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.

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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.

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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.

Gross profit margin 36.9 % 35.8 %

Selling, general and administrative expenses $ 3,255 $ 3,315

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 salesin 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:

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)

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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

Net sales

Operating income

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 %

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

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) %

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.

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Business Realignment

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

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

Operating income as a percent of sales 23.3 % 20.3 %

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.

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Corporate general and administrative expenses

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

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)

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:

Cash provided by (used in):

Effect of exchange rates 22 (24)

Net increase (decrease) in cash and cash equivalents $ 45 $ (53)

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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 Goodwilland 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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ITEM 7A.Quantitative and Qualitative Disclosures About Market Risk.

A substantial portion of our operations are conducted by our subsidiaries outside of the U.S. in currencies other than the U.S. dollar. Most of our non-U.S. subsidiaries conduct their business primarily in their local currencies, which are also their functional currencies. Foreign currency exposures arise from translation of foreign currency-denominated assets and liabilities into U.S. dollars and from transactions denominated in a currency other than the subsidiary’s functional currency. We continue to manage the associated foreign currency transaction and translation risk using existing processes.

The Company manages foreign currency transaction and translation risk by utilizing derivative and non-derivative financial instruments, including forward exchange contracts, cross-currency swap contracts and certain foreign currency denominated debt designated as net investment hedges. The derivative financial instrument contracts are with major investment grade financial institutions and we do not anticipate any material non-performance by any of the counterparties. We do not hold or issue derivative financial instruments for trading purposes.

Derivative financial instruments are recognized on the Consolidated Balance Sheet as either assets or liabilities and are measured at fair value. Further information on the fair value of these contracts is provided in Note 17 to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K. Derivatives that are not designated as hedges are adjusted to fair value by recording gains and losses through the Consolidated Statement of Income. Derivatives that are designated as hedges are adjusted to fair value by recording gains and losses through accumulated other comprehensive loss in the Consolidated Balance Sheet until the hedged item is recognized in earnings. For cross-currency swaps measured using the spot method, the periodic interest settlements are recognized directly in earnings through interest expense. The translation of the foreign currency denominated debt that has been designated as a net investment hedge is recorded in accumulated other comprehensive loss and remains there until the underlying net investment is sold or substantially liquidated. A 10 percent change in foreign exchange rates related to our forward exchange contracts as of June 30, 2025, would affect earnings by approximately $80 million. A majority of the impact would be offset by changes in value from the remeasurement of the underlying items being hedged. Collectively, the forward exchange contracts and their associated hedged items do not create material market risk.

The Company's debt portfolio contains variable rate debt, consisting of commercial paper, inherently exposing the Company to interest rate risk. The Company's objective is to maintain a 60/40 mix between fixed rate and variable rate debt thereby limiting its exposure to changes in near-term interest rates. A 100 basis point increase in near-term interest rates would increase annual interest expense on variable rate debt, consisting of commercial paper borrowings as of June 30, 2025, by approximately $18 million.

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ITEM 8. Financial Statements and Supplementary Data.

Page Numberin Form 10-K

Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34) 31

Financial Statements

Consolidated Statement of Income 33

Consolidated Statement of Comprehensive Income 34

Consolidated Balance Sheet 35

Consolidated Statement of Cash Flows 36

Consolidated Statement of Equity 37

Notes to Consolidated Financial Statements 38

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of Parker-Hannifin Corporation

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Parker-Hannifin Corporation and subsidiaries (the “Company”) as of June 30, 2025 and 2024, the related consolidated statements of income, comprehensive income, cash flows, and equity, for each of the three years in the period ended June 30 2025, and the related notes (collectively referred to as the “financial statements”). We also have audited the Company’s internal control over financial reporting as of June 30, 2025, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of June 30, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended June 30, 2025, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 30, 2025, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

Basis for Opinions

The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report On Internal Control Over Financial Reporting. Our responsibility is to express an opinion on these financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a

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whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue — Refer to Notes 1 and 2 to the financial statements

Critical Audit Matter Description

The Company recognizes revenue from the sale of products to customers primarily in aerospace & defense, in-plant & industrial equipment, transportation, off-highway, energy, and HVAC & refrigeration markets around the world. The Company’s business activities are carried out by a large number of individual business units collectively offering hundreds of thousands of individual products in over forty countries globally.

We identified revenue from product shipments as a critical audit matter due to the geographic dispersion of the Company’s operations and business units generating revenue. Extensive audit effort is required due to the volume of the underlying transactions and number of individual business units. High levels of auditor judgment were necessary to determine the nature, timing, and extent of audit procedures performed to audit revenue from product shipments.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the Company’s revenue from product shipments included the following, among others:

•We tested the operating effectiveness of internal controls over the recognition of revenue from product shipments, including controls over the quantity and price of products shipped and timing of revenue recognition.

•We performed detail transaction testing for revenue from product shipments by making a sample of transactions and comparing the transactions selected to source documents such as purchase orders and shipping records.

•We tested the completeness of revenue from product shipments by making a sample from a listing of sales orders and comparing the sample transactions to source documentation such as shipping records to determine whether the transactions selected were appropriately included in revenue from product shipments.

•We tested the timing of revenue recognition by making a sample from a list of products shipped prior to and subsequent to year end and used source documentation such as shipping records to determine whether the transactions selected were appropriately recorded in the correct period.

•We performed substantive analytical procedures for certain revenue transactions by developing independent expectations of revenue based on data derived from the results of our detail revenue testing and comparing these expectations to the revenue recorded by management.

/s/ DELOITTE & TOUCHE LLP

Cleveland, Ohio

August 22, 2025

We have served as the Company's auditor since 2008.

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CONSOLIDATED STATEMENT OF INCOME

For the years ended June 30,

Selling, general and administrative expenses 3,255 3,315 3,354

Gain on sale of businesses and assets, net (273) (12) (363)

Less: Noncontrolling interest in subsidiaries' earnings 1 1 1

Net Income Attributable to Common Shareholders $ 3,531 $ 2,844 $ 2,083

Earnings per Share Attributable to Common Shareholders:

The accompanying notes are an integral part of the consolidated financial statements.

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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the years ended June 30,

Less: Noncontrolling interests in subsidiaries' earnings 1 1 1

Net income attributable to common shareholders 3,531 2,844 2,083

Other comprehensive income (loss), net of tax

Foreign currency translation adjustment and other 413 (168) 187

Retirement benefits plan activity 142 23 63

The accompanying notes are an integral part of the consolidated financial statements.

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CONSOLIDATED BALANCE SHEET

(In millions, except par value) 2025 2024

Assets

Current Assets

Cash and cash equivalents $ 467 $ 422

Trade accounts receivable, net 2,910 2,866

Non-trade and notes receivable 318 331

Property, plant and equipment 7,417 7,075

Less: Accumulated depreciation 4,480 4,199

Property, plant and equipment, net 2,937 2,876

Deferred income taxes 270 93

Liabilities and Equity

Current Liabilities

Notes payable and long-term debt payable within one year $ 1,791 $ 3,403

Accrued payrolls and other compensation 587 581

Accrued domestic and foreign taxes 382 355

Other accrued liabilities 933 982

Pensions and other postretirement benefits 267 437

Equity

Shareholders' Equity

Serial preferred stock, $.50 par value, authorized 3.0 shares; none issued — —

Additional paid-in capital 194 264

Accumulated other comprehensive loss (883) (1,438)

Noncontrolling interests 9 9

The accompanying notes are an integral part of the consolidated financial statements.

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CONSOLIDATED STATEMENT OF CASH FLOWS

For the years ended June 30,

Cash Flows From Operating Activities

Foreign currency transaction loss (gain) 46 (38) 46

(Gain) loss on disposal of property, plant and equipment (20) 12 4

Gain on sale of businesses (253) (24) (366)

Accounts receivable, net 6 (85) (17)

Prepaid expenses (9) (49) 32

Other current assets (11) (15) (30)

Accrued payrolls and other compensation 2 (64) 87

Accrued domestic and foreign taxes (18) 27 102

Pensions and other postretirement benefits (21) (80) (109)

Cash Flows From Investing Activities

Acquisitions, net of cash acquired — — (7,146)

Proceeds from sale of property, plant and equipment 32 9 13

Proceeds from sale of businesses 623 78 473

Payments of deal-contingent forward contracts — — (1,405)

Net cash provided by (used in) investing activities 224 (298) (8,177)

Cash Flows From Financing Activities

Proceeds from exercise of stock options 4 4 3

Acquisition of noncontrolling interests — (3) —

Proceeds from notes payable, net (364) 359 358

Proceeds from long-term borrowings 751 24 2,023

Financing fees paid — — (13)

Net cash used in financing activities (3,977) (3,115) (971)

Effect of exchange rate changes on cash 22 (24) (5)

Cash, cash equivalents and restricted cash at beginning of year 422 475 6,648

Cash, cash equivalents and restricted cash at end of year $ 467 $ 422 $ 475

Supplemental Data:

Cash paid during the year for:

The accompanying notes are an integral part of the consolidated financial statements.

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CONSOLIDATED STATEMENT OF EQUITY

Other comprehensive income — — — 250 — — 250

Dividends paid ($5.47 per share) — — (703) — — (1) (704)

Stock incentive plan activity — (22) — — 70 — 48

Shares purchased at cost — — — — (200) — (200)

Other comprehensive loss — — — (145) — — (145)

Dividends paid ($6.07 per share) — — (781) — — (1) (782)

Stock incentive plan activity — (41) — — 68 — 27

Other — — — — — (2) (2)

Shares purchased at cost — — — — (200) — (200)

Other comprehensive income — — — 555 — — 555

Dividends paid ($6.69 per share) — — (861) — — — (861)

Stock incentive plan activity — (70) — — 68 — (2)

Other — — — — — (1) (1)

Shares purchased at cost, including excise tax — — — — (1,613) — (1,613)

The accompanying notes are an integral part of the consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions, except per share amounts or as otherwise noted)

The term "year" and references to specific years refer to the applicable fiscal years.

1. Significant Accounting Policies

The significant accounting policies followed in the preparation of the accompanying consolidated financial statements are summarized below.

Nature of Operations - The Company is a 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. We evaluate performance based on segment operating income before corporate administrative expenses, interest expense and income taxes.

Due to our diverse group of customers throughout the world, we do not consider ourself exposed to any concentration of credit risks.

The Company manufactures and markets its products throughout the world. Although certain risks and uncertainties exist, the diversity and breadth of our products and geographic operations mitigate the risk that adverse changes with respect to any particular product and geographic operation would materially affect our operating results.

Use of Estimates - The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Basis of Consolidation - The consolidated financial statements include the accounts of all majority-owned domestic and foreign subsidiaries. All intercompany transactions and profits have been eliminated in the consolidated financial statements. The Company does not have off-balance sheet arrangements. Within the business segment information, inter-segment and inter-area sales have been eliminated. The Company has changed its presentation from thousands to millions and, as a result, any necessary rounding adjustments have been made to prior period disclosed amounts.

Certain prior year amounts have been reclassified to conform to the current year presentation.

Revenue Recognition - Revenues are recognized when control of performance obligations, which are distinct goods or services within the contract, is transferred to the customer. Control is transferred when the customer has the ability to direct the use of and obtain the benefits from the goods or services. When revenue is recognized at a point in time, control generally transfers at time of shipment. Revenues are recognized over time if the customer simultaneously receives control as the Company performs work under a contract, if the customer controls the asset as it is being produced or if the product produced for the customer has no alternative use and the Company has a contractual right to payment.

For contracts where revenue is recognized over time, we use the cost-to-cost, efforts expended or units of delivery method depending on the nature of the contract, including length of production time. The estimation of these costs and efforts expended requires judgment on the part of management due to the duration of the contractual agreements as well as the technical nature of the products involved. We make adjustments to these estimates on a consistent basis and establish a contract reserve when the estimated costs to complete a contract exceed the expected contract revenues.

A contract’s transaction price is allocated to each distinct performance obligation. When there are multiple performance obligations within a contract, the transaction price is allocated to each performance obligation based on its standalone selling price. The primary method used to estimate a standalone selling price is the price observed in standalone sales to customers of the same product or service. Revenue is recognized when control of the individual performance obligations is transferred to the customer.

We consider the contractual consideration payable by the customer and assess variable consideration that may affect the total transaction price. Variable consideration primarily includes prompt pay discounts, rebates and volume discounts and is included in the estimated transaction price when there is a basis to reasonably estimate the amount, including whether the estimate should be constrained in order to avoid a significant reversal of revenue in a future period. These estimates are based on historical experience, anticipated performance under the terms of the contract and our best judgment at the time.

Payment terms vary by customer and the geographic location of the customer. The time between when revenue is recognized and payment is due is not significant. Our contracts with customers generally do not include significant financing components or noncash consideration.

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Taxes collected from customers and remitted to governmental authorities are excluded from revenue. Shipping and handling costs are treated as fulfillment costs and are included in cost of sales. The costs to obtain a contract where the amortization period for the related asset is one year or less are expensed as incurred.

There is generally no unilateral right to return products. The Company primarily offers an assurance-type standard warranty that the product will conform to certain specifications for a defined period of time or usage after delivery. This type of warranty does not represent a separate performance obligation.

Cash and Cash Equivalents - Cash equivalents consist of short-term, highly liquid investments with a maturity of three months or less. These investments are carried at cost plus accrued interest and are readily convertible into cash.

Trade Accounts Receivable, Net - Trade accounts receivable are initially recorded at their net collectible amount and are generally recorded at the time the revenue from the sales transaction is recorded. We evaluate the collectibility of our receivables based on historical experience and current and forecasted economic conditions based on management's judgment. Additionally, receivables are written off to bad debt when management makes a final determination of uncollectibility. Allowance for credit losses was $10 million and $21 million at June 30, 2025 and 2024, respectively.

Non-Trade and Notes Receivable - The non-trade and notes receivable caption in the Consolidated Balance Sheet is comprised of the following components:

Notes receivable $ 84 $ 93

Accounts receivable, other 234 238

Property, Plant and Equipment and Depreciation - Property, plant and equipment are recorded at cost and are depreciated principally using the straight-line method for financial reporting purposes. Depreciation rates are based on estimated useful lives of the assets, generally 40 years for buildings, 15 years for land improvements and building equipment, seven to 10 years for machinery and equipment, and three to eight years for vehicles and office equipment. Improvements, which extend the useful life of property, are capitalized. Maintenance and repairs are expensed. We review property, plant and equipment for impairment whenever events or changes in circumstances indicate that their carrying value may not be recoverable. When property, plant and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the appropriate accounts and any gain or loss is included in current income.

The property, plant and equipment caption in the Consolidated Balance Sheet is comprised of the following components:

Land and land improvements $ 411 $ 380

Buildings and building equipment 2,241 2,129

Construction in progress 333 349

Investments in Joint Ventures - Investments in joint venture companies in which ownership is 50 percent or less and in which the Company does not have operating control are accounted for under the equity method of accounting and are included in other assets on the Consolidated Balance Sheet. Equity method investments amounted to $280 million and $294 million at June 30, 2025 and 2024, respectively. A significant portion of the underlying net assets of the joint ventures are related to goodwill. Refer to Note 20 for further discussion.

Intangible Assets - Intangible assets primarily include patents and technology, trade names and customer relationships and contracts and are recorded at cost and amortized on a straight-line method. Patents and technology are amortized over the shorter of their remaining useful or legal life. Trade names are amortized over the estimated time period over which an economic benefit is expected to be received. Customer relationships are amortized over a period based on anticipated customer attrition rates or contractual lives. The Company reviews intangible assets for impairment whenever events or changes in circumstances indicate that their carrying value may not be recoverable.

Goodwill - The Company conducts a formal impairment test of goodwill on an annual basis and between annual tests if an event occurs or circumstances change that would, more likely than not, reduce the fair value of a reporting unit below its carrying value.

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Income Taxes - Income taxes are provided based upon income for financial reporting purposes. Taxes related to Global Intangible Low-Taxed Income ("GILTI") are treated as a current period expense when incurred. Tax credits and similar tax incentives are applied to reduce the provision for income taxes in the year in which the credits arise. We recognize accrued interest related to unrecognized tax benefits in income tax expense. Penalties, if incurred, are recognized in income tax expense. Deferred income taxes arise from temporary differences in the recognition of income and expense for tax purposes. Income tax effects resulting from adjusting temporary differences recorded in accumulated other comprehensive loss are released when the circumstances on which they are based cease to exist.

Fair Value Measurements - Assets and liabilities measured at fair value are classified according to the following hierarchy, which is determined by the observability of the inputs used in the valuation as of the measurement date. Level 1 inputs are quoted prices in active markets for identical assets or liabilities. Level 2 inputs are inputs other than quoted prices included within Level 1 that are directly or indirectly observable. Level 3 inputs are unobservable inputs that are significant to the fair value measurement.

Foreign Currency Translation - Assets and liabilities of foreign subsidiaries are translated at current exchange rates, and income and expenses are translated using weighted-average exchange rates. The effects of these translation adjustments, as well as gains and losses from certain hedging and intercompany transactions, are reported in accumulated other comprehensive loss. Such adjustments will affect net income only upon sale or liquidation of the underlying foreign investments. Exchange (gains) losses from transactions in a currency other than the local currency of the entity involved are included within other (income) expense, net in the Consolidated Statement of Income. Refer to Note 20 for further discussion.

Subsequent Events - We evaluated subsequent events that have occurred through the date of filing of this Annual Report on Form 10-K for the year ended June 30, 2025 and determined no further events or transactions are required to be disclosed other than those already disclosed elsewhere in the Notes to Consolidated Financial Statements.

Recent Accounting Pronouncements

In November 2024, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2024-03, “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses,” which requires expanded interim and annual disclosures of expense information, including the amounts of inventory purchases, employee compensation, depreciation, amortization and depletion within commonly presented expense captions during the period. The amendments are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The amendments should be applied either (1) prospectively to financial statements issued for reporting periods after the effective date or (2) retrospectively to any or all prior periods presented in the financial statements. The Company is currently evaluating the ASU to determine its impact on the Company's disclosures.

In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures," which enhances the disclosure requirements for income taxes primarily related to the rate reconciliation and income taxes paid information. The amendments are effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The amendment should be applied on a prospective basis. Retrospective application is permitted. The Company is currently evaluating the impact this guidance will have on the Company's disclosures.

In November 2023, the FASB issued ASU 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures," which updates reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. The amendments should be applied retrospectively to all prior periods presented in the financial statements. The Company adopted the standard in the fourth quarter of fiscal 2025. Refer to Note 19 for further discussion.

In September 2022, the FASB issued ASU 2022-04, "Liabilities—Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations," which requires a buyer in a supplier finance program to disclose information about the program’s nature, activity during the period, changes from period to period, and potential magnitude. To achieve that objective, the buyer should disclose qualitative and quantitative information about its supplier finance programs, including the outstanding amount under the program, the balance sheet presentation of the outstanding amount, and a rollforward of the obligations in the program. This ASU should be adopted retrospectively for each balance sheet period presented; however, the rollforward

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information should be provided prospectively. The amendments in this ASU are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, except for the amendment on rollforward information, which is effective for fiscal years beginning after December 15, 2023. Early adoption is permitted. The Company adopted the guidance on July 1, 2023, except for the rollforward requirement, which was adopted in the fourth quarter of fiscal 2025. The adoption did not have a material impact on the Company's consolidated financial statements. Refer to Note 8for further discussion.

2. Revenue recognition

Revenue is derived primarily from the sale of products in the aerospace & defense, in-plant & industrial equipment, transportation, off-highway, energy, and HVAC & refrigeration markets. A majority of the Company’s revenues are recognized at a point in time. However, a portion of the Company’s revenues are recognized over time.

Disaggregation of revenue

Revenue from contracts with customers is disaggregated by technology platform for the Diversified Industrial Segment, by market segment for the Aerospace Systems Segment and by geographic location for the total Company.

The Diversified Industrial Segment is an aggregation of several business units, which manufacture a broad range of motion-control systems and components for builders and users of various types of manufacturing, packaging, processing, transportation, agricultural, construction, and military vehicles and equipment. Contracts consist of individual purchase orders for standard product, blanket purchase orders and production contracts. Blanket purchase orders are often associated with individual purchase orders and have terms and conditions which are subject to a master supply or distributor agreement. Individual production contracts, some of which may include multiple performance obligations, are typically for products manufactured to the customer's specifications. Revenue in the Diversified Industrial Segment is typically recognized at the time of product shipment, but a portion of revenue may be recognized over time for installation services or in situations where the product has no alternative use and we have an enforceable right to payment.

Diversified Industrial Segment revenues by technology platform:

The Aerospace Systems Segment produces engine and airframe components and systems, which are utilized on virtually every major commercial and military aircraft. Contracts generally consist of blanket purchase orders and individual long-term production contracts. Blanket purchase orders, which have terms and conditions subject to long-term supply agreements, are typically associated with individual purchase orders. Revenue in the Aerospace Systems Segment is typically recognized at the time of product shipment, but a portion of revenue may be recognized over time in situations where the customer controls the asset as it is produced or the product has no alternative use and we have an enforceable right to payment.

Aerospace Systems Segment revenues by market segment:

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Total revenues by geographic region based on the Company's selling operation's location:

The majority of revenues from the Aerospace Systems Segment is generated from sales within North America.

Contract balances

Contract assets and contract liabilities are reported on a contract-by-contract basis. Contract assets reflect revenue recognized and performance obligations satisfied in advance of customer billing. Contract liabilities relate to payments received in advance of the satisfaction of performance under the contract. Payments from customers are received based on the terms established in the contract with the customer.

Total contract assets and contract liabilities are as follows:

Contract assets, current (included within Other current assets) $ 149 $ 137

Contract assets, noncurrent (included within Other assets) 16 21

Contract liabilities, noncurrent (included within Other liabilities) (71) (78)

Total contract liabilities (282) (262)

Net contract liabilities $ (117) $ (104)

Net contract liabilities at June 30, 2025 increased from the prior year amount due to timing differences between when revenue was recognized and the receipt of advance payments. During 2025, approximately $165 million of revenue was recognized that was included in the contract liabilities at June 30, 2024.

Remaining performance obligations

Our backlog represents written firm orders from a customer to deliver products and, in the case of blanket purchase orders, only includes the portion of the order for which a schedule or release has been agreed to with the customer. We believe our backlog represents our unsatisfied or partially unsatisfied performance obligations. Backlog at June 30, 2025 was $11.0 billion, of which approximately 71 percent is expected to be recognized as revenue within the next 12 months and the balance thereafter.

3. Acquisitions and Divestitures

Pending Acquisition

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.

Curtis designs and manufactures motor speed controllers, instrumentation, power conversion and input devices that complement Parker’s strength in electric vehicle motors, hydraulic and electrification technologies. 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.

Acquisitions

On September 12, 2022, we completed the acquisition of all the outstanding ordinary shares of Meggitt for 800 pence per share, resulting in an aggregate cash purchase price of $7.2 billion, including the assumption of debt.

Meggitt is a leader in design, manufacturing and aftermarket support of technologically differentiated systems and equipment in aerospace, defense and selected energy markets with annual sales of approximately $2.1 billion for the year ended December 31, 2021. For segment reporting purposes, the majority of Meggitt's sales are included in the Aerospace Systems Segment, with the remainder attributed to the Diversified Industrial Segment.

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Assets acquired and liabilities assumed are recognized at their respective fair values as of the acquisition date. The process of estimating the fair values of certain tangible assets, identifiable intangible assets and assumed liabilities requires the use of judgment in determining the appropriate assumptions and estimates. During the measurement period which ended in September 2023, adjustments did not have a material impact on the Consolidated Statement of Income. The following table presents the final estimated fair values of Meggitt's assets acquired and liabilities assumed on the acquisition date.

Assets:

Cash and cash equivalents $ 90 $ — $ 90

Property, plant and equipment, net 659 (1) 658

Deferred income taxes 34 (19) 15

Liabilities:

Notes payable and long-term debt payable within one year $ 308 $ — $ 308

Accrued payrolls and other compensation 87 — 87

Accrued domestic and foreign taxes 21 (1) 20

Pensions and other postretirement benefits 100 (2) 98

Goodwill is calculated as the excess of the purchase price over the net assets acquired and represents cost synergies and enhancements to our existing technologies. For tax purposes, Meggitt's goodwill is not deductible. Based upon a final acquisition valuation, we acquired $4.2 billion of customer-related intangible assets, $1.1 billion of technology and $303 million of trade names, each with weighted-average estimated useful lives of 21, 22 and 18 years, respectively. These intangible assets were valued using the income approach, which includes significant assumptions around future revenue growth, earnings before interest, taxes, depreciation and amortization, royalty rates and discount rates. Such assumptions are classified as level 3 inputs within the fair value hierarchy.

Based upon a final acquisition valuation, the fair value of the assets acquired includes $115 million and $91 million of operating and finance lease right-of-use assets, respectively. As of the acquisition date, the fair value of liabilities assumed includes $116 million and $90 million of operating and finance lease liabilities, respectively, of which, $18 million and $1 million of operating and finance lease liabilities, respectively, are current liabilities.

Debt assumed included $900 million aggregate principal amount of private placement notes with fixed interest rates ranging from 2.78 percent to 3.60 percent, and maturity dates ranging from July 2023 to July 2026. The private placement notes were recorded at fair value at acquisition. In October 2022, we paid off $300 million aggregate principal amount of private placement notes in two tranches pursuant to an offer to noteholders according to change in control provisions. In June 2023, the Company paid the remaining $600 million aggregate principal amount of private placement notes assumed in the acquisition, which resulted in a $10 million charge recorded in interest expense in the Consolidated Statement of Income associated with the fair value discount.

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Based upon a final acquisition valuation, we also assumed $142 million of liabilities associated with environmental matters. As of the acquisition date, approximately $102 million of environmental matters are included within other accrued liabilities, and the remainder is included within other liabilities in the Consolidated Balance Sheet. The environmental matters primarily relate to known exposures arising from environmental litigation, investigations and remediation of certain sites for which Meggitt has been identified as a potentially responsible party. The liabilities are based on outcomes of litigation and estimates of the level and timing of remediation costs, including the period of operating and monitoring activities required.

Our consolidated financial statements for 2023 include the results of operations of Meggitt from the date of acquisition through June 30, 2023. Net sales and segment operating income attributable to Meggitt during 2023 were $2.1 billion and $23 million, respectively. Segment operating income attributable to Meggitt includes estimated amortization and depreciation expense associated with the preliminary fair value estimates of intangible assets, plant and equipment, inventory, as well as acquisition integration charges. Refer to Note 4 for further discussion of acquisition integration charges.

Acquisition-related transaction costs totaled $115 million in 2023. These costs are included in selling, general and administrative expenses in the Consolidated Statement of Income.

The following table presents unaudited pro forma information for 2023 and 2022 as if the acquisition had occurred on July 1, 2021.

Net income attributable to common shareholders 1,957 1,530

The historical consolidated financial information of Parker and Meggitt has been adjusted in the pro forma information in the table above to give effect to events that are directly attributable to the Acquisition and factually supportable. To reflect the occurrence of the acquisition on July 1, 2021, the unaudited pro forma information includes adjustments for the amortization of the step-up of inventory to fair value and incremental depreciation and amortization expense resulting from the fair value adjustments to property, plant and equipment and intangible assets. These adjustments were based upon a preliminary purchase price allocation. Additionally, adjustments to financing costs and income tax expense were also made to reflect the capital structure and anticipated effective tax rate of the combined entity. Additionally, the pro forma information includes adjustments for non-recurring transactions directly related to the acquisition, including the gain on the divestiture of the aircraft wheel and brake business, loss on deal-contingent forward contracts, and transaction costs. These non-recurring adjustments totaled $199 million and $654 million in 2023 and 2022, respectively. The resulting pro forma amounts are not necessarily indicative of the results that would have been obtained if the acquisition had occurred as of the beginning of the period presented or that may occur in the future, and do not reflect future synergies, integration costs or other such costs or savings.

Divestitures

We continually assess our existing businesses and may divest those that are not considered to be a good long-term strategic fit for the Company.

During November 2024, we divested our CFC business within the North America businesses of the Diversified Industrial Segment, which was acquired in the acquisition of Meggitt, for net proceeds of $555 million. The resulting pre-tax gain of $241 million is included in gain on sale of businesses and assets, net in the Consolidated Statement of Income. The operating results and net assets of this business were immaterial to the Company's consolidated results of operations and financial position.

During November 2024, we divested a non-core filtration business within the North America businesses of the Diversified Industrial Segment for proceeds of $66 million. The resulting pre-tax gain of $11 million is included in gain on sale of businesses and assets, net in the Consolidated Statement of Income. The operating results and net assets of this business were immaterial to the Company's consolidated results of operations and financial position.

During December 2023, we divested our Filter Resources business, which was part of the Diversified Industrial Segment, for proceeds of $37 million. The resulting pre-tax gain of $12 million is included in gain on sale of businesses and assets, net in the Consolidated Statement of Income. The operating results and net assets of the Filter Resources business were immaterial to the Company's consolidated results of operations and financial position.

During September 2023, we divested the MicroStrain sensing systems business, which was part of the Diversified Industrial Segment, for proceeds of $37 million. The resulting pre-tax gain of $13 million is included in gain on sale of businesses and assets, net in the Consolidated Statement of Income. The operating results and net assets of the MicroStrain sensing systems business were immaterial to the Company's consolidated results of operations and financial position.

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During March 2023, we divested a French aerospace business, which was part of the Aerospace Systems Segment, for proceeds of $27 million. The resulting pre-tax loss of $12 million is included in gain on sale of businesses and assets, net in the Consolidated Statement of Income. The operating results and net assets of the French aerospace business were immaterial to the Company's consolidated results of operations and financial position.

During September 2022, we divested our aircraft wheel and brake business, which was part of the Aerospace Systems Segment, for proceeds of $443 million. The resulting pre-tax gain of $374 million is included in gain on sale of businesses and assets, net in the Consolidated Statement of Income. The operating results and net assets of the aircraft wheel and brake business were immaterial to the Company's consolidated results of operations and financial position.

4. Business Realignment and Acquisition Integration Charges

The Company incurred business realignment and acquisition integration charges in 2025, 2024 and 2023. Business realignment charges included severance costs related to actions taken under the Company's simplification initiative aimed at reducing organizational and process complexity, as well as plant closures. In 2025, 2024 and 2023, a majority of the business realignment charges were incurred in Europe. We believe the realignment actions will positively impact future results of operations but will not have a material effect on liquidity and sources and uses of capital.

Business realignment charges by business segment are as follows:

Diversified Industrial $ 53 $ 51 $ 24

Aerospace Systems — — 3

Corporate general and administrative expenses 1 — —

Other (income) expense, net 2 2 —

Workforce reductions in connection with such business realignment charges by business segment are as follows:

Corporate general and administrative expenses 13 — —

The business realignment charges are presented in the Consolidated Statement of Income as follows:

Selling, general and administrative expenses 23 21 11

Gain on sale of businesses and assets, net 2 2 —

During 2025, approximately $45 million in payments were made relating to business realignment charges. Remaining payments related to current-year and prior-year business realignment actions of approximately $26 million, a majority of which are expected to be paid by December 31, 2025, are primarily reflected within the accrued payrolls and other compensation and other accrued liabilities captions in the Consolidated Balance Sheet. Additional charges may be recognized in future periods related to the business realignment and acquisition integration actions described above, the timing and amount of which are not known at this time.

We also incurred acquisition integration charges related to the Meggitt acquisition. Charges by business segment are as follows:

Diversified Industrial $ 3 $ 4 $ 9

In 2025, 2024 and 2023, acquisition integration charges relate to the acquisition of Meggitt. These charges were primarily included in selling, general and administrative expenses in the Consolidated Statement of Income.

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5. Income Taxes

Income before income taxes was derived from the following sources:

Income taxes include the following:

Federal

Foreign

State and local

A reconciliation of the effective income tax rate to the statutory federal rate follows:

Statutory federal income tax rate 21.0 % 21.0 % 21.0 %

State and local income taxes 0.6 0.9 2.1

Tax related to international activities (2.8) 2.3 1.2

Cash surrender value of life insurance (0.1) (0.1) (0.1)

Foreign derived intangible income deduction (1.3) (1.5) (1.1)

Research tax credit (0.4) (0.6) (0.7)

Share-based compensation (1.2) (1.2) (1.0)

Effective income tax rate 14.0 % 20.9 % 22.2 %

In December 2021, the Organization for Economic Cooperation and Development ("OECD") published a framework, known as Pillar Two, defining a global minimum tax of 15 percent on large corporations. The OECD has since issued administrative guidance providing transition and safe harbor rules around the implementation of the Pillar Two global minimum tax. Several countries have proposed or enacted legislation to implement core elements of the Pillar Two proposal effective for years beginning after December 31, 2023, which for us is fiscal year 2025. Pillar Two does not currently have a significant impact on our consolidated financial statements. Future legislation and guidance may result in a change to our assessment.

On July 4, 2025, H.R. 1, commonly referred to as the One Big Beautiful Bill Act, (the "Act"), was signed into law. The Act makes various provisions of the 2017 Tax Cuts and Jobs Act permanent while also restoring full expensing of research & development costs and capital investments. The majority of these provisions will impact us starting in fiscal year 2027. We continue to evaluate the future impacts of these provisions and, as of June 30, 2025, have not recorded the impact of any future provisions. We do not expect The Act to have a material impact on our financial statements.

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Deferred income taxes are provided for the temporary differences between the financial reporting basis and the tax basis of assets and liabilities. The differences comprising the net deferred taxes shown on the Consolidated Balance Sheet at June 30 were as follows:

Retirement benefits $ 27 $ 124

Other liabilities and reserves 189 214

Long-term contracts 41 45

Stock-based compensation 38 34

Capitalized research and development 172 146

Tax credit carryforwards 45 36

Unrealized currency exchange gains and losses 5 (18)

Undistributed foreign earnings (32) (30)

Depreciation and amortization (1,748) (2,104)

Net deferred tax (liability) $ (1,220) $ (1,491)

Change in net deferred tax (liability):

Provision for deferred tax $ 304 $ (32)

Items of other comprehensive (loss) income (44) (24)

Acquisitions and other 11 133

Total change in net deferred tax $ 271 $ 77

The following schedule presents the changes in deferred tax asset valuation allowance as follows:

Deferred tax asset valuation allowance:

(1) The balance primarily represents adjustments due to acquisitions.

During the year ended June 30, 2025, we completed an initiative that simplified our foreign legal entity structure. The initiative impacted our evaluation of certain foreign tax loss carryforwards whose realizability was previously considered to be remote. This led to a valuation allowance release and the recording of a $180 million discrete tax benefit. Additionally, as a result of the initiative, $784 million in deferred tax assets for certain other foreign tax loss carryforwards whose realizability was previously considered to be remote, and the associated valuation allowances, were also written off.

As of June 30, 2025, we recorded deferred tax assets of $114 million resulting from $492 million in loss carryforwards. A valuation allowance of $106 million related to the loss carryforwards has been established due to the uncertainty of their realization. Of this valuation allowance, $92 million relates to non-operating entities whose loss carryforward utilization is considered to be remote. Some of the loss carryforwards can be carried forward indefinitely; others can be carried forward from three years to 20 years. In addition, a valuation allowance of $35 million related to other future deductible items has been established due to the uncertainty of their realization.

Although future distributions of foreign earnings to the United States should not be subject to U.S. federal income taxes, other U.S. or foreign taxes may be imposed on such earnings. We have analyzed existing factors and determined we will no longer permanently reinvest certain foreign earnings. On these undistributed foreign earnings of approximately $484 million that are no longer permanently reinvested outside of the United States, we have recorded a deferred tax liability of $16 million. The

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remaining undistributed foreign earnings of approximately $1,011 million remain permanently reinvested outside the United States at June 30, 2025. Of these undistributed earnings, we have recorded a deferred tax liability of $17 million where certain foreign holding companies are not permanently reinvested in their subsidiaries. It is not practicable to estimate the additional taxes, including applicable foreign withholding taxes, that might be payable on the potential distribution of such permanently reinvested foreign earnings.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

Additions for tax positions related to current year 6 6 9

Additions for tax positions of prior years 19 — 6

Additions for acquisitions — 4 26

Reductions for tax positions of prior years — (5) (3)

Reductions for settlements — — (7)

Reductions for expiration of statute of limitations (27) (15) (11)

Effect of foreign currency translation 4 (2) 3

The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was $104 million, $102 million and $114 million as of June 30, 2025, 2024 and 2023, respectively. The accrued interest related to the gross unrecognized tax benefits, excluded from the amounts above, was $28 million, $27 million, and $21 million as of June 30, 2025, 2024 and 2023, respectively. The accrued penalties related to the gross unrecognized tax benefits, excluded from the amounts above, was $2 million as of June 30, 2025, 2024, and 2023.

It is reasonably possible that, within the next 12 months, the amount of gross unrecognized tax benefits could be reduced by up to approximately $60 million as a result of the revaluation of existing uncertain tax positions arising from developments in the examination process or the closure of tax statutes. Any increase in the amount of unrecognized tax benefits within the next 12 months is expected to be insignificant.

We file income tax returns in the United States and in various foreign jurisdictions. In the normal course of business, we are subject to examination by taxing authorities throughout the world. We are open to assessment of our U.S. federal income tax returns by the Internal Revenue Service for years after 2013, and our state and local income tax returns for years after 2018. We are open to assessment for significant foreign jurisdictions for years after 2013.

6. Earnings Per Share

Basic earnings per share are computed using the weighted-average number of common shares outstanding during the year. Diluted earnings per share are computed using the weighted-average number of common shares and common share equivalents outstanding during the year. Common share equivalents represent the dilutive effect of outstanding equity-based awards. The reconciliation of the numerator and denominator of basic and diluted earnings per share was as follows (shares in millions):

Numerator:

Net income attributable to common shareholders $ 3,531 $ 2,844 $ 2,083

Denominator:

Dilutive effect of equity-based awards 1.9 1.7 1.5

For 2025, 2024 and 2023, 0.3 million, 0.4 million and 1.0 million common shares, respectively, subject to equity-based awards were excluded from the computation of diluted earnings per share because the effect of their exercise would be anti-dilutive.

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7. Inventories

Inventories are stated at the lower of cost or net realizable value using the first-in, first-out ("FIFO") method. Cost components include raw materials, purchased components, labor and overhead.

The inventories caption in the Consolidated Balance Sheet is comprised of the following components:

8. Supply Chain Financing

We have SCF programs with financial intermediaries, which provide certain suppliers the option to be paid by the financial intermediaries earlier than the due date on the applicable invoice. We are not a party to the agreements between the participating financial intermediaries and the suppliers in connection with the programs. The range of payment terms we negotiate with our suppliers is consistent, irrespective of whether a supplier participates in the SCF programs. We do not reimburse suppliers for any costs they incur for participation in the SCF programs and their participation is voluntary.

The following table summarizes the changes in amounts due to our suppliers that elected to participate in the SCF programs. These amounts are included in accounts payable, trade on the Consolidated Balance Sheet, and payments made under the SCF programs are included within operating activities on the Consolidated Statement of Cash Flows.

Beginning balance $ 116 $ 85

Invoices confirmed during the year 500 363

Invoices settled during the year (446) (331)

Foreign currency translation adjustments 5 (1)

9. Goodwill and Intangible Assets

The changes in the carrying amount of goodwill are as follows:

Diversified Industrial Segment Aerospace Systems Segment Total

Divestitures (25) — (25)

Foreign currency translation (52) (56) (108)

Divestitures (90) — (90)

Acquisitions represent goodwill resulting from the purchase price allocation for the acquisition of Meggitt during the measurement period. Refer to Note 3 for further discussion.

Divestitures represent goodwill associated with the sale of businesses during 2025 and 2024.

Goodwill is tested for impairment at the reporting unit level annually and between annual tests whenever events or circumstances indicate that the carrying value of a reporting unit may exceed its fair value. Our annual impairment tests performed in 2025, 2024 and 2023 resulted in no impairment loss being recognized.

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Intangible assets are amortized on a straight-line method over their legal or estimated useful lives. The gross carrying value and accumulated amortization for each major category of intangible asset at June 30 are as follows:

Total intangible asset amortization expense in 2025, 2024 and 2023 was $553 million, $578 million and $501 million, respectively. The estimated intangible asset amortization expense for the five years ending June 30, 2026 through 2030 is $550 million, $547 million, $539 million, $518 million and $489 million, respectively.

Intangible assets are evaluated for impairment whenever events or circumstances indicate that the undiscounted net cash flows to be generated by their use over their expected useful lives and eventual disposition may be less than their net carrying value. No material intangible asset impairments occurred in 2025, 2024 or 2023.

10. Financing Arrangements

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. The credit agreement expires June 2028; however, the Company has the right to request a one-year extension of the expiration date on an annual basis, which may result in changes to the current terms and conditions of the credit agreement. Advances from the credit agreement can be used for general corporate purposes, including acquisitions, and for the refinancing of existing indebtedness. The credit agreement supports our commercial paper program, and issuances of commercial paper reduce the amount of credit available under the agreement. The credit agreement requires the payment of an annual facility fee, the amount of which may increase in the event our credit ratings are lowered. Although a lowering of our credit ratings would likely increase the cost of future debt, it would not limit our ability to use the credit agreement nor would it accelerate the repayment of any outstanding borrowings.

The Company was authorized to sell up to $3.0 billion of short-term commercial paper notes as of June 30, 2025 with commercial paper notes outstanding as of June 30, 2025 and 2024 of $1.8 billion and $2.1 billion, respectively. On August 21, 2025, the authorization limit for short-term commercial paper notes increased to $3.75 billion. The Company had $10 million outstanding borrowings from foreign banks at June 30, 2025 and no outstanding borrowings at June 30, 2024. The weighted-average interest rate on notes payable outstanding at June 30, 2025 and 2024 was 4.6 percent and 5.5 percent, respectively.

In the ordinary course of business, some of our locations may enter into financial guarantees through financial institutions which enable customers to be reimbursed in the event of nonperformance by the Company.

The Company's credit agreements and indentures governing certain debt agreements contain various covenants, the violation of which would limit or preclude the use of the applicable agreements for future borrowings, or might accelerate the maturity of the related outstanding borrowings covered by the applicable agreements. Based on our rating level at June 30, 2025, the most restrictive financial covenant provides that the ratio of debt to debt-shareholders' equity cannot exceed 0.65 to 1.0. As of June 30, 2025, our debt to debt-shareholders' equity ratio was 0.41 to 1.0. We are in compliance with all covenants.

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11. Debt

Domestic:

3.30% Fixed-rate medium term notes, due 2025 $ — $ 500

Foreign:

Other long-term debt (includes finance leases) 109 105

Deferred debt issuance costs (54) (58)

Less: Long-term debt payable within one year 7 1,255

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PH · 10-K · period ended 2025-06-30

ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

ITEM 7A.Quantitative and Qualitative Disclosures About Market Risk.

ITEM 8. Financial Statements and Supplementary Data.

PH US Equity☆

PH · 10-K · period ended 2025-06-30

ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

ITEM 7A.Quantitative and Qualitative Disclosures About Market Risk.

ITEM 8. Financial Statements and Supplementary Data.

PH US Equity