Parker-Hannifin CorpPH
Parker-Hannifin Corp Stock Compensation Disclosure
Stock Incentive Plans
The Company's 2023 Omnibus Stock Incentive Plan ("2023 SIP") provides for the granting of stock-based incentive awards in the form of nonqualified stock options, stock appreciation rights ("SARs"), restricted stock units ("RSUs") and restricted and unrestricted stock to officers and key employees of the Company. The aggregate number of shares of common stock authorized for issuance under the 2023 SIP is 11.3 million. At June 30, 2025, 7.2 million common stock shares were available for future issuance.
The Company also maintains a Global Employee Stock Purchase Plan ("ESPP"), which is offered in a limited number of international countries. The ESPP is intended to provide eligible employees with the opportunity to acquire interest in the Company's common shares for 90 percent of the fair market value per share. The maximum number of shares that may be issued under the ESPP is 10.0 million shares, of which approximately 9.9 million shares are still available for future issuance. Activity under this plan is not material.
We satisfy stock-based incentive award obligations by issuing shares of common stock out of treasury, which have been repurchased pursuant to our share repurchase program described in Note 14, or through the issuance of previously unissued common stock.
Total stock-based compensation expense and the related tax benefits were as follows:
| 2025 | 2024 | 2023 | |||||||||||||||
| Stock-based compensation expense | $ | 159 | $ | 156 | $ | 143 | |||||||||||
| Income tax benefits | $ | 23 | $ | 20 | $ | 20 | |||||||||||
At June 30, 2025, $142 million of total unrecognized compensation costs related to stock-incentive awards has yet to be recognized and will be amortized into expense over a weighted-average period of approximately 1.8 years. The Company also realized income tax benefits related to the exercise and issuance of awards for $54 million, $52 million and $33 million during 2025, 2024 and 2023, respectively.
SARs - SARs vest ratably over a three-year service period and expire ten years from the grant date. Upon exercise, SARs entitle the participant to receive shares of common stock equal to the increase in value of the award between the grant date and the exercise date.
The fair value of each SAR award granted in 2025, 2024 and 2023 was estimated at the date of grant using a Black-Scholes option pricing model.
| 2025 | 2024 | 2023 | |||||||||||||||
| Weighted-average grant date fair value | $ | 205.79 | $ | 146.72 | $ | 97.70 | |||||||||||
| Assumptions: | |||||||||||||||||
| Risk-free interest rate | 3.7 | % | 4.4 | % | 3.0 | % | |||||||||||
| Expected life of award | 5.7 years | 5.5 years | 5.6 years | ||||||||||||||
| Expected dividend yield of stock | 1.1 | % | 1.8 | % | 1.8 | % | |||||||||||
| Expected volatility of stock | 35.7 | % | 39.0 | % | 37.1 | % | |||||||||||
The risk-free interest rate was based on U.S. Treasury yields with a term similar to the expected life of the award. The expected life of the award was derived by referring to actual exercise and post-vesting employment termination experience. The expected dividend yield was based on the annual rate of dividends per share over the market value of the stock on the grant date. The expected volatility of stock was derived by referring to changes in our historical common stock prices over a time-frame similar to the expected life of the award.
SAR activity during 2025 is as follows:
| (Shares in thousands) | Number of Shares | Weighted-Average Exercise Price | Weighted-Average Remaining Contractual Term | Aggregate Intrinsic Value | |||||||||||||||||||
| Outstanding June 30, 2024 | 3,495 | $ | 238.15 | ||||||||||||||||||||
| Granted | 347 | $ | 578.39 | ||||||||||||||||||||
| Exercised | (733) | $ | 180.74 | ||||||||||||||||||||
| Canceled and forfeited | (21) | $ | 445.30 | ||||||||||||||||||||
| Outstanding June 30, 2025 | 3,088 | $ | 288.60 | 5.8 years | $ | 1,266 | |||||||||||||||||
| Exercisable June 30, 2025 | 2,230 | $ | 226.33 | 4.9 years | $ | 1,053 | |||||||||||||||||
A summary of the status and changes of shares subject to SAR awards and the related average price per share follows:
| (Shares in thousands) | Number of Shares | Weighted-Average Grant Date Fair Value | |||||||||
| Nonvested June 30, 2024 | 1,050 | $ | 119.05 | ||||||||
| Granted | 347 | $ | 205.79 | ||||||||
| Vested | (519) | $ | 109.06 | ||||||||
| Canceled and forfeited | (21) | $ | 155.39 | ||||||||
| Nonvested June 30, 2025 | 857 | $ | 159.29 | ||||||||
The total fair value of shares vested during 2025, 2024 and 2023 was $57 million, $45 million and $34 million, respectively. The total intrinsic value of SAR awards exercised during 2025, 2024 and 2023 was $340 million, $270 million and $158 million, respectively.
RSU & LTIP Awards - RSUs constitute an agreement to deliver shares of common stock to the participant at the end of a vesting period. Generally, the RSUs vest ratably over a three-year service period. For each nonvested RSU, recipients are entitled to receive a dividend equivalent, payable in cash or common shares, equal to the cash dividend per share paid to common shareholders.
We also granted RSUs with a one-year vesting period to non-employee members of the Board of Directors. Recipients receive a dividend equivalent payable in common shares, equal to the cash dividend per share paid to common shareholders.
The Company's Long Term Incentive Plans ("LTIP") provide for the issuance of unrestricted stock to certain officers and key employees based on the attainment of certain goals relating to our revenue growth, earnings per share growth and return on invested capital during a three-year performance period. The number of shares earned at the end of the performance period could vary, based on actual performance, between zero and 200 percent of the target LTIP awards granted. These nonvested LTIP awards entitle participants to earn dividend equivalent units, payable in common shares, equal to the cash dividend per share paid to common shareholders and are subject to the same performance goals as the initial award granted.
A summary of the status and changes of shares subject to RSU and LTIP awards for employees and the related average price per share follows:
| RSU | LTIP Awards | ||||||||||||||||||||||
| (Shares in thousands) | Number of Shares | Weighted-Average Grant Date Fair Value | Number of Shares | Weighted-Average Grant Date Fair Value | |||||||||||||||||||
| Nonvested June 30, 2024 | 182 | $ | 345.45 | 348 | $ | 350.75 | |||||||||||||||||
Granted(1) | 60 | $ | 582.76 | 146 | $ | 465.01 | |||||||||||||||||
| Vested | (91) | $ | 329.00 | (213) | $ | 313.89 | |||||||||||||||||
| Canceled | (5) | $ | 462.19 | (6) | $ | 436.67 | |||||||||||||||||
| Nonvested June 30, 2025 | 146 | $ | 449.11 | 275 | $ | 438.35 | |||||||||||||||||
(1) LTIP awards granted includes an adjustment for actual performance achieved. | |||||||||||||||||||||||
The fair value of each RSU and LTIP award granted in 2025, 2024 and 2023 was based on the fair market value of our common stock on the date of grant. A summary of the fair value information for awards vested and granted were as follows:
| Fair Value of Awards Vested | Weighted-Average Grant Date Fair Value | ||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | 2025 | 2024 | 2023 | ||||||||||||||||||||||||||||||
| RSU | $ | 30 | $ | 29 | $ | 32 | $ | 582.76 | $ | 401.86 | $ | 297.43 | |||||||||||||||||||||||
| LTIP awards | $ | 64 | $ | 45 | $ | 58 | $ | 465.01 | $ | 380.97 | $ | 301.64 | |||||||||||||||||||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Aug 22, 2025 | Showing above |
| 2024 | Aug 22, 2024 | |
| 2023 | Aug 24, 2023 | |
| 2017 | Aug 25, 2017 | |
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.