# Parker-Hannifin Corp (PH)

Informational only - not investment advice.

CIK: 0000076334
SIC: 3490 Miscellaneous Fabricated Metal Products
SIC breadcrumb: [Manufacturing](/division/D/) > [SIC Major Group 34](/major-group/34/) > [SIC 3490 Miscellaneous Fabricated Metal Products](/industry/3490/)
Latest 10-K filed: 2025-08-22
SEC page: https://www.sec.gov/edgar/browse/?CIK=76334
Filing source: https://www.sec.gov/Archives/edgar/data/76334/000007633425000035/ph-20250630.htm

## Selected Fundamentals
| Metric | Value | Unit | FY | Filed |
| --- | ---: | --- | ---: | --- |
| Revenue | 19850000000 | USD | 2025 | 2025-08-22 |
| Net income | 3532000000 | USD | 2025 | 2025-08-22 |
| Assets | 29494000000 | USD | 2025 | 2025-08-22 |

## Financials

Annual standardized facts from SEC companyfacts as of latest extracted filing date 2025-08-22. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0000076334.json. Derived margins are computed from the extracted annual SEC facts.

| Metric | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Revenue |  | 12,029,312,000 | 14,302,392,000 | 14,320,324,000 | 13,695,520,000 | 14,347,640,000 | 15,861,608,000 | 19,065,000,000 | 19,930,000,000 | 19,850,000,000 |
| Net income | 807,216,000 | 983,844,000 | 1,061,315,000 | 1,525,083,000 | 1,202,332,000 | 1,746,861,000 | 1,316,186,000 | 2,084,000,000 | 2,845,000,000 | 3,532,000,000 |
| Operating income | 1,575,655,000 | 1,790,255,000 | 2,038,278,000 | 2,236,239,000 | 1,966,704,000 | 2,459,941,000 | 2,975,035,000 | 3,404,000,000 | 4,069,000,000 | 4,347,000,000 |
| Diluted EPS | 5.89 | 7.25 | 7.83 | 11.57 | 9.26 | 13.35 | 10.09 | 16.04 | 21.84 | 27.12 |
| Assets | 12,034,142,000 | 15,489,904,000 | 15,320,087,000 | 17,732,028,000 | 19,887,753,000 | 20,341,200,000 | 25,943,943,000 | 29,964,000,000 | 29,298,000,000 | 29,494,000,000 |
| Liabilities | 7,455,464,000 | 10,222,558,000 | 9,454,594,000 | 11,608,538,000 | 13,645,983,000 | 11,927,530,000 | 17,084,023,000 | 19,626,193,000 | 17,217,000,000 | 15,803,000,000 |
| Stockholders' equity | 4,575,255,000 | 5,261,649,000 | 5,859,866,000 | 5,961,969,000 | 6,227,224,000 | 8,398,307,000 | 8,848,011,000 | 10,326,888,000 | 12,072,000,000 | 13,682,000,000 |
| Cash and cash equivalents | 1,221,653,000 | 884,886,000 | 822,137,000 | 3,219,767,000 | 685,514,000 | 733,117,000 | 535,799,000 | 475,182,000 | 422,000,000 | 467,000,000 |
| Net margin |  | 8.18% | 7.42% | 10.65% | 8.78% | 12.18% | 8.30% | 10.93% | 14.27% | 17.79% |
| Operating margin |  | 14.88% | 14.25% | 15.62% | 14.36% | 17.15% | 18.76% | 17.85% | 20.42% | 21.90% |

## Macro Cross-References
- [CPIAUCSL](/indicator/CPIAUCSL/): Consumer Price Index for All Urban Consumers: All Items in U.S. City Average
- [UNRATE](/indicator/UNRATE/): Unemployment Rate
- [FEDFUNDS](/indicator/FEDFUNDS/): Federal Funds Effective Rate
- [CES0500000003](/indicator/CES0500000003/): Average Hourly Earnings of All Employees, Total Private
- [DFEDTARU](/indicator/DFEDTARU/): Federal Funds Target Range - Upper Limit
- [DFEDTARL](/indicator/DFEDTARL/): Federal Funds Target Range - Lower Limit
- [DGS3MO](/indicator/DGS3MO/): Market Yield on U.S. Treasury Securities at 3-Month Constant Maturity
- [DGS2](/indicator/DGS2/): Market Yield on U.S. Treasury Securities at 2-Year Constant Maturity
- [DGS10](/indicator/DGS10/): Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity
- [DGS30](/indicator/DGS30/): Market Yield on U.S. Treasury Securities at 30-Year Constant Maturity
- [T10Y2Y](/indicator/T10Y2Y/): 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity
- [CPILFESL](/indicator/CPILFESL/): Consumer Price Index for All Urban Consumers: All Items Less Food and Energy
- [CPIUFDSL](/indicator/CPIUFDSL/): Consumer Price Index for All Urban Consumers: Food
- [CPIENGSL](/indicator/CPIENGSL/): Consumer Price Index for All Urban Consumers: Energy
- [CUSR0000SAH1](/indicator/CUSR0000SAH1/): Consumer Price Index for All Urban Consumers: Shelter
- [PCEPI](/indicator/PCEPI/): Personal Consumption Expenditures: Chain-type Price Index
- [PCEPILFE](/indicator/PCEPILFE/): Personal Consumption Expenditures Excluding Food and Energy: Chain-type Price Index
- [PPIACO](/indicator/PPIACO/): Producer Price Index by Commodity: All Commodities
- [T10YIE](/indicator/T10YIE/): 10-Year Breakeven Inflation Rate
- [U6RATE](/indicator/U6RATE/): Total Unemployed, Plus All Marginally Attached Workers Plus Total Employed Part Time for Economic Reasons
- [PAYEMS](/indicator/PAYEMS/): All Employees, Total Nonfarm
- [CIVPART](/indicator/CIVPART/): Labor Force Participation Rate
- [EMRATIO](/indicator/EMRATIO/): Employment-Population Ratio
- [UNEMPLOY](/indicator/UNEMPLOY/): Unemployed
- [CE16OV](/indicator/CE16OV/): Employment Level
- [ICSA](/indicator/ICSA/): Initial Claims
- [JTSJOL](/indicator/JTSJOL/): Job Openings: Total Nonfarm
- [JTSQUR](/indicator/JTSQUR/): Quits: Total Nonfarm
- [GDPC1](/indicator/GDPC1/): Real Gross Domestic Product
- [A191RL1Q225SBEA](/indicator/A191RL1Q225SBEA/): Real Gross Domestic Product: Percent Change from Preceding Period
- [INDPRO](/indicator/INDPRO/): Industrial Production: Total Index
- [TCU](/indicator/TCU/): Capacity Utilization: Total Index
- [HOUST](/indicator/HOUST/): New Privately-Owned Housing Units Started: Total Units
- [PERMIT](/indicator/PERMIT/): New Privately-Owned Housing Units Authorized in Permit-Issuing Places: Total Units
- [RSAFS](/indicator/RSAFS/): Advance Retail Sales: Retail Trade
- [PCE](/indicator/PCE/): Personal Consumption Expenditures
- [DSPIC96](/indicator/DSPIC96/): Real Disposable Personal Income
- [PSAVERT](/indicator/PSAVERT/): Personal Saving Rate
- [M2SL](/indicator/M2SL/): M2
- [BOPGSTB](/indicator/BOPGSTB/): U.S. International Trade in Goods and Services: Balance

## Latest 10-K MD&A

Extracted between Item 7 and the next Item 7A/8 heading after HTML sanitization.
Confidence: high

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," "expects," "targets," "is likely," "will," or the negative of these terms and similar expressions, and include all statements regarding future performance, orders, earnings projections, events or developments. Neither Parker nor any of its respective associates or directors, officers or advisers provides any representation, assurance or guarantee that the occurrence of the events expressed or implied in any forward-looking statements will actually occur. Parker cautions readers not to place undue reliance on these statements. It is possible that the future performance may differ materially from past performance or current expectations. A change in the economic conditions in individual markets may have a particularly volatile effect on segment performance.

Among other factors which may affect future performance are:

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

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

•changes in product mix;

•ability to identify acceptable strategic acquisition targets;

•uncertainties surrounding timing, successful completion or integration of acquisitions and similar transactions, including the acquisition of Curtis Instruments, Inc.;

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

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

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

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

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

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

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

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

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

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

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

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

The Company makes these statements as of the date of the filing of this Annual Report on Form 10-K for the year ended June 30, 2025 and undertakes no obligation to update them unless otherwise required by law.

18

Table of Contents

Overview

The Company is a global leader in motion and control technologies. Leveraging a unique combination of interconnected technologies, we design, manufacture, and provide aftermarket support for highly engineered solutions that create value for customers primarily in aerospace and defense, in-plant and industrial equipment, transportation, off-highway, energy, and HVAC and refrigeration markets around the world.

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

The Win Strategy 3.0 is Parker's business system 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 aerospace & defense, in-plant & industrial equipment, transportation, off-highway, energy, and HVAC and refrigeration. We believe we can meet our strategic objectives by:

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

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

•maintaining a decentralized division and sales company structure;

•fostering a safety-first and entrepreneurial culture;

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

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

•enabling a sustainable future by providing innovative 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.

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

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

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. Dollars are presented in millions, except per share amounts or as otherwise noted. The Company has changed its presentation on the Consolidated Financial Statements from thousands to millions and, as a result, any necessary rounding adjustments have been made to prior period disclosed amounts within Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. Discussion of the 2023 financial statements is included in Part II, Item 7 of the Company's 2024 Annual Report on Form 10-K.

19

Table of Contents

CONSOLIDATED STATEMENT OF INCOME

The Consolidated Statement of Income summarizes the Company's operating performance. The discussion below compares the operating performance in 2025 and 2024.

(dollars in millions)

2025

2024

Net sales

$

19,850 

$

19,930 

Gross profit margin

36.9 

%

35.8 

%

Selling, general and administrative expenses

$

3,255 

$

3,315 

Selling, general and administrative expenses, as a percent of sales

16.4 

%

16.6 

%

Interest expense

$

409 

$

506 

Other (income) expense, net

(183)

(276)

Gain on sale of businesses and assets, net

$

(273)

$

(12)

Effective tax rate

14.0 

%

20.9 

%

Net income attributable to common shareholders

$

3,531 

$

2,844 

Net sales in 2025 decreased from the 2024 amount due to lower sales in the Diversified Industrial Segment, partially offset by higher sales in the Aerospace Systems Segment resulting from strength across commercial and defense markets. Within the Diversified Industrial Segment, the impact of divestiture activity decreased sales by approximately $295 million in 2025. The effect of currency exchange rates decreased net sales in 2025 by approximately $41 million, which is primarily attributable to the Diversified Industrial Segment.

Gross profit margin (calculated as net sales less cost of sales, divided by net sales) increased in 2025 primarily due to higher margins in both segments resulting from price increases, favorable product mix, cost containment and continued execution of the Win Strategy.

Cost of sales also included business realignment and acquisition integration charges of $31 million and $34 million in 2025 and 2024, respectively.

Selling, general and administrative expenses decreased in 2025 compared to 2024 primarily due to benefits from prior-year restructuring and acquisition-integration activities, lower research and development expenses and cost containment initiatives.

Selling, general and administrative expenses also included business realignment and acquisition integration charges of $45 million and $55 million in 2025 and 2024, respectively.

Interest expense in 2025 decreased compared to 2024 primarily due to lower average debt outstanding.

Other (income) expense, net included the following:

(dollars in millions)

2025

2024

Foreign currency transaction loss (gain)(1)

$

46 

$

(38)

Income related to equity method investments

(178)

(152)

Non-service components of retirement benefit cost

(51)

(73)

Interest income

(11)

(15)

Saegertown incident(2)

8 

— 

Other items, net

3 

2 

Total other (income) expense, net

$

(183)

$

(276)

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

(2) On February 9, 2025, a fire damaged a portion of our Saegertown, Pennsylvania facility, causing a pause in production. Some production and operations were re-established within days of the event. Global available capacity has been utilized to restore production, substantially fulfill demand and minimize customer disruption. There was no material impact as a result of this disruption during fiscal 2025 and none is expected during future periods. We maintain third-party insurance coverage for property damage, clean-up, replacement and business interruption, subject to an $8 million deductible and liability retention for the event, which was recorded in the third quarter of 2025. While we expect to be reimbursed for a significant portion of our business interruption impacts by our third-party insurance coverage, we will not record any associated gain until realized.

20

Table of Contents

Gain on sale of businesses and assets, net in 2025 primarily relates to the divestiture of the composites and fuel containment ("CFC") business. 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.

Effective tax rate in 2025, was lower than the U.S. Federal statutory rate of 21 percent due to tax benefits from the release of a foreign valuation allowance, share-based compensation, foreign-derived intangible income and a tax benefit from a lower taxable gain on divestitures than gain under GAAP, which were partially offset by U.S. state and local taxes and taxes related to international activities.

The effective tax rate in 2024, was lower than the U.S. Federal statutory rate of 21 percent due to share-based compensation and foreign-derived intangible income, which were partially offset by U.S. state and local taxes and taxes related to international activities.

Refer to Note 5 to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for a further reconciliation of the U.S. federal statutory tax rate to our effective tax rate.

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)

2025

2024

Net sales

North America businesses

$

8,134 

$

8,801 

International businesses

5,531 

5,657 

Diversified Industrial Segment

13,665 

14,458 

Operating income

North America businesses

1,891 

1,963 

International businesses

1,229 

1,213 

Diversified Industrial Segment

$

3,120 

$

3,176 

Operating income as a percent of sales

North America businesses

23.2 

%

22.3 

%

International businesses

22.2 

%

21.4 

%

Diversified Industrial Segment

22.8 

%

22.0 

%

Backlog

$

3,655 

$

4,182 

21

Table of Contents

The Diversified Industrial Segment operations experienced the following percentage changes in net sales:

2025

North America businesses – as reported

(7.6)

%

Divestitures

(3.4)

%

Currency

(0.5)

%

North America businesses – without divestitures and currency(1)

(3.7)

%

International businesses – as reported

(2.2)

%

Currency

(0.3)

%

International businesses – without currency(1)

(1.9)

%

Diversified Industrial Segment – as reported

(5.5)

%

Divestitures

(2.0)

%

Currency

(0.5)

%

Diversified Industrial Segment – without divestitures and currency(1)

(3.0)

%

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

Net Sales

Diversified Industrial Segment sales in 2025 decreased $793 million from 2024. The effect of currency exchange rates decreased sales by approximately $63 million. The impact of divestiture activity decreased sales by approximately $295 million. Excluding the effects of changes in currency exchange rates and divestiture activity, sales in 2025 decreased $435 million from prior-year levels.

North America businesses - Sales within the North America businesses of the Diversified Industrial Segment decreased $667 million in 2025. The effect of currency exchange rates decreased sales by approximately $43 million during the year. The impact of divestiture activity decreased sales by approximately $295 million. Excluding the effects of changes in the currency exchange rates and divestiture activity, sales in 2025 decreased $329 million from prior-year levels reflecting lower demand within the off-highway, transportation, in-plant and industrial equipment and energy markets, partially offset by an increase in demand in the HVAC and refrigeration and aerospace and defense markets.

International businesses - Sales within the International businesses of the Diversified Industrial Segment decreased $126 million in 2025. The effect of currency exchange rates decreased sales by approximately $20 million, reflecting the strengthening of the U.S. dollar primarily against currencies in Mexico, Brazil and China, partially offset by the weakening of the U.S. dollar primarily against currencies in the United Kingdom and the Eurozone countries. Excluding changes in the currency exchange rates, sales in 2025 decreased $106 million from prior-year levels primarily due to lower sales in Europe, partially offset by an increase in sales in the Asia Pacific Region and Latin America.

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

Within the Asia Pacific region, the increase in sales was primarily due to higher demand within the electronics and semiconductor and in-plant and industrial equipment markets, partially offset by lower demand from end users in the transportation, energy and off-highway markets.

Within Latin America, the increase in sales was primarily due to higher demand within the in-plant and industrial equipment, transportation and off-highway markets, partially offset by lower demand from end users in the energy market.

Operating Margin

Diversified Industrial Segment operating margin increased in 2025, in both the North America and International businesses, primarily due to benefits from favorable product mix, price increases and benefits related to prior-year restructuring activities as well as cost containment initiatives, partially offset by decreased sales volume.

22

Table of Contents

Business Realignment

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

(dollars in millions)

2025

2024

North America businesses

$

17 

$

22 

International businesses

39 

33 

Diversified Industrial Segment

$

56 

$

55 

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. In both 2025 and 2024, acquisition integration charges relate to the acquisition of Meggitt. Business realignment and acquisition integration charges within the International businesses were primarily incurred in Europe.

We anticipate that cost savings realized from the workforce reduction measures taken during 2025 will increase operating income in 2026 by approximately two percent for both the International and North America businesses. We expect to continue to take actions necessary to integrate acquisitions and appropriately structure the operations of the Diversified Industrial Segment. These actions are expected to result in approximately $65 million in business realignment charges in 2026. However, continually changing business conditions could impact the ultimate costs we incur.

Backlog

Diversified Industrial Segment backlog decreased in 2025 primarily due to the CFC divestiture in the North America businesses, partially offset by an increase in backlog in the International businesses. Within the International businesses, the increase in backlog was primarily attributable to Europe, partially offset by the Asia Pacific region and Latin America.

Backlog consists of written firm orders from a customer to deliver products and, in the case of blanket purchase orders, only includes the portion of the order for which a schedule or release date has been agreed to with the customer. The dollar value of backlog is equal to the amount that is expected to be billed to the customer and reported as a sale.

Aerospace Systems Segment

(dollars in millions)

2025

2024

Net sales

$

6,185 

$

5,472 

Operating income

$

1,441 

$

1,111 

Operating income as a percent of sales

23.3 

%

20.3 

%

Backlog

$

7,389 

$

6,680 

Net Sales

Aerospace Systems Segment sales increased compared to prior-year due to higher volume across all market segments, especially the commercial and defense aftermarkets.

Operating Margin

Aerospace Systems Segment operating margin increased in 2025 primarily due to higher sales volume and favorable aftermarket mix, as well as benefits from cost containment initiatives and prior-year acquisition integration activities.

Business Realignment

Within the Aerospace Systems Segment, we incurred acquisition integration and business realignment charges of $19 million and $34 million in 2025 and 2024, respectively. We do not expect to incur significant business realignment and acquisition integration charges in 2026. However, continually changing business conditions could impact the ultimate costs we incur.

Backlog

Aerospace Systems Segment backlog increased in 2025 primarily due to orders exceeding shipments in the commercial and defense OEM market segments.

23

Table of Contents

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 and administrative expenses

(dollars in millions)

2025

2024

Corporate general and administrative expense

$

214 

$

218 

Corporate general and administrative expense, as a percent of sales

1.1 

%

1.1 

%

Corporate general and administrative expenses decreased in 2025 primarily due to lower expenses related to the Company's incentive compensation programs, net expense associated with the Company's deferred compensation plan and related investments, information technology expenses and discretionary spending, partially offset by an increase in charitable contributions and professional service fees.

Other (income) expense, net

(dollars in millions)

2025

2024

Foreign currency transaction loss (gain)(1)

$

46 

$

(38)

Stock-based compensation

97 

95 

Non-service components of retirement benefit cost

(51)

(73)

Gain on sale of businesses and assets, net(2)

(273)

(12)

Interest income

(11)

(15)

Saegertown incident(3)

8 

— 

Other items, net

15 

11 

Total other (income) expense, net

$

(169)

$

(32)

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

(2) Gain on sale of businesses and assets, net primarily relates to the divestiture of the CFC business. Refer to Note 3 to the Consolidated Financial Statements for further discussion.

(3) The Saegertown incident represents the deductible and retained liability expense associated with a fire at our plant in Saegertown, Pennsylvania in February 2025.

LIQUIDITY AND CAPITAL RESOURCES

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

•Continuing our record annual dividend increases

•Investing in organic growth and productivity

•Strategic acquisitions that strengthen our portfolio

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

Cash Flows

A summary of cash flows follows:

(dollars in millions)

2025

2024

Cash provided by (used in):

Operating activities

$

3,776 

$

3,384 

Investing activities

224 

(298)

Financing activities

(3,977)

(3,115)

Effect of exchange rates

22 

(24)

Net increase (decrease) in cash and cash equivalents

$

45 

$

(53)

24

Table of Contents

Cash flows from operating activities were $3,776 million in 2025 compared to $3,384 million in 2024. The increase of $392 million in 2025 was primarily related to an increase in earnings combined with strong management of working capital items. We continue to focus on managing inventory and other working capital requirements.

•Days sales outstanding relating to trade receivables for the Company was 51 days in both 2025 and 2024.

•Days supply of inventory on hand was 82 days in 2025 and 80 days in 2024.

Cash flows from investing activities in 2025 and 2024 were impacted by the following factors:

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

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

•Capital expenditures of $435 million in 2025 compared to $400 million in 2024.

Cash flows from financing activities in 2025 and 2024 were impacted by the following factors:

•Repurchases under the Company's share repurchase program amounted to 2.5 million common shares for $1.6 billion during 2025 compared to repurchases of 0.4 million common shares for $200 million during 2024.

•Net commercial paper repayments of $374 million in 2025 compared to net commercial paper borrowings of $359 million in 2024.

•Principal payments totaling $490 million related to the term loan facility (the "Term Loan Facility") in 2025 compared to principal payments totaling $385 million related to the Term Loan Facility in 2024. Refer to Note 11 to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for further discussion.

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

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

•Payments related to the maturity of $2.0 billion aggregate principal amounts of senior notes in 2024.

Cash Requirements

We are actively monitoring our liquidity position and remain focused on managing our inventory and other working capital requirements. We are targeting 2.5 percent of sales for capital expenditures for 2026 and have a long-term target of two percent. We will continue to prioritize capital expenditures related to safety, productivity and strategic investments. 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 11, 12, and 13 respectively, of Part II, Item 8 of this Annual Report on Form 10-K for further discussion.

Dividends

Cash dividends have been paid for 300 consecutive quarters, including a yearly increase in dividends for the last 69 years. The current annual dividend rate is $7.20 per common share.

Share Repurchases

On October 22, 2014, the Board of Directors approved a share repurchase program authorizing the repurchase of up to 35.0 million of the Company's common shares. As of June 30, 2025, we had 4.8 million shares available under this repurchase authorization. On August 21, 2025, the Board of Directors approved an update to the number of shares available under the Company's existing share repurchase authorization so that the aggregate number of shares available for repurchase as of such date was 20.0 million. There is no limitation on the number of shares that can be repurchased in a year and there is no expiration date for the program. Repurchases may be funded primarily from operating cash flows and commercial paper borrowings and the shares are initially held as treasury shares.

Liquidity

Cash, comprised of cash and cash equivalents and marketable securities and other investments, includes $344 million and $311 million held by the Company's foreign subsidiaries at June 30, 2025 and 2024, respectively. The Company does not permanently reinvest certain foreign earnings. The distribution of these earnings could result in non-federal U.S. or foreign taxes. All other undistributed foreign earnings remain permanently reinvested.

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As of June 30, 2025, the Company had a line of credit totaling $3.0 billion through a multi-currency revolving credit agreement with a group of banks with $1.2 billion available for borrowing under the credit agreement. On August 21, 2025, the multi-currency revolving credit agreement was amended to increase the total line of credit by $750 million to $3.75 billion. 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 expires in June 2028; however, the Company has the right to request a one-year extension of the expiration date on an annual basis, which 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 10 to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for further discussion.

We were authorized to sell up to $3.0 billion of short-term commercial paper notes as of June 30, 2025 with $1.8 billion outstanding. The largest amount of commercial paper notes outstanding during the fourth quarter of 2025 was $2.1 billion. On August 21, 2025, the authorization limit for short-term commercial paper notes increased to $3.75 billion.

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 2025, the company issued €700 million aggregate principal amount of 2.90 percent Senior Notes due March 1, 2030. We used the net proceeds from the issuance, together with cash on hand, to repay the €700 million aggregate principal amount of 1.125 percent Senior Notes upon maturity in March 2025. Our debt portfolio previously included a Term Loan Facility. During 2025, we repaid the remaining principal balance of $490 million of the Term Loan Facility. Additionally, we repaid the $500 million aggregate principal amount of fixed rate medium-term notes bearing interest of 3.30 percent upon maturity in November 2024. Refer to the Cash flows from financing activities section above and Note 11 of the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for further discussion.

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, 2025, 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, 2025, the Company's debt to debt-shareholders' equity ratio was 0.41 to 1.0. We are in compliance, and expect to remain in compliance, with all covenants set forth in the credit agreement and indentures.

Our goal is to maintain an investment-grade credit profile. The rating agencies periodically update our credit ratings as events occur. At June 30, 2025, the long-term credit ratings assigned to the Company's senior debt securities by the credit rating agencies engaged by the Company were as follows:

Fitch Ratings

A-

Moody's Investor Services, Inc.

A3

Standard & Poor's

BBB+

Supply Chain Financing

We continue to identify opportunities to improve our liquidity and working capital efficiency, which includes the extension of payment terms with our suppliers. We 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 do not believe that changes in the availability of supply chain financing will have a significant impact on our liquidity. Refer to Note 8 to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for further discussion.

Strategic Acquisitions and Divestitures

Acquisitions will be considered from time to time to the extent there is a strong strategic fit, while at the same time maintaining the Company’s strong financial position. In addition, we will continue to assess our existing businesses and initiate efforts to divest businesses that are not considered to be a good long-term strategic fit for the Company. During both 2025 and 2024, we divested two businesses each year. On June 30, 2025, the Company announced that it has agreed to acquire Curtis Instruments, Inc. from Rehlko, for approximately $1.0 billion in cash. The transaction is subject to customary closing conditions, including receipt of applicable regulatory approvals, and is expected to close by the end of calendar year 2025. 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.

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CRITICAL ACCOUNTING POLICIES & ESTIMATES

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.

Revenue Recognition - Revenues are recognized when control of performance obligations, which are distinct goods or services within the contract, is transferred to the customer. Control is transferred when the customer has the ability to direct the use of and obtain the benefits from the goods or services. A majority of our revenues are recognized at a point in time when control is transferred to the customer, which is generally at the time of shipment. However, a portion of our revenues are recognized over time if the customer simultaneously receives control as we perform work under a contract, if the customer controls the asset as it is being produced or if the product has no alternative use and we have a contractual right to payment.

For contracts where revenue is recognized over time, we use the cost-to-cost, efforts expended or units of delivery method depending on the nature of the contract, including length of production time. The estimation of costs and efforts expended requires 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.

The Company performed its fiscal 2025 annual goodwill impairment test as of January 1 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 2025, 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

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date. Changes in the assumptions or actual experience that differs from the assumptions could result in a material change in the annual net periodic expense and benefit obligations reported in the financial statements.

For the Company's domestic qualified defined benefit plan, our largest plan, a 50 basis point change in the assumed long-term rate of return on plan assets is estimated to have an $17 million effect on annual pension expense and a 50 basis point decrease in the discount rate is estimated to increase annual pension expense by $3 million.

Net actuarial gains and losses are recorded in accumulated other comprehensive loss and are subject to amortization and will affect earnings in the future. Further information on pensions is provided in Note 13 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.

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