Gross Carrying
Amount
Accumulated
Amortization
Patents and technology
Trade names
Customer relationships and other
Total
$
2,128,847 $
352,040 $
990,775 $
1,047,678
8,109,063
390,737
727,820
2,092,197
3,735,042
1,718,989
$ 11,285,588 $
2,834,974 $
5,453,637 $
2,317,820
259,587
339,244
Total intangible asset amortization expense in 2023, 2022 and 2021 was $501 million, $314 million and $325 million,
respectively. The estimated intangible asset amortization expense for the five years ending June 30, 2024 through 2028 is $550
million, $528 million, $523 million, $518 million and $508 million, respectively.
56
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 2023, 2022 or 2021.
9.
Financing Arrangements
The Company has a line of credit totaling $3.0 billion through a multi-currency revolving credit agreement with a group of
banks, of which $1.2 billion was available for borrowing as of June 30, 2023. During 2023, the Company amended its credit
agreement by extending the expiration to June 2028. 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 supports our commercial paper program, and issuances of
commercial paper reduce the amount of credit available under the agreement. The credit agreement requires the payment of an
annual facility fee, the amount of which may increase in the event our credit ratings are lowered. Although a lowering of our
credit ratings would likely increase the cost of future debt, it would not limit our ability to use the credit agreement nor would it
accelerate the repayment of any outstanding borrowings.
The Company is currently authorized to sell up to $3.0 billion of short-term commercial paper notes. There were $1.8 billion
commercial paper notes outstanding at June 30, 2023 and $1.4 billion were outstanding at June 30, 2022. The Company had no
outstanding borrowings from foreign banks at June 30, 2023 and 2022. The weighted-average interest rate on notes payable
outstanding at June 30, 2023 and 2022 was 5.6 percent and 0.7 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, 2023, 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, 2023, our debt to debt-shareholders' equity ratio was 0.55 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 2025 - 2045
Senior Notes, 2.70% to 4.50%, due 2024 - 2049
Term Loan Facility, due 2026
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
2023
2022
$
1,825,000 $
2,125,000
7,275,000
7,275,000
875,000
—
763,770
106,598
(74,713)
733,950
11,127
(86,972)
10,770,655
10,058,105
1,974,371
302,280
$
8,796,284 $
9,755,825
In connection with the Acquisition, the Company entered into a Bridge Credit Agreement on August 2, 2021 (the "Bridge
Credit Agreement"). Under the Bridge Credit Agreement, lenders committed to provide senior, unsecured financing in the
aggregate principal amount of £6.5 billion at August 2, 2021. In July 2022, after consideration of the escrow balance and funds
available under the delayed-draw term loan facility (the “Term Loan Facility”), we reduced the aggregate committed principal
amount of the Bridge Credit Agreement to zero, and the Bridge Credit Agreement was terminated.
In September 2022, the Company fully drew against the $2.0 billion delayed-draw Term Loan Facility, which will mature in its
entirety in September 2025. We used the proceeds of the Term Loan Facility to finance a portion of the Acquisition. At
June 30, 2023, the Term Loan Facility had an interest rate of Secured Overnight Financing Rate plus 122.5 bps. Interest
payments are made at the interest reset dates, which are either one, three, or six months at the discretion of the Company.
57
Additionally, the provisions of the Term Loan Facility allow for prepayments at the Company's discretion. During 2023, we
made principal payments totaling $1.1 billion related to the Term Loan Facility.
Principal amounts of long-term debt payable in the five years ending June 30, 2024 through 2028 are $1,980 million, $1,268
million, $879 million, $704 million and $1,204 million, respectively. The principal amounts of long-term debt payable exclude
the amortization of debt issuance costs.
11.
Leases
We primarily enter into lease agreements for office space, distribution centers, certain manufacturing facilities and equipment.
Certain leases contain options that provide us with the ability to extend the lease term. Such options are included in the lease
term when it is reasonably certain that the option will be exercised. When accounting for leases, we combine payments for
leased assets, related services and other components of a lease. Payments within certain lease agreements are adjusted
periodically for changes in an index or rate. In addition, leases with an initial term of 12 months or less are not recorded on the
Consolidated Balance Sheet.
The discount rate implicit within our leases is generally not determinable, and therefore we determine the discount rate based on
our incremental borrowing rate. The incremental borrowing rate for our leases is determined based on lease term and the
currency in which lease payments are made.
The components of lease expense are as follows:
Operating lease expense
Finance lease cost:
Amortization of lease assets
Interest on lease liabilities
Short-term lease cost
Variable lease cost
Total lease cost
2023
2022
2021
$
60,411 $
46,026 $
48,171
5,604
4,383
7,577
5,747
1,861
390
7,041
5,849
1,576
455
7,674
5,835
$
83,722 $
61,167 $
63,711
Supplemental cash flow information related to leases is as follows:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows - payments on operating leases
$
57,717 $
45,371 $
47,080
Operating cash outflows - interest payments on finance leases
Financing cash outflows - payments on finance lease obligations
Right-of-use assets obtained in exchange for operating lease obligations
Right-of-use assets obtained in exchange for finance lease obligations
4,383
5,141
45,365
1,340
390
1,992
50,925
—
455
1,713
41,637
3,834
2023
2022
2021
58
Supplemental balance sheet information related to operating leases is as follows:
Operating Leases
Operating lease right-of-use assets (included within Investments and other assets)
$ 232,733
$
133,412
2023
2022
Current operating lease liabilities (included within Other accrued liabilities)
Long-term operating lease liabilities (included within Other liabilities)
Total operating lease liabilities
Finance Leases
Land and buildings
Machinery and equipment
Accumulated depreciation
Net property, plant and equipment
Current portion of long-term debt (included within Other accrued liabilities)
Long-term debt (included within Other liabilities)
Total finance lease liabilities
Weighted-average remaining lease term
Operating leases
Finance leases
Weighted-average discount rate
Operating leases
Finance leases
Maturities of lease liabilities at June 30, 2023 are as follows:
2024
2025
2026
2027
2028
Thereafter
Total lease payments
Less imputed interest
Total lease liabilities
$
50,523
187,445
$ 237,968
$ 107,910
5,113
(8,196)
$ 104,827
$
4,198
100,889
$ 105,087
$
$
$
$
$
$
36,023
100,337
136,360
9,223
5,066
(3,836)
10,453
1,691
8,575
10,266
6.9 years
20.8 years
5.6 years
15.7 years
3.9 %
5.2 %
1.6 %
3.3 %
Operating Leases
Finance Leases
$
58,351 $
49,196
38,352
28,590
21,481
82,407
$
$
278,377 $
40,409
237,968 $
9,483
8,871
8,792
8,896
8,936
128,519
173,497
68,410
105,087
59
12.
Retirement Benefits
Pensions - The Company has noncontributory defined benefit pension plans covering eligible employees, including certain
employees in foreign countries. Our largest plans are generally closed to new participants. Plans for most salaried employees
provide pay-related benefits based on years of service. Plans for hourly employees generally provide benefits based on flat-
dollar amounts and years of service. We also have arrangements for certain key employees, which provide for supplemental
retirement benefits. In general, the Company's policy is to fund these plans based on legal requirements, tax considerations,
local practices and investment opportunities. 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
One-time charges related to divestitures
Net periodic benefit cost
2023
2022
2021
$
57,418 $
76,638 $
225,468
110,250
84,188
102,475
(311,145)
(267,888)
(267,579)
931
17,178
—
(2,480)
4,103
157,288
8
—
5,325
207,897
18
—
$
(12,630) $
80,399 $
132,324
Components of net pension benefit cost, other than service cost, are included in other expense (income), net in the Consolidated
Statement of Income.
60
Change in benefit obligation
Benefit obligation at beginning of year
Service cost
Interest cost
Acquisition
Plan amendments
Divestiture
Actuarial gain
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 (loss) 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
Investments and other assets
Other accrued liabilities
Pensions and other postretirement benefits
Net amount recognized
Amounts recognized in Accumulated Other Comprehensive (Loss)
Net actuarial loss
Prior service cost
Net amount recognized
2023
2022
$
4,959,319 $
6,323,003
57,418
225,468
1,181,139
2,521
(1,779)
76,638
110,250
—
(5,691)
—
(349,476)
(1,097,053)
(312,758)
(256,868)
73,839
(190,960)
$
5,835,691 $
4,959,319
$
4,362,153 $
5,305,577
31,399
(605,642)
1,140,707
153,038
—
96,717
(312,758)
(256,868)
80,756
(177,631)
$
$
5,455,295 $
4,362,153
(380,396) $
(597,166)
$
145,809 $
103,632
(57,783)
(19,307)
(468,422)
(681,491)
$
(380,396) $
(597,166)
$
$
593,937 $
672,775
6,489
4,901
600,426 $
677,676
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.
As of the date of the Acquisition, the Meggitt plans were remeasured at fair value using accounting policies consistent with
Parker plans.
At June 30, 2023, the benefit obligation increased primarily due to plans acquired with the Acquisition partially offset by
increased discount rates. At June 30, 2022, the benefit obligation decreased primarily due to significantly higher discount rates.
The plans acquired with the Acquisition are the primary contributing factor for the increase in plan assets' fair value during
2023. In 2022, investment (losses) were the largest driver for the decrease in plan assets.
The accumulated benefit obligation for all defined benefit plans was $5.7 billion and $4.8 billion at June 30, 2023 and 2022,
respectively.
61
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
2023
2022
$ 4,352,952 $ 4,284,601
3,955,284
3,742,513
2023
2022
$ 4,545,650 $ 4,483,486
4,019,445
3,782,688
We expect to make cash contributions of approximately $171 million to our defined benefit pension plans in 2024, the majority
of which relates to our non-U.S. plans. Estimated future benefit payments in the five years ending June 30, 2024 through 2028
are $413 million, $413 million, $380 million, $387 million and $388 million, respectively, and $2.0 billion in the aggregate for
the five years ending June 30, 2029 through June 30, 2033.
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
2023
2022
2021
4.36 %
3.35 %
6.50 %
2.55 %
3.05 %
6.50 %
2.36 %
2.98 %
6.75 %
0.60 to 5.06%
0.25 to 2.95% 0.20 to 3.03%
1.75 to 4.00% 1.75 to 4.50% 1.75 to 4.50%
1.00 to 5.10%
1.00 to 4.50% 1.00 to 5.40%
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
2023
2022
4.88 %
3.81 %
4.36 %
3.81 %
0.90 to 5.20%
2.00 to 4.40%
0.60 to 5.06%
1.75 to 4.00%
The discount rate assumption is based on current rates of high-quality, long-term corporate bonds over the same estimated time
period that benefit payments will be required to be made. The expected return on plan assets assumption is based on the
weighted-average expected return of the various asset classes in the plans' portfolio. The asset class return is developed using
historical asset return performance as well as current market conditions such as inflation, interest rates and equity market
performance.
The weighted-average allocation of the majority of the assets related to defined benefit plans is as follows:
Equity securities
Debt securities
Other investments
2023
30 %
45 %
25 %
100 %
2022
31 %
43 %
26 %
100 %
62
The weighted-average target asset allocation as of June 30, 2023 is 39 percent equity securities, 45 percent debt securities and
16 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 65 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, 2023 and at June 30, 2022, 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, 2023
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, 2022
Quoted Prices In
Active Markets
(Level 1)
Significant Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
June 30, 2023
$
341,812 $
333,978 $
7,834 $
538,118
152,354
464,056
610,326
11,406
357
264,346
2,626,832
137,077
308,610
523,649
76,173
118,536
570,368
11,406
357
14,469
76,181
345,520
39,958
—
—
—
308,610
$
5,455,294 $
1,634,467 $
792,572 $
—
—
—
—
—
—
—
—
—
Quoted Prices In
Active Markets
(Level 1)
Significant Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
June 30, 2022
$
201,053 $
190,616 $
10,437 $
327,122
8,700
380,694
87,650
9,085
9,679
279,849
2,718,445
133,026
206,850
327,122
8,700
1,309
55,201
9,085
9,679
—
—
379,385
32,449
—
—
—
206,850
$
4,362,153 $
601,712 $
629,121 $
—
—
—
—
—
—
—
—
—
63
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, 2023, this
required cash balance totaled approximately $49 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 $519 million and $327 million as of June 30, 2023 and 2022,
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, for which the lock-up period expired 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.
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. Effective January 1, 2022, the Company
matching contributions were increased, up to a maximum of five percent of eligible compensation from the previous maximum
of four percent of eligible compensation. These contributions 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
2023
2022
2021
3,779,985
4,125,214
4,497,902
$
104,237 $
87,554 $
66,249
In addition to shares within the ESOP, as of June 30, 2023, employees have elected to invest in 1,115,612 shares of common
stock within a company stock fund of the savings and investment 401(k) plan.
64
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 contributions 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 $63 million,
$57 million and $42 million in expense related to the RIA in 2023, 2022 and 2021, respectively.
In September 2023, we acquired several defined contribution plans, relating to the Meggitt acquisition, which are comprised of
similar company matching contributions and RIA features as our legacy plan. During the year we recorded additional company
matching expense of $9 million and additional RIA type expense of $11 million for the acquired 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 $2 million, $1 million and $1 million in expense related to other postretirement benefits in 2023,
2022 and 2021, respectively. Components of net other postretirement benefit cost, other than service cost, are included in other
expense (income), net in the Consolidated Statement of Income.
Change in benefit obligation
Benefit obligation at beginning of year
Service cost
Interest cost
Acquisition
Actuarial gain
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
2023
2022
$
48,876 $
63,739
330
3,004
39,112
206
982
—
(4,403)
(8,352)
78,567 $
(11,220)
(4,831)
48,876
(78,567) $
(48,876)
(7,831) $
(70,736)
(78,567) $
(4,971)
(43,905)
(48,876)
$
$
$
$
Amounts recognized in Accumulated Other Comprehensive (Loss)
Net actuarial gain
$
(17,952) $
(15,154)
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.
As of the date of the Acquisition, the Meggitt plans were remeasured at fair value using accounting policies consistent with
Parker plans.
The increase in the benefit obligation is due to the Acquisition in 2023. The decrease in the benefit obligation in 2022 is due to
significantly higher discount rates and updated census data and actuarial assumptions.
65
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
2023
4.26 %
6.73 %
6.81 %
4.50 %
2031
2022
2.36 %
6.45 %
6.72 %
4.50 %
2029
2021
2.14 %
6.73 %
7.03 %
4.50 %
2028
The discount rate assumption used to measure the benefit obligation was 4.86 percent and 4.26 percent in 2023 and 2022,
respectively.
Estimated future benefit payments for other postretirement benefits in the five years ending June 30, 2024 through 2028 are
$8 million, $7 million, $7 million, $7 million and $7 million, respectively, and $29 million in the aggregate for the five years
ending June 30, 2029 through June 30, 2033.
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 2023, 2022 and 2021, we recorded expense
(income) relating to these programs of $20 million, $(21) million and $45 million, 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.
13.
Equity
Changes in accumulated other comprehensive (loss) in shareholders' equity by component:
Balance June 30, 2021
Foreign Currency
Translation
Adjustment and
Other
Retirement
Benefit Plans
$
(865,865) $
(700,862) $
Other comprehensive (loss) income before reclassifications
Amounts reclassified from accumulated other comprehensive (loss)
(290,853)
7,647
185,101
121,634
Total
(1,566,727)
(105,752)
129,281
Balance June 30, 2022
Other comprehensive income before reclassifications
Amounts reclassified from accumulated other comprehensive (loss)
Balance June 30, 2023
$
(1,149,071) $
(394,127) $
(1,543,198)
187,027
—
$
(962,044) $
53,172
10,127
(330,828) $
240,199
10,127
(1,292,872)
Significant reclassifications out of accumulated other comprehensive (loss) in shareholders' equity during 2023:
Details about Accumulated Other Comprehensive (Loss) Components
Retirement benefit plans
Amortization of prior service cost and initial net obligation
Recognized actuarial loss
Divestiture activity
Total before tax
Tax benefit
Net of tax
Income (Expense) Reclassified
from Accumulated Other
Comprehensive (Loss)
Consolidated Statement of Income
Classification
(931) Other expense (income), net
(15,573) Other expense (income), net
2,480 Other expense (income), net
(14,024)
3,897
(10,127)
$
$
66
Significant reclassifications out of accumulated other comprehensive (loss) in shareholders' equity during 2022:
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
$
$
(4,111) Other expense (income), net
(156,912) Other expense (income), net
(161,023)
39,389
(121,634)
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.
The number of common shares repurchased at the average purchase price follows:
Shares repurchased
2023
2022
663,599
1,281,818
Average price per share, including commissions
$
301.39 $
296.71 $
2021
331,259
301.88
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, 2023, 6.4 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 2023, 2022 and 2021 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
2023
3.0 %
2022
0.8 %
2021
0.4 %
5.6 years
5.6 years
5.4 years
1.8 %
37.1 %
1.9 %
35.7 %
2.0 %
35.2 %
$
97.70
$
81.71
$
53.92
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.
67
SAR activity during 2023 is as follows (aggregate intrinsic value in millions):
Outstanding June 30, 2022
Granted
Exercised
Canceled
Outstanding June 30, 2023
Exercisable June 30, 2023
Number
of Shares
Weighted-
Average Exercise
Price
Weighted-Average
Remaining
Contractual Term
Aggregate
Intrinsic
Value
4,099,144 $
605,135 $
(800,815) $
(30,035) $
3,873,429 $
2,737,336 $
172.27
298.26
134.38
263.62
199.08
165.45
6.0 years
5.0 years
$
$
739.7
614.8
A summary of the status and changes of shares subject to SAR awards and the related average price per share follows:
Nonvested June 30, 2022
Granted
Vested
Canceled
Nonvested June 30, 2023
Number
of Shares
Weighted-
Average Grant
Date Fair Value
1,212,497 $
605,135 $
(654,784) $
(26,755) $
1,136,093 $
60.44
97.36
52.13
83.35
84.36
During 2023, 2022 and 2021, we recognized stock-based compensation expense of $51 million, $37 million and $35 million,
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, 2023, $19 million 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 23 months. The total fair value of shares vested during 2023,
2022 and 2021 was $34 million, $29 million and $25 million, respectively.
Information related to SAR awards exercised during 2023, 2022 and 2021 is as follows:
Net cash proceeds
Intrinsic value
Income tax benefit
Number of shares surrendered
2023
2022
$
$
$
3,476 $
158,452 $
26,854 $
152,835
2,831 $
97,002 $
15,845 $
98,673
2021
4,684
225,025
37,437
316,330
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.
68
The fair value of each RSU award granted in 2023, 2022 and 2021 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, 2022
Granted
Vested
Canceled
Nonvested June 30, 2023
Number
of Shares
Weighted-
Average Grant
Date Fair Value
277,902 $
93,336 $
(155,718) $
(9,999) $
205,521 $
224.40
298.54
194.46
262.95
278.88
During 2023, 2022 and 2021, we recognized stock-based compensation expense of $27 million, $26 million and $26 million,
respectively, relating to RSU awards for employees. At June 30, 2023, $18 million 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 21
months. The total fair value of RSU awards vested during 2023, 2022 and 2021 was $30 million, $26 million and $21 million,
respectively. We recognized an income tax benefit of $2 million, $4 million and $1 million relating to the issuance of common
stock for RSU awards that vested during 2023, 2022 and 2021, 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, 2022
Granted
Vested
Canceled
Nonvested June 30, 2023
Number
of Shares
Weighted-Average
Grant Date
Fair Value
5,620 $
6,638 $
(5,650) $
(383) $
6,225 $
297.89
278.99
297.89
278.90
278.90
The fair value of each RSU award granted to the Board of Directors in 2023, 2022 and 2021 was based on the fair market value
of our common stock on the date of grant. In 2023, 2022 and 2021, we recognized stock-based compensation expense of $1.9
million, $1.8 million and $1.5 million, respectively, relating to these awards. During 2023, 2022 and 2021, we recognized an
income tax (cost) benefit of $(0.02) million, $0.2 million and $2.1 million, respectively, related to the vesting of Board of
Directors RSU awards. At June 30, 2023, $0.4 million 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 three
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
2023
2022
2021
2020-21-22
2019-20-21
2018-19-20
204,175
102,120
251,783
124,007
$
$
311.65 $
63,631 $
271.38 $
68,329 $
210,864
105,402
317.60
66,970
Under the Company's 2021-22-23 LTIP, a payout of unrestricted stock will be issued in April 2024.
69
The fair value of each LTIP award granted in 2023, 2022 and 2021 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 shares
relating to the LTIP and the related average price per share follows:
Nonvested June 30, 2022
Granted
Vested
Canceled
Nonvested June 30, 2023
Number
of Shares
Weighted-Average
Grant Date
Fair Value
417,789 $
186,194 $
(199,143) $
(12,233) $
392,607 $
246.63
301.64
205.95
279.75
292.32
During 2023, 2022 and 2021, we recorded stock-based compensation expense of $63 million, $72 million and $59 million,
respectively, relating to the LTIP. During 2023, 2022 and 2021, we recognized an income tax benefit of $4 million, $5 million
and $2 million, respectively, relating to the LTIP.
15.
Research and Development
Independent research and development costs amounted to $258 million in 2023, $191 million in 2022 and $205 million in 2021.
Pre-production expense incurred in connection with development contracts amounted to $73 million in 2023, $74 million in
2022 and $54 million in 2021.
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.
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
2023
2022
$
10,845,359 $
10,221,563
10,145,077
9,709,407
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 currency denominated debt designated as net investment hedges, to
manage foreign currency transaction and translation risk. Additionally, we acquired forward exchange contracts and cross-
currency swap contracts in connection with the Acquisition. 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.
70
In connection with the Acquisition, the Company entered into deal-contingent forward contracts during October 2021 to
mitigate the risk of appreciation in the GBP-denominated purchase price. The deal-contingent forward contracts had an
aggregate notional amount of £6.4 billion, and were settled in September 2022 in connection with the Acquisition. In June
2022, we amended the agreement to include a credit support annex ("CSA") obligating Parker to post $250 million of cash
collateral, which was recorded within non-trade and notes receivables on the Consolidated Balance Sheet. In July 2022, the
Company received, and subsequently deposited into the escrow account, the $250 million cash collateral previously posted.
Cash flows associated with the cash collateral are recorded in cash flow from investing activities on the Consolidated Statement
of Cash Flows.
Derivative financial instruments are recognized on the Consolidated Balance Sheet as either assets or liabilities and are
measured at fair value.
The location and fair value of derivative financial instruments reported on the Consolidated Balance Sheet are as follows:
Balance Sheet Caption
2023
2022
Net investment hedges
Cross-currency swap contracts
Investments and other assets $
21,578 $
21,444
Other derivative contracts
Forward exchange contracts
Forward exchange contracts
Deal-contingent forward contracts
Costless collar contracts
Costless collar contracts
Non-trade and notes receivable
Other accrued liabilities
Other accrued liabilities
Non-trade and notes receivable
Other accrued liabilities
—
—
—
—
—
20,976
5,651
1,015,426
351
1,578
The cross-currency swap, forward exchange, deal-contingent forward 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 €69 million, €290 million and ¥2.1 billion cross-currency swap contracts have been designated as hedging instruments.
The forward exchange, deal-contingent forward and costless collar contracts, as well as cross-currency swap contracts acquired
as part of the Acquisition, have not been designated as hedging instruments and are considered to be economic hedges of
forecasted transactions.
The forward exchange and costless collar contracts, as well as the cross-currency swap contracts acquired as part of the
Acquisition, are adjusted to fair value by recording gains and losses through the cost of sales caption in the Consolidated
Statement of Income. The deal-contingent forward contracts are adjusted to fair value by recording gains and losses through
the other expense (income), net 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 assess the
effectiveness of the €69 million, €290 million and ¥2.1 billion cross-currency swap hedging instruments using the spot method.
Under this method, the periodic interest settlements are recognized directly in earnings through interest expense.
Gains (losses) on derivative financial instruments were recorded in the Consolidated Statement of Income as follows:
Deal-contingent forward contracts
Forward exchange contracts
Costless collar contracts
Cross-currency swap contracts
2023
2022
$
(389,992) $
(1,015,426) $
(7,259)
55,860
11,528
(18,739)
(4,364)
—
2021
—
15,879
(2,092)
—
Gains (losses) 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 currency denominated debt
$
2023
451 $
(22,534)
2022
69,992
72,670
During 2023, 2022, and 2021, the periodic interest settlements related to the cross-currency swaps were not material.
71
A summary of financial assets and liabilities that were measured at fair value on a recurring basis at June 30, 2023 and 2022 are
as follows:
Assets:
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, 2023
$
21,578 $
— $
21,578 $
—
Quoted Prices
In
Active Markets
(Level 1)
Significant Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
June 30, 2022
$
13,038 $
42,771
13,038 $
—
— $
42,771
1,022,655
—
1,022,655
—
—
—
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, deal-contingent forward, 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, employee claims, class action lawsuits, and alleged violations of various
environmental laws. We are self-insured in the United States for health care, workers' compensation, general liability and
product liability up to predetermined amounts, above which third-party insurance applies. Management regularly reviews the
probable outcome of these proceedings, the expenses expected to be incurred, the availability and limits of the insurance
coverage and the established accruals for liabilities. While the outcome of pending proceedings cannot be predicted with
certainty, management believes that any liabilities that may result from these proceedings will not have a material adverse effect
on our liquidity, financial condition or results of operations.
Environmental - We are currently responsible for environmental matters primarily relating to known exposures arising from
environmental litigation, investigations, and remediation at various manufacturing facilities presently or formerly operated by
Parker and for which we have been named as a “potentially responsible party,” along with other companies, at off-site waste
disposal facilities and regional sites.
As of June 30, 2023, we had an accrual of $149.4 million for environmental matters, which are probable and reasonably
estimable. The accrual is recorded based upon the best estimate of costs to be incurred in light of the progress made in
determining the magnitude of remediation costs, the timing and extent of remedial actions required by governmental authorities,
the amount of our liability in proportion to other responsible parties, and outcomes of litigation.
Our estimated total liability for environmental matters ranges from a minimum of $149.4 million to a maximum of $251.5
million. The largest range for any one site is approximately $27.8 million. The actual costs we will incur are dependent on
final determination of contamination and required remedial action, negotiations with governmental authorities with respect to
cleanup levels, changes in regulatory requirements, innovations in investigatory and remedial technologies, effectiveness of
remedial technologies employed, the ability of other responsible parties to pay, outcomes of litigation, and any insurance or
other third-party recoveries.
72
18.
Business Segment Information
The Company operates in two reportable business segments: Diversified Industrial and Aerospace Systems. Both segments
utilize eight core technologies, including hydraulics, pneumatics, electromechanical, filtration, fluid and gas handling, process
control, engineered materials and climate control, to drive superior customer problem solving and value creation.
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 41 countries throughout
Europe, Asia Pacific, Latin America, the Middle East and Africa.
The Aerospace Systems Segment produces actuation, fuel, oil, pneumatic, hydraulic, electric power, sensing, fire suppression,
thermal management, and braking systems and components, which are utilized on virtually every domestic commercial and
military aircraft. 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.
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.
2023
2022
2021
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 expense (income)
Income before income taxes
Assets:
Diversified Industrial
Aerospace Systems(a)
Corporate
Property Additions:
Diversified Industrial
Aerospace Systems
Corporate
$
8,916,194 $
5,789,499
4,359,501
6,676,449
5,283,710
2,387,481
$ 19,065,194 $ 15,861,608 $ 14,347,640
7,703,150 $
5,638,896
2,519,562
$
$
1,853,079 $
1,218,331
562,444
3,633,854
229,677
3,404,177
573,894
150,619
2,679,664 $
1,515,259 $
1,178,044
501,431
3,194,734
219,699
2,975,035
255,252
1,105,557
1,614,226 $
1,247,419
988,054
402,895
2,638,368
178,427
2,459,941
250,036
(37,052)
2,246,957
$ 15,572,849 $ 15,838,512 $ 16,518,688
3,077,395
745,117
$ 29,964,472 $ 25,943,943 $ 20,341,200
13,661,086
730,537
3,020,606
7,084,825
$
$
292,456 $
81,456
6,835
380,747 $
197,675 $
27,452
4,917
230,044 $
186,233
20,705
3,019
209,957
73
Depreciation:
Diversified Industrial
Aerospace Systems
Corporate
Amortization:
Diversified Industrial
Aerospace Systems
By Geographic Area(b)
Net Sales:
North America
International
Long-Lived Assets:
North America
International
2023
2022
2021
$
$
$
$
204,632 $
104,286
8,498
317,416 $
219,206 $
29,576
8,532
257,314 $
229,891
32,151
7,901
269,943
267,779 $
232,934
500,713 $
263,430 $
51,020
314,450 $
274,368
51,079
325,447
$ 12,689,719 $ 10,216,292 $
9,046,162
6,375,475
5,645,316
5,301,478
$ 19,065,194 $ 15,861,608 $ 14,347,640
$
1,828,457 $
1,398,966 $
1,448,109
1,036,573
723,792
818,367
$
2,865,030 $
2,122,758 $
2,266,476
(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 (2023 - $216 million; 2022 - $211 million; 2021 - $219 million) and assets held for sale (2022 - $66
million).
(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.
74
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, 2023. Based on this evaluation,
the Company’s principal executive officer and principal financial officer concluded that, as of June 30, 2023, the Company’s
disclosure controls and procedures were effective.
The Company acquired Meggitt on September 12, 2022. As a result of the Acquisition, management is in the process
of integrating, evaluating and, where necessary, implementing changes in controls and procedures. Other than with respect to
the Acquisition, there have been no changes in the Company’s internal control over financial reporting during the quarter ended
June 30, 2023 that materially affected, or are reasonably likely to materially affect, our internal control 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, 2023. We have
excluded Meggitt from our evaluation of internal control over financial reporting as of June 30, 2023 because it was acquired in
a business combination during the year. Total assets and total revenue that were excluded from management's assessment
represented approximately 36% and 11%, respectively, of consolidated total assets and net sales, as of and for the year ended
June 30, 2023. 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, 2023.
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,
2023, which is included in Part II, Item 8 of this Annual Report on Form 10-K.
ITEM 9B. Other Information. None of the Company's directors or officers adopted, modified or terminated a Rule
10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the Company's fiscal quarter ended June 30,
2023.
ITEM 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. Not Applicable.
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 2023 Annual Meeting of Shareholders, to be held October 25, 2023 (the "2023 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 2023 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 "Board Committees; Committee Charters - Audit Committee" and "Board
and Committee Structure - Board Committees; Committee Charters" in the 2023 Proxy Statement is incorporated herein by
reference.
75
ITEM 11. Executive Compensation. The information set forth under the captions "Compensation Discussion and
Analysis," "Compensation Committee Report," and "Compensation Tables" in the 2023 Proxy Statement is incorporated herein
by reference.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The information set forth under the caption "Principal Shareholders" in the 2023 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, 2023, 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
4,870,389(1)
—
4,870,389
$203.21
—
$203.21
16,364,821(2)
—
16,364,821
(1)Includes the maximum future payouts of common stock that may be issued under the calendar year 2020-21-22,
2021-22-23 and 2022-23-24 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 6.4 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 "Item 1 -
Election of Directors - Director Independence" in the 2023 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 2023 Proxy Statement is incorporated herein
by reference.
76
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
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
40
41
42
43
44
45
83
3. Exhibits
Exhibit No.
(2)(a)
(3)(a)
(3)(b)
(4)(a)
(10)(a)
(10)(b)
(10)(c)
(10)(d)
Description of Exhibit
Plans of Acquisition, Reorganization, Arrangement, Liquidation or Succession:
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).
Amended and Restated Regulations, dated as of April 27, 2023, incorporated by reference to Exhibit 3(a)
to the Registrant's Report on Form 10-Q for the quarterly period ended March 31, 2023 (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:
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).
77
(10)(e)
(10)(f)
(10)(g)
(10)(h)
(10)(i)
(10)(j)
(10)(k)
(10)(l)
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)
(10)(s)
(10)(t)
(10)(u)
(10)(v)
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).
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).
78
(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)
(10)(jj)
(10)(kk)
(10)(ll)
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 Long-Term Incentive Performance Plan Under the Performance Bonus Plan,
as Amended and Restated, effective as of January 27, 2022, incorporated by reference to Exhibit 10(a) to
the Registrant's Report on Form 10-Q for the quarterly period ended March 31, 2022 (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 27, 2022, incorporated by
reference to Exhibit 10(a) to the Registrant's Report on Form 10-Q for the quarterly period ended March
31, 2022 (Commission File No. 1-4982).
Parker-Hannifin Corporation 2022 Performance Bonus Plan, effective as of July 1, 2021, incorporated by
reference to Exhibit 10(a) to the Registrant's Report on Form 10-Q for the quarterly period ended
September 30, 2021 (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).
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).
79
(10)(mm)
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)(nn)
(10)(oo)
(10)(pp)
(10)(qq)
(10)(rr)
(10)(ss)
(10)(tt)
(10)(uu)
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).
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).
(10)(vv)
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).
(10)(ww)
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).
(10)(xx)
(10)(yy)
(10)(zz)
(10)(aaa)
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).
Term Loan Agreement, dated August 27, 2021, by and among Parker-Hannifin Corporation, Key Bank
National Association, as administrative agent, and the lenders party thereto, incorporated by reference to
Exhibit 10.1 to Registrants Report on Form 8-K filed with the SEC on August 27, 2021 (Commission File
No. 1-4982).
Amendment One to the Parker-Hannifin Corporation Amended and Restated Defined Contribution
Supplemental Executive Retirement Program, effective August 1, 2022, incorporated by reference to
Exhibit 10(a) to Registrant’s Report on Form 10-Q for the quarterly period ended September 30, 2022
(Commission File No. 1-4982).
(10)(bbb) Amendment Three to the Parker-Hannifin Corporation Amended and Restated Executive Deferral Plan,
effective August 1, 2022, incorporated by reference to Exhibit 10(b) to Registrant’s Report on Form 10-Q
for the quarterly period ended September 30, 2022 (Commission File No. 1-4982).
(10)(ccc)
Amendment One to the Parker-Hannifin Corporation Amended and Restated Savings Restoration Plan,
effective August 1, 2022, incorporated by reference to Exhibit 10(c) to Registrant’s Report on Form 10-Q
for the quarterly period ended September 30, 2022 (Commission File No. 1-4982).
(10)(ddd) Amendment One to the Amended and Restated Deferred Compensation Plan for Directors of Parker-
Hannifin Corporation, effective August 1, 2022, incorporated by reference to Exhibit 10(d) to Registrant’s
Report on Form 10-Q for the quarterly period ended September 30, 2022 (Commission File No. 1-4982).
80
(10)(eee)
(10)(fff)
(10)(ggg)
(10)(hhh)
(10)(iii)
(10)(jjj)
(21)
(23)
(24)
(31)(a)
(31)(b)
(32)
Parker-Hannifin Corporation Annual Cash Incentive Plan, effective July 1, 2022, incorporated by
reference to Exhibit 10(e) to Registrant’s Report on Form 10-Q for the quarterly period ended September
30, 2022 (Commission File No. 1-4982).
Parker-Hannifin Corporation Deferred Compensation Plan, effective January 1, 2023, incorporated by
reference to Exhibit 10(f) to Registrant’s Report on Form 10-Q for the quarterly period ended September
30, 2022 (Commission File No. 1-4982).
Parker-Hannifin Corporation Deferred Compensation Plan Adoption Agreement, effective January 1,
2023, incorporated by reference to Exhibit 10(g) to Registrant’s Report on Form 10-Q for the quarterly
period ended September 30, 2022 (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 25, 2023, incorporated by
reference to Exhibit 10(a) to Registrant’s Report on Form 10-Q for the quarterly period ended March 31,
2023 (Commission File No. 1-4982).
Parker-Hannifin Corporation Deferred Compensation Plan Adoption Agreement, effective January 1,
2023, incorporated by reference to Exhibit 10(g) to Registrant’s Report on Form 10-Q for the quarterly
period ended September 30, 2022 (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 25, 2023, incorporated by
reference to Exhibit 10(a) to Registrant’s Report on Form 10-Q for the quarterly period ended March 31,
2023 (Commission File No. 1-4982).
List of Subsidiaries of Registrant.*
Consent of Independent Registered Public Accounting Firm.*
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
The instance document does not appear in the Interactive Data File because its XBRL tags are embedded
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, 2023, 2022 and 2021, (ii)
Consolidated Statement of Comprehensive Income for the years ended June 30, 2023, 2022 and 2021, (iii) Consolidated
Balance Sheet at June 30, 2023 and 2022, (iv) Consolidated Statement of Cash Flows for the years ended June 30, 2023, 2022
and 2021, (v) Consolidated Statement of Equity for the years ended June 30, 2023, 2022 and 2021, 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.
81
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 24, 2023
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, Executive Chairman of the Board of Directors, JENNIFER A. PARMENTIER, Director 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; KEVIN A. LOBO, Director; JOSEPH
SCAMINACE, Director; ÅKE SVENSSON, Director; LAURA K. THOMPSON, Director; JAMES R. VERRIER, Director;
and JAMES L. WAINSCOTT, Director.
Date: August 24, 2023
/s/ Todd M. Leombruno
Todd M. Leombruno, Executive Vice President
and Chief Financial Officer (Principal Financial
Officer and Attorney-in-Fact for the officers and
directors signing in the capacities indicated)
82
PARKER-HANNIFIN CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED JUNE 30, 2021, 2022 AND 2023
(Dollars in Thousands)
Column A
Description
Allowance for credit losses:
Year ended June 30, 2021
Year ended June 30, 2022
Year ended June 30, 2023
Deferred tax asset valuation allowance:
Year ended June 30, 2021
Year ended June 30, 2022
Year ended June 30, 2023
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
$
$
$
$
$
$
11,644 $
12,078 $
9,942 $
4,673 $
1,719 $
7,379 $
(4,239) $
(3,855) $
15,129 $
12,078
9,942
32,450
771,430 $
865,764 $
901,875 $
94,781 $
36,111 $
163,178 $
(447) $
— $
13,301 $
865,764
901,875
1,078,354
(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.
83
Exhibit 31(a)
CERTIFICATIONS
I, Jennifer A. Parmentier, 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 24, 2023
/s/ Jennifer A. Parmentier
Jennifer A. Parmentier
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 24, 2023
/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, 2023, 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 24, 2023
/s/ Jennifer A. Parmentier
Name: Jennifer A. Parmentier
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:
Business realignment charges
Acquisition-related expenses & Costs to Achieve
Net gain on divestitures
Loss on deal-contingent forward contracts
Amortization of inventory step-up to fair value
Russia liquidation
Adjusted EBITDA*
EBITDA margin
Adjusted EBITDA margin
*Totals may not foot due to rounding
Twelve Months Ended
June 30,
2023
$ 19,065
2022
$ 15,862
2,084
596
818
574
1,316
298
572
255
$
4,072
$
2,441
27
262
(362)
390
110
-
4,498
$
15
100
-
1,015
-
20
3,592
$
21.4%
23.6%
15.4%
22.6%
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
Net gain on divestitures
Loss on deal-contingent forward contracts
Amortization of inventory step-up to fair value
Meggitt early debt retirement
Russia liquidation
Tax effect of adjustments1
Adjusted earnings per diluted share
2023
$
16.04
2022
$
10.09
3.85
0.20
2.02
(2.78)
3.00
0.84
0.08
-
(1.70)
21.55
$
2.41
0.11
0.78
-
7.79
-
-
0.15
(2.61)
18.72
$
1This 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
Amortization of inventory step-up to fair value
Russia liquidation
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,
2023
$
19,065
2022
$
15,862
$
3,634
$
3,195
27
95
501
110
-
4,367
$
15
5
314
-
13
3,542
$
19.1%
22.9%
20.1%
22.3%
This Page is Not Part of Parker-Hannifin Corporation's Form 10-K Filing
RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION, CONTINUED
RECONCILIATION OF ORGANIC GROWTH - TOTAL PARKER
(Unaudited)
Sales growth - as reported
Adjustments:
Currency
Divestiture
Acquisitions
Organic sales growth
RECONCILIATION OF ORGANIC GROWTH - AEROSPACE
(Unaudited)
Sales growth - as reported
Adjustments:
Currency
Divestiture
Acquisitions
Organic sales growth
Twelve Months
Ended
June 30, 2023
20.2%
-3.0%
-0.4%
13.1%
10.5%
Twelve Months
Ended
June 30, 2023
73.0%
-0.3%
-2.7%
65.1%
10.9%
RECONCILIATION OF NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS TO ADJUSTED NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS
(Unaudited)
(Dollars in millions)
Twelve Months Ended
June 30,
Net income attributable to common shareholders
Adjustments:
Acquisition-related intangible asset amortization expense
Business realignment charges
Acquisition-related expenses & Costs to achieve
Loss on deal-contingent forward contracts
Net gain on divestitures
Amortization of inventory step-up to fair value
Meggitt early debt retirement
Russia liquidation
Tax effect of adjustments1
Adjusted net income attributable to common shareholders
2023
$
2,083
2022
$
1,316
501
27
262
390
(362)
110
10
-
(222)
2,798
$
314
15
100
1,015
-
-
-
20
(340)
2,441
$
1This 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.
TOP QUARTILE PERFORMANCE
• Top quartile safety driven by engaged team members
• Continue performance acceleration from The Win Strategy™ 3.0
• Proven track record of performance through cycles
PORTFOLIO TRANSFORMATION
• Integration of Meggitt ahead of schedule
• ~30% exposure to Aerospace & Defense markets
• Longer cycle & more resilient revenue mix
A PROMISING FUTURE
• Well positioned to capitalize on the growth from secular trends
• Committed to FY27 financial targets
• Continue to be great generators and deployers of cash
BOARD OF DIRECTORS
EXECUTIVE MANAGEMENT
INVESTOR INFORMATION
THOMAS L. WILLIAMS
Executive Chairman
Parker-Hannifin Corporation
JENNIFER A. PARMENTIER
Chief Executive Officer
Parker-Hannifin Corporation
LEE C. BANKS
Vice Chairman and President
Parker-Hannifin Corporation
THOMAS L. WILLIAMS
Executive Chairman
JENNIFER A. PARMENTIER
Chief Executive Officer
LEE C. BANKS
Vice Chairman and President
ANDREW D. ROSS
Chief Operating Officer
JILLIAN C. EVANKO
President and Chief Executive Officer
Chart Industries, Inc. (cryogenic technologies)
TODD M. LEOMBRUNO
Executive Vice President and Chief
Financial Officer
DENISE RUSSELL FLEMING
Executive Vice President, Technology and
Global Services and Chief Information Officer
Becton, Dickinson and Company
(medical technologies)
LANCE M. FRITZ
Former Chairman, President and Chief
Executive Officer
Union Pacific Corporation (rail transport)
LINDA A. HARTY
Former Treasurer
Medtronic plc (medical technology)
KEVIN A. LOBO
Chairman, Chief Executive Officer
and President
Stryker Corporation (medical 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 Chief Executive Officer and President
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
RACHID BENDALI
Vice President and President –
Engineered Materials Group
WILLIAM “SKIP” BOWMAN
Vice President and President –
Fluid Connectors Group
BEREND BRACHT
Vice President and President –
Motion Systems Group
MARK T. CZAJA
Vice President – Chief Technology and
Innovation Officer
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
ROGER S. SHERRARD
Vice President and President –
Aerospace Group
MICHAEL WEE
President – Asia Pacific Group
ANNUAL MEETING
The 2023 Annual Meeting of Shareholders
will be held on Wednesday, October 25, 2023
at Parker-Hannifin Global Headquarters
6035 Parkland Blvd., Cleveland, Ohio 44124-4141,
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
JEFF MILLER
Vice President, Investor Relations
216 896 2708
jeffery.miller@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
$300
250
200
150
100
6/18
6/19
6/20
6/21
6/22
6/23
2018
2019
2020
2021
2022
2023
Parker-Hannifin Corporation 100.00
100.00
S&P 500
100.00
S&P Industrials
111.13
110.42
110.43
122.19
118.70
100.47
207.72
167.13
152.15
168.93
149.39
131.74
272.52
178.66
164.89
*$100 invested on 6/30/18 in stock or index, including reinvestment of dividends.
Fiscal year ending June 30.
Copyright© 2023 Standard & Poor’s, a division of S&P Global. All rights reserved.
© 2023 PARKER HANNIFIN CORPORATION
PARKER HANNIFIN
ANNUAL REPORT
2023
Parker Hannifin Corporation, 6035 Parkland Boulevard, Cleveland, Ohio 44124-4141, 216 896 3000, www.parker.com