Parker-Hannifin Corporation
Loading chart...
Item 1. Business
Parker-Hannifin Corporation was incorporated in Ohio in 1938. 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.
Parker 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 & defense, in-plant & industrial equipment, transportation, off-highway, energy, and HVAC & refrigeration markets around the world.
Parker values having a decentralized operating structure that fosters deeper connections with our customers and greater engagement among our team members. To align our operations and achieve our goal of top quartile performance, we deploy our business system, The Win StrategyTM, which establishes goals and strategies for engaged people, customer experience, profitable growth and financial performance. Underpinning this business system is our culture of safety, collaboration, continuous improvement, and team-based problem solving. Together our goals, strategies, and culture help us to fulfill our purpose: Enabling Engineering Breakthroughs that Lead to a Better Tomorrow. We credit the Win Strategy with leading Parker through a period of sustained operational excellence and transformation and believe it is the foundation for achieving our future goals.
Our investor relations website address is investors.parker.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.
Our 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 Governance page. Shareholders may request copies of these corporate governance documents, free of charge, by writing to our principal executive offices located at Parker-Hannifin Corporation, 6035 Parkland Boulevard, Cleveland, Ohio 44124-4141, Attention: Secretary, or by calling (216) 896-3000.
Markets
Our interconnected technologies and solutions provide value for customers across our market verticals including aerospace & defense, in-plant & industrial equipment, transportation, off-highway, energy, and HVAC and refrigeration. We serve several hundred thousand original equipment manufacturers ("OEMs") and distribution customer locations.
Reportable Segments
We have two reportable segments: Diversified Industrial and Aerospace Systems. Of the Company's $21.5 billion in net sales for fiscal year 2026, Diversified Industrial Segment products accounted for 67% and Aerospace Systems Segment products accounted for 33%.
Our Diversified Industrial Segment, which is an aggregation of several business units, sells highly engineered differentiated products to both OEMs and distributors who serve the aftermarket replacement markets. The major market verticals served by our Diversified Industrial Segment are listed below:
•Aerospace & Defense | •Off-highway | ||||
•In-plant & Industrial Equipment | •Energy | ||||
•Transportation | •HVAC & Refrigeration |
2
Our Aerospace Systems Segment sells highly engineered, differentiated airframe and engine components and systems to OEMs and aftermarket parts and maintenance directly to end users primarily in the commercial aerospace and defense market verticals. The major market platforms served by our Aerospace Systems Segment are listed below:
•Commercial Transport | •Regional Transport | ||||
•Defense Fixed Wing | •Helicopters | ||||
•Business Jets | •Energy |
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, 2026. Listed below are some of our principal products.
Our Diversified Industrial Segment products consist of a broad range of motion-control systems and components, which are described below:
•Active & Passive Vibration Control | •High Purity Sealing | ||||
•Coatings | •High Temperature Sealing | ||||
•Cryogenic Valves & Fittings | •HVAC/R Controls & Monitoring | ||||
•Elastomeric, Fabric Reinforced, Metal, & Precision Cut Seals | •Hydrogen & Natural Gas Filters | ||||
•Electric & Hydraulic Pumps & Motors | •Industrial Air & Gas Filtration | ||||
•Electric & Hydraulic Valves | •Miniature Pumps & Valves | ||||
•Electromagnetic Interface Shielding | •Pneumatic Actuators, Regulators & Valves | ||||
•Electromechanical & Hydraulic Actuators | •Power Take Offs | ||||
•Electronics, Drives & Controllers | •Process Filtration Solutions | ||||
•Engine Filtration Solutions | •Rubber to Substrate Adhesives | ||||
•Fluid Condition Monitoring | •Sensors & Diagnostics | ||||
•Fluid Conveyance Hose & Tubing | •Structural Adhesives | ||||
•High Pressure Connectors, Fittings, Valves & Regulators | •Thermal Management | ||||
•High Purity Fittings, Valves & Regulators |
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.
Our Aerospace Systems Segment products are used in commercial and defense airframe and engine programs and include:
•Avionics | •Fuel Systems & Components | ||||
•Electric & Hydraulic Braking Systems | •Fuel Tank Inerting Systems | ||||
•Electric Power | •Hydraulic Pumps & Motors | ||||
•Electromechanical Actuators | •Hydraulic Valves & Actuators | ||||
•Engine Exhaust Systems & Components |
Loading financial statements...
Financial statements
data from SEC XBRL filings. Values are as-reported; restatements supersede originals. Values reported in .
| Line item |
|---|
| Period ending |
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to provide a reader of our financial statements with a narrative, from management's perspective, on our financial condition and results of operations. The following discussion and analysis should be read in conjunction with the consolidated financial statements and the accompanying notes in Item 8 in this Annual Report on Form 10-K for the year ended June 30, 2026. 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. Dollars are presented in millions, except per share amounts or as otherwise noted. The term "year" and references to specific years refer to the applicable fiscal year. For a discussion comparing the year ended 2025 to the year ended 2024, refer to Part II, Item 7 of the Company's Annual Report on Form 10-K for the year ended June 30, 2025.
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 pending acquisition of CIRCOR Aerospace, and the integration of FGC and Curtis;
•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, including geopolitical tensions in the Middle East, 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;
20
•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, 2026 and undertakes no obligation to update them unless otherwise required by law.
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, customer experience, profitable growth and financial performance;
•maintaining a decentralized division and sales company structure;
•fostering a safety-first and entrepreneurial culture;
•engineering innovative systems and products to provide superior customer value through improved service, efficiency and productivity;
•delivering products, systems and services that have demonstrable savings to customers and are priced by the value they deliver;
•enabling a sustainable future by providing innovative technology solutions that offer a positive global environmental impact and operating responsibly by reducing our energy use and emissions;
•acquiring strategic businesses;
•organizing around targeted regions, technologies and markets;
•driving efficiency by implementing lean enterprise principles; and
•creating a culture of empowerment through our values, inclusion, 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.
21
Over the long term, the extent to which our business and results of operations will be impacted by global economic and political uncertainty and geopolitical risks depends on future developments that remain uncertain. In particular, the tariff environment continues to be dynamic. In February 2026, the U.S. Supreme Court ruled that tariffs imposed under the International Emergency Economic Powers Act ("IEEPA") on goods imported into the U.S. were unauthorized. During the fourth quarter of fiscal 2026, the Company recognized a reduction to cost of sales of $84 million related to IEEPA tariff refunds received from the U.S. government. We have applied for additional refunds under the same program, though for lesser amounts. No receivable has been recorded for these additional refunds as the amount and timing 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.
Consolidated Results
The following discussion and accompanying table provide an analysis of our operating performance for 2026 and 2025, with selected Consolidated Statements of Income line items expressed as a percentage of revenue to enhance comparability between periods.
| For the years ended June 30, | 2026 | 2025 | ||||||||||||||
| Net sales | $ | 21,499 | $ | 19,850 | ||||||||||||
| Gross profit margin | 37.7 | % | 36.9 | % | ||||||||||||
| Selling, general and administrative expenses | $ | 3,468 | $ | 3,255 | ||||||||||||
| Selling, general and administrative expenses, as a percent of sales | 16.1 | % | 16.4 | % | ||||||||||||
| Interest expense | $ | 401 | $ | 409 | ||||||||||||
| Other expense (income), net | (330) | (456) | ||||||||||||||
| Effective tax rate | 20.0 | % | 14.0 | % | ||||||||||||
| Net income attributable to common shareholders | $ | 3,648 | $ | 3,531 | ||||||||||||
Net Sales
Throughout this discussion, both reported sales growth, determined in accordance with U.S. GAAP, and organic sales growth, a non-GAAP measure, are presented. Organic sales growth represents the percentage change in net sales adjusted to exclude the effects of acquisitions and divestitures for the twelve-month period following their completion, as well as the impact of changes in currency exchange rates. Management believes these adjustments provide management and investors with additional insight into underlying sales trends and facilitate meaningful period-to-period comparisons of operating performance. References to organic sales in this discussion reflect this measure and are presented as a percentage increase or decrease relative to the comparable prior-year period. Total Company net sales changed as follows:
| 2026 | |||||||
| Reported sales growth | 8.3 | % | |||||
| Less: currency | 1.2 | % | |||||
| Less: divestitures | (0.7) | % | |||||
| Less: acquisitions | 1.2 | % | |||||
| Organic sales growth | 6.6 | % | |||||
Net sales in 2026 increased by $1,649 million, or 8.3%, compared to 2025, which was primarily driven by organic growth in both segments. Acquisitions net of divestitures increased sales by approximately $91 million in 2026. These changes are discussed in more detail within the business segment results section below.
Gross Profit Margin
Gross profit margin is calculated as net sales less cost of sales, divided by net sales, and increased in 2026 primarily due to higher margins in both segments primarily driven by sales volume, partially offset by unfavorable product mix and increased material costs.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased in 2026 compared to 2025 primarily due to higher stock-based compensation expense, acquisition-related expenses, research and development expenses, and intangible asset amortization.
22
Interest Expense
Interest expense in 2026 decreased compared to 2025 primarily due to lower average rates on commercial paper borrowings.
Other Expense (Income), Net
| For the years ended June 30, | 2026 | 2025 | ||||||||||||||||
| Foreign currency transaction loss (gain) | $ | (31) | $ | 46 | ||||||||||||||
| Income related to equity method investments | (218) | (178) | ||||||||||||||||
| Non-service components of retirement benefit cost (income) | (64) | (51) | ||||||||||||||||
Gain on sale of businesses(1) | (9) | (253) | ||||||||||||||||
| Interest income | (14) | (11) | ||||||||||||||||
| Insurance-related charges (recoveries) | (23) | 8 | ||||||||||||||||
| Other items, net | 29 | (17) | ||||||||||||||||
| Total other expense (income), net | $ | (330) | $ | (456) | ||||||||||||||
(1) For further discussion of the gain on sale of businesses refer to Note 3 to the consolidated financial statements. | ||||||||||||||||||
Income Taxes
The effective tax rate in 2026 was lower than the U.S. Federal statutory rate of 21% due to share-based compensation, foreign-derived intangible income and U.S. Federal income tax credits, which were partially offset by U.S. state and local taxes and tax effects in foreign jurisdictions.
The effective tax rate in 2025 was lower than the U.S. Federal statutory rate of 21% 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.
Refer to Note 5 to the consolidated financial statements for a further reconciliation of the U.S. federal statutory tax rate to our effective tax rate.
Business Segment Results
The following segment information is presented on a basis that is consistent with the manner in which the Company's various businesses are managed for internal review and decision-making.
| For the years ended June 30, | 2026 | 2025 | ||||||||||
| Net sales | ||||||||||||
| Diversified Industrial | $ | 14,438 | $ | 13,665 | ||||||||
| Aerospace Systems | 7,061 | 6,185 | ||||||||||
| Total net sales | $ | 21,499 | $ | 19,850 | ||||||||
| Segment operating income | ||||||||||||
| Diversified Industrial | $ | 3,440 | $ | 3,120 | ||||||||
| Aerospace Systems | 1,833 | 1,441 | ||||||||||
| Total segment operating income | 5,273 | 4,561 | ||||||||||
| Corporate general and administrative expenses | 205 | 214 | ||||||||||
| Income before interest expense and other expense (income), net | 5,068 | 4,347 | ||||||||||
| Interest expense | 401 | 409 | ||||||||||
| Other expense (income), net | 104 | (169) | ||||||||||
| Income before income taxes | $ | 4,563 | $ | 4,107 | ||||||||
The following segment discussions include information relating to backlog for each segment. 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.
23
Diversified Industrial
| For the years ended June 30, | 2026 | 2025 | ||||||||||||||
| North America businesses | ||||||||||||||||
| Net sales | $ | 8,392 | $ | 8,134 | ||||||||||||
| Segment operating income | 2,041 | 1,891 | ||||||||||||||
| Segment operating margin | 24.3 | % | 23.2 | % | ||||||||||||
| International businesses | ||||||||||||||||
| Net sales | 6,046 | 5,531 | ||||||||||||||
| Segment operating income | 1,399 | 1,229 | ||||||||||||||
| Segment operating margin | 23.1 | % | 22.2 | % | ||||||||||||
| Total Diversified Industrial | ||||||||||||||||
| Net sales | 14,438 | 13,665 | ||||||||||||||
| Segment operating income | 3,440 | 3,120 | ||||||||||||||
| Segment operating margin | 23.8 | % | 22.8 | % | ||||||||||||
Net Sales
The Diversified Industrial Segment operations experienced the following percentage changes in net sales:
| 2026 | |||||||||||||||||||
| North America | International | Total | |||||||||||||||||
| Reported sales growth | 3.2 | % | 9.3 | % | 5.7 | % | |||||||||||||
| Less: currency | 0.4 | % | 3.4 | % | 1.7 | % | |||||||||||||
| Less: divestitures | (1.8) | % | — | % | (1.1) | % | |||||||||||||
| Less: acquisitions | 1.5 | % | 2.0 | % | 1.7 | % | |||||||||||||
| Organic sales growth | 3.1 | % | 3.9 | % | 3.4 | % | |||||||||||||
Diversified Industrial Segment net sales in 2026 increased $773 million, or 5.7%, from 2025. Lost sales from the divestment of the composites and fuel containment ("CFC") and non-core filtration businesses in 2025 decreased sales by approximately $146 million. The effect of the Curtis acquisition increased sales by approximately $237 million. Organic sales growth relating to our North American businesses in 2026 increased by 3.1%, or $252 million, from 2025, driven by demand within the in-plant and industrial equipment, aerospace and defense, and off-highway markets, partially offset by lower demand within the transportation market. Organic sales growth within our international businesses in 2026 increased by 3.9%, or $218 million, from prior-year levels primarily due to higher sales in the Asia Pacific region, where we experienced higher demand within the electronics and semiconductor and in-plant and industrial equipment markets, partially offset by lower demand within the transportation market.
Segment Operating Margin
Diversified Industrial segment operating margin increased by 100 basis points in 2026 compared to 2025. Within the North America businesses, segment operating margin increased by 110 basis points in 2026 compared to 2025, primarily driven by favorable pricing and benefits from prior year divestitures, partially offset by unfavorable product mix, increased material costs and higher intangible amortization. Within the International businesses, segment operating margin increased by 90 basis points in 2026 compared to 2025, primarily driven by favorable mix and pricing, partially offset by higher business realignment charges.
We expect to incur approximately $90 million in business realignment charges in fiscal 2027. In addition, we expect to incur approximately $25 million in acquisition integration charges. Continually changing business conditions could impact the ultimate costs we incur.
Backlog
| June 30, | 2026 | 2025 | ||||||||||||||
| Backlog | $ | 4,332 | $ | 3,655 | ||||||||||||
Diversified Industrial Segment backlog increased in 2026 primarily due to orders exceeding shipments in both the North America and International businesses.
24
Aerospace Systems
| For the years ended June 30, | 2026 | 2025 | ||||||||||||||
| Net sales | $ | 7,061 | $ | 6,185 | ||||||||||||
| Segment operating income | $ | 1,833 | $ | 1,441 | ||||||||||||
| Segment operating margin | 26.0 | % | 23.3 | % | ||||||||||||
Net Sales
The Aerospace Systems Segment operations experienced the following percentage changes in net sales:
| 2026 | |||||||
| Reported sales growth | 14.2 | % | |||||
| Less: currency | 0.8 | % | |||||
| Organic sales growth | 13.4 | % | |||||
Aerospace Systems Segment sales increased compared to prior-year due to higher volume across all market segments, especially in the commercial OEM and aftermarket market segments.
Segment Operating Margin
Aerospace Systems segment operating margin increased by 270 basis points in 2026 compared to 2025, primarily driven by higher sales volume, partially offset by unfavorable mix. Aftermarket profitability and benefits from cost containment initiatives also contributed to the increase in margins, to a lesser extent.
Backlog
| June 30, | 2026 | 2025 | ||||||||||||||
| Backlog | $ | 8,498 | $ | 7,389 | ||||||||||||
Aerospace Systems Segment backlog increased in 2026 primarily due to orders exceeding shipments in all market segments, especially in the commercial OEM and aftermarket market segments.
Corporate General and Administrative Expenses
| For the years ended June 30, | 2026 | 2025 | ||||||||||||||
| Corporate general and administrative expense | $ | 205 | $ | 214 | ||||||||||||
| Corporate general and administrative expense, as a percent of sales | 1.0 | % | 1.1 | % | ||||||||||||
Corporate general and administrative expenses primarily included salaries, benefits and incentive compensation expense, professional service fees, information technology, charitable contributions and other discretionary spending.
Other Expense (Income), Net
| For the years ended June 30, | 2026 | 2025 | ||||||||||||||||
| Foreign currency transaction (gain) loss | $ | (31) | $ | 46 | ||||||||||||||
| Stock-based compensation expense | 179 | 97 | ||||||||||||||||
| Non-service components of retirement benefit cost (income) | (64) | (51) | ||||||||||||||||
| Acquisition-related expenses | 30 | — | ||||||||||||||||
Gain on sale of businesses(1) | (9) | (253) | ||||||||||||||||
| Interest income | (14) | (11) | ||||||||||||||||
| Insurance-related charges (recoveries) | (23) | 8 | ||||||||||||||||
| Other items, net | 36 | (5) | ||||||||||||||||
| Total other expense (income), net | $ | 104 | $ | (169) | ||||||||||||||
(1) For further discussion of the gain on sale of businesses refer to Note 3 to the consolidated financial statements. | ||||||||||||||||||
25
Liquidity And Capital Resources
We believe that we are great generators and deployers of cash. We assess our liquidity in terms of our ability to generate cash to fund our operations and meet our strategic capital deployment objectives, which include the following:
•Investing in organic growth and productivity
•Continuing our record annual dividend increases
•Strategic acquisitions that strengthen our portfolio
•Share repurchases, including repurchases under the 10b5-1 share repurchase program
We expect that our cash and cash equivalents, cash flows from operations, availability under our commercial paper program, and access to capital markets will be sufficient to meet our liquidity needs for the next twelve months and the foreseeable future.
At June 30, 2026, we had cash and cash equivalents totaling $501 million, of which $482 million was held by our foreign subsidiaries. We intend to repatriate certain foreign earnings, which may result in non-federal U.S. or foreign tax liabilities. All other undistributed foreign earnings are considered to be permanently reinvested.
Cash Flows
A summary of cash flows follows:
| For the years ended June 30, | 2026 | 2025 | Change | ||||||||||||||
| Cash provided by (used in): | |||||||||||||||||
| Operating activities | $ | 4,364 | $ | 3,776 | $ | 588 | |||||||||||
| Investing activities | (1,390) | 224 | (1,614) | ||||||||||||||
| Financing activities | (2,934) | (3,977) | 1,043 | ||||||||||||||
| Effect of exchange rates | (6) | 22 | (28) | ||||||||||||||
| Net increase (decrease) in cash and cash equivalents | $ | 34 | $ | 45 | $ | (11) | |||||||||||
Net cash provided by operating activities increased $588 million in 2026 compared to 2025. The increase was primarily driven by higher net income adjusted for non-cash items (including depreciation, amortization, stock-based compensation expense, deferred income taxes and gains on sale of businesses), which more than offset the increased working capital requirements, specifically within inventory and accounts receivable. We continue to focus on managing inventory and other working capital requirements.
•Days sales outstanding relating to trade receivables for the Company was 50 days in 2026 and 51 days in 2025.
•Days supply of inventory on hand was 86 days in 2026 and 82 days in 2025.
Net cash (used in) provided by investing activities decreased by $1,614 million in 2026 compared to 2025. The decrease was primarily attributable to $1.0 billion in cash used for the Curtis acquisition and lower proceeds from sale of businesses in 2026. Proceeds from sale of businesses in 2025 included net proceeds of $621 million related to the divestitures of the composites and fuel containment business and the non-core filtration business.
Net cash used in financing activities in 2026 and 2025 were impacted by the following factors:
•Net commercial paper repayments of $736 million in 2026 compared to $374 million in 2025.
•During 2025, we made principal payments of $490 million on our term loan facility and $500 million in connection with the maturity of medium-term notes. Additionally, we issued €700 million aggregate principal amount of 2.90% Senior Notes due 2030, the proceeds of which were used to repay the €700 million aggregate principal amount of 1.125% Senior Notes due 2025. There were no comparable transactions during 2026.
•Repurchases under our share repurchase program amounted to 1.2 million common shares for $1.0 billion during 2026 compared to repurchases of 2.5 million common shares for $1.6 billion during 2025.
26
Debt
To fund short-term liquidity needs, we utilize a commercial paper program that is supported by our revolving credit agreement.
During 2026, we amended our revolving credit agreement to increase the total line of credit to $3.75 billion, and authorized a corresponding increase in the commercial paper program size to $3.75 billion. The revolving credit agreement expires in June 2028; however, we have the right to request a one-year extension of the expiration date. Advances from the revolving credit agreement can be used for general corporate purposes, including acquisitions, and for the refinancing of existing indebtedness. Issuances of commercial paper reduce the amount of credit available under the revolving credit agreement. As of June 30, 2026, there were no borrowings outstanding under the revolving credit agreement, and commercial paper notes outstanding were $1.0 billion. Taking into account outstanding commercial paper notes, $2.7 billion was available for borrowing under the revolving credit agreement as of June 30, 2026.
During 2026, we entered into a 364-Day Term Loan Agreement and a Three-Year Term Loan Agreement, which provide for senior unsecured delayed draw term loan facilities in aggregate principal amounts of $5.25 billion and $2.50 billion, respectively (together, the “Credit Facilities”). The Credit Facilities mature 364 days and three years, respectively, following August 13, 2026. As of June 30, 2026, we had not borrowed any funds under the Credit Facilities. Subsequent to June 30, 2026, to finance the FGC acquisition, the Company borrowed the full $7.75 billion aggregate amount available under the Credit Facilities. The Company intends to repay a portion of these borrowings with cash on hand and refinance the remaining borrowings with long-term debt.
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.
Our credit agreements and indentures governing certain debt securities contain various covenants. Violation of these covenants would limit or preclude the use of the credit agreements for future borrowings or could accelerate the maturity of the related outstanding borrowings. Based on our rating level at June 30, 2026, the most restrictive financial covenant requires that the ratio of debt to debt-shareholders' equity not exceed 0.65 to 1.0. As of June 30, 2026, we are in compliance with all covenants, with a ratio of 0.36 to 1.0. While the incurrence of additional debt in connection with the FGC acquisition and the potential incurrence of additional debt in connection with the acquisition of CIRCOR Aerospace has raised and may raise the Company's debt levels and interest expense, we expect to remain in compliance with all covenants set forth in our credit agreements 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, 2026, the long-term credit ratings assigned to our senior debt securities were as follows:
| Fitch Ratings | A- | ||||||
| Moody's Investor Services, Inc. | A3 | ||||||
| Standard & Poor's | BBB+ | ||||||
Refer to the cash flows from financing activities section and Note 10 to the consolidated financial statements for further discussion.
Capital Expenditures
We are targeting 2.5% of sales for capital expenditures for fiscal 2027 and have an annual long-term target of 2.0%. We will continue to prioritize capital expenditures related to safety, productivity and strategic investments.
Dividends
Cash dividends have been paid for 304 consecutive quarters, including a yearly increase in dividends for the last 70 years. The current annual dividend rate is $8.00 per common share.
Share Repurchases
On August 21, 2025, the Board of Directors approved an update to the number of shares available under our previous 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. As of June 30, 2026, 18.8 million shares remained available under the
27
repurchase authorization. Refer to Note 13 to the consolidated financial statements for further discussion.
Strategic Acquisitions and Divestitures
Acquisitions will be considered from time to time to the extent there is a strong strategic fit, while at the same time maintaining our 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 Parker.
On September 18, 2025, we completed the acquisition of Curtis, for approximately $1.0 billion, net of cash acquired. On August 13, 2026, we completed the FGC acquisition from Madison Industries for the cash purchase price of $9.25 billion. On May 21, 2026, the Company announced that it entered into a definitive agreement to acquire CIRCOR Aerospace for approximately $2.55 billion in cash. The pending transaction is subject to customary closing conditions, including receipt of applicable regulatory approvals, and is expected to close in the second half of calendar year 2026. We expect to fund the acquisition of CIRCOR Aerospace with a combination of new debt and cash. Refer to Notes 3 and 20 to the consolidated financial statements for further discussion.
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 for further discussion.
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.
28
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 2026 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 2026, the Company did not record any material impairments related to long-lived assets.
Pensions
The annual net periodic benefit cost (credit) 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 or actual experience that differs from the assumptions could result in a material change in the annual net periodic benefit cost (credit) and benefit obligations reported in the financial statements. Based on the assumptions selected at the June 30, 2026 measurement date, the Company expects to record a net periodic benefit credit of approximately $48 million in 2027 for all defined benefit plans.
Recent insider activity
| Date | Insider | Role | Action | Shares | Price | Value |
|---|---|---|---|---|---|---|
| 2026-08-17 | Scott Patrick | VP & Pres-Fluid Conn. Grp. | Sell | -1,235 ×2 | $1,057.00 | -$1,305,390 |
| 2026-08-14 | Verrier James | Director | Sell | -1,500 | $1,058.00 | -$1,587,000 |
| 2026-08-14 | Hart Mark J | EVP-HR & External Affairs | Sell | -2,497 | $1,057.00 | -$2,639,329 |
| 2026-08-14 | Bracht Berend | VP & Pres.- Motion Sys. Grp. | Sell | -700 | $1,055.03 | -$738,521 |
| 2026-08-14 | Scott Patrick | VP & Pres-Fluid Conn. Grp. | Sell | -631 | $1,053.20 | -$664,569 |
| 2026-08-14 | Parel Dinu J | VP & Chief Digital & Info Off. | Sell | -2,265 ×3 | $1,057.25 | -$2,394,673 |
| 2026-08-14 | Parel Dinu J | VP & Chief Digital & Info Off. | Sell | -2,204 ×4 | $1,057.59 | -$2,330,939 |
| 2026-08-14 | Ross Andrew D | President & COO | Sell | -5,498 | $1,057.57 | -$5,814,520 |
| 2026-08-14 | Reidy Jay | VP & Pres.-Aerospace Grp. | Sell | -300 | $1,055.77 | -$316,731 |
Source: SEC Form 4 filings.
Next expected filings
- ~2026-11-06 10-Q expected by 2026-11-11 (in 75 days)
- ~2027-01-29 10-Q expected by 2027-02-03 (in 159 days)
- ~2027-04-30 10-Q expected by 2027-05-05 (in 250 days)
- ~2027-08-20 10-K expected by 2027-08-26 (in 362 days)
Predicted from historical filing cadence; not an SEC commitment.
Recent SEC filings
- 2026-08-21 10-K Annual Report
- 2026-08-13 8-K Completion of Acquisition/Disposition; Material Financial Obligation; Financial Statements and Exhibits
- 2026-08-06 8-K Earnings Release; Financial Statements and Exhibits
- 2026-05-01 10-Q Quarterly Report
- 2026-04-30 8-K Earnings Release; Financial Statements and Exhibits
- 2026-03-17 8-K Officer/Director Change
- 2026-01-30 10-Q Quarterly Report
- 2026-01-29 8-K Earnings Release; Financial Statements and Exhibits
- 2025-12-10 8-K Material Agreement Entered; Material Financial Obligation; Financial Statements and Exhibits
- 2025-11-12 8-K Material Agreement Entered; Financial Statements and Exhibits
- 2025-11-07 10-Q Quarterly Report
- 2025-11-06 8-K Earnings Release; Financial Statements and Exhibits
- 2025-09-02 8-K Officer/Director Change
- 2025-08-22 10-K Annual Report
- 2025-08-07 8-K Earnings Release; Financial Statements and Exhibits