XML 51 R26.htm IDEA: XBRL DOCUMENT v3.25.2
Financial Instruments
 12 Months Ended
Jun. 30, 2025
Fair Value Disclosures [Abstract]  
Financial Instruments Financial Instruments
The Company utilizes derivative and non-derivative financial instruments, including forward exchange contracts, costless collar contracts, cross-currency swap contracts and certain foreign currency denominated debt, to manage foreign currency transaction and translation risk. The derivative financial instrument contracts are with major investment grade financial institutions, and the Company does not anticipate any material non-performance by any of the counterparties. The Company does not hold or issue derivative financial instruments for trading purposes.
Net Investment Hedges
The Company uses cross-currency swap contracts and foreign currency denominated debt, a non-derivative financial instrument, to hedge portions of the Company's investments in foreign subsidiaries and manage foreign exchange risk. The effect of translating the debt into U.S. dollars is recorded in foreign currency translation within accumulated other comprehensive loss and remains there until the underlying net investment is sold or substantially liquidated. For the cross-currency swap contracts that are designated and qualify as a net investment hedges, we assess the effectiveness using the spot method and the net gains or losses attributable to changes in the spot rate are recorded in foreign currency translation within accumulated other comprehensive loss. Any ineffective portions of the net investment hedges are reclassified from accumulated other comprehensive loss into earnings through interest expense during the period of change. During 2025, 2024, and 2023, the periodic interest settlements related to the cross-currency swaps were not material.
The notional amounts for the cross-currency swap contracts designated as hedging instruments were €69 million, €290 million and ¥2.1 billion as of June 30, 2025 and 2024.
During 2025, the Company issued €700 million aggregate principal amount of 2.90 percent Senior Notes due 2030. We used the net proceeds from the issuance, together with cash on hand, to repay the €700 million aggregate principal amount of 1.125 percent Senior Notes due 2025. The Company’s €700 million aggregate principal amount of 2.90 percent Senior Notes due 2030 have been designated as a hedge of the Company’s net investment in certain foreign subsidiaries.
Non-Designated Derivative Contracts
In addition to the net investment hedges, the Company utilizes derivatives that are not designated as hedging instruments but serve as economic hedges of forecasted transactions. These include forward exchange, cross-currency swap, deal-contingent forward and costless collar contracts, which are used to mitigate foreign exchange risk. Changes in the fair value of these instruments are recorded in other (income) expense, net in the Consolidated Statement of Income.
In connection with the acquisition of 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 had an aggregate notional amount of £6.4 billion, and were settled in September 2022 in connection with the acquisition of Meggitt. In June 2022, we amended the agreement to include a credit support annex obligating Parker to post $250 million of cash collateral. In July 2022, the Company received the $250 million cash collateral previously posted. Cash flows associated with the cash collateral are recorded in cash flow from investing activities on the Consolidated Statement of Cash Flows.
Financial Statement Impact
Derivative financial instruments are recognized on the Consolidated Balance Sheet as either assets or liabilities and are measured at fair value. The location and fair value of derivative financial instruments reported on the Consolidated Balance Sheet are as follows:
Balance Sheet Caption20252024
Net investment hedges
Cross-currency swap contracts
Other assets$4 $16 
Cross-currency swap contracts
Other liabilities
26 — 
Non-designated derivative contracts
Forward exchange contractsNon-trade and notes receivable3 8 
Forward exchange contractsOther accrued liabilities38 — 
The cross-currency swap and forward exchange contracts are reflected on a gross basis in the Consolidated Balance Sheet. The Company has not entered into any master netting arrangements.
(Losses) gains on derivative financial instruments were recorded in the Consolidated Statement of Income as follows:
202520242023
Deal-contingent forward contracts$— $— $(390)
Forward exchange contracts(63)11 (7)
Costless collar contracts— — 12 
Cross-currency swap contracts— — (19)
(Losses) gains on derivative and non-derivative financial instruments that were recorded in accumulated other comprehensive loss in the Consolidated Balance Sheet are as follows:
20252024
Cross-currency swap contracts$(30)$(4)
Foreign currency denominated debt(56)10 
Fair Values of Financial Instruments
The Company’s financial instruments consist primarily of cash and cash equivalents, accounts receivable and long-term investments, as well as obligations under accounts payable, trade, notes payable and long-term debt. Due to their short-term nature, the carrying values for cash and cash equivalents, accounts receivable, accounts payable, trade and notes payable approximate fair value.
The carrying value of long-term debt, which excludes the impact of net unamortized debt issuance costs, and estimated fair value of long-term debt at June 30 are as follows:
20252024
Carrying value of long-term debt$7,555 $8,470 
Estimated fair value of long-term debt7,174 7,885 
The fair value of long-term debt is classified within level 2 of the fair value hierarchy.
A summary of derivative assets and liabilities that were measured at fair value on a recurring basis at June 30, 2025 and 2024 are as follows:
June 30, 2025Level 1Level 2Level 3
Derivative assets$7 $— $7 $— 
Derivative liabilities64 — 64 — 
June 30, 2024Level 1Level 2Level 3
Derivative assets$24 $— $24 $— 
The calculation of fair value for cross-currency swaps and forward contracts utilizes market observable inputs including both spot and forward prices for the same underlying currencies. The calculation of fair value of the cross-currency swap contracts also utilizes a present value cash flow model.