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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q 
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021
OR 
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission File number 1-4982
 PARKER-HANNIFIN CORPORATION
(Exact name of registrant as specified in its charter)
Ohio34-0451060
(State or other jurisdiction of
Incorporation or Organization)		(I.R.S. Employer
Identification No.)
6035 Parkland Boulevard,Cleveland,Ohio44124-4141
(Address of Principal Executive Offices)(Zip Code)
Registrant’s telephone number, including area code: (216) 896-3000
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading SymbolName of Each Exchange on which Registered
Common Shares, $.50 par valuePHNew York Stock Exchange
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).    Yes  ☒    No ☐
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act: 
Large accelerated filer ☒  Accelerated filer ☐
Non-accelerated filer ☐  Smaller reporting company ☐
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes  ☐    No  ☒
Number of Common Shares outstanding at September 30, 2021: 128,514,953

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PARKER-HANNIFIN CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(Dollars in thousands, except per share amounts)
(Unaudited)
 
Three Months Ended
September 30,
 20212020*
Net sales$3,762,809 $3,230,540 
Cost of sales2,713,897 2,386,449 
Selling, general and administrative expenses407,765 369,851 
Interest expense59,350 65,958 
Other expense (income), net10,052 (4,892)
Income before income taxes571,745 413,174 
Income taxes120,282 93,063 
Net income451,463 320,111 
Less: Noncontrolling interest in subsidiaries' earnings306 308 
Net income attributable to common shareholders$451,157 $319,803 
Earnings per share attributable to common shareholders:
Basic$3.50 $2.48 
Diluted$3.45 $2.45 
*Prior period has been adjusted to reflect the change in inventory accounting method, as described in the Company's fiscal 2021 Annual Report on Form 10-K.
See accompanying notes to consolidated financial statements.













- 2 -
PARKER-HANNIFIN CORPORATION
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(Dollars in thousands)
(Unaudited)
 
Three Months Ended
September 30,
 20212020*
Net income$451,463 $320,111 
Less: Noncontrolling interests in subsidiaries' earnings306 308 
Net income attributable to common shareholders451,157 319,803 
Other comprehensive (loss) income, net of tax
  Foreign currency translation adjustment(68,324)130,682 
  Retirement benefits plan activity 29,022 40,152 
    Other comprehensive (loss) income(39,302)170,834 
Less: Other comprehensive (loss) income for noncontrolling interests(539)431 
Other comprehensive (loss) income attributable to common shareholders(38,763)170,403 
Total comprehensive income attributable to common shareholders
$412,394 $490,206 
*Prior period has been adjusted to reflect the change in inventory accounting method, as described in the Company's fiscal 2021 Annual Report on Form 10-K.
See accompanying notes to consolidated financial statements.




- 3 -
PARKER-HANNIFIN CORPORATION
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
(Unaudited)
September 30,
2021		June 30,
2021
ASSETS
Current assets:
Cash and cash equivalents$478,582 $733,117 
Marketable securities and other investments40,160 39,116 
Trade accounts receivable, net2,109,648 2,183,594 
Non-trade and notes receivable315,571 326,315 
Inventories2,264,725 2,090,642 
Prepaid expenses and other422,588 243,966 
Total current assets5,631,274 5,616,750 
Property, plant and equipment6,019,237 6,040,220 
Less: Accumulated depreciation3,795,703 3,773,744 
Property, plant and equipment, net2,223,534 2,266,476 
Deferred income taxes145,972 104,251 
Investments and other assets800,211 774,239 
Intangible assets, net3,426,540 3,519,797 
Goodwill8,009,340 8,059,687 
Total assets$20,236,871 $20,341,200 
LIABILITIES
Current liabilities:
Notes payable and long-term debt payable within one year$302,309 $2,824 
Accounts payable, trade1,636,272 1,667,878 
Accrued payrolls and other compensation341,355 507,027 
Accrued domestic and foreign taxes279,173 236,384 
Other accrued liabilities724,134 682,390 
Total current liabilities3,283,243 3,096,503 
Long-term debt6,263,941 6,582,053 
Pensions and other postretirement benefits997,392 1,055,638 
Deferred income taxes568,369 553,981 
Other liabilities618,081 639,355 
Total liabilities11,731,026 11,927,530 
EQUITY
Shareholders’ equity:
Serial preferred stock, $.50 par value; authorized 3,000,000 shares; none issued
— — 
Common stock, $.50 par value; authorized 600,000,000 shares; issued 181,046,128 shares at September 30 and June 30
90,523 90,523 
Additional capital358,677 329,619 
Retained earnings15,233,799 14,915,497 
Accumulated other comprehensive (loss)(1,605,490)(1,566,727)
Treasury shares, at cost; 52,531,175 shares at September 30 and 51,900,460 shares at June 30
(5,586,728)(5,370,605)
Total shareholders’ equity8,490,781 8,398,307 
Noncontrolling interests15,064 15,363 
Total equity8,505,845 8,413,670 
Total liabilities and equity$20,236,871 $20,341,200 
See accompanying notes to consolidated financial statements.
- 4 -
PARKER-HANNIFIN CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Three Months Ended
 September 30,
 20212020*
CASH FLOWS FROM OPERATING ACTIVITIES
Net income$451,463 $320,111 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation65,751 66,739 
Amortization79,771 81,703 
Share incentive plan compensation57,666 58,461 
Deferred income taxes(40,027)11,043 
Foreign currency transaction gain(9,470)(4,855)
Gain on disposal of property, plant and equipment(30)(498)
Loss (gain) on marketable securities804 (340)
Gain on investments(200)(970)
Other42,823 5,302 
Changes in assets and liabilities, net of effects from acquisitions:
Accounts receivable, net74,070 15,532 
Inventories(190,779)42,039 
Prepaid expenses and other37,763 53,129 
Other assets(27,553)(9,693)
Accounts payable, trade(20,365)138,900 
Accrued payrolls and other compensation(161,560)(98,186)
Accrued domestic and foreign taxes46,592 (2,209)
Other accrued liabilities36,288 34,457 
Pensions and other postretirement benefits(15,651)17,652 
Other liabilities(2,997)9,057 
Net cash provided by operating activities424,359 737,374 
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures(48,203)(42,117)
Proceeds from sale of property, plant and equipment7,751 6,590 
Purchases of marketable securities and other investments(7,456)(10,726)
Maturities and sales of marketable securities and other investments5,312 49,107 
Other649 1,054 
Net cash (used in) provided by investing activities(41,947)3,908 
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from exercise of stock options1,089 989 
Payments for common shares(245,820)(22,739)
(Payments for) proceeds from notes payable, net(4)114,400 
Proceeds from long-term borrowings1 — 
Payments for long-term borrowings(592)(671,842)
Financing fees paid(42,703)— 
Dividends paid(132,921)(113,542)
Net cash (used in) financing activities(420,950)(692,734)
Effect of exchange rate changes on cash(997)8,332 
Net (decrease) increase in cash, cash equivalents and restricted cash(39,535)56,880 
Cash, cash equivalents and restricted cash at beginning of year733,117 685,514 
Cash, cash equivalents and restricted cash at end of period$693,582 $742,394 
*Prior period has been adjusted to reflect the change in inventory accounting method, as described in the Company's fiscal 2021 Annual Report on Form 10-K.
See accompanying notes to consolidated financial statements.
- 5 -
PARKER-HANNIFIN CORPORATION
BUSINESS SEGMENT INFORMATION
(Dollars in thousands)
(Unaudited)
The Company operates in two reportable business segments: Diversified Industrial and Aerospace Systems. Both segments utilize eight core technologies, including hydraulics, pneumatics, electromechanical, filtration, fluid and gas handling, process control, engineered materials and climate control, to drive superior customer problem solving and value creation.
Diversified Industrial - This segment produces a broad range of motion-control and fluid systems and components used in all kinds of manufacturing, packaging, processing, transportation, mobile construction, refrigeration and air conditioning, agricultural, and military machinery and equipment and has significant international operations. Sales are made directly to major original equipment manufacturers ("OEMs") and through a broad distribution network to smaller OEMs and the aftermarket.
Aerospace Systems - This segment designs and manufactures products and provides aftermarket support for commercial, business jet, military and general aviation aircraft, missile and spacecraft markets. The Aerospace Systems Segment provides a full range of systems and components for hydraulic, pneumatic and fuel applications.
 
Three Months Ended
 September 30,
 20212020*
Net sales
Diversified Industrial:
North America$1,793,715 $1,528,111 
International1,376,436 1,129,251 
Aerospace Systems592,658 573,178 
Total net sales$3,762,809 $3,230,540 
Segment operating income
Diversified Industrial:
North America$333,702 $268,833 
International291,176 186,901 
Aerospace Systems118,251 86,766 
Total segment operating income743,129 542,500 
Corporate general and administrative expenses49,072 36,735 
Income before interest expense and other expense694,057 505,765 
Interest expense59,350 65,958 
Other expense62,962 26,633 
Income before income taxes$571,745 $413,174 
*Prior period has been adjusted to reflect the change in inventory accounting method, as described in the Company's fiscal 2021 Annual Report on Form 10-K.


- 6 -
PARKER-HANNIFIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts or as otherwise noted)

As used in this Quarterly Report on Form 10-Q, unless the context otherwise requires, the terms "Company", "Parker", "we" or "us" refer to Parker-Hannifin Corporation and its subsidiaries.
1. Management representation
In the opinion of the management of the Company, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the Company's financial position as of September 30, 2021, the results of operations for the three months ended September 30, 2021 and 2020 and cash flows for the three months then ended. These financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company’s 2021 Annual Report on Form 10-K.
The future impacts of the novel coronavirus ("COVID-19") pandemic and its residual effects, including economic uncertainty and disruption within the global supply chain, labor markets and aerospace industry, on our business remain uncertain. Therefore, accounting estimates and assumptions may change over time in response to the impacts of COVID-19. Interim period results are not necessarily indicative of the results to be expected for the full fiscal year.
Subsequent Events
The Company has evaluated subsequent events that occurred through the date these financial statements were issued. In connection with the proposed acquisition of Meggitt plc ("Meggitt"), the Company entered into deal-contingent forward contracts during October 2021 to mitigate the risk of appreciation in the GBP-denominated purchase price. The deal-contingent forward contracts have an aggregate notional amount of £6,415 million, and settlement is contingent upon closing the proposed acquisition.
During October 2021, we issued $2,126 million of commercial paper. We used the net proceeds and cash on hand to deposit a total of $2,272 million into the escrow account designated for the proposed acquisition. As of October 31, 2021, the balance of the escrow account is $2,487 million. After consideration of the increase in funds designated for the proposed acquisition and the deal-contingent forward contracts, the aggregate principal amount of the bridge credit agreement, dated August 2, 2021 (the "Bridge Credit Agreement") was decreased to £3,200 million.
2. Revenue recognition
Revenue is derived primarily from the sale of products in a variety of mobile, industrial and aerospace markets. A majority of the Company’s revenues are recognized at a point in time. However, a portion of the Company’s revenues are recognized over time.
Diversified Industrial Segment revenues by technology platform:
Three Months Ended
September 30,
20212020
Motion Systems$828,672 $657,141 
Flow and Process Control1,085,423 924,125 
Filtration and Engineered Materials1,256,056 1,076,096 
Total$3,170,151 $2,657,362 

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Aerospace Systems Segment revenues by product platform:
Three Months Ended
September 30,
20212020
Flight Control Actuation$177,353 $158,102 
Fuel, Inerting and Engine Motion Control122,319 118,963 
Hydraulics73,341 75,918 
Engine Components141,608 149,037 
Airframe and Engine Fluid Conveyance54,033 47,362 
Other24,004 23,796 
Total$592,658 $573,178 
Total Company revenues by geographic region based on the Company's selling operation's location:
Three Months Ended
September 30,
20212020
North America$2,384,974 $2,096,165 
Europe761,970 615,572 
Asia Pacific568,134 485,148 
Latin America47,731 33,655 
Total$3,762,809 $3,230,540 
The majority of revenues from the Aerospace Systems Segment are generated from sales to customers within North America.
Contract balances
Contract assets and contract liabilities are reported on a contract-by-contract basis. Contract assets reflect revenue recognized and performance obligations satisfied in advance of customer billing. Contract liabilities relate to payments received in advance of the satisfaction of performance under the contract. Payments from customers are received based on the terms established in the contract with the customer.
Total contract assets and contract liabilities are as follows:
September 30,
2021		June 30,
2021
Contract assets, current (included within Prepaid expenses and other)$25,936 $34,190 
Contract assets, noncurrent (included within Investments and other assets)2,471 1,884 
Total contract assets28,407 36,074 
Contract liabilities, current (included within Other accrued liabilities)(45,439)(51,211)
Contract liabilities, noncurrent (included within Other liabilities)(2,250)(3,080)
Total contract liabilities(47,689)(54,291)
Net contract liabilities$(19,282)$(18,217)
At September 30, 2021, the change in net contract liabilities was primarily due to timing differences between when revenue was recognized and the receipt of advance payments. During the three months ended September 30, 2021, approximately $21 million of revenue was recognized that was included in the contract liabilities at June 30, 2021.
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 September 30, 2021 was $6,783 million, of which approximately 85 percent is expected to be recognized as revenue within the next 12 months and the balance thereafter.

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3. Proposed Acquisition
On August 2, 2021, the Company announced that it reached an agreement on the terms of a recommended cash acquisition of the entire issued and to be issued ordinary share capital of Meggitt for 800 pence per share (the "Acquisition"), which is approximately £6,255 million based on issued share capital at September 30, 2021.

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 $2.3 billion for the year ended December 31, 2020. We intend to fund the proposed Acquisition with cash and new debt. Refer to Note 13 for further discussion. The proposed Acquisition remains subject to customary closing conditions, including regulatory clearances. Acquisition-related transaction costs totaled $13 million for the current-year quarter. These costs are included in selling, general and administrative expenses in the Consolidated Statement of Income.

Restricted Cash
At September 30, 2021, the Company held approximately $215 million of cash in an escrow account that was restricted for payments related to the proposed Acquisition, all of which was recorded within prepaid expenses and other in the Consolidated Balance Sheet.
4. Earnings per share
The following table presents a reconciliation of the numerator and denominator of basic and diluted earnings per share for the three months ended September 30, 2021 and 2020.
Three Months Ended
September 30,
 20212020*
Numerator:
Net income attributable to common shareholders$451,157 $319,803 
Denominator:
Basic - weighted average common shares128,726,721 128,707,745 
Increase in weighted average common shares from dilutive effect of equity-based awards2,101,250 1,586,478 
Diluted - weighted average common shares, assuming exercise of equity-based awards130,827,971 130,294,223 
Basic earnings per share$3.50 $2.48 
Diluted earnings per share$3.45 $2.45 
*Prior period has been adjusted to reflect the change in inventory accounting method, as described in the Company's fiscal 2021 Annual Report on Form 10-K.
For the three months ended September 30, 2021 and 2020, 165,732 and 530,438 common shares subject to equity-based awards, respectively, were excluded from the computation of diluted earnings per share because the effect of their exercise would be anti-dilutive.
5. Share repurchase program
The Company has a program to repurchase its common shares. On October 22, 2014, the Board of Directors of the Company approved an increase in the overall number of shares authorized for repurchase under the program so that, beginning on such date, the aggregate number of shares authorized for repurchase was 35 million. There is no limitation on the number of shares that can be repurchased in a fiscal year. There is no expiration date for this program. Repurchases may be funded primarily from operating cash flows and commercial paper borrowings and the shares are initially held as treasury shares. During the three months ended September 30, 2021, we repurchased 767,600 shares at an average price, including commissions, of $300.07 per share.
6. Trade accounts receivable, net
Trade accounts receivable are initially recorded at their net collectible amount and are generally recorded at the time the revenue from the sales transaction is recorded. We evaluate the collectibility of our receivables based on historical experience and current and forecasted economic conditions based on management's judgment. Additionally, receivables are written off to bad debt when management makes a final determination of uncollectibility. Allowance for credit losses was $12 million at September 30, 2021 and June 30, 2021.
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7. Non-trade and notes receivable
The non-trade and notes receivable caption in the Consolidated Balance Sheet is comprised of the following components:
September 30,
2021		June 30,
2021
Notes receivable$128,414 $144,441 
Accounts receivable, other187,157 181,874 
Total$315,571 $326,315 

8. Inventories
The inventories caption in the Consolidated Balance Sheet is comprised of the following components:
September 30,
2021		June 30,
2021
Finished products$774,749 $733,744 
Work in process1,189,194 1,089,976 
Raw materials300,782 266,922 
Total$2,264,725 $2,090,642 
9. Business realignment and acquisition integration charges
We incurred business realignment and acquisition integration charges in the first three months of fiscal 2022 and 2021. In both the first three months of fiscal 2022 and 2021, 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. During fiscal 2021, business realignment charges primarily consisted of actions taken to address the impact of COVID-19 on our business. A majority of the business realignment charges were incurred in North America and Europe. We believe the realignment actions will positively impact future results of operations, but will not have a material effect on liquidity and sources and uses of capital.
Business realignment charges presented in the Business Segment Information are as follows:
Three Months Ended
 September 30,
 20212020
Diversified Industrial$3,017 $10,572 
Aerospace Systems(3)3,951 
Corporate general and administrative expenses— 614 
Other expense — 564 
Workforce reductions in connection with business realignment charges in the Business Segment Information are as follows:
Three Months Ended
 September 30,
 20212020
Diversified Industrial35 384 
Aerospace Systems— 240 
Corporate general and administrative expenses— 13 
The business realignment charges are presented in the Consolidated Statement of Income as follows:
Three Months Ended
 September 30,
 20212020
Cost of sales$1,001 $12,150 
Selling, general and administrative expenses2,013 2,987 
Other expense (income), net— 564 
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During the first three months of fiscal 2022, approximately $9 million in payments were made relating to business realignment charges. Remaining payments related to business realignment actions of approximately $9 million, a majority of which are expected to be paid by June 30, 2022, are primarily reflected within the other accrued liabilities caption in the Consolidated Balance Sheet. Additional charges may be recognized in future periods related to the business realignment actions described above, the timing and amount of which are not known at this time.
We also incurred the following acquisition integration charges related to the fiscal 2020 acquisitions of LORD Corporation ("Lord") and Exotic Metals Forming Company ("Exotic"):
Three Months Ended
 September 30,
 20212020
Diversified Industrial$1,202 $3,615 
Aerospace Systems— 332 
In the first three months of fiscal 2022, these charges are evenly split between cost of sales and selling, general and administrative expenses within the Consolidated Statement of Income. In fiscal 2021, these charges were primarily included in selling, general and administrative expenses within the Consolidated Statement of Income.
10. Equity

Changes in equity for the three months ended September 30, 2021 and 2020 are as follows:
Common StockAdditional CapitalRetained EarningsAccumulated Other Comprehensive (Loss)Treasury SharesNoncontrolling
Interests		Total Equity
Balance at June 30, 2021$90,523 $329,619 $14,915,497 $(1,566,727)$(5,370,605)$15,363 $8,413,670 
Net income451,157 306 451,463 
Other comprehensive (loss)(38,763)(539)(39,302)
Dividends paid ($1.03 per share)
(132,855)(66)(132,921)
Stock incentive plan activity29,058 14,211 43,269 
Shares purchased at cost(230,334)(230,334)
Balance at September 30, 2021$