Revenue Recognition

12 Months Ended

Jun. 30, 2022

Revenue from Contract with Customer [Abstract]

Revenue recognition

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.

Disaggregation of revenue

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

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

Diversified Industrial Segment revenues by technology platform:

	2022		2021
Motion Systems	$	3,489,431	$	3,081,366
Flow and Process Control	4,616,270		4,108,080
Filtration and Engineered Materials	5,236,345		4,770,713
Total	$	13,342,046	$	11,960,159

The Aerospace Systems Segment produces hydraulic, fuel, pneumatic and electro-mechanical systems and components, which are utilized on virtually every domestic commercial, military and general aviation aircraft. Aerospace Systems Segment products also perform a vital role in naval vessels and land-based weapon systems. Contracts generally consist of blanket purchase orders and individual long-term production contracts. Blanket purchase orders, which have terms and conditions subject to long-term supply agreements, are typically associated with individual purchase orders. Revenue in the Aerospace Systems Segment is typically recognized at the time of product shipment, but a portion of revenue may be recognized over time in situations where the customer controls the asset as it is produced or the product has no alternative use and we have an enforceable right to payment.

Aerospace Systems Segment revenues by product platform:

	2022		2021
Flight Control Actuation	$	761,215	$	698,877
Fuel and Inerting	535,292		509,687
Hydraulics	306,279		308,835
Engines	591,513		575,804
Fluid Conveyance	219,543		196,348
Other	105,720		97,930
Total	$	2,519,562	$	2,387,481

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

	2022		2021
North America	$	10,216,292	$	9,046,162
Europe	3,156,024		2,919,025
Asia Pacific	2,290,557		2,215,686
Latin America	198,735		166,767
Total	$	15,861,608	$	14,347,640

The majority of revenues from the Aerospace Systems Segment is 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:

	2022		2021
Contract assets, current (included within Prepaid expenses and other)	$	28,546	$	34,190
Contract assets, noncurrent (included within Investments and other assets)	794		1,884
Total contract assets	29,340		36,074
Contract liabilities, current (included within Other accrued liabilities)	(60,472)		(51,211)
Contract liabilities, noncurrent (included within Other liabilities)	(2,225)		(3,080)
Total contract liabilities	(62,697)		(54,291)
Net contract liabilities	$	(33,357)	$	(18,217)

Net contract liabilities at June 30, 2022 increased from the prior year amount due to both an increase in contract liabilities related to the receipt of advance payments and a decrease in contract assets resulting from customer billings. During 2022, approximately $44 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 June 30, 2022 was $7,850 million, of which approximately 88 percent is expected to be recognized as revenue within the next 12 months and the balance thereafter.