ph-20201231

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 December 31, 2020


☐			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)


Ohio			34-0451060
(State or other jurisdiction of Incorporation or Organization)			(I.R.S. Employer Identification No.)

6035 Parkland Boulevard,	Cleveland,	Ohio	44124-4141
(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 Class

Trading Symbol

Name of Each Exchange on which Registered

Common Shares, $.50 par value

New 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 December 31, 2020: 129,081,165

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				Six Months Ended
	December 31,				December 31,
	2020		2019		2020		2019
Net sales	$	3,411,905	$	3,497,974	$	6,642,445	$	6,832,485
Cost of sales	2,519,545		2,682,765		4,903,873		5,162,506
Selling, general and administrative expenses	356,572		491,121		726,423		890,300

Interest expense	62,990		82,891		128,948		152,847
Other (income), net	(103,714)		(13,549)		(108,606)		(61,070)
Income before income taxes	576,512		254,746		991,807		687,902
Income taxes	129,015		50,148		222,593		144,263
Net income	447,497		204,598		769,214		543,639
Less: Noncontrolling interest in subsidiaries' earnings	191		124		499		267
Net income attributable to common shareholders	$	447,306	$	204,474	$	768,715	$	543,372

Earnings per share attributable to common shareholders:
Basic	$	3.47	$	1.59	$	5.97	$	4.23
Diluted	$	3.41	$	1.57	$	5.89	$	4.17

See accompanying notes to consolidated financial statements.

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PARKER-HANNIFIN CORPORATION

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(Dollars in thousands)

(Unaudited)


	Three Months Ended				Six Months Ended
	December 31,				December 31,
	2020		2019		2020		2019
Net income	$	447,497	$	204,598	$	769,214	$	543,639
Less: Noncontrolling interests in subsidiaries' earnings	191		124		499		267
Net income attributable to common shareholders	447,306		204,474		768,715		543,372

Other comprehensive income, net of tax
Foreign currency translation adjustment	217,828		151,583		348,510		48,862
Retirement benefits plan activity	40,984		33,416		81,136		64,442
Other comprehensive income	258,812		184,999		429,646		113,304
Less: Other comprehensive income (loss) for noncontrolling interests	846		137		1,277		(12)
Other comprehensive income attributable to common shareholders	257,966		184,862		428,369		113,316
Total comprehensive income attributable to common shareholders	$	705,272	$	389,336	$	1,197,084	$	656,688

See accompanying notes to consolidated financial statements.

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PARKER-HANNIFIN CORPORATION

CONSOLIDATED BALANCE SHEET

(Dollars in thousands)

(Unaudited)



	December 31, 2020		June 30, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	564,734	$	685,514
Marketable securities and other investments	43,314		70,805
Trade accounts receivable, net	1,816,731		1,854,398
Non-trade and notes receivable	312,590		244,870
Inventories	1,870,948		1,814,631
Prepaid expenses and other	191,362		214,986
Total current assets	4,799,679		4,885,204
Property, plant and equipment	6,026,680		5,810,681
Less: Accumulated depreciation	3,724,538		3,517,946
Property, plant and equipment, net	2,302,142		2,292,735
Deferred income taxes	134,325		126,839
Investments and other assets	795,073		764,563
Intangible assets, net	3,695,194		3,798,913
Goodwill	8,101,016		7,869,935
Total assets	$	19,827,429	$	19,738,189
LIABILITIES
Current liabilities:
Notes payable and long-term debt payable within one year	$	610,909	$	809,529
Accounts payable, trade	1,343,011		1,111,759
Accrued payrolls and other compensation	345,973		424,231
Accrued domestic and foreign taxes	218,624		195,314
Other accrued liabilities	688,566		607,540
Total current liabilities	3,207,083		3,148,373
Long-term debt	6,602,309		7,652,256
Pensions and other postretirement benefits	1,843,209		1,887,414
Deferred income taxes	420,699		382,528
Other liabilities	631,825		539,089
Total liabilities	12,705,125		13,609,660
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 December 31 and June 30	90,523		90,523
Additional capital	385,049		416,585
Retained earnings	14,072,152		13,530,666
Accumulated other comprehensive (loss)	(2,130,506)		(2,558,875)
Treasury shares, at cost; 51,964,963 shares at December 31 and 52,490,165 shares at June 30	(5,311,236)		(5,364,916)
Total shareholders’ equity	7,105,982		6,113,983
Noncontrolling interests	16,322		14,546
Total equity	7,122,304		6,128,529
Total liabilities and equity	$	19,827,429	$	19,738,189

See accompanying notes to consolidated financial statements.

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PARKER-HANNIFIN CORPORATION

CONSOLIDATED STATEMENT OF CASH FLOWS

(Dollars in thousands)

(Unaudited)


	Six Months Ended
	December 31,
	2020		2019
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	769,214	$	543,639
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	135,320		119,741
Amortization	162,940		133,559

Share incentive plan compensation	79,833		73,069
Deferred income taxes	(3,034)		8,608
Foreign currency transaction (gain) loss	(530)		6,569
Gain on property, plant and equipment	(102,565)		(4,478)

Gain on marketable securities	(6,959)		(1,969)
Gain on investments	(4,783)		(1,849)

Other	7,523		—
Changes in assets and liabilities, net of effects from acquisitions:
Accounts receivable, net	79,685		379,536
Inventories	(4,264)		25,724
Prepaid expenses and other	27,646		(50,153)
Other assets	(22,052)		(38,747)
Accounts payable, trade	193,901		(178,013)
Accrued payrolls and other compensation	(92,010)		(117,882)
Accrued domestic and foreign taxes	15,244		(7,699)
Other accrued liabilities	53,236		(76,616)
Pensions and other postretirement benefits	35,365		32,316
Other liabilities	30,278		(19,387)
Net cash provided by operating activities	1,353,988		825,968
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions (net of cash of $82,192 in 2019)	—		(5,075,605)
Capital expenditures	(92,907)		(118,593)
Proceeds from sale of property, plant and equipment	124,428		20,993


Purchases of marketable securities and other investments	(16,029)		(190,129)
Maturities and sales of marketable securities and other investments	52,019		198,872
Other	11,183		9,374
Net cash provided by (used in) investing activities	78,694		(5,155,088)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from exercise of stock options	3,137		1,923
Payments for common shares	(60,825)		(136,815)

(Payments for) proceeds from notes payable, net	(113,500)		931,546
Proceeds from long-term borrowings	—		1,721,181
Payments for long-term borrowings	(1,210,848)		(236,505)
Dividends paid	(227,228)		(227,025)
Net cash (used in) provided by financing activities	(1,609,264)		2,054,305
Effect of exchange rate changes on cash	55,802		3,403
Net decrease in cash and cash equivalents	(120,780)		(2,271,412)
Cash and cash equivalents at beginning of year	685,514		3,219,767
Cash and cash equivalents at end of period	$	564,734	$	948,355

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.

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 a significant portion of 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				Six Months Ended
	December 31,				December 31,
	2020		2019		2020		2019
Net sales
Diversified Industrial:
North America	$	1,566,877	$	1,615,852	$	3,094,988	$	3,240,457
International	1,259,625		1,147,084		2,388,876		2,225,934
Aerospace Systems	585,403		735,038		1,158,581		1,366,094
Total net sales	$	3,411,905	$	3,497,974	$	6,642,445	$	6,832,485
Segment operating income
Diversified Industrial:
North America	$	281,619	$	211,339	$	550,452	$	486,531
International	220,213		153,816		407,114		322,389
Aerospace Systems	90,729		121,039		177,495		244,019
Total segment operating income	592,561		486,194		1,135,061		1,052,939
Corporate general and administrative expenses	38,720		35,660		75,455		84,562
Income before interest expense and other expense	553,841		450,534		1,059,606		968,377
Interest expense	62,990		82,891		128,948		152,847
Other (income) expense	(85,661)		112,897		(61,149)		127,628
Income before income taxes	$	576,512	$	254,746	$	991,807	$	687,902

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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 December 31, 2020, the results of operations for the three and six months ended December 31, 2020 and 2019 and cash flows for the six months then ended. These financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company’s 2020 Annual Report on Form 10-K.

The novel coronavirus ("COVID-19") pandemic is having, and will likely continue to have, an adverse effect on our business, and its future impacts remain highly uncertain and unpredictable. Therefore, accounting estimates and assumptions may change over time in response to COVID-19 and may change materially in future periods. Interim period results are not necessarily indicative of the results to be expected for the full fiscal year.

The Company has evaluated subsequent events that occurred through the date these financial statements were issued. No subsequent events have occurred that required adjustment to or disclosure in these financial statements.

2. New accounting pronouncements

In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-13, "Measurement of Credit Losses on Financial Instruments." ASU 2016-13 requires a financial asset (or a group of financial assets) measured at amortized cost to be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. Credit losses relating to available-for-sale debt securities should be recorded through an allowance for credit losses. We adopted ASU 2016-13 on July 1, 2020. The adoption of this guidance, using the modified retrospective method, did not result in a cumulative-effect adjustment to retained earnings and did not have a material impact on the consolidated financial statements or related disclosures.

3. 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				Six Months Ended
	December 31,				December 31,
	2020		2019		2020		2019
Motion Systems	$	720,315	$	752,306	$	1,377,456	$	1,519,120
Flow and Process Control	949,949		942,249		1,874,074		1,953,604
Filtration and Engineered Materials	1,156,238		1,068,381		2,232,334		1,993,667
Total	$	2,826,502	$	2,762,936	$	5,483,864	$	5,466,391

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Aerospace Systems Segment revenues by product platform:


	Three Months Ended				Six Months Ended
	December 31,				December 31,
	2020		2019		2020		2019
Flight Control Actuation	$	167,263	$	180,423	$	325,365	$	353,682
Fuel, Inerting and Engine Motion Control	136,107		159,474		255,070		311,687
Hydraulics	70,845		110,385		146,763		218,760
Engine Components	141,264		179,605		290,301		273,400
Airframe and Engine Fluid Conveyance	45,186		79,123		92,548		163,802
Other	24,738		26,028		48,534		44,763
Total	$	585,403	$	735,038	$	1,158,581	$	1,366,094

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


	Three Months Ended				Six Months Ended
	December 31,				December 31,
	2020		2019		2020		2019
North America	$	2,147,822	$	2,344,338	$	4,243,987	$	4,600,089
Europe	682,960		652,586		1,298,532		1,291,724
Asia Pacific	539,953		463,840		1,025,101		861,554
Latin America	41,170		37,210		74,825		79,118
Total	$	3,411,905	$	3,497,974	$	6,642,445	$	6,832,485

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:


	December 31, 2020		June 30, 2020
Contract assets, current (included within Prepaid expenses and other)	$	32,401	$	30,827
Contract assets, noncurrent (included within Investments and other assets)	1,908		1,497
Total contract assets	34,309		32,324
Contract liabilities, current (included within Other accrued liabilities)	(49,360)		(51,278)
Contract liabilities, noncurrent (included within Other liabilities)	(3,420)		(3,232)
Total contract liabilities	(52,780)		(54,510)
Net contract liabilities	$	(18,471)	$	(22,186)

At December 31, 2020, 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 six months ended December 31, 2020, approximately $27 million of revenue was recognized that was included in the contract liabilities at June 30, 2020.

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 December 31, 2020 was $5,762 million, of which approximately 83 percent is expected to be recognized as revenue within the next 12 months and the balance thereafter.

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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 and six months ended December 31, 2020 and 2019.


	Three Months Ended				Six Months Ended
	December 31,				December 31,
	2020		2019		2020		2019
Numerator:
Net income attributable to common shareholders	$	447,306	$	204,474	$	768,715	$	543,372
Denominator:
Basic - weighted average common shares	129,013,781		128,396,933		128,860,763		128,430,463
Increase in weighted average common shares from dilutive effect of equity-based awards	2,061,874		2,098,448		1,621,801		1,723,616
Diluted - weighted average common shares, assuming exercise of equity-based awards	131,075,655		130,495,381		130,482,564		130,154,079

Basic earnings per share	$	3.47	$	1.59	$	5.97	$	4.23
Diluted earnings per share	$	3.41	$	1.57	$	5.89	$	4.17

For the three months ended December 31, 2020 and 2019, 247,107 and 2,718 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. For the six months ended December 31, 2020 and 2019, 636,032 and 767,692 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 current-year quarter, the Company reinitiated the share repurchase program, which was suspended in March 2020 in response to business uncertainty resulting from the COVID-19 pandemic. We did not repurchase any shares under the program during the current-year quarter.

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 $17,056 and $11,644 at December 31, 2020 and June 30, 2020, respectively.

7. Non-trade and notes receivable

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


	December 31, 2020		June 30, 2020
Notes receivable	$	154,469	$	97,370

Accounts receivable, other	158,121		147,500
Total	$	312,590	$	244,870

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8. Inventories

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


	December 31, 2020		June 30, 2020
Finished products	$	704,075	$	694,577
Work in process	930,099		881,104
Raw materials	236,774		238,950
Total	$	1,870,948	$	1,814,631

9. Business realignment and acquisition integration charges

We incurred business realignment and acquisition integration charges in the first six months of fiscal 2021 and 2020. During fiscal 2021, business realignment charges primarily consisted of actions taken to address the impact of COVID-19 on our business. In both fiscal 2021 and 2020, 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. 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				Six Months Ended
	December 31,				December 31,
	2020		2019		2020		2019
Diversified Industrial	$	16,536	$	9,667	$	27,108	$	14,392
Aerospace Systems	1,386		52		5,337		45
Corporate general and administrative expenses	184		117		798		122
Other expense	661		—		1,225		—

Workforce reductions in connection with business realignment charges in the Business Segment Information are as follows:


	Three Months Ended		Six Months Ended
	December 31,		December 31,
	2020	2019	2020	2019
Diversified Industrial	292	599	676	818
Aerospace Systems	45	16	285	16
Corporate general and administrative expenses	5	4	18	5

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


	Three Months Ended				Six Months Ended
	December 31,				December 31,
	2020		2019		2020		2019
Cost of sales	$	14,183	$	7,679	$	26,333	$	11,024
Selling, general and administrative expenses	3,923		2,157		6,910		3,535
Other (income), net	661		—		1,225		—

During the first six months of fiscal 2021, approximately $32 million in payments were made relating to business realignment charges. Remaining payments related to business realignment actions of approximately $26 million, a majority of which are expected to be paid by December 31, 2021, 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.

- 10 -

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				Six Months Ended
	December 31,				December 31,
	2020		2019		2020		2019
Diversified Industrial	$	3,249	$	6,725	$	6,864	$	10,139
Aerospace Systems	343		489		675		1,084

These charges are primarily included in selling, general and administrative expenses within the Consolidated Statement of Income.

10. Equity

Changes in equity for the three months ended December 31, 2020 and 2019 are as follows:


	Common Stock		Additional Capital		Retained Earnings		Accumulated Other Comprehensive (Loss)		Treasury Shares		Noncontrolling Interests		Total Equity
Balance at September 30, 2020	$	90,523	$	428,329	$	13,738,533	$	(2,388,472)	$	(5,339,949)	$	15,285	$	6,544,249
Net income					447,306						191		447,497

Other comprehensive income							257,966				846		258,812
Dividends paid ($0.88 per share)					(113,687)								(113,687)
Stock incentive plan activity			(43,280)						28,713				(14,567)


Balance at December 31, 2020	$	90,523	$	385,049	$	14,072,152	$	(2,130,506)	$	(5,311,236)	$	16,322	$	7,122,304


	Common Stock		Additional Capital		Retained Earnings		Accumulated Other Comprehensive (Loss)		Treasury Shares		Noncontrolling Interests		Total Equity
Balance at September 30, 2019	$	90,523	$	464,440	$	13,003,084	$	(2,130,594)	$	(5,330,837)	$	6,176	$	6,102,792
Net income					204,474						124		204,598
Other comprehensive income							184,862				137		184,999
Dividends paid ($0.88 per share)					(113,306)						(366)		(113,672)
Stock incentive plan activity			(8,578)						16,107				7,529
Acquisition activity											6,255		6,255
Shares purchased at cost									(50,000)				(50,000)
Balance at December 31, 2019	$	90,523	$	455,862	$	13,094,252	$	(1,945,732)	$	(5,364,730)	$	12,326	$	6,342,501

Changes in equity for the six months ended December 31, 2020 and 2019 are as follows:


	Common Stock		Additional Capital		Retained Earnings		Accumulated Other Comprehensive (Loss)		Treasury Shares		Noncontrolling Interests		Total Equity
Balance at June 30, 2020	$	90,523	$	416,585	$	13,530,666	$	(2,558,875)	$	(5,364,916)	$	14,546	$	6,128,529

Net income					768,715						499		769,214
Other comprehensive income							428,369				1,277		429,646
Dividends paid ($1.76 per share)					(227,229)								(227,229)
Stock incentive plan activity			(31,536)						53,680				22,144


Balance at December 31, 2020	$	90,523	$	385,049	$	14,072,152	$	(2,130,506)	$	(5,311,236)	$	16,322	$	7,122,304

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	Common Stock		Additional Capital		Retained Earnings		Accumulated Other Comprehensive (Loss)		Treasury Shares		Noncontrolling Interests		Total Equity
Balance at June 30, 2019	$	90,523	$	462,086	$	12,777,538	$	(2,059,048)	$	(5,309,130)	$	6,183	$	5,968,152

Net income					543,372						267		543,639
Other comprehensive income (loss)							113,316				(12)		113,304
Dividends paid ($1.76 per share)					(226,658)						(367)		(227,025)
Stock incentive plan activity			(6,224)						44,400				38,176
Acquisition activity											6,255		6,255
Shares purchased at cost									(100,000)				(100,000)
Balance at December 31, 2019	$	90,523	$	455,862	$	13,094,252	$	(1,945,732)	$	(5,364,730)	$	12,326	$	6,342,501

Changes in accumulated other comprehensive (loss) in shareholders' equity by component for the six months ended December 31, 2020 and 2019 are as follows:


	Foreign Currency Translation Adjustment		Retirement Benefit Plans		Total
Balance at June 30, 2020	$	(1,193,937)	$	(1,364,938)	$	(2,558,875)
Other comprehensive income before reclassifications	347,233		—		347,233
Amounts reclassified from accumulated other comprehensive (loss)	—		81,136		81,136
Balance at December 31, 2020	$	(846,704)	$	(1,283,802)	$	(2,130,506)


	Foreign Currency Translation Adjustment		Retirement Benefit Plans		Total
Balance at June 30, 2019	$	(1,011,656)	$	(1,047,392)	$	(2,059,048)

Other comprehensive income before reclassifications	48,874		—		48,874
Amounts reclassified from accumulated other comprehensive (loss)	—		64,442		64,442
Balance at December 31, 2019	$	(962,782)	$	(982,950)	$	(1,945,732)

Significant reclassifications out of accumulated other comprehensive (loss) in shareholders' equity for the three and six months ended December 31, 2020 and 2019 are as follows:


Details about Accumulated Other Comprehensive (Loss) Components	Income (Expense) Reclassified from Accumulated Other Comprehensive (Loss)				Consolidated Statement of Income Classification
	Three Months Ended		Six Months Ended
	December 31, 2020		December 31, 2020
Retirement benefit plans
Amortization of prior service cost and initial net obligation	$	(1,420)	$	(2,238)	Other (income), net
Recognized actuarial loss	(52,763)		(105,028)		Other (income), net
Total before tax	(54,183)		(107,266)
Tax benefit	13,199		26,130
Net of tax	$	(40,984)	$	(81,136)

- 12 -


Details about Accumulated Other Comprehensive (Loss) Components	Income (Expense) Reclassified from Accumulated Other Comprehensive (Loss)				Consolidated Statement of Income Classification
	Three Months Ended		Six Months Ended
	December 31, 2019		December 31, 2019
Retirement benefit plans
Amortization of prior service cost and initial net obligation	$	(1,284)	$	(2,767)	Other (income), net
Recognized actuarial loss	(42,703)		(82,188)		Other (income), net
Total before tax	(43,987)		(84,955)
Tax benefit	10,571		20,513
Net of tax	$	(33,416)	$	(64,442)

11. Goodwill and intangible assets

The changes in the carrying amount of goodwill for the six months ended December 31, 2020 are as follows:


	Diversified Industrial Segment		Aerospace Systems Segment		Total
Balance at June 30, 2020	$	7,267,573	$	602,362	$	7,869,935
Acquisitions	3,738		—		3,738


Foreign currency translation and other	227,317		26		227,343
Balance at December 31, 2020	$	7,498,628	$	602,388	$	8,101,016

The acquisitions line represents adjustments to the Lord goodwill allocation during the measurement period subsequent to its acquisition date. The impact of these adjustments during the first six months of fiscal 2021 was immaterial to our results of operations and financial position. At December 31, 2020, purchase price allocations for both Lord and Exotic are complete.

We did not identify any events or circumstances during the first six months of fiscal 2021 that required performance of an interim goodwill impairment test. However, the effects of COVID-19 on the global economy, including further market disruption, lack of economic recovery or lower than anticipated customer demand, may require the performance of an interim goodwill impairment test in future periods.

Intangible assets are amortized using the straight-line method over their legal or estimated useful lives. The following summarizes the gross carrying value and accumulated amortization for each major category of intangible assets:

December 31, 2020

June 30, 2020

Gross Carrying
Amount

Accumulated
Amortization

Gross Carrying
Amount