Parker(PH) - 2025 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS This section presents Parker-Hannifin's unaudited consolidated financial statements for Q1 FY2025 and Q1 FY2024, detailing income, comprehensive income, balance sheet, cash flows, and notes Consolidated Statement of Income Net income attributable to common shareholders increased for the three months ended September 30, 2024, driven by higher net sales and improved basic EPS | Metric | Three Months Ended Sep 30, 2024 ($ thousands) | Three Months Ended Sep 30, 2023 ($ thousands) | | :----------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net sales | 4,903,984 | 4,847,488 | | Income before income taxes | 875,186 | 820,435 | | Net income | 698,528 | 651,072 | | Net income attributable to common shareholders | 698,420 | 650,827 | | Basic Earnings per share | $5.43 | $5.07 | Consolidated Statement of Comprehensive Income Total comprehensive income attributable to common shareholders significantly increased in Q1 FY2025, primarily due to a positive foreign currency translation adjustment | Metric | Three Months Ended Sep 30, 2024 ($ thousands) | Three Months Ended Sep 30, 2023 ($ thousands) | | :------------------------------------------------ | :-------------------------------------------- | :-------------------------------------------- | | Net income attributable to common shareholders | 698,420 | 650,827 | | Foreign currency translation adjustment | 344,546 | (222,532) | | Retirement benefits plan activity | 3,451 | 818 | | Other comprehensive income (loss) | 347,997 | (221,714) | | Total comprehensive income attributable to common shareholders | $1,045,997 | $428,752 | Consolidated Balance Sheet Total assets and total equity increased as of September 30, 2024, compared to June 30, 2024, with notable changes in current assets, goodwill, and retained earnings | Metric | September 30, 2024 ($ thousands) | June 30, 2024 ($ thousands) | | :----------------------------------- | :------------------------------- | :-------------------------- | | Total current assets | 7,033,701 | 6,798,624 | | Total assets | 29,600,835 | 29,297,842 | | Total current liabilities | 7,338,030 | 7,313,309 | | Total liabilities | 16,699,486 | 17,216,949 | | Total equity | 12,901,349 | 12,080,893 | Consolidated Statement of Cash Flows Operating activities generated significantly more cash in Q1 FY2025, while cash used in investing and financing activities also increased, resulting in a net decrease in cash and cash equivalents | Cash Flow Activity | Three Months Ended Sep 30, 2024 ($ thousands) | Three Months Ended Sep 30, 2023 ($ thousands) | | :--------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net cash provided by operating activities | 743,975 | 649,959 | | Net cash used in investing activities | (86,608) | (55,994) | | Net cash used in financing activities | (710,955) | (617,862) | | Net decrease in cash and cash equivalents | (50,959) | (26,256) | | Cash and cash equivalents at end of period | $371,068 | $448,926 | Notes to Consolidated Financial Statements These notes provide detailed explanations and disclosures supporting the consolidated financial statements, covering accounting policies, significant transactions, and financial instrument disclosures 1. Management representation & Subsequent Events Management affirms the fair presentation of the unaudited consolidated financial statements and discloses two divestitures completed subsequent to the quarter end - Management confirms the fair presentation of the unaudited consolidated financial statements for the three months ended September 30, 2024, including all normal recurring adjustments[16] - On November 1, 2024, Parker completed two divestitures: the CFC business for $560 million and a non-core filtration business for $66 million[17] 2. New accounting pronouncements The Company is evaluating new FASB ASUs on income tax disclosures and segment reporting, with the segment reporting standard planned for adoption in fiscal 2025 - FASB issued ASU 2023-09, 'Income Taxes (Topic 740): Improvements to Income Tax Disclosures,' effective for fiscal years beginning after December 15, 2024, with the Company evaluating its impact[18] - FASB issued ASU 2023-07, 'Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,' effective for fiscal years beginning after December 15, 2023, which the Company plans to adopt in fiscal 2025, expecting expanded disclosure with no financial impact[19] - The Company adopted ASU 2022-04, 'Liabilities—Supplier Finance Programs,' on July 1, 2023, with no material impact on condensed consolidated financial statements[20] 3. Revenue recognition Revenue is primarily generated from product sales in various industrial and aerospace markets, with most recognized at a point in time, and North America remaining the largest geographic contributor - Revenue is primarily derived from product sales in aerospace and defense, in-plant and industrial equipment, transportation, off-highway, energy, and HVAC and refrigeration markets, with most recognized at a point in time[22] | Segment / Region | Three Months Ended Sep 30, 2024 ($ thousands) | Three Months Ended Sep 30, 2023 ($ thousands) | | :----------------- | :-------------------------------------------- | :-------------------------------------------- | | Diversified Industrial Segment revenues by technology platform: | | | | Motion Systems | 848,549 | 942,314 | | Flow and Process Control | 1,125,634 | 1,181,461 | | Filtration and Engineered Materials | 1,481,975 | 1,494,753 | | Total DI Segment | $3,456,158 | $3,618,528 | | Aerospace Systems Segment revenues by market segment: | | | | Commercial OEM | 433,235 | 418,616 | | Commercial aftermarket | 520,829 | 391,206 | | Defense OEM | 262,291 | 263,065 | | Defense aftermarket | 231,471 | 156,073 | | Total AS Segment | $1,447,826 | $1,228,960 | | Total Company revenues by geographic region: | | | | North America | 3,333,660 | 3,293,091 | | Europe | 934,580 | 941,715 | | Asia Pacific | 579,911 | 554,405 | | Latin America | 55,833 | 58,277 | | Total Company | $4,903,984 | $4,847,488 | - Net contract liabilities decreased to $(99,561) thousand at September 30, 2024, from $(103,948) thousand at June 30, 2024, primarily due to timing differences between revenue recognition and advance payment receipts[28] - Backlog at September 30, 2024, was $11.0 billion, with approximately 73% expected to be recognized as revenue within the next 12 months[29] 4. Divestitures The Company signed an agreement to divest its CFC business, which closed on November 1, 2024, and previously divested the MicroStrain sensing systems business in September 2023 - On July 28, 2024, the Company signed an agreement to divest its CFC business (from Meggitt acquisition), which closed on November 1, 2024, with assets held for sale at $356 million and liabilities at $65 million as of September 30, 2024[30] - In September 2023, the MicroStrain sensing systems business was divested for $37 million, yielding a $13 million pre-tax gain[30] 5. Earnings per share Basic and diluted earnings per