PARKER HANNIFIN CORP
For the period ended Sep 30, 2024. Filed Nov 5, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 5, 2024
PH$917.79+2.9%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-03.
0000076334-24-000020
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OFCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-05.
0000076334-24-000067
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OFThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 145 previous paragraphs and 131 current paragraphs.
54 unchanged; 51 reworded; 23 added; 36 removed; 4 previous and 3 current paragraphs rearranged.
Tables are not compared: 10 previous and 10 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (23)
Current report
AND COMPARABLE PERIOD ENDED SEPTEMBER 30, 2023
Current report
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.
Current report
Effective tax rate for the current-year quarter was lower than the U.S. Federal statutory rate of 21 percent due to tax benefits from share-based compensation and foreign-derived intangible income, which were partially offset by U.S. state and local taxes and taxes on international activities.
Current report
The effective tax rate for the comparable prior-year period was lower than the U.S. Federal statutory rate of 21 percent due to tax benefits from share-based compensation and foreign-derived intangible income, which were partially offset by taxes on international activities.
Current report
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.
Current report
Diversified Industrial Segment sales in the current-year quarter decreased $162 million from the prior-year quarter. The effect of changes in currency exchange rates decreased sales by approximately $9 million. The impact of divestiture activity decreased sales by approximately $7 million. Excluding the effects of the changes in currency exchange rates and divestiture activity, sales decreased $146 million from prior-year levels.
Current report
North America businesses - Sales decreased $130 million during the current-year quarter. The effect of changes in currency exchange rates decreased sales by approximately $10 million in the current-year quarter. The effects of divestiture activity decreased sales by approximately $7 million in the current-year quarter. Excluding the effects of changes in currency exchange rates and divestiture activity, sales in the North America businesses decreased $112 million in the current-year quarter primarily due to lower demand from end users in the energy, in-plant and industrial equipment, off-highway and transportation markets, partially offset by an increase in end-user demand in the aerospace and defense and HVAC and refrigeration markets.
Current report
International businesses - Sales decreased $33 million from the prior-year quarter. The effect of changes in currency exchange rates increased sales by approximately $1 million in the current-year quarter. Excluding the effects of changes in currency exchange rates, sales in the International businesses decreased $34 million in the current-year quarter. In the current-year quarter, the decrease in sales was due to lower sales in Europe, partially offset by an increase in sales in the Asia Pacific region and Latin America.
Current report
Within Europe, sales in the current-year quarter decreased primarily due to lower demand from end users across the in-plant and industrial equipment, off-highway, and transportation markets.
Current report
Within the Asia Pacific region, sales in the current-year quarter increased primarily due to higher end-user demand in the electronics and semiconductor, in-plant and industrial equipment and transportation markets.
Current report
Diversified Industrial Segment operating margin increased in both the North America and International businesses due to price increases, favorable product mix and benefits from prior-year business realignment activities as well as cost containment initiatives, partially offset by a decrease in volume.
Current report
Diversified Industrial Segment backlog increased from the June 30, 2024 amount of $4.2 billion due to orders exceeding shipments in the International businesses, partially offset by shipments exceeding orders in the North America businesses. Within the International businesses, the increase in backlog from the June 30, 2024 amount was primarily attributable to both the Asia Pacific region and Latin America, partially offset by a decrease in backlog in Europe.
Current report
Aerospace Systems Segment sales increased $219 million in the current-year quarter. The effect of currency exchange rates increased sales by approximately $7 million. Excluding the effects of changes in currency exchange rates, sales during the current-year quarter increased $212 million from prior-year levels. The increase in sales is primarily due to higher volume in the commercial and defense aftermarket, as well as the commercial original equipment manufacturer ("OEM") market segment.
Current report
The increase in backlog from the June 30, 2024 amount of $6.7 billion was due to orders exceeding shipments in the commercial and defense OEM market segments, partially offset by shipments exceeding orders within the commercial and defense aftermarket market segments.
Current report
•Capital expenditures of $95 million in fiscal 2025 compared to $98 million in fiscal 2024.
Current report
The rating agencies periodically update the Company's credit ratings as events occur. On October 21, 2024, Fitch Ratings upgraded the Company's credit rating to A- from BBB+.
Current report
Strategic Acquisitions and Divestitures
Current report
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. On July 28, 2024, the Company signed an agreement to divest its composites and fuel containment ("CFC") business within the North America businesses of the Diversified Industrial Segment. CFC was acquired as part of the Meggitt acquisition. This divestiture closed on November 1, 2024 for proceeds of $560 million. Refer to Note 4 to the Consolidated Financial Statements for further discussion. Additionally, we divested a non-core filtration business within the North America businesses of the Diversified Industrial Segment for proceeds of $66 million on November 1, 2024.
Current report
•changes in product mix;
Current report
•threats associated with international conflicts and cybersecurity risks and risks associated with protecting our intellectual property;
Current report
•changes in the tax laws in the United States and foreign jurisdictions and judicial or regulatory interpretations thereof; and
Current report
•large scale disasters, such as floods, earthquakes, hurricanes, industrial accidents and pandemics.
Removed paragraphs (36)
Previous report
AND COMPARABLE PERIODS ENDED MARCH 31, 2023
Previous report
The Company is a global leader in motion and control technologies. For more than a century, the Company has engineered the success of its customers in a wide range of diversified industrial and aerospace markets.
Previous report
Net sales increased for the first nine months of fiscal 2024 due to higher sales in the Aerospace Systems Segment, partially offset by lower sales in the Diversified Industrial Segment. The acquisition (the "Acquisition") of Meggitt plc ("Meggitt") increased sales by approximately $501 million during the first nine months of fiscal 2024. The effect of currency exchange rate changes increased net sales during the first nine months of fiscal 2024 by approximately $33 million, of which $19 million and $14 million were attributable to the Aerospace Systems and Diversified Industrial Segments, respectively. The impact of divestiture activity decreased sales by approximately $54 million during the first nine months of fiscal 2024.
Previous report
Loss (gain) on disposal of assets and divestitures for the first nine months of fiscal 2023 includes a gain on the sale of the aircraft wheel and brake business within the Aerospace Systems Segment of $374 million. Refer to Note 4 to the Consolidated Financial Statements for further discussion.
Previous report
Loss on deal-contingent forward contracts includes a loss on the deal-contingent forward contracts related to the Acquisition. Refer to the Company’s 2023 Annual Report on Form 10-K for further discussion.
Previous report
Diversified Industrial North America - Sales decreased 4.7 percent and 0.7 percent during the current-year quarter and first nine months of fiscal 2024, respectively. The effect of changes in currency exchange rates increased sales by approximately $6 million and $24 million in the current-year quarter and first nine months of fiscal 2024, respectively. The effects of divestiture activity decreased sales by approximately $9 million and $14 million in the current-year quarter and first nine months of fiscal 2024, respectively. The Acquisition increased sales by approximately $77 million during the first nine months of fiscal 2024.
Previous report
Excluding the effects of the Acquisition, divestitures and changes in the currency exchange rates, sales in the Diversified Industrial North American businesses decreased 4.6 percent and 2.0 percent in the current-year quarter and first nine months of fiscal 2024, respectively.
Previous report
In the current-year quarter, the decrease in sales is primarily due to lower demand from distributors and end users across the refrigeration, cars and light trucks and turf markets, partially offset by higher end-user demand in the aerospace and heavy-duty truck markets.
Previous report
In the first nine months of fiscal 2024, sales decreased primarily due to lower end-user demand in the refrigeration, turf and cars and light trucks markets, partially offset by higher end-user demand in the aerospace, oil and gas, and material handling markets. In the first nine months of fiscal 2024, we also experienced lower demand from distributors.
Previous report
Diversified Industrial International - Sales decreased 5.9 percent and 1.2 percent from the prior-year quarter and first nine months of fiscal 2023, respectively. The effect of changes in currency exchange rates decreased sales by approximately $44 million and $10 million in the current-year quarter and first nine months of fiscal 2024, respectively. The effect of the Acquisition increased sales by approximately $38 million during the first nine months of fiscal 2024. Excluding the effects of the Acquisition and changes in the currency exchange rates, Diversified Industrial International sales decreased 3.1 percent and 1.8 percent in the current-year quarter and first nine months of fiscal 2024, respectively. In the current-year quarter and first nine months of fiscal 2024, the decreases in sales were attributed to Europe and the Asia Pacific region, partially offset by an increase in sales in Latin America.
Previous report
Within Europe, sales in the current-year quarter and first nine months of fiscal 2024 decreased primarily due to lower demand from end users across the construction equipment, power generation, industrial machinery, life sciences, and farm and agriculture markets, as well as lower demand from distributors. The decreases in sales were partially offset by higher end-user demand in the aerospace, semiconductor and rubber and plastics markets.
Previous report
Within Latin America, sales in the current-year quarter increased primarily due to higher demand from distributors and end users in the cars and light trucks, marine and construction equipment markets, partially offset by lower end-user demand in the rubber and plastics, railroad equipment and industrial machinery markets. In the first nine months of fiscal 2024, sales increased primarily due to higher demand from distributors and end users in the marine, oil and gas, and life sciences markets, partially offset by lower end-user demand in the farm and agriculture, heavy-duty truck, industrial machinery and metal fabrication markets.
Previous report
Operating margin increased in the North American businesses and remained flat in the International businesses during both the current-year quarter and first nine months of fiscal 2024, primarily due to price increases, cost containment initiatives, moderating material costs and operational efficiencies, partially offset by lower volume. Additionally, during the first nine months of fiscal 2024 operating margins in the North American and International businesses benefited from favorable product mix. International businesses also experienced higher business realignment charges during the first nine months of fiscal 2024.
Previous report
Aerospace Systems Segment sales increased in the current-year quarter and first nine months of fiscal 2024 primarily due to higher volume across all businesses, especially the commercial aftermarket business. Sales also increased by $386 million during the first nine months of fiscal 2024 due to the Acquisition.
Previous report
Other (income) expense, net (in Business Segments) included the following:
Previous report
Loss on deal-contingent forward contracts includes a loss on the deal-contingent forward contracts related to the Acquisition. Refer to the Company’s 2023 Annual Report on Form 10-K for further discussion.
Previous report
Loss (gain) on disposal of assets and divestitures for the first nine months of fiscal 2023 includes a gain on the sale of the aircraft wheel and brake business within the Aerospace Systems Segment of approximately $374 million. Refer to Note 4 to the Consolidated Financial Statements for further discussion.
Previous report
•Payment for the Acquisition, net of cash acquired, of $7.1 billion in fiscal 2023.
Previous report
•Payments to settle the deal-contingent forward contracts of $1.4 billion in fiscal 2023.
Previous report
•Cash collateral received of $250 million in fiscal 2023 per the credit support annex attached to the deal-contingent forward contracts.
Previous report
•Capital expenditures of $283 million in fiscal 2024 compared to $273 million in fiscal 2023.
Previous report
•Net purchases of marketable securities of $1.4 million in fiscal 2024 compared to maturities of $3.8 million in fiscal 2023.
Previous report
•Proceeds of $2 billion from borrowings under the term loan facility (the "Term Loan Facility") in fiscal 2023.
Previous report
•Payments to retire $300 million aggregate principal amount of private placement notes assumed in the Acquisition in fiscal 2023.
Previous report
•Payments related to the maturity of $300 million aggregate principal amount of medium term notes in fiscal 2023.
Previous report
•Repurchases of 0.3 million common shares for $149 million during fiscal 2024 compared to repurchases of 0.5 million common shares for $150 million during fiscal 2023.
Previous report
•the impact of political, social and economic instability and disruptions;
Previous report
•additional liabilities relating to changes in tax rates or exposure to additional income tax liabilities;
Previous report
•ability to enter into, own, renew, protect and maintain intellectual property and know-how;
Previous report
•leverage and future debt service obligations;
Previous report
•potential impairment of goodwill;
Previous report
•compliance costs associated with environmental laws and regulations;
Previous report
•potential labor disruptions or shortages and the ability to attract and retain key personnel;
Previous report
•local and global political and economic conditions, including the Russia-Ukraine war and other armed conflicts and their residual effects;
Previous report
•government actions and natural phenomena such as pandemics, floods, earthquakes, hurricanes or other natural phenomena that may be related to climate change;
Previous report
•increased cyber security threats and sophisticated computer crime; and
Reworded paragraphs (51)
Previous wording
FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2024
Current wording
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2024
Previous wording
We believe many opportunities for profitable growth are available. The Company intends to focus primarily on business opportunities in the areas of energy, water, food, environment, defense, life sciences, infrastructure and transportation. We believe we can meet our strategic objectives by:
Current wording
We believe many opportunities for profitable growth are available. The Company intends to focus primarily on business opportunities in the areas of aerospace and defense, in-plant and industrial equipment, transportation, off-highway, energy, and HVAC and refrigeration. We believe we can meet our strategic objectives by:
Previous wording
•enabling a sustainable future by providing innovative technology solutions that make our world safer, smarter and cleaner and operating responsibly by minimizing our environmental impact and conserving natural resources;
Current wording
•enabling a sustainable future by providing innovative technology solutions that offer a positive global environmental impact and operating responsibly by reducing our energy use and emissions;
Previous wording
We continue to manage the challenging supply chain environment through our "local for local" manufacturing strategy, ongoing supplier management process, and broadened supply base. We continue to monitor inflation and manage its impact through a variety of cost and pricing measures, including continuous improvement and lean initiatives. Additionally, we strategically manage our workforce and discretionary spending. At the same time, we are appropriately addressing the ongoing needs of our business so that we continue to serve our customers.
Current wording
We manage our supply chain through our "local for local" manufacturing strategy, ongoing supplier management process, and broadened supply base. We are monitoring inflation and manage its impact through a variety of cost and pricing measures, including continuous improvement and lean initiatives. Additionally, we strategically manage our workforce and discretionary spending. At the same time, we are appropriately addressing the ongoing needs of our business so that we continue to serve our customers.
Previous wording
The discussion below is structured to separately discuss the Consolidated Statement of Income, Business Segment Information, and Liquidity and Capital Resources. 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.
Current wording
The discussion below is structured to separately discuss the Consolidated Statement of Income, Business Segments, and Liquidity and Capital Resources. 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. Dollars are presented in millions (except per share amounts or as otherwise noted) and computed based on the amounts in thousands; therefore, totals may not sum due to rounding.
Previous wording
Net sales increased for the current-year quarter due to higher sales in the Aerospace Systems Segment, partially offset by lower sales in the Diversified Industrial Segment. The effect of currency exchange rate changes decreased net sales during the current-year quarter by approximately $31 million. The change was driven by a decrease of approximately $37 million in the Diversified Industrial Segment, partially offset by an increase of approximately $6 million within the Aerospace Systems Segment. The impact of divestiture activity decreased sales by approximately $16 million during the current-year quarter.
Current wording
Net sales increased in the current-year quarter due to higher sales in the Aerospace Systems Segment, partially offset by lower sales in the Diversified Industrial Segment. The effect of currency exchange rate changes decreased net sales during the current-year quarter by approximately $3 million. The change was driven by a decrease of approximately $9 million in the Diversified Industrial Segment, partially offset by an increase of approximately $7 million within the Aerospace Systems Segment. The impact of divestiture activity decreased net sales by approximately $7 million during the current-year quarter.
Previous wording
Gross profit margin (calculated as net sales minus cost of sales, divided by net sales) increased in both the current-year quarter and first nine months of fiscal 2024 due to higher margins in both segments resulting from price increases, favorable product mix, moderating material costs, cost containment initiatives and operational efficiencies. In addition, cost of sales in the prior-year quarter and first nine months of fiscal 2023 included $38 million and $168 million, respectively, of amortization expense related to the step-up in inventory to fair value resulting from the Acquisition.
Current wording
Gross profit margin (calculated as net sales minus cost of sales, divided by net sales) increased in the current-year quarter due to higher margins in both segments primarily resulting from price increases and favorable product mix, partially offset by decreased volume.
Previous wording
Cost of sales also included business realignment and acquisition integration charges of $4 million and $9 million for the current and prior-year quarter, respectively, and $21 million and $18 million for the first nine months of fiscal 2024 and 2023, respectively.
Current wording
Cost of sales also included business realignment and acquisition integration charges of $6 million and $8 million for the current and prior-year quarter, respectively.
Previous wording
Selling, general and administrative expenses("SG&A") decreased in the current-year quarter due to lower intangible asset amortization and research and development expenses. SG&A decreased during the first nine months of fiscal 2024 primarily due to a decrease in acquisition related expenses of $112 million, partially offset by higher intangible asset amortization and stock-based compensation expense, as well as an increase in general administrative expenses resulting from the Acquisition. In both the current-year quarter and first nine months of fiscal 2024, SG&A benefited from savings related to prior-year restructuring and acquisition-integration activities.
Current wording
Selling, general and administrative expenses("SG&A") decreased in the current-year quarter primarily due to lower intangible asset amortization, stock-based compensation expense and research and development expense.
Previous wording
SG&A also included business realignment and acquisition integration charges of $16 million and $31 million for the current and prior-year quarter, respectively, and $42 million and $76 million for the first nine months of fiscal 2024 and 2023, respectively.
Current wording
SG&A also included business realignment and acquisition integration charges of $10 million and $11 million for the current and prior-year quarter, respectively.
Previous wording
Interest expense decreased during the current-year quarter and the first nine months of fiscal 2024 primarily due to lower average debt outstanding and lower average interest rates.
Current wording
Interest expense decreased during the current-year quarter primarily due to lower average debt outstanding.
Previous wording
Foreign currency transaction (gain) loss primarily relates to the impact of exchange rates on cash, forward contracts, certain cross-currency swap contracts and intercompany transactions. The first nine months of fiscal 2023 also includes a foreign currency transaction loss associated with completing the Acquisition.
Current wording
Foreign currency transaction (gain) loss primarily relates to the impact of exchange rates on cash, forward contracts and intercompany transactions.
Previous wording
Effective tax rate for the current-year quarter and first nine months of fiscal 2024 was lower than the comparable prior-year periods primarily due to a net increase in discrete tax benefits. The fiscal 2024 effective tax rate is expected to be approximately 22 percent.
Current wording
The fiscal 2025 effective tax rate is expected to be approximately 22.5 percent.
Previous wording
The Diversified Industrial Segment operations experienced the following percentage changes in net sales in the current-year periods versus the comparable prior-year periods:
Current wording
The Diversified Industrial Segment operations experienced the following percentage changes in net sales in the current-year period versus the comparable prior-year period:
Previous wording
1 This table reconciles the percentage changes in net sales of the Diversified Industrial Segment reported in accordance with accounting principles generally accepted in the United States of America ("GAAP") to percentage changes in net sales adjusted to remove the effects of acquisitions and divestitures for 12 months after their completion as well as changes in currency exchange rates (a non-GAAP measure). The effects of acquisitions, divestitures and changes in currency exchange rates are removed to allow investors and the Company to meaningfully evaluate the percentage changes in net sales on a comparable basis from period to period.
Current wording
1 This table reconciles the percentage changes in net sales of the Diversified Industrial Segment reported in accordance with accounting principles generally accepted in the United States of America ("GAAP") to percentage changes in net sales adjusted to remove the effects of divestitures for 12 months after their completion as well as changes in currency exchange rates (a non-GAAP measure). The effects of divestitures and changes in currency exchange rates are removed to allow investors and the Company to meaningfully evaluate the percentage changes in net sales on a comparable basis from period to period.
Previous wording
Within the Asia Pacific region, sales in the current-year quarter and first nine months of fiscal 2024 decreased primarily due to lower demand from distributors and end-users in the semiconductor, construction equipment, industrial machinery, metal fabrication and marine markets, partially offset by higher end-user demand in the oil and gas and railroad equipment markets.
Current wording
Within Latin America, sales in the current-year quarter increased primarily due to higher end-user demand in the in-plant and industrial equipment, off-highway and transportation markets, partially offset by lower demand from end users in the energy market.
Previous wording
The following business realignment and acquisition integration charges are included in Diversified Industrial North American and Diversified Industrial International operating income:
Current wording
The following business realignment and acquisition integration charges are included in the Diversified Industrial Segment operating income:
Previous wording
The business realignment charges primarily consist of severance costs related to actions taken under the Company's simplification initiative aimed at reducing organizational and process complexity, as well as plant closures. Acquisition integration charges relate to the acquisition of Meggitt. Business realignment and acquisition integration charges within the Diversified Industrial International businesses were primarily incurred in Europe.
Current wording
The business realignment charges primarily consist of severance costs related to actions taken under the Company's simplification initiative aimed at reducing organizational and process complexity, as well as plant closures. Acquisition integration charges relate to the acquisition of Meggitt plc ("Meggitt"). Business realignment and acquisition integration charges within the International businesses were primarily incurred in Europe.
Previous wording
We anticipate that cost savings realized from the workforce reduction measures taken in the first nine months of fiscal 2024 will not materially impact operating income in fiscal 2024 and will increase operating income by approximately one percent in fiscal 2025 for both the Diversified Industrial North American and International businesses. We expect to continue to take actions necessary to integrate acquisitions and appropriately structure the operations of the Diversified Industrial Segment. We currently anticipate incurring approximately $27 million of additional business realignment and acquisition integration charges in the remainder of fiscal 2024. However, continually changing business conditions could impact the ultimate costs we incur.
Current wording
We anticipate that cost savings realized from the workforce reduction measures taken in the first three months of fiscal 2025 will not materially impact operating income in fiscal 2025 and 2026. We expect to continue to take actions necessary to integrate acquisitions and appropriately structure the operations of the Diversified Industrial Segment. We currently anticipate incurring approximately $41 million of additional business realignment and acquisition integration charges in the remainder of fiscal 2025. However, continually changing business conditions could impact the ultimate costs we incur.
Previous wording
Diversified Industrial Segment backlog, as of March 31, 2024, decreased from the prior-year quarter and June 30, 2023 amount of $4.8 billion due to shipments exceeding orders in both the North American and International businesses. The decrease in backlog was split evenly between the North American and International businesses from both the prior-year quarter and June 30, 2023.
Current wording
Diversified Industrial Segment backlog, as of September 30, 2024, decreased from the prior-year quarter due to shipments exceeding orders in both the North America and International businesses. The decrease in backlog was split evenly between the North America and International businesses. Within the International businesses, Europe and the Asia Pacific region accounted for approximately 90 percent and 10 percent, respectively, of the decrease from the prior-year quarter.
Previous wording
Aerospace Systems Segment operating margin increased during the current-year quarter and first nine months of fiscal 2024 due to higher sales volume, favorable aftermarket mix and lower acquisition-integration charges, as well as benefits of cost containment initiatives and prior-year business realignment and acquisition integration activities. In addition, operating income in the prior-year quarter and first nine months of fiscal 2023 included $38 million and $168 million, respectively, of amortization expense related to the step-up in inventory to fair value resulting from the Acquisition. Favorable contract settlements also contributed to the increase in operating margin during the first nine months of fiscal 2024.
Current wording
Aerospace Systems Segment operating margin increased during the current-year quarter due to higher sales volume and favorable aftermarket mix, as well as benefits of cost containment initiatives and prior-year business realignment and acquisition integration activities, partially offset by higher material costs.
Previous wording
Within the Aerospace Systems Segment, we incurred acquisition integration and business realignment charges of $12 million and $26 million in the current and prior-year quarter, respectively, and $27 million and $72 million in the first nine months of fiscal 2024 and 2023, respectively. We do not expect to incur material business realignment and acquisition integration charges in the remainder of fiscal 2024. However, continually changing business conditions could impact the ultimate costs we incur.
Current wording
Within the Aerospace Systems Segment, we incurred acquisition integration and business realignment charges of $6 million in both the current and prior-year quarter, respectively. We do not expect to incur material business realignment and acquisition integration charges in the remainder of fiscal 2025. However, continually changing business conditions could impact the ultimate costs we incur.
Previous wording
Aerospace Systems Segment backlog, as of March 31, 2024, increased from the prior-year quarter and the June 30, 2023 amount of $6.2 billion due to orders exceeding shipments in all businesses, especially the commercial and military aftermarket businesses.
Current wording
Aerospace Systems Segment backlog, as of September 30, 2024, increased from the prior-year quarter due to orders exceeding shipments in all market segments, especially the commercial and defense OEM market segments.
Previous wording
Corporate general and administrative expenses increased in the current-year quarter and first nine months of fiscal 2024 primarily due to an increase in net expense associated with the Company's deferred compensation plan and related investments and charitable contributions, partially offset by a decrease in professional service fees. In addition, salaries, benefits, and incentive compensation expense increased during the first nine months of fiscal 2024.
Current wording
Corporate general and administrative expenses decreased in the current-year quarter primarily due to lower net expense associated with the Company's deferred compensation plan and related investments, partially offset by an increase in professional service fees and salaries and benefits.
Previous wording
Cash flows from operating activities for the first nine months of fiscal 2024 were $2,147 million compared to $1,795 million for the first nine months of fiscal 2023. This increase of $352 million was primarily related to net changes in cash provided by working capital items. We continue to focus on managing inventory and other working capital requirements. Cash flows from operating activities for the first nine months of fiscal 2023 were negatively impacted by acquisition-related transaction expenses.
Current wording
Cash flows from operating activities for the first three months of fiscal 2025 were $744 million compared to $650 million for the first three months of fiscal 2024. This increase of $94 million 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.
Previous wording
•Days sales outstanding relating to trade accounts receivable was 53 days at March 31, 2024, 51 days at June 30, 2023 and 52 days at March 31, 2023.
Current wording
•Days sales outstanding relating to trade accounts receivable was 52 days at September 30, 2024, 51 days at June 30, 2024 and 52 days at September 30, 2023.
Previous wording
•Days supply of inventory on hand was 87 days at March 31, 2024, 85 days at June 30, 2023 and 90 days at March 31, 2023.
Current wording
•Days supply of inventory on hand was 91 days at September 30, 2024, 80 days at June 30, 2024 and 96 days at September 30, 2023.
Previous wording
Cash flows from investing activitiesfor the first nine months of fiscal 2024 and 2023 were impacted by the following factors:
Current wording
Cash flows from investing activitiesfor the first three months of fiscal 2025 and 2024 were impacted by the following factors:
Previous wording
•Net proceeds from the sale of the aircraft wheel and brake business of approximately $443 million in fiscal 2023.
Current wording
•Net proceeds from the sale of the MicroStrain sensing systems business of approximately $37 million in fiscal 2024.
Previous wording
Cash flows from financing activities for the first nine months of fiscal 2024 and 2023 were impacted by the following factors:
Current wording
Cash flows from financing activities for the first three months of fiscal 2025 and 2024 were impacted by the following factors:
Previous wording
•Net commercial paper repayments of $941 million in fiscal 2024 compared to net commercial paper borrowings of $258 million in fiscal 2023.
Current wording
•Net commercial paper repayments of $377 million in fiscal 2025 compared to net commercial paper repayments of $170 million in fiscal 2024.
Previous wording
•Principal payments totaling $250 million related to the Term Loan Facility in fiscal 2024 compared to principal payments totaling $750 million related to the Term Loan Facility in fiscal 2023.
Current wording
•Principal payments totaling $40 million related to borrowings under the term loan facility ("Term Loan Facility") in fiscal 2025 compared to principal payments totaling $175 million related to the Term Loan Facility in fiscal 2024.
Previous wording
We are actively monitoring our liquidity position and remain focused on managing our inventory and other working capital requirements. We are continuing to target two percent of sales for capital expenditures and are prioritizing those related to safety and strategic investments. We believe that cash generated from operations and our commercial paper program will satisfy our operating needs for the foreseeable future.
Current wording
We are actively monitoring our liquidity position and remain focused on managing our inventory and other working capital requirements. We are continuing to target two percent of sales for capital expenditures and are prioritizing those related to safety, strategic investments and sustainability initiatives. We believe that cash generated from operations and our commercial paper program will satisfy our operating needs for the foreseeable future.
Previous wording
We declared a quarterly dividend of $1.48 per share on January 25, 2024, which was paid on March 1, 2024. Dividends have been paid for 295 consecutive quarters. Additionally, we declared a quarterly dividend of $1.63 per share on April 25, 2024, payable on June 7, 2024, increasing our annual dividend per share paid to shareholders for 68 consecutive fiscal years.
Current wording
We declared a quarterly cash dividend of $1.63 per share on August 15, 2024, which was paid on September 13, 2024. Dividends have been paid for 297 consecutive quarters, including a yearly increase in dividends for the last 68 years. Additionally, we declared a quarterly cash dividend of $1.63 per share on October 23, 2024, payable on December 6, 2024.
Previous wording
Cash, comprised of cash and cash equivalents and marketable securities and other investments, includes $331 million and $422 million held by the Company's foreign subsidiaries at March 31, 2024 and June 30, 2023, 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.
Current wording
Cash, comprised of cash and cash equivalents and marketable securities and other investments, includes $327 million and $311 million held by the Company's foreign subsidiaries at September 30, 2024 and June 30, 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.
Previous wording
We are currently authorized to sell up to $3.0 billion of short-term commercial paper notes. As of March 31, 2024, $0.8 billion of commercial paper notes were outstanding, and the largest amount of commercial paper notes outstanding during the current-year quarter was $1.2 billion.
Current wording
We are currently authorized to sell up to $3.0 billion of short-term commercial paper notes. As of September 30, 2024, $1.8 billion of commercial paper notes were outstanding, and the largest amount of commercial paper notes outstanding during the current-year quarter was $2.1 billion.
Previous wording
The Company has a line of credit totaling $3.0 billion through a multi-currency revolving credit agreement with a group of banks, of which $2.2 billion was available as of March 31, 2024. 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 credit 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 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.
Current wording
The Company has a line of credit totaling $3.0 billion through a multi-currency revolving credit agreement with a group of banks, of which $1.2 billion was available as of September 30, 2024. 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 credit 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 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.
Previous wording
Our debt portfolio includes the Term Loan Facility. During the nine months ended March 31, 2024, we made principal payments totaling $250 million related to the Term Loan Facility. Refer to Note 15 to the Consolidated Financial Statements for further discussion.
Current wording
Our debt portfolio includes the Term Loan Facility. During the three months ended September 30, 2024, we made principal payments totaling $40 million related to the Term Loan Facility. Refer to Note 15 to the Consolidated Financial Statements for further discussion.
Previous wording
The Company’s credit agreement 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 March 31, 2024, the most restrictive financial covenant provides that the ratio of debt to debt-shareholders' equity cannot exceed 0.65 to 1.0. At March 31, 2024, the Company's debt to debt-shareholders' equity ratio was 0.50 to 1.0. We are in compliance and expect to remain in compliance with all covenants set forth in the credit agreement and indentures.
Current wording
The Company’s credit agreement 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 September 30, 2024, the
Previous wording
Our goal is to maintain an investment-grade credit profile. The rating agencies periodically update our credit ratings as events occur. At March 31, 2024, 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:
Current wording
Our goal is to maintain an investment-grade credit profile. At September 30, 2024, 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:
Showing the first 40 of 51 pairs. Open the source sections for the rest.
Rearranged current paragraphs (3)
Current report — wording carried from elsewhere
Foreign currency transaction (gain) loss primarily relates to the impact of exchange rates on cash, forward contracts and intercompany transactions.
Current report — wording carried from elsewhere
24 - most restrictive financial covenant provides that the ratio of debt to debt-shareholders' equity cannot exceed 0.65 to 1.0. At September 30, 2024, the Company's debt to debt-shareholders' equity ratio was 0.44 to 1.0. We are in compliance and expect to remain in compliance with all covenants set forth in the credit agreement and indentures.
Current report — wording carried from elsewhere
•uncertainties surrounding timing, successful completion or integration of acquisitions and similar transactions;
Rearranged previous paragraphs (4)
Previous report — wording carried elsewhere
Within the International businesses, Europe and the Asia Pacific region accounted for approximately 60 percent and 40 percent, respectively, of the decrease from the prior-year quarter. Europe, the Asia Pacific region and Latin America accounted for approximately 70 percent, 25 percent and five percent, respectively, of the decrease from June 30, 2023.
Previous report — wording carried elsewhere
Foreign currency transaction (gain) loss primarily relates to the impact of exchange rates on cash, forward contracts, certain cross-currency swap contracts and intercompany transactions. Foreign currency transaction (gain) loss during the first nine months of fiscal 2023 also included foreign currency transaction loss associated with completing the Acquisition.
Previous report — wording carried elsewhere
•inability to obtain, or meet conditions imposed for, required governmental and regulatory approvals;
Previous report — wording carried elsewhere
•success of business and operating initiatives.