UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-K



ý	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended June 30, ~~2016~~2017



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 1-4982

PARKER-HANNIFIN CORPORATION

(Exact name of registrant as specified in its charter)



Ohio	34-0451060
(State or other jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

6035 Parkland Boulevard, Cleveland, Ohio	44124-4141
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code (216) 896-3000

Securities registered pursuant to Section 12(b) of the Act:



Title of Each Class		Name of Each Exchange on which Registered
Common Shares, $.50 par value		New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ý No ¨

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No ý

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). Yes ý No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K ý.

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated ~~filer"~~filer," "smaller reporting company," and ~~"smaller reporting~~"emerging growth company" in Rule 12b-2 of the Exchange Act.



Large Accelerated Filer:	ý	Accelerated Filer:	¨
Non-Accelerated Filer:	¨	Smaller Reporting Company:	¨
(Do not check if a smaller reporting company)
Emerging Growth Company	¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No ý

The aggregate market value of the outstanding common stock held by non-affiliates of the Registrant as of December 31, ~~2015,~~2016, excluding, for purpose of this computation only, stock holdings of the Registrant’s Directors and Officers: ~~$12,945,310,211.~~$18,577,753,996.

The number of Common Shares outstanding on July 31, ~~2016~~2017 was ~~133,901,044.~~133,129,936.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Definitive Proxy Statement for the Company’s ~~2016~~2017 Annual Meeting of Shareholders to be held on October ~~26, 2016~~25, 2017, are incorporated by reference into Part III of this Annual Report on Form 10-K.

TABLE OF CONTENTS



PART I
Item 1.	Business	2
Item 1A.	Risk Factors	8
Item 1B.	Unresolved Staff Comments	1213
Item 1C.	Executive Officers of the Registrant	1314
Item 2.	Properties	1415
Item 3.	Legal Proceedings	1516
Item 4.	Mine Safety Disclosures	1516

PART II
Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	1516
Item 6.	Selected Financial Data	1617
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1718
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	2728
Item 8.	Financial Statements and Supplementary Data	2729
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	6166
Item 9A.	Controls and Procedures	6166
Item 9B.	Other Information	6266

PART III
Item 10.	Directors, Executive Officers and Corporate Governance	6266
Item 11.	Executive Compensation	6266
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	6267
Item 13.	Certain Relationships and Related Transactions, and Director Independence	6268
Item 14.	Principal Accountant Fees and Services	6268

PART IV
Item 15.	Exhibits and Financial Statement Schedules	6369

Signatures		6470
Exhibit Index		6672

PARKER-HANNIFIN CORPORATION

FORM 10-K

Fiscal Year Ended June 30, ~~2016~~2017

PART I

ITEM 1. Business. Parker-Hannifin Corporation is a leading worldwide diversified manufacturer of motion and control technologies and systems, providing precision engineered solutions for a wide variety of mobile, industrial and aerospace markets. The Company was incorporated in Ohio in 1938. Its principal executive offices are located at 6035 Parkland Boulevard, Cleveland, Ohio 44124-4141, telephone (216) 896-3000. As used in this Annual Report on Form 10-K, unless the context otherwise requires, the term "Company" refers to Parker-Hannifin Corporation and its subsidiaries and the term "year" and references to specific years refer to the applicable fiscal year.

The Company’s investor relations internet website address is www.phstock.com. The Company makes available free of charge on or through its website its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as soon as reasonably practicable after filing or furnishing such material electronically with the Securities and Exchange Commission. The information contained on or accessible through the Company’s website is not part of this Annual Report on Form 10-K.

The Board of Directors has adopted a written charter for each of the committees of the Board of Directors. These charters, as well as the Company’s Global Code of Business Conduct, ~~Board of Directors Guidelines on Significant~~ Corporate Governance ~~Issues~~Guidelines and Independence Standards for Directors, are posted and available on the Company’s investor relations internet website at www.phstock.com under the Corporate Governance page. Shareholders may request copies of these corporate governance documents, free of charge, by writing to Parker-Hannifin Corporation, 6035 Parkland Boulevard, Cleveland, Ohio 44124-4141, Attention: Secretary, or by calling (216) 896-3000.

The Company’s manufacturing, service, sales, distribution and administrative facilities are located in 3941 states within the United States and in 4849 other countries. The Company’s products are sold as original and replacement equipment through sales and distribution centers worldwide. The Company markets its products through direct-sales employees, independent distributors and sales representatives. The Company's products are supplied to approximately ~~444,000~~439,000 customers in virtually every significant manufacturing, transportation and processing industry.

The Company has two reporting segments: Diversified Industrial and Aerospace Systems. During ~~2016,~~2017, the Company's technologies and systems were used in the products of these two reporting segments. For ~~2016,~~2017, total net sales were ~~$11.4~~$12.0 billion. Diversified Industrial Segment products accounted for ~~80%~~81% and Aerospace Systems Segment products accounted for ~~20%~~19% of those net sales.

Markets

The Company’s technologies and systems are used throughout various industries and in various applications. The approximately ~~444,000~~439,000 customers who purchase the Company’s products are found throughout ~~virtually~~nearly every significant manufacturing, transportation and processing industry. No single customer accounted for more than 4%3% of the Company’s total net sales for the year ended June 30, ~~2016.~~2017.

Diversified Industrial Segment. Sales of Diversified Industrial Segment products are made ~~primarily~~ to both original equipment manufacturers ("OEMs") and ~~their~~distributors who serve the replacement markets in manufacturing, packaging, processing, transportation, mobile construction, refrigeration and air conditioning, agricultural and military machinery and equipment industries. The major markets for products of the Diversified Industrial Segment are listed below by group:



~~Automation~~ ~~Group:~~	~~• Battery Energy Storage~~ ~~• Factory automation~~ ~~• Food and beverage~~ ~~• Heavy industry~~ ~~• Industrial machinery~~	~~• Life sciences~~ ~~• Packaging~~ ~~• Semiconductor and electronics~~ ~~• Transportation~~

Engineered Materials Group:	• Aerospace • Chemical processing • Consumer • Fluid power • General industrial • Information technology • Life sciences	• Microelectronics • Military • Oil and gas • Power generation • Renewable energy • Telecommunications • Transportation

Filtration Group:	• Agriculture • Aerospace and defense • Construction • Food and beverage • Heating, ventilation and air conditioning (HVAC) • Industrial machinery • Life sciences ~~• Marine~~	• Marine • Mining • Oil and gas • Power generation • Renewable energy • Transportation • Water purification

Fluid Connectors Group:	• Aerial lift • Agriculture • Bulk chemical handling • Construction machinery • Food and beverage • Fuel and gas delivery • Industrial machinery	• Life sciences • Marine • Mining • Mobile • Oil and gas • Renewable energy • Transportation

~~Hydraulics~~ Instrumentation Group:	~~• Aerial lift~~ ~~• Agriculture~~ • Air conditioning • Alternative fuels • ~~Construction machinery~~Biopharmaceuticals • ~~Entertainment~~Chemical • ~~Forestry~~Diesel engine • Food and beverage • Industrial machinery • ~~Machine tools~~Life sciences • ~~Marine~~Microelectronics	• ~~Material handling~~ • Mining • Oil and gas • Packaging • Pharmaceuticals • Power generation • ~~Recreational vehicles~~ Refining • ~~Refuse vehicles~~ Refrigeration • ~~Renewable energy~~ Transportation • ~~Truck hydraulics~~Water/wastewater ~~• Turf equipment~~



~~Instrumentation~~Motion Systems Group:	• ~~Air conditioning~~Aerial lift • Agriculture • Battery energy storage • ~~Alternative fuels~~Construction machinery • ~~Bio pharmaceuticals~~Entertainment • Factory automation • ~~Chemical~~Forestry • ~~Food and beverage~~Industrial machinery • ~~Life sciences~~Machine tools • ~~Microelectronics~~Marine • Material handling	• Microelectronics • Mining • Oil and gas • ~~Pharmaceuticals~~ Packaging • Power generation • ~~Refining~~Recreational vehicles • Refuse vehicles • Renewable energy • Transportation • Truck hydraulics • ~~Refrigeration~~Turf equipment ~~• Water/wastewater~~

Aerospace Systems Segment. Sales of the Aerospace Systems Segment products are made primarily in the commercial and military aerospace markets to both OEMs and to end users for spares, maintenance, repair and overhaul. The major markets for products of the Aerospace Systems Segment are listed below:



• Aftermarket Services • Commercial transports • Engines • General and business aviation • Helicopters	• ~~Helicopters~~ • Military aircraft	• Missiles • Power generation • Regional transports • Unmanned aerial vehicles ~~• Aftermarket services~~

Principal Products and Methods of Distribution

Although the Company offers hundreds of thousands of individual products, no single product contributed more than 1% to the Company’s total net sales for the year ended June 30, ~~2016.~~2017. Listed below are some of the Company’s principal products.

Diversified Industrial Segment. The products produced by the Company’s Diversified Industrial Segment consist of a broad range of motion-control and fluid systems and components, which are described below by group:

~~Automation Group: pneumatic, fluidic and electromechanical components and systems, including:~~



~~• Air regulators/filters~~ ~~• Electric actuators and stages~~ ~~• Fluid control valves~~ ~~• Fluid system mass flow meters/controllers~~ ~~• Grippers~~ ~~• Inverters~~ ~~• Miniature air/liquid pumps~~	~~• Motion controllers~~ ~~• Pneumatic control valves~~ ~~• Pneumatic cylinders~~ ~~• Pressure and flow controls~~ ~~• Servo motors and drives~~ ~~• Solenoid valves~~ ~~• Vacuum variable frequency drives~~

Engineered Materials Group: static and dynamic sealing devices, including:



• Dynamic seals • Elastomeric o-rings • Electro-medical instrument design and assembly • Electromagnetic interference shielding • Extruded and precision-cut fabricated elastomeric seals • High-temperature metal seals	• Homogeneous and inserted elastomeric shapes • Medical device fabrication and assembly • Metal and plastic retained composite seals • Shielded optical windows • Silicone tubing and extrusions • Thermal management • Vibration dampening

Filtration Group: filters, systems and diagnostics solutions to monitor and remove contaminants from fuel, air, oil, water and other liquids and gases, including:



• Aerospace filters and systems • Air pollution control and dust collection systems and filters • Compressed air and gas treatment solutions • Engine fuel, oil, air and closed crankcase ventilation filtration systems • Filtration and purification systems • Fluid condition monitoring systems • ~~Hydraulic~~Gas turbine air inlet filters • Heating, ventilation and ~~lubrication~~air conditioning (HVAC) filters	• Hydraulic and lubrication filters and systems • Industrial and analytical gas generators • Instrumentation filters • Membrane, fiber, and ~~fiber~~sintered metal filters • Natural gas filters • Process liquid, air and gas filters • Sterile air filters • Water purification filters and systems

Fluid Connectors Group: connectors which control, transmit and contain fluid, including:



• Check valves • Diagnostic equipment • Hose couplings • Industrial hose • Low pressure fittings and adapters	• Polytetrafluoroethylene ("PTFE") hose and tubing • Quick couplings • Rubber and thermoplastic hose • Tube fittings and adapters • Tubing and plastic fittings

~~Hydraulics~~Motion Systems Group: hydraulic, pneumatic, and electromechanical components and systems for builders and users of industrial and mobile machinery and equipment, including:



• Accumulators • Air regulators/filters • Cartridge valves • Coolers • Electric actuators and stages • Electrohydraulic actuators • Electronic displays and human machine interfaces • Electronic I/O controllers • Fan drives • ~~Hybrid drives~~Grippers • Hydraulic cylinders • Hydraulic motors and pumps	• Hydraulic systems • Hydraulic valves and controls • Hydrostatic steering units	• Integrated hydraulic circuits • Intensifiers • Inverters • Motion controllers • Pneumatic control valves • Pneumatic cylinders • Power take-offs • Power units • Pressure and flow controls • Rotary actuators • Sensors • Servo motors and drives • Telematic controllers • Vacuum • Variable frequency drives

Instrumentation Group: high quality critical flow components for process instrumentation, healthcare and ultra-high-purity applications and components for use in refrigeration and air conditioning systems and in fluid control applications for processing, fuel dispensing, beverage dispensing and mobile emissions, including:



• Accumulators • Analytical instruments and sample conditioning systems • Carbon dioxide controls • Compressed natural gas dispensers • Cryogenic valves • Electronic controllers • Electronic valves • Filter driers	• Fluid system and control fittings, meters, valves, regulators, and manifold valves	• Fluoropolymer chemical delivery fittings, valves and pumps • High pressure fittings, valves, pumps and systems • High-purity gas delivery fittings, valves and regulators • Minature valves and pumps • Natural gas on-board fuel systems • Pressure regulating valves • Refrigeration and air conditioning electronic controls and monitoring • Solenoid valves

Diversified Industrial Segment products include standard products, as well as custom products which are engineered and produced to OEMs’ specifications for application to particular end products. Both standard and custom products are also used in the replacement of original products. Diversified Industrial Segment products are marketed primarily through field sales employees and approximately ~~13,200~~13,700 independent distributor locations throughout the world.

Aerospace Systems Segment. The principal products of the Company’s Aerospace Systems Segment are used on commercial and military airframe and engine programs and include:



• Control actuation systems and components • Engine systems and components • Fluid conveyance systems and components • Fluid metering, delivery and atomization devices • Fuel systems and components • Fuel tank inerting systems	• Hydraulic systems and components • Lubrication components • Pneumatic control components • Power conditioning and management systems • Thermal management • Wheels and brakes

Aerospace Systems Segment products are marketed by the Company’s regional sales organizations and are sold directly to original equipment manufacturers and end users throughout the world.

Competition

The Company’s business operates in highly competitive markets and industries. The Company offers its products over numerous, varied markets through its divisions operating in 4950 countries and consequently has hundreds of competitors when viewed across its various markets and product offerings. The Company’s competitors include U.S. and non-U.S. companies. These competitors and the degree of competition vary widely by product lines, end markets, geographic scope and/or geographic locations. Although each of the Company’s segments has numerous competitors, given the Company’s market and product breadth, no single competitor competes with the Company with respect to all products manufactured and sold by the Company.

In the Diversified Industrial Segment, the Company competes on the basis of product quality and innovation, customer service, manufacturing and distribution capability, and price competitiveness. The Company believes that it is one of the market leaders in most of the major markets for its most significant Diversified Industrial Segment products. The Company has comprehensive motion and control packages for the broadest systems capabilities. While the Company’s primary global competitors include Bosch Rexroth AG, Danaher Corporation, Danfoss A/S, Donaldson Company, Inc., Eaton Corporation plc, Emerson Climate Technologies, Emerson/ASCO, Festo AG, Freudenberg-NOK, Gates Corporation, IMI/Norgren, SMC Corporation, Swagelok Company, and Trelleborg AB, none of these businesses compete with every group in the Company's Diversified Industrial Segment and every product line offered by this segment.

In the Aerospace Systems Segment, the Company has developed alliances with key customers based on the Company’s advanced technological and engineering capabilities, superior performance in quality, delivery, and service, and price

competitiveness, which has enabled the Company to obtain significant original equipment business on new aircraft programs for its systems and components and to thereby obtain the follow-on repair and replacement business for these programs. Further, the Aerospace Systems Segment is able to utilize low-cost manufacturing techniques ~~for similar products in the Diversified Industrial Segment~~and best cost region strategies to achieve a lower cost producer status. Although the Company believes that it is one of the market leaders in most of the major markets for its most significant Aerospace Systems Segment products, the Company’s primary global competitors for the most significant Aerospace Systems Segment products include Eaton Corporation plc, Honeywell International, Inc., Moog Inc., Triumph Group, Inc., UTC Aerospace Systems, Woodward, Inc. and Zodiac Aerospace SA.

The Company believes that its platform utilizing nine core technologies, which consist of aerospace, electromechanical, filtration, fluid handling, hydraulics, pneumatics, process control, refrigeration, and sealing and shielding, is a positive factor in its ability to compete effectively with both large and small competitors. For both of its segments, the Company believes that the following factors also contribute to its ability to compete effectively:

decentralized operating structure that allows each division to focus on its customers and respond quickly at the local level;

systems solution capabilities that use the Company’s core technologies from both of its segments;

global presence; and

a strong global distribution network.

Research and Product Development

The Company continually researches the feasibility of new products and services through its development laboratories and testing facilities in many of its worldwide manufacturing locations. Its research and product development staff includes chemists, physicists, and mechanical, chemical and electrical engineers.

Total research and development costs relating to the development of new products and services and the improvement of existing products and services amounted to $336.7 million in 2017, $359.8 million in 2016 and $403.1 million in ~~2015 and $410.1 million in 2014.~~2015. These amounts include costs incurred by the Company related to independent research and development initiatives as well as costs incurred in connection with research and development contracts. Costs incurred in connection with research and development contracts and included in the total research and development costs reported above for 2017, 2016 and 2015 ~~and 2014~~ were $65.3 million, $58.0 million ~~$57.8 million~~ and ~~$55.9~~$57.8 million, respectively.

Patents, Trademarks, Licenses

The Company owns a number of patents, trademarks and licenses related to its products and has exclusive and non-exclusive rights to use a number of patents owned by others. In addition, patent applications on certain products are now pending, although there can be no assurance that patents will be issued. The Company is not dependent to any material extent on any single patent, trademark or license or group of patents, trademarks or licenses.

Backlog and Seasonal Nature of Business

Backlog consists of 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 date has been agreed to with the customer. The dollar value of backlog is equal to the amount that is expected to be billed to the customer and reported as a sale. The Company's backlog by business segment for the past two years is included in Part II, Item 7 of this Annual Report on Form 10-K and is incorporated herein by reference. The Company’s backlog was $3.8 billion at June 30, 2017 and $3.2 billion at June 30, ~~2016 and $3.3 billion at June 30, 2015.~~2016. Approximately ~~86%~~88% of the Company’s backlog at June 30, ~~2016~~2017 is scheduled for delivery in the succeeding twelve months. The Company’s business is generally not seasonal in nature.

Environmental Regulation

Certain of the Company’s operations necessitate the use and handling of hazardous materials and, as a result, the Company is subject to United States federal, state, and local laws and regulations as well as non-U.S. laws and regulations designed to protect the environment and regulate the discharge of materials into the environment. These laws impose penalties, fines and other sanctions for non-compliance and liability for response costs, property damage and personal injury resulting from past and current spills, disposals or other releases of, or exposures to, hazardous materials. Among other environmental laws, the Company is subject to the United States federal "Superfund" law, under which the Company has been designated as a "potentially responsible party" and may be liable for cleanup costs associated with various waste sites, some of which are on the United States Environmental Protection Agency’s Superfund priority list.

As of June 30, ~~2016,~~2017, the Company was involved in environmental remediation at various United States and non-U.S. manufacturing facilities presently or formerly operated by the Company and as a "potentially responsible party," along with other companies, at off-site waste disposal facilities and regional sites.

The Company believes that its policies, practices and procedures are properly designed to prevent unreasonable risk of environmental damage and the consequent financial liability to the Company. Compliance with environmental laws and regulations requires continuing management efforts and expenditures by the Company. Compliance with environmental laws and regulations has not had in the past, and, the Company believes, will not have in the future, a material adverse effect on the capital expenditures, earnings, or competitive position of the Company.

As of June 30, ~~2016,~~2017, the Company had a reserve of ~~$15.2~~$20.8 million for environmental matters that were probable and reasonably estimable. This reserve was recorded based upon the best estimate of costs to be incurred in light of the progress made in determining the magnitude of remediation costs, the timing and extent of remedial actions required by governmental authorities and the amount of the Company’s liability in proportion to other responsible parties.

The Company’s estimated total liability for the above mentioned sites ranges from a minimum of ~~$15.2~~$20.8 million to a maximum of ~~$80.6~~$83.3 million. The largest range of the estimated total liability for any one site is approximately ~~$7.6~~$7.4 million. The actual costs to be incurred by the Company will be dependent on final determination of contamination and required remedial action, negotiations with governmental authorities with respect to cleanup levels, changes in regulatory requirements, innovations in investigatory and remedial technologies, effectiveness of remedial technologies employed, the ability of the other responsible parties to pay, and any insurance or other third-party recoveries.

Energy Matters and Sources and Availability of Raw Materials

The Company’s primary energy source for both of its business segments is electric power. While the Company cannot predict future costs of electric power, the primary source for production of the required electric power ~~will~~is expected to be coal and natural gas from substantial, proven coal and natural gas reserves available to electric utilities. The Company is subject to governmental regulations in regard to energy supplies in the United States and elsewhere. To date, the Company has not experienced any significant disruptions of its operations due to energy curtailments.

Steel, brass, copper, aluminum, nickel, rubber and thermoplastic materials and chemicals are the principal raw materials used by the Company. These materials are expected to be available from numerous sources in quantities sufficient to meet the requirements of the Company.

Employees

The Company employed approximately ~~48,950~~56,690 persons as of June 30, ~~2016,~~2017, of whom approximately ~~26,280~~29,230 were employed by foreign subsidiaries.

Business Segment Information

The Company’s net sales, segment operating income and assets by business segment and net sales and long-lived assets by geographic area for the past three years are included in Part II, Item 8 of this Annual Report on Form 10-K and are incorporated herein by reference.

Acquisitions

The Company made three acquisitions during 2017, which are more fully discussed in Note 2 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K and are incorporated herein by reference.

ITEM 1A. Risk Factors.

The following "risk factors" identify what the Company believes to be the risks that could materially adversely affect the Company’s financial and/or operational performance. These risk factors should be considered and evaluated together with information incorporated by reference or otherwise included elsewhere in this Annual Report on Form 10-K. Additional risks not currently known to the Company or that the Company currently believes are immaterial also may impair the Company’s business, financial condition, results of operations and cash flows.

The Company may be subject to risks arising from uncertainty in worldwide and regional economic conditions.

The Company's business is sensitive to global macro-economic conditions. ~~Slow~~Moderate economic growth persists in the economic regions in which the Company conducts substantial operations. ~~The continued effects of the global economic downturn and the rate of recovery~~Future macroeconomic downturns may have an adverse effect on the business, results of operations and financial condition of the Company and its distributors, customers and suppliers, and on ~~the general economic~~ activity in many of the industries and markets in which the Company and its distributors, customers and suppliers operate. Among the economic factors which may have such an effect are manufacturing and other end-market activity, currency exchange rates, air travel trends, difficulties entering new markets, and general economic conditions such as inflation, deflation, interest rates and credit availability. These factors may, among other things, negatively impact the level of purchases, capital expenditures, and creditworthiness of the Company and its distributors, customers and suppliers, and, therefore, the Company’s revenues, operating profits, margins, and order rates.

The Company has remained focused on maintaining its financial strength by adjusting its cost structure to reflect changing demand levels, maintaining a strong balance sheet and managing its cash. The Company cannot predict changes in worldwide or regional economic conditions, as such conditions are highly volatile and beyond the Company’s control. If these conditions deteriorate or ~~do not return to previous~~remain at depressed levels for extended periods, however, the Company’s business, results of operations and financial condition could be materially adversely affected.

The Company may be subject to risks relating to its non-U.S. operations.

The Company’s net sales derived from customers outside the United States were approximately 40% in 2017, 41% in 2016 and 42% in ~~2015 and 44% in 2014.~~2015. In addition, many of the Company’s manufacturing operations and suppliers are located outside the United States. The Company expects net sales from non-U.S. markets to continue to represent a significant portion of its total net sales. The Company’s non-U.S. operations are subject to risks in addition to those facing its domestic operations, including:

fluctuations in currency exchange rates;

limitations on ownership and on repatriation of earnings;

transportation delays and interruptions;

political, social and economic instability and disruptions;

government embargoes or trade restrictions;

the imposition of duties and tariffs and other trade barriers;

import and export controls;

labor unrest and current and changing regulatory environments;

the potential for nationalization of enterprises;

difficulties in staffing and managing multi-national operations;

limitations on the Company’s ability to enforce legal rights and remedies;

potentially adverse tax consequences; and

difficulties in implementing restructuring actions on a timely basis.

If the Company is unable to successfully manage the risks associated with expanding its global business or adequately manage operational fluctuations internationally, the risks could have a material adverse effect on the Company’s business, results of operations or financial condition.

The Company may be subject to risks relating to acquisitions and joint ventures, and risks relating to the integration of acquired companies, including risks related to the integration of CLARCOR Inc. ("Clarcor").

assurances that the Company will be able to avoid acquiring or assuming unexpected liabilities. If the Company is unable to avoid these risks, its results of operations and financial condition could be materially adversely affected.

In addition, the Company may not be able to integrate successfully any businesses that it purchases into its existing business or that any acquired businesses or joint ventures will be profitable. Specifically, the Company is devoting significant management attention and resources to integrating the business practices and operations of Clarcor with the businesses of the Company. The Company may encounter the following difficulties during the integration process of Clarcor:

the consequences of a change in tax treatment, including the cost of integration and compliance and the possibility that the full benefits anticipated to result from the Clarcor acquisition may not be realized;

delays in the integration of management teams, strategies, operations, products, and services;

differences in business backgrounds, corporate cultures, and management philosophies that may delay successful integration;

the ability to retain key employees;

the ability to create and enforce uniform standards, controls, procedures, policies, and information systems;

challenges of integrating complex systems, technologies, networks, and other assets of Clarcor, into the Company’s, in a manner that minimizes any adverse impact or disruptions to customers, suppliers, employees, and other constituencies; and

unknown liabilities and unforeseen increased expenses or delays associated with the integration beyond current estimates.

The successful integration of new businesses and the success of joint ventures also depend on the Company’s ability to manage these new businesses and cut excess costs. If the Company is unable to avoid these risks, its results of operations and financial condition could be materially adversely affected.

The Company’s results may be adversely affected if expanded operations from the acquisition of Clarcor are not effectively managed.

The Company’s acquisition of Clarcor greatly expanded the size and complexity of its business. The Company’s future success depends, in part, on the ability to manage this expanded business, which may pose substantial challenges for management, including challenges related to the management and monitoring of the expanded global operations and new manufacturing processes and products, and the associated costs and complexity. There can be no assurance of successful management of these matters or that the Company will realize the expected benefits of the acquisition of Clarcor.

The Company may be subject to risks relating to organizational changes.

The Company regularly executes organizational changes such as acquisitions, divestitures and realignments to support its growth and cost management strategies. The Company also engages in initiatives aimed to increase productivity, efficiencies and cash flow and to reduce costs. The Company further commits significant resources to identify, develop and retain key employees to ensure uninterrupted leadership and direction. If the Company is unable to successfully manage these and other organizational changes, the ability to complete such activities and realize anticipated synergies or cost savings as well as the Company's results of operations and financial condition could be materially adversely affected. The Company also cannot offer assurances that any of these initiatives will continue to be beneficial to the extent anticipated, or that the estimated efficiency improvements, incremental cost savings or cash flow improvements will be realized as anticipated or at all.

~~The Company may be subject to risks relating to acquisitions and joint ventures.~~

The Company expects to continue its strategy of identifying and acquiring businesses with complementary products and services, and entering into joint ventures, which it believes will enhance its operations and profitability. However, there can be no assurance that the Company will be able to continue to find suitable businesses to purchase or joint venture opportunities or that it will be able to acquire such businesses or enter into such joint ventures on acceptable terms. In addition, there is no assurance that the Company will be able to avoid acquiring or assuming unexpected liabilities, that the Company will be able to integrate successfully any businesses that it purchases into its existing business or that any acquired businesses or joint ventures will be profitable. The successful integration of new businesses and the success of joint ventures depend on the Company’s

~~ability to manage these new businesses and cut excess costs. If the Company is unable to avoid these risks, its results of operations and financial condition could be materially adversely affected.~~

The Company may be subject to risks relating to its information technology systems.

The Company relies extensively on information technology systems to manage and operate its business, some of which are managed by third parties. The security and functionality of these information technology systems, and the processing of data by these systems, are critical to our business operations. If these systems, or any part of the systems, are damaged, intruded upon, attacked, shutdown or cease to function properly (whether by planned upgrades, force majeure, telecommunications failures, hardware or software break-ins or viruses, or other cybersecurity incidents) and the Company suffers any resulting interruption in its ability to manage and operate its business or if its products are effected, the Company's results of operations and financial condition could be materially adversely affected.

The Company may be subject to risks relating to changes in the demand for and supply of its products.

Demand for and supply of the Company’s products may be adversely affected by numerous factors, some of which the Company cannot predict or control. Such factors include:

changes in business relationships with and purchases by or from major customers, suppliers or distributors, including delays or cancellations in shipments, disputes regarding contract terms or significant changes in financial condition, and changes in contract cost and revenue estimates for new development programs;

changes in product mix;

changes in the market acceptance of the Company’s products;

increased competition in the markets the Company serves;

declines in the general level of industrial production;

weakness in the end-markets the Company serves;

fluctuations in the availability or the prices of raw materials; and

fluctuations in currency exchange rates.

If any of these factors occur, the demand for and supply of the Company’s products could suffer, which could materially adversely affect the Company’s results of operations.

The Company may be subject to risks relating to the development of new products and technologies.

The markets in which the Company operates are characterized by rapidly changing technologies and frequent introductions of new products and services. The Company’s ability to develop new products based on technological innovation can affect its competitive position and often requires the investment of significant resources. If the Company does not develop, or has difficulties or delays in the development of, innovative new and enhanced products and services, or fails to gain market or regulatory acceptance of new products and technologies, the Company's revenues may be materially reduced and the Company's competitive position could be materially adversely affected. In addition, the Company may invest in research and development of products and services, or in acquisitions or other investments, that do not lead to significant revenue, which could adversely affect our profitability.

The Company may be subject to risks arising from price and supply fluctuations in raw materials used in the Company’s production processes and by its suppliers of component parts.

The Company’s supply of raw materials for its businesses could be interrupted for a variety of reasons, including availability and pricing. Prices for raw materials necessary for production have fluctuated significantly in the past and significant increases could adversely affect the Company’s results of operations and profit margins. Although the Company generally attempts to manage these fluctuations by, among other things, passing along increased raw material prices to its customers in the form of price increases, there may be a time delay between the increased raw material prices and the Company’s ability to increase the price of its products, or the Company may be unable to increase the prices of its products due to pricing pressure, contract terms or other factors which could adversely impact results of operations and cash flows.

The Company’s suppliers of component parts may significantly and quickly increase their prices in response to increases in costs of raw materials that they use to manufacture the component parts. As a result, the Company may not be able to

increase its prices commensurately with its increased costs. Consequently, the Company’s results of operations or financial condition could be materially adversely affected.

The Company may be subject to risks arising from changes in the competitive environment in which it operates.

The Company’s operations are subject to competition from a wide variety of global, regional and local competitors, which could adversely affect the Company’s results of operations by creating downward pricing pressure and/or a decline in the Company’s margins or market shares. To compete successfully, the Company must excel in terms of product quality and innovation, technological and engineering capability, manufacturing and distribution capability, delivery, price competitiveness, and customer service.

The Company may be subject to risks relating to changes in its tax rates or exposure to additional income tax liabilities.

The Company is subject to income taxes in the United States and various non-U.S. jurisdictions. The Company's domestic and international tax liabilities are dependent upon the location of earnings among these different jurisdictions. The Company’s future results of operation could be adversely affected by changes in the Company's effective tax rate as a result of changes in the mix of earnings in countries with differing statutory tax rates, changes in overall profitability, changes in generally accepted accounting principles, changes in the valuation of deferred tax assets or changes in tax laws or regulations.

In addition, the amount of income taxes paid by the Company is subject to ongoing audits by United States federal, state and local tax authorities and by non-U.S. tax authorities. If these audits result in assessments different from amounts reserved, future financial results may include unfavorable adjustments to the Company’s tax liabilities, which could have a material adverse effect on the Company’s results of operations.

The Company may be subject to product liability risks.

The Company’s businesses expose it to potential product liability risks that are inherent in the design, manufacture and sale of its products and the products of third-party vendors that the Company uses or resells. Significant product liability claims could have a material adverse effect on the Company’s financial condition, liquidity and results of operations. Although the Company currently maintains what it believes to be suitable and adequate product liability insurance, there can be no assurance that the Company will be able to maintain its insurance on acceptable terms or that its insurance will provide adequate protection against all potential significant liabilities.

The Company may be subject to risks arising from litigation, and legal and regulatory proceedings and obligations.

From time to time, the Company is subject to litigation or other commercial disputes and other legal and regulatory proceedings relating to its business. Due to the inherent uncertainties of any litigation, commercial disputes or other legal or regulatory proceedings, the Company cannot accurately predict their ultimate outcome, including the outcome of any related appeals. An unfavorable outcome could materially adversely impact the Company’s business, financial condition or results of operations. Furthermore, as required by U.S. generally accepted accounting principles, the Company establishes reserves based on its assessment of contingencies, including contingencies related to legal claims asserted against it. Subsequent developments in legal proceedings may affect the Company's assessment and estimates of the loss contingency recorded as a reserve and require the Company to make payments in excess of our reserves, which could have an adverse effect on the Company's results of operations.

The Company is subject to national and international laws and regulations, such as the anti-corruption laws of the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act, relating to its business and its employees. Despite the Company's policies, procedures and compliance programs, its internal controls and compliance systems may not be able to protect the Company from prohibited acts willfully committed by its employees, agents or business partners that would violate such applicable laws and regulations. Any such improper acts could damage the Company's reputation, subject it to civil or criminal judgments, fines or penalties, and could otherwise disrupt the Company's business, and as a result, could materially adversely impact the Company's business, financial condition or results of operations.

The Company may be subject to risks relating to the preservation of its intellectual property.

Protecting the Company’s intellectual property is critical to its innovation efforts. The Company owns a number of patents, trade secrets, copyrights, trademarks, trade names and other forms of intellectual property in its products and services throughout the ~~world.~~world and in the operation of its business. The Company also has exclusive and non-exclusive rights to intellectual property owned by others. The Company’s intellectual property may be challenged or infringed upon by third parties or the Company may be unable to maintain, renew or enter into new license agreements with third-party owners of intellectual property on reasonable terms. In addition, the global nature of the Company’s business increases the risk that the Company’s intellectual property may be subject to infringement or other unauthorized use or disclosure by others. In some cases, the Company’s ability to protect its intellectual property

rights by legal recourse or otherwise may be limited, particularly in countries where laws or enforcement practices are inadequate or undeveloped. Unauthorized use or disclosure of the Company’s intellectual property rights or the Company's inability to preserve existing intellectual property rights could adversely impact the Company’s competitive position and results of operations.

The Company may be subject to risks arising from the impact of environmental regulations.

The Company’s operations necessitate the use and handling of hazardous materials and, as a result, it is subject to various United States federal, state and local laws and regulations, as well as non-U.S. laws, designed to protect the environment and to regulate the discharge of materials into the environment. These laws impose penalties, fines and other sanctions for non-compliance and liability for response costs, property damages and personal injury resulting from past and current spills, disposals or other releases of, or the exposure to, hazardous materials. Among other laws, the Company is subject to the United States federal "Superfund" law, under which it has been designated as a "potentially responsible party" and may be liable for clean-up costs associated with various waste sites, some of which are on the United States Environmental Protection Agency’s Superfund priority list. The Company could incur substantial costs as a result of non-compliance with or liability for cleanup or other costs or damages under environmental laws, including the Superfund law.

In addition, increased worldwide focus on climate change issues has led to recent legislative and regulatory efforts to limit greenhouse gas emissions, including regulation of such emissions through a "cap-and-trade" system globally. Increased regulation of greenhouse gas emissions and other climate changes concerns could subject the Company to additional costs and restrictions, including increased energy and raw material costs. Until definitive regulations are adopted, the Company is not able to predict how such regulations would affect the Company’s business, operations or financial results.

The Company may be subject to more stringent environmental laws in the future. If more stringent environmental laws are enacted in the future, these laws could have a material adverse effect on the Company’s business, results of operations and financial condition.

The Company may be subject to risks relating to increasing costs of certain employee and retiree benefits.

The funding requirements and the amount of expenses recorded for the Company’s defined benefit pension plans are dependent on changes in market interest rates and the value of plan assets, which are dependent on actual plan asset returns. Significant changes in market interest rates and decreases in the fair value of plan assets and investment losses on plan assets would increase funding requirements and expenses and may adversely impact the Company’s results of operations.

The Company absorbs a portion of healthcare costs for its employees. If healthcare costs rise significantly and the Company continues to absorb the majority of these costs, these increasing costs may adversely impact the Company's future results of operations.

The Company may be subject to risks arising from regulations applicable to companies doing business with the United States government.

In addition to the risks identified herein, doing business with the United States government subjects the Company to unusual risks, including dependence on the level of government spending and compliance with and changes in governmental procurement regulations. Agreements relating to the sale of products to government entities may be subject to termination, reduction or modification, either at the convenience of the government or for the Company’s failure to perform under the applicable contract. The Company is subject to government investigations of business practices and compliance with government procurement regulations. If the Company were charged with wrongdoing as a result of any such investigation, it could be suspended from bidding on or receiving awards of new government contracts, which could have a material adverse effect on the Company’s results of operations.

ITEM 1B. Unresolved Staff Comments. None.

ITEM 1C. Executive Officers of the Registrant.

The Company’s executive officers as of August 15, ~~2016~~2017, were as follows:


Name	Position	Officer Since(1)	Age as of 8/15/2016	Position	Officer Since(1)	Age as of 8/15/2017
Thomas L. Williams	Chairman of the Board, Chief Executive Officer and Director	2005	57	Chairman of the Board, Chief Executive Officer and Director	2005	58
Lee C. Banks	President, Chief Operating Officer and Director	2001	53	President, Chief Operating Officer and Director	2001	54
Jon P. Marten	Executive Vice President – Finance & Administration and Chief Financial Officer	2008	60
Catherine A. Suever				Executive Vice President – Finance & Administration and Chief Financial Officer	2010	58
Mark J. Hart	Executive Vice President – Human Resources & External Affairs	2016	51	Executive Vice President – Human Resources & External Affairs	2016	52
Robert W. Bond	Vice President – eBusiness, IoT and Services	2000	58	Vice President	2000	59
William R. "Skip" Bowman				Vice President and President - Instrumentation Group	2016	59
Yoon "Michael" Chung	Vice President and President – Automation Group	2008	53	Vice President – eBusiness, IoT and Services	2008	54
John G. Dedinsky, Jr.	Vice President – Global Supply Chain and Procurement	2006	59
William G. Eline	Vice President – Chief Information Officer	2002	60	Vice President – Chief Information Officer	2002	61
John R. Greco	Vice President and President – Instrumentation Group	2006	62
Thomas C. Gentile				Vice President – Global Supply Chain	2017	45
Kurt A. Keller	Vice President and President – Asia Pacific Group	2009	58	Vice President and President – Asia Pacific Group	2009	59
Todd M. Leombruno				Vice President and Controller	2017	47
Joseph R. Leonti	Vice President, General Counsel and Secretary	2014	44	Vice President, General Counsel and Secretary	2014	45
Robert W. Malone	Vice President and President – Filtration Group	2014	52	Vice President and President – Filtration Group	2014	53
M. Craig Maxwell	Vice President – Chief Technology and Innovation Officer	2003	58	Vice President – Chief Technology and Innovation Officer	2003	59
Jennifer A. Parmentier	Vice President and President – Engineered Materials Group	2015	49	Vice President and President – Engineered Materials Group	2015	50
Andrew D. Ross	Vice President and President – Fluid Connectors Group	2012	49	Vice President and President – Fluid Connectors Group	2012	50
Daniel S. Serbin	Vice President	2005	62
Roger S. Sherrard	Vice President and President – Aerospace Group	2003	50	Vice President and President – Aerospace Group	2003	51
Catherine A. Suever	Vice President and Controller	2010	57
Andrew M. Weeks	Vice President and President – Hydraulics Group	2015	53	Vice President and President – Motion Systems Group	2015	54


~~(1)~~	Executive officers of the Company are elected by the Board of Directors to serve for a term of one year or until their respective successors are elected, except in the case of death, resignation or removal. Messrs. Marten, Dedinsky, Eline, Greco, and Maxwell and Ms. Suever have served in the executive capacities indicated above opposite their respective names during each of the past five years.

(1)Executive officers of the Company are elected by the Board of Directors to serve for a term of one year or until their respective successors are elected, except in the case of death, resignation or removal. Messrs. Eline, Keller, Maxwell, and Sherrard have served in the executive capacities indicated above opposite their respective names during each of the past five years.

Mr. Williams has been a Director since January 2015; Chief Executive Officer since February 2015; and Chairman of the Board since January 2016. He was an Executive Vice President from August 2008 to February 2015 and an Operating Officer from November 2006 to February 2015. He is also a Director of Chart Industries, Inc.

Mr. Banks has been a Director since January 2015 and President and Chief Operating Officer since February 2015. He was an Executive Vice President from August 2008 to February 2015 and an Operating Officer from November 2006 to February 2015. He is also a Director of Nordson Corporation.

Ms. Suever has been Executive Vice President - Finance & Administration and Chief Financial Officer since April 2017. She was Vice President and Controller from December 2010 to April 2017.

Mr. Hart has been Executive Vice President - Human Resources & External Affairs since January 2016. He was Vice President - Total Rewards from August 2013 to January ~~2016~~2016; and Area Vice President - Human Resources of the Fluid Connectors Group, Filtration Group and Climate and Industrial Controls Group from October 2010 to August 2013.

Mr. Bond has been Vice President since August 2017. He was Vice President - eBusiness, IoT and Services ~~since~~from September ~~2015. He was~~2015 until July 2017; Vice President from July 2000 to September ~~2015~~2015; and President of the Fluid Connectors Group from March 2005 to September 2015.

Mr. Bowman has been Vice President and President - Instrumentation Group since September 2016. He was Vice President, Operations - Filtration Group from March 2015 to August 2016; and Vice President, Operations - Fluid Connectors Group from November 2007 to February 2015.

Mr. Chung has been Vice President - eBusiness, IoT and Services since August 2017. He was President of the Automation Group ~~since~~from July 2012 until July 2017; and has been a Vice President since March 2008. He was President of the Asia Pacific Group from March 2008 to July 2012.

Mr. ~~Keller~~Gentile has been Vice President - Global Supply Chain since July 2017. He was General Manager of the ~~Asia-Pacific~~Company's domnick hunter Process Filtration Division from December 2013 to July 2017; and Vice President, Supply Chain - Filtration Group from July 2008 to December 2013.

Mr. Leombruno has been Vice President and Controller since July ~~2012 and has been a~~2017. He was Vice President ~~since August 2009. He was President of the~~and Controller - Engineered Materials Group from ~~August 2009~~January 2015 to ~~July 2012.~~June 2017; and Director of Investor Relations from June 2012 to December 2014.

Mr. Leonti has been Vice President, General Counsel and Secretary since July 2014. He was Assistant Secretary from April 2011 to July ~~2014~~2014; and Associate General Counsel from January 2008 to July 2014.

Mr. Malone has been Vice President and President of the Filtration Group since December 2014. He was Vice President - Operations of the Filtration Group from January 2013 to December ~~2014~~2014; and President and Chief Executive Officer of Purolator Filters (a German joint venture) from April 2006 to January 2013.

Ms. Parmentier has been Vice President and President of the Engineered Materials Group since September 2015. She was General Manager of the Hose Products Division from May 2014 to September 2015; General Manager of the Sporlan Division from May 2012 to May 2014; and Business Unit Manager of the Sporlan Division from December 2008 to May 2012.

Mr. Ross has been Vice President since July 2012 and President of the Fluid Connectors Group since September 2015. He was President of the Engineered Materials Group from July 2012 to September 2015; Vice President - Operations of the Hydraulics Group from July 2011 to July 2012; and General Manager of the Hydraulic Valve Division from June 2007 to July 2011.

Mr. Serbin has been Vice President since January 2016. He was Executive Vice President - Human Resources & External Affairs from July 2014 to January 2016 and Executive Vice President – Human Resources from January 2011 to July 2014.

~~Mr. Sherrard has been President of the Aerospace Group since July 2012 and has been Vice President since November 2003. He was President of the Automation Group from March 2005 to July 2012.~~

~~Mr.~~ Weeks has been Vice President and President of the ~~Hydraulics~~Motion Systems Group since September 2015. He was Vice President - Operations of the Aerospace Group from April 2013 to September ~~2015~~2015; and Senior Vice President and General Manager of the Fluid and Electrical Distribution Division of Eaton Corporation plc (power management company) from July 2003 to April 2013.

ITEM 2. Properties. The Company’s corporate headquarters is located in Cleveland, Ohio, and, at June 30, ~~2016,~~2017, the Company had ~~292~~336 manufacturing plants, 88133 distribution centers and ~~154~~157 sales and administrative offices throughout the world, none of which were individually material to its operations. The facilities are situated in 3941 states within the United States and in 4849 other countries. The Company owns the majority of its manufacturing plants and its leased properties primarily consist of sales and administrative offices and distribution centers. The number of facilities used by each of the Company’s operating segments is summarized by type and geographic location in the tables below:


	Type of Facility			Type of Facility
	Manufacturing Plants	Distribution Centers	Sales and Administrative Offices	Manufacturing Plants	Distribution Centers	Sales and Administrative Offices
Diversified Industrial	275	81	140	318	129	143
Aerospace Systems	17	7	14	18	4	14
Total	292	88	154	336	133	157


	Geographic Location				Geographic Location
	North America	Europe	Asia-Pacific	Latin America	North America	Europe	Asia-Pacific	Latin America
Diversified Industrial	225	143	108	20	296	165	117	12
Aerospace Systems	32	4	2	—	30	4	2	—
Total	257	147	110	20	326	169	119	12

Several facilities are shared between the Company’s operating segments. To avoid double counting, each shared facility is counted once, primarily in the Diversified Industrial Segment.

The Company believes that its properties have been adequately maintained, are in good condition generally and are suitable and adequate for its business as presently conducted. The extent to which the Company uses its properties varies by property and from time to time. The Company believes that its restructuring efforts have brought capacity levels closer to present and anticipated needs. Most of the Company’s manufacturing facilities remain capable of handling volume increases.

ITEM 3. Legal Proceedings. Parker ITR S.r.l. (Parker ITR), a subsidiary acquired on January 31, 2002, has been the subject of a number of lawsuits and regulatory investigations. The lawsuits and investigations relate to allegations that for a period of up to 21 years, the Parker ITR business unit that manufactures and sells marine hose, typically used in oil transfer, conspired with competitors in unreasonable restraint of trade to artificially raise, fix, maintain or stabilize prices, rig bids and allocate markets and customers for marine oil and gas hose in the United States and in other jurisdictions. Parker ITR and the Company have cooperated with all of the regulatory authorities investigating the activities of the Parker ITR business unit that manufactures and sells marine hose and continue to cooperate with the investigations that remain ongoing. Several of the investigations and all of the lawsuits have concluded. The following investigation remains pending.None.

On May 15, 2007, the European Commission issued its initial Request for Information to the Company and Parker ITR. On January 28, 2009, the European Commission announced the results of its investigation of the alleged cartel activities. As part of its decision, the European Commission found that Parker ITR infringed Article 81 of the European Community Treaty from April 1986 to May 2, 2007 and fined Parker ITR 25.61 million euros. The European Commission also determined that the Company was jointly and severally responsible for 8.32 million euros of the total fine which related to the period from January 2002, when the Company acquired Parker ITR, to May 2, 2007, when the cartel activities ceased. Parker ITR and the Company filed an appeal to the General Court of the European Union on April 10, 2009. On May 12, 2013, the court reversed in part the decision of the European Commission, reducing the original fine of 25.61 million euros to 6.40 million euros and holding that the Company and Parker ITR are jointly and severally liable for payment of the fine up to 6.30 million euros. The European Commission appealed the ruling to the European Court of Justice. On December 18, 2014, the European Court of Justice reversed the ruling of the General Court and referred the case back to the General Court. On July 14, 2016, the General Court rendered its judgment and reduced Parker ITR's fine from the initial 25.61 million euros to 19.95 million euros, of which it determined the Company is jointly and severally liable for 6.40 million euros.

ITEM 4. Mine Safety Disclosures. Not applicable.

PART II

ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.


(a)	Market for the Registrant’s Common Equity. The Company’s common stock is listed for trading on the New York Stock Exchange (NYSE) under the symbol "PH". Information regarding stock price as reported on the NYSE and dividend information with respect to the Company’s common stock, is included in the table below.


(In dollars)		1st		2nd		3rd		4th		Fiscal Year			1st		2nd		3rd		4th		Fiscal Year
2017												High	$	126.59	$	145.44	$	161.23	$	166.60	$	166.60
												Low	105.00		118.77		139.92		151.17		105.00
												Dividends	0.63		0.63		0.66		0.66		2.58

2016	High	$	117.98	$	108.00	$	113.51	$	117.78	$	117.98	High	$	117.98	$	108.00	$	113.51	$	117.78	$	117.98
	Low	94.64		93.47		83.32		99.10		83.32		Low	94.64		93.47		83.32		99.10		83.32
	Dividends	0.63		0.63		0.63		0.63		2.52		Dividends	0.63		0.63		0.63		0.63		2.52

2015	High	$	127.60	$	133.41	$	129.54	$	125.33	$	133.41	High	$	127.60	$	133.41	$	129.54	$	125.33	$	133.41
	Low	105.91		99.82		115.86		115.65		99.82		Low	105.91		99.82		115.86		115.65		99.82
	Dividends	0.48		0.63		0.63		0.63		2.37		Dividends	0.48		0.63		0.63		0.63		2.37

2014	High	$	110.21	$	129.77	$	129.40	$	130.44	$	130.44
	Low	94.81		103.36		108.66		118.46		94.81
	Dividends	0.45		0.45		0.48		0.48		1.86

As of July 31, ~~2016,~~2017, the number of shareholders of record of the Company was ~~3,789.~~3,519.


(b)	Use of Proceeds. Not Applicable.


(c)	Purchases of Equity Securities by the Issuer and Affiliated Purchasers.

											ISSUER PURCHASES OF EQUITY SECURITIES
Period	(a) Total Number of Shares Purchased	(b) Average Price Paid Per Share		(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)	(d) Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs	(a) Total Number of Shares Purchased	(b) Average Price Paid Per Share		(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)	(d) Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs
April 1, 2016 through April 30, 2016	147,500	$	111.82	147,500	20,122,709
May 1, 2016 through May 31, 2016	404,100	$	111.70	404,100	19,718,609
June 1, 2016 through June 30, 2016	401,504	$	114.20	401,504	19,317,105
April 1, 2017 through April 30, 2017						96,400	$	158.85	96,400	17,559,246
May 1, 2017 through May 31, 2017						110,000	$	158.39	110,000	17,449,246
June 1, 2017 through June 30, 2017						108,919	$	158.44	108,919	17,340,327
Total:	953,104	$	112.77	953,104	19,317,105	315,319	$	158.55	315,319	17,340,327

(1)

On August 16, 1990, the Company publicly announced that its Board of Directors authorized the repurchase by the Company of up to 3 million shares of its common stock. From time to time thereafter, the Board of Directors has adjusted the overall maximum number of shares authorized for repurchase under this program. On October 22, 2014, the Company publicly announced that the Board of Directors increased the overall maximum number of shares authorized for repurchase under this program so that, beginning on such date, the aggregate number of shares authorized for repurchase was 35 million shares. There is no limitation on the amount of shares that can be repurchased in a year. There is no expiration date for this program.

ITEM 6. Selected Financial Data.


(Amounts in thousands, except per share information)	2016		2015		2014		2013		2012		2017		2016		2015		2014		2013
Net sales	$	11,360,753	$	12,711,744	$	13,215,971	$	13,015,704	$	13,145,942	$	12,029,312	$	11,360,753	$	12,711,744	$	13,215,971	$	13,015,704
Net income attributable to common shareholders	806,840		1,012,140		1,041,048		948,427		1,151,823		983,412		806,840		1,012,140		1,041,048		948,427
Basic earnings per share	5.96		7.08		6.98		6.36		7.62		7.37		5.96		7.08		6.98		6.36
Diluted earnings per share	5.89		6.97		6.87		6.26		7.45		7.25		5.89		6.97		6.87		6.26
Cash dividends per share	2.52		$	2.37	$	1.86	$	1.70	$	1.54	$	2.58	$	2.52	$	2.37	$	1.86	$	1.70
Total assets (1)	12,056,738		12,279,282		13,259,815		12,502,478		11,126,276		15,489,904		12,034,142		12,254,279		13,249,907		12,490,956
Long-term debt(1)	2,675,000		2,723,960		1,508,142		1,495,960		1,503,946		4,861,895		2,652,457		2,698,957		1,498,234		1,484,438

(1) Amounts revised to ~~reflect~~present debt issuance costs related to a recognized debt liability as a direct reduction from the ~~reclassification~~carrying amount of ~~current deferred tax assets and liabilities to noncurrent~~that debt liability in accordance with Accounting Standards Update ~~2015-17.~~2015-03. Refer to Note 1 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for further information.

ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward-Looking Statements

Forward-looking statements contained in this and other written and oral reports are made based on known events and circumstances at the time of release, and as such, are subject in the future to unforeseen uncertainties and risks. All statements regarding future performance, earnings projections, events or developments are forward-looking statements. It is possible that the future performance and earnings projections of the Company, including its individual segments, may differ materially from current expectations, depending on economic conditions within its mobile, industrial and aerospace markets, and the Company's ability to maintain and achieve anticipated benefits associated with announced realignment activities, strategic initiatives to improve operating margins, actions taken to combat the effects of the current economic environment, and growth, innovation and global diversification initiatives. A change in the economic conditions in individual markets may have a particularly volatile effect on segment performance.

Among other factors which may affect future performance are:

changes in business relationships with and purchases by or from major customers, suppliers or distributors, including delays or cancellations in ~~shipments,~~ shipments;

disputes regarding contract terms or significant changes in financial condition, changes in contract cost and revenue estimates for new development programs, and changes in product mix;

ability to identify acceptable strategic acquisition targets;

uncertainties surrounding timing, successful completion or integration of acquisitions and similar ~~transactions;~~

transactions, including the integration of Clarcor; ability to successfully divest businesses planned for divestiture and realize the anticipated benefits of such divestitures;

the determination to undertake business realignment activities and the expected costs thereof and, if undertaken, the ability to complete such activities and realize the anticipated cost savings from such activities;

ability to implement successfully the Company's capital allocation initiatives, including timing, price and execution of share repurchases;

availability, limitations or cost increases inof raw ~~material costs~~materials, component products and/or commodities that cannot be recovered in product pricing;

~~the Company's~~ ability to manage costs related to insurance and employee retirement and health care benefits;

compliance costs associated with environmental laws and regulations;

potential labor disruptions;

threats associated with and efforts to combat terrorism and cyber-security risks;

uncertainties surrounding the ultimate resolution of outstanding legal proceedings, including the outcome of any appeals;

competitive market conditions and resulting effects on sales and pricing; and

global economic factors, including manufacturing activity, air travel trends, currency exchange rates, difficulties entering new markets and general economic conditions such as inflation, deflation, interest rates and credit availability.

The Company makes these statements as of the date of the filing of its Annual Report on Form 10-K for the year ended June 30, ~~2016,~~2017, and undertakes no obligation to update them unless otherwise required by law.

Overview

The Company's order rates provide a near-term perspective of the Company's outlook particularly when viewed in the context of prior and future order rates. The Company publishes its order rates on a quarterly basis. The lead time between the time an order is received and revenue is realized generally ranges from one day to 12 weeks for mobile and industrial orders and from one day to 18 months for aerospace orders. The Company believes the leading economic indicators of these markets that have a correlation to the Company's future order rates are as follows:

Purchasing Managers Index (PMI) on manufacturing activity specific to regions around the world with respect to most mobile and industrial markets;

Global aircraft miles flown and global revenue passenger miles for commercial aerospace markets and Department of Defense spending for military aerospace markets; and

Housing starts with respect to the North American residential air conditioning market and certain mobile construction markets.

A PMI above 50 indicates that the manufacturing activity specific to a region of the world in the mobile and industrial markets is expanding. A PMI below 50 indicates the opposite. Recent PMI levels for some regions around the world were as follows:


	June 30, 2016	March 31, 2016	June 30, 2015	June 30, 2017	March 31, 2017	June 30, 2016
United States	53.2	51.8	53.5	57.8	57.2	52.8
Eurozone countries	52.8	51.6	52.5	57.4	56.2	52.8
China	48.6	49.7	49.4	50.4	51.2	48.6
Brazil	43.2	46.0	46.5	50.5	49.6	43.2

Global aircraft miles flown increased by approximately six percent and global revenue passenger miles ~~have both~~ increased approximately ~~six~~seven percent from their comparable ~~2015 level.~~2016 levels. The Company anticipates that U.S. Department of Defense spending with regards to appropriations, and operations and maintenance for the U.S. Government's fiscal year ~~2016~~2017 will increase ~~by approximately one percent~~slightly from the comparable fiscal ~~2015~~2016 level.

Housing starts in June ~~2016~~2017 were ~~approximately nine~~unchanged from housing starts in March 2017 but were two percent higher than housing starts in ~~March 2016 but were two percent lower than housing starts in~~ June ~~2015.~~

The Company has remained focused on maintaining its financial strength by adjusting its cost structure to reflect changing demand levels, maintaining a strong balance sheet and managing its cash. The Company continues to generate substantial cash flows from operations, has controlled capital spending and has proactively managed working capital. The Company has been able to borrow needed funds at affordable interest rates and had a debt to debt-shareholders' equity ratio of 39.9 percent at June 30, 2016 compared to 39.3 percent at March 31, 2016 and 36.6 percent at June 30, 2015. Net of cash and cash equivalents and marketable securities and other investments, the debt to debt-shareholders' equity ratio was 16.9 percent at June 30, 2016 compared to 18.6 percent at March 31, 2016 and 16.8 percent at June 30, 2015.2016.

The Company believes many opportunities for 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.

The Company believes it can meet its strategic objectives by:

Serving the customer and continuously enhancing its experience with the Company;

Successfully executing its Win Strategy initiatives relating to premier customer service, financial performance and profitable growth;

Maintaining its decentralized division and sales company structure;

Fostering an entrepreneurial culture;

Engineering innovative systems and products to provide superior customer value through improved service, efficiency and productivity;

Delivering products, systems and services that have demonstrable savings to customers and are priced by the value they deliver;

Acquiring strategic businesses;

Organizing around targeted regions, technologies and markets;

Driving efficiency by implementing lean enterprise principles; and

Creating a culture of empowerment through its values, inclusion and diversity, accountability and teamwork.

During 2017, the Company completed three acquisitions, including the acquisition of Clarcor which is further discussed in Note 2 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K. 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. The Company will continue to assess its existing businesses and initiate efforts to divest businesses that are not considered to be a good long-term strategic fit for the Company. Future business divestitures could have a negative effect on the Company’s results of operations.

The discussion below is structured to separately discuss the financial statements presented in Part II, Item 8 of this Annual Report on Form 10-K. The term "year" and references to specific years refer to the applicable fiscal year.

Discussion of Consolidated Statement of Income

The Consolidated Statement of Income summarizes the Company's operating performance over the last three years.


(dollars in millions)	2016			2015			2014			2017			2016			2015
Net sales	$	11,361		$	12,712		$	13,216		$	12,029		$	11,361		$	12,712
Gross profit margin	22.3		%	24.0		%	22.9		%	23.6		%	22.3		%	24.0		%
Selling, general and administrative expenses	$	1,359		$	1,545		$	1,634		$	1,454		$	1,359		$	1,545
Selling, general and administrative expenses, as a percent of sales	12.0		%	12.2		%	12.4		%	12.1		%	12.0		%	12.2		%
Goodwill and intangible asset impairment	$	—		$	—		$	189
Interest expense	137			118			83			162			137			118
Other (income), net	(62		)	(43		)	(26		)	(61		)	(62		)	(43		)
(Gain) loss on disposal of assets	(11		)	4			(409		)	(43		)	(11		)	4
Effective tax rate	27.6		%	29.3		%	33.1		%	26.0		%	27.6		%	29.3		%
Net income attributable to common shareholders	$	807		$	1,012		$	1,041		$	983		$	807		$	1,012

Net salesin 2017 were 5.9 percent higher than 2016. The increase in net sales in 2017 was primarily a result of acquisitions made in the last 12 months (which contributed approximately $558 million in sales in 2017) and an increase in volume in both the Diversified Industrial International operations and the Aerospace Systems Segment, partially offset by the effect of currency rate changes (which decreased net sales in 2017 by approximately $84 million). Net sales in 2016 were 10.6 percent lower than 2015. ~~Acquisitions made~~The decrease in ~~the last 12 months contributed approximately $42 million in sales in 2016 and the effect of currency rate changes decreased~~ net sales in 2016 ~~by approximately $403 million. Excluding the effect of acquisitions and currency rate changes, net sales in 2016 were 7.8 percent lower than 2015~~was primarily due to a decrease in volume in ~~the~~ both the Diversified Industrial North American and Diversified Industrial International ~~operations.~~

~~Net sales in 2015 were 3.8 percent lower than 2014. Acquisitions made in 2015 contributed approximately $14 million in sales in 2015~~operations and the effect of currency rate changes (which decreased net sales in ~~2015~~2016 by approximately ~~$547 million. Excluding the effect of~~$403 million), partially offset by sales from acquisitions ~~and currency rate changes, net~~(which contributed approximately $42 million in sales in 2015 were essentially unchanged from 2014 as an increase in volume experienced in the Diversified Industrial North American operations and the Aerospace Systems Segment was offset by lower volume experienced in the Diversified Industrial International operations.2016).

Gross profit margin increased in 2017 primarily due to lower operating expenses resulting from the Company's simplification initiative and other restructuring activities, primarily experienced in the Diversified Industrial Segment, partially offset by lower margins in the Aerospace Systems Segment and higher amortization expense in the Diversified Industrial Segment. Gross profit margin decreased in 2016 primarily due to both lower sales volume, resulting in manufacturing inefficiencies, and higher business realignment charges in the Diversified Industrial Segment, partially offset by a favorable product mix and lower engineering ~~costs in the Aerospace Systems Segment.~~ ~~Gross profit margin increased in 2015 primarily due to lower business realignment charges in the Diversified Industrial International operations and lower product support~~ costs in the Aerospace Systems Segment. Foreign currency transaction (gain) loss (relating to cash, marketable securities and other investments and intercompany transactions) included in cost of sales for 2017, 2016 and 2015 ~~and 2014 were~~was $8.1 million, $22.7 million ~~$(77.8) million~~ and ~~$5.4~~$(77.8) million, respectively. Pension cost included in cost of sales in 2017, 2016 and 2015 ~~and 2014 were~~was $135.0 million, $172.4 million ~~$169.8 million~~ and ~~$174.8~~$169.8 million, respectively. Included in cost of sales in 2017, 2016 ~~2015~~ and ~~2014~~2015 were business realignment charges of $35.9 million, $76.2 million ~~$19.4 million~~ and ~~$63.6~~$19.4 million, respectively.

Selling, general and administrative expenses increased 7.0 percent in 2017 and decreased 12.0 percent in ~~2016~~2016. The increase in 2017 was primarily due to higher amortization expense resulting from current-year acquisitions and ~~decreased 5.5 percent in 2015.~~higher acquisition expenses partially offset by lower expenses resulting from the Company's simplification initiative, lower expenses associated with the Company's deferred compensation program and lower professional services expenses. The decrease in 2016 was primarily due to lower research and development expenses, lower incentive compensation expense and lower stock compensation expense, partially offset by higher business realignment charges. The decrease in selling, general and administrative expenses in 2015 was primarily due to lower business realignment charges and stock compensation expense, partially offset by higher net expenses associated with the Company's deferred compensation programs. The decrease in stock compensation expense in 2016 is primarily due to fewer stock awards granted. The decrease in stock compensation expense in 2015 is primarily due to a lower fair value calculated for 2015 stock awards as well as fewer stock awards granted. Pension cost included in selling, general and administrative expenses in 2017, 2016 and 2015 ~~and 2014 were~~was $65.8 million, $74.4 million ~~$69.6 million~~ and ~~$64.2~~$69.6 million, respectively. Included in

selling, general and administrative expenses in 2017, 2016 ~~2015~~ and ~~2014~~2015 were business realignment charges of $19.7 million, $21.1 million and $12.9 million, ~~and $38.9 million,~~ respectively.

~~Goodwill and intangible asset impairment~~ ~~related to the Worldwide Energy Products Division. Refer to Note 7 to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for further discussion.~~

Interest expensein 2017 increased primarily due to higher weighted-average borrowings partially offset by lower weighted-average interest rates. Interest expense in 2016 increased primarily due to higher weighted-average borrowings and higher weighted-average interest rates. ~~Interest expense in 2015 increased primarily due to higher weighted-average interest rates.~~

Other (income), net in 2017, 2016 and 2015 ~~and 2014~~ includes $42.4 million, $25.6 million ~~$23.2 million~~ and ~~$11.1~~$23.2 million of income, respectively, related to the Company's equity interests in joint ventures.

(Gain) loss on disposal of assets includes a gain of $42 million related to the sale of a product line in 2017 and a gain of $11.5 million related to the sale of businesses in ~~2016 and a gain of $412.6 million related to the deconsolidation of a subsidiary in 2014.~~2016.

Effective tax rate in 2017 was favorably impacted by an increase of discrete tax benefits, mostly related to stock-based compensation expense. The effective tax rate in 2016 was favorably impacted by an increase of discrete tax benefits, an increase in the U.S. Research and Development credit, and an increase in the U.S. Foreign Tax Credit. These benefits were partially offset by an unfavorable geographic mix of earnings. The effective tax rate in 2015 was favorably impacted by the re-enactment of the U.S. Research and Development credit, an increase in the federal manufacturing deduction and the absence of discrete tax costs incurred in the prior year. These benefits were partially offset by an unfavorable geographic mix of earnings.

Discussion of Business Segment Information

The Business Segment information presents sales, operating income and assets on a basis that is consistent with the manner in which the Company's various businesses are managed for internal review and decision-making.

Diversified Industrial Segment (dollars in millions)


	2016			2015			2014			2017			2016			2015
Sales
North America	$	4,955		$	5,716		$	5,694		$	5,367		$	4,955		$	5,716
International	4,145			4,741			5,288			4,378			4,145			4,741
Operating income
North America	790			956			946			874			790			956
International	448			584			572			579			448			584
Operating income as a percent of sales
North America	15.9		%	16.7		%	16.6		%	16.3		%	15.9		%	16.7		%
International	10.8		%	12.3		%	10.8		%	13.2		%	10.8		%	12.3		%
Backlog	$	1,455		$	1,586		$	1,861		$	2,041		$	1,455		$	1,586
Assets	8,729			8,735			9,471			13,367			8,729			8,735
Return on average assets	14.2		%	16.9		%	16.1		%	13.1		%	14.2		%	16.9		%

Sales in ~~2016~~2017 for the Diversified Industrial North American operations ~~decreased~~increased 8.3 percent from 2016 compared to decreasing 13.3 percent ~~from~~between 2015 ~~compared to remaining relatively flat between 2014~~ and ~~2015.~~2016. Acquisitions completed within the last 12 months contributed approximately $8$436 million in sales in ~~2016~~2017 and the effect of currency exchange rates decreased sales in 2017 by $17 million. Excluding acquisitions and the effect of currency rate changes, sales in 2017 in the Diversified Industrial North American operations remained flat from 2016 reflecting higher demand from distributors being offset by ~~$60 million.~~lower demand from end-users in the heavy-duty truck, cars and light trucks, life sciences, and oil and gas markets. Excluding acquisitions and the effect of currency rate changes, sales in 2016 in the Diversified Industrial North American operations decreased 12.4 percent from 2015 reflecting lower demand from distributors and end-users in most markets. The markets that

experienced the largest decline in end-user demand were the oil and gas, construction equipment and farm and agriculture equipment markets.

Sales in the Diversified Industrial International operations increased 5.6 percent in 2017 after a decrease of 12.6 percent from 2015 to 2016. Acquisitions completed within the last 12 months contributed approximately $121 million in sales in 2017. The effect of currency rate changes decreased sales by $66 million, reflecting the strengthening of the U.S. dollar primarily against currencies in the United Kingdom, the Eurozone countries and China. Excluding acquisitions and the effect of currency rate changes, sales in 2015 in the Diversified Industrial North American operations increased 1.2 percent from 2014 reflecting higher demand from distributors as well as from end-users in the car and light truck, heavy-duty truck, refrigeration and air conditioning and construction equipment markets, partially offset by lower demand in the farm and agriculture equipment market.

~~Sales~~2017 in the Diversified Industrial International operations ~~decreased 12.6 percent in 2016 after a decrease of 10.3~~increased 4.3 percent from ~~2014~~2016, primarily due to ~~2015. Acquisitions completed within~~higher volume in the ~~last 12 months contributed approximately $34 million~~Asia Pacific region and Latin America, partially offset by lower volume in ~~sales~~Europe. Within the Asia Pacific region, higher demand was experienced from distributors as well as end-users in ~~2016. The effect of currency rate changes decreased sales~~the semiconductor, cars and light

trucks, telecommunications, construction equipment and engine markets. Within Latin America, higher demand was experienced from distributors and end-user demand in the agriculture equipment market. Within Europe, higher demand from distributors and end-user demand in the construction equipment, forestry, and miscellaneous manufacturing markets was more than offset by ~~$338 million, reflecting~~lower end-user demand in the ~~strengthening of the U.S. dollar against most currencies.~~general industrial machinery, oil and gas, and marine markets. Excluding acquisitions and the effect of currency rate changes, sales in 2016 in the Diversified Industrial International operations decreased 6.1 percent from 2015, primarily due to lower volume in all regions, with approximately 55 percent of the decrease occurring in Europe and approximately 35 percent of the decrease occurring in the Asia Pacific region. Within these regions, the largest decrease in sales was experienced from distributors and end-users in the oil and gas, marine, engine, and construction equipment markets. ~~Excluding acquisitions~~

The increase in operating margins in 2017 in the Diversified Industrial North American operations was primarily due to lower operating expenses resulting from the Company's simplification initiative and ~~the effect of currency rate changes, sales~~other restructuring activities, resulting in ~~2015~~manufacturing efficiencies, partially offset by higher acquisition-related expenses and higher amortization expense. The increase in operating margins in 2017 in the Diversified Industrial International operations ~~decreased 1.3 percent from 2014~~was primarily due to the higher sales volume, lower operating expenses resulting from restructuring activities and the Company's simplification initiative, resulting in ~~the Asia Pacific region being more than offset by lower volume in Europe, approximately two-thirds of which was due to the absence of sales from divested businesses, and in Latin America.~~

manufacturing efficiencies. The decrease in operating margins in 2016 in the Diversified Industrial North American operations was primarily due to the lower sales volume and higher business realignment charges, partially offset by lower operating expenses primarily resulting from the Company's ~~Simplification~~simplification initiative. The decrease in operating margins in 2016 in the Diversified Industrial International operations was primarily due to the lower sales volume, an unfavorable product mix and higher business realignment charges, partially offset by lower operating expenses primarily resulting from the Company's ~~Simplification~~simplification initiative and prior-year restructuring activities. The increase in operating margins in 2015 in the Diversified Industrial North American operations was primarily due to the higher sales volume, a favorable product mix and manufacturing efficiencies, partially offset by higher warehouse, shipping, and manufacturing support costs, research and development expenses and raw material costs. Diversified Industrial North American margins in 2015 were also adversely affected by a voluntary retirement expense of $12.7 million. The increase in operating margins in 2015 in the Diversified Industrial International operations was primarily due to lower fixed overhead costs and lower business realignment charges in the current-year, partially offset by higher raw material costs due to changes in currency exchange rates.

The following business realignment charges are included in Diversified Industrial North America and Diversified Industrial International operating income:


(dollars in millions)	2016		2015		2014		2017		2016		2015
Diversified Industrial North America	$	31	$	4	$	2	$	20	$	31	$	4
Diversified Industrial International	60		27		99		33		60		27

The business realignment charges consist primarily of severance costs related to actions taken under the Company's ~~Simplification~~simplification initiative implemented by operating units throughout the world as well as plant closures. The majority of the Diversified Industrial International business realignment charges were incurred in Europe. In addition to the business realignment charges presented in the table above, the Company recognized $12 million of expense associated with enhanced retirement benefits in connection with a plant closure during 2016. The Company anticipates that cost savings realized from the work force reduction measures taken during ~~2016~~2017 will increase ~~2017~~2018 operating income by approximately 11three percent in the Diversified Industrial North American ~~business~~operations and by approximately 13four percent in the Diversified Industrial International ~~business.~~operations. In ~~2017,~~2018, the Company expects to continue to take actions necessary to structure appropriately the operations of the Diversified Industrial ~~Segment.~~Segment, including the integration of 2017 acquisitions. Such actions are expected to result in approximately ~~$48~~$110 million in ~~business realignment~~ charges in ~~2017.~~2018.

The Company anticipates Diversified Industrial North American sales for ~~2017~~2018 will ~~range from a decrease of five percent to a decrease of one~~increase between 19 and 23 percent from the ~~2016~~2017 level and Diversified Industrial International sales for ~~2017~~2018 will increase between ~~one~~eight percent and ~~five~~12 percent from the ~~2016~~2017 level. The primary driver for the increase in sales in 2018 in both the Diversified Industrial North American and Diversified Industrial International businesses is expected to be the sales contribution from 2017 acquisitions. Diversified Industrial North American operating margins in ~~2017~~2018 are expected to range from ~~16.7~~16.1 percent to ~~17.1~~16.5 percent and Diversified Industrial International margins are expected to range from ~~12.5~~13.4 percent to ~~12.9~~13.8 percent.

The increase in total Diversified Industrial Segment backlog in 2017 was primarily due to current-year acquisitions as well as orders exceeding shipments in all regions, with North America and Europe each accounting for approximately 40 percent of the increase. The decrease in total Diversified Industrial Segment backlog in 2016 was primarily due to shipments exceeding orders primarily in North America and Europe, with North America accounting for approximately 70 percent of the decrease and

Europe accounting for approximately 30 percent of the decrease. ~~The decrease in total Diversified Industrial Segment backlog in 2015 was primarily due to shipments exceeding orders in all regions.~~ Backlog consists of 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 date has been agreed to with the customer. The dollar value of backlog is equal to the amount that is expected to be billed to the customer and reported as a sale.

The increase in total Diversified Industrial Segment assets in 2017 was primarily due to current-year acquisitions, partially offset by the effect of currency rate fluctuations. The decrease in total Diversified Industrial Segment assets in 2016 was primarily due to the effect of currency rate fluctuations and a decrease in prepaid expenses, inventory, intangible assets, trade accounts receivable, net and plant and equipment, net, partially offset by an increase in marketable securities and other investments, cash and cash equivalents, deferred income taxes and goodwill. The decrease in total Diversified Industrial Segment assets in 2015 was primarily due to the effect of currency rate fluctuations and a decrease in trade accounts receivable, net, non-trade and notes receivable and intangible assets, partially offset by an increase in cash and cash equivalents and other assets.

Aerospace Systems Segment (dollars in millions)


	2016			2015			2014			2017			2016			2015
Sales	$	2,260		$	2,255		$	2,235		$	2,285		$	2,260		$	2,255
Operating income	338			299			271			337			338			299
Operating income as a percent of sales	14.9		%	13.3		%	12.1		%	14.8		%	14.9		%	13.3		%
Backlog	$	1,762		$	1,756		$	1,994		$	1,753		$	1,762		$	1,756
Assets	1,431			1,376			1,359			1,413			1,431			1,376
Return on average assets	24.1		%	21.9		%	21.7		%	23.7		%	24.1		%	21.9		%

Sales in 2017 were higher than the 2016 level primarily due to higher volume in the military original equipment manufacturer ("OEM") and commercial and military aftermarket businesses, partially offset by lower volume in the commercial OEM business. Sales in 2016 were higher than the 2015 level as higher volume in the military ~~original equipment manufacturer (OEM)~~OEM and commercial and military aftermarket businesses was partially offset by lower volume in the commercial OEM business. ~~Sales~~

The slightly lower margin in ~~2015 were~~2017 was primarily due to an unfavorable OEM product mix, higher ~~than the 2014 level as~~warranty-related costs, higher ~~volume~~favorable contract settlements in ~~the commercial OEM~~2016, and ~~aftermarket businesses was~~higher business realignment expenses, partially offset by higher aftermarket profitability and lower ~~volume in the military OEM business.~~

engineering development and operating expenses. The higher margin in 2016 was primarily due to a favorable product mix, favorable contract settlements, lower engineering development expenses and lower operating costs.

The ~~higher margin~~decrease in ~~2015~~backlog in 2017 was primarily due to shipments exceeding orders in the ~~higher sales volume~~commercial and ~~lower engineering and development costs~~military OEM businesses, partially offset by ~~a voluntary retirement expense of $5.4 million. Margins~~orders exceeding shipments in ~~2015~~the commercial and ~~2014 were favorably impacted by the finalization of contract negotiations related to certain programs.~~

military aftermarket businesses. The increase in backlog in 2016 was primarily due to orders exceeding shipments in the military OEM and commercial and military aftermarket businesses, partially offset by shipments exceeding orders in the commercial OEM business. ~~The decrease in backlog in 2015 was primarily due to shipments exceeding orders in all businesses of the Aerospace Systems Segment.~~ Backlog consists of 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 date has been agreed to with the customer. The dollar value of backlog is equal to the amount that is expected to be billed to the customer and reported as a sale.

For ~~2017,~~2018, sales are expected to increase between one percent and three percent from the ~~2016~~2017 level and operating margins are expected to range from ~~15.1~~15.5 percent to ~~15.5~~15.9 percent. A higher concentration of commercial OEM volume in future product mix and higher than expected new product development costs could result in lower margins.

The decrease in assets in 2017 was primarily due to a decrease in trade accounts receivable, intangible assets and other assets, partially offset by an increase in cash and cash equivalents and inventory. The increase in assets in 2016 was primarily due to an increase in trade accounts receivable, net and other assets, partially offset by a decrease in inventory. ~~The increase in assets in 2015 was primarily due to an increase in inventory and other assets, partially offset by a decrease in trade accounts receivable, net.~~

Corporate general and administrative expenses were $172.6 million in 2017 compared to $173.2 million in 2016 ~~compared to~~and $215.4 million in ~~2015 and $181.9 million in 2014.~~2015. As a percent of sales, corporate general and administrative expenses in 2017 were ~~1.5~~1.4 percent of sales compared to 1.5 percent in 2016 and 1.7 percent in ~~2015 and 1.4 percent~~2015. The lower expense in ~~2014.~~2017 was primarily due to lower expenses associated with the Company's deferred compensation program as well as lower professional services fees. The lower expense in 2016 was primarily due to a decrease in research and development expense and lower incentive compensation expense. The higher expense in 2015 was primarily due to an increase in incentive compensation expense and higher net expenses associated with the Company's deferred compensation programs. Corporate general and administrative expenses in 2015 included $3.1 million in voluntary retirement expense.

Corporate assets decreased ~~12.5~~62.1 percent in ~~2016~~2017 compared to a decrease of ~~10.8~~12.5 percent from ~~2014~~2015 to ~~2015.~~2016. The decrease in Corporate assets in 2017 was primarily due to decreases in cash and cash equivalents, marketable securities and non-current deferred taxes. Decreases in these assets in 2017 primarily resulted from the Clarcor acquisition. The decrease in Corporate assets in 2016 was primarily due to decreases in marketable securities and other investments, non-trade and notes receivable, cash and cash equivalents and the effect of currency rate fluctuations, partially offset by an increase in deferred income taxes. The decrease in Corporate assets in 2015 was primarily due to the effect of currency rate fluctuations and changes in cash and cash equivalents, marketable securities and other investments, non-trade and notes receivable, deferred income taxes and other assets.

Other expense ~~(income)~~ (in the Business Segment Information)


(dollars in millions)	2016			2015			2014			2017			2016			2015
Foreign currency transaction	$	23		$	(78	)	$	5		$	8		$	23		$	(78	)
Stock compensation	49			57			71
Stock-based compensation										52			49			57
Pensions	116			97			108			78			116			97
Divestitures and asset sales and writedowns	(11		)	4			(409		)	(43		)	(11		)	4
Goodwill and intangible asset impairment	—			—			189
Interest income	(18		)	(15		)	(11		)	(12		)	(18		)	(15		)
Acquisition expenses										41			—			—
Other items, net	(8		)	7			16			3			(8		)	7
	$	151		$	72		$	(31	)	$	127		$	151		$	72

Foreign currency transaction primarily relates to the impact of changes in foreign exchange rates on cash, marketable securities and other investments and intercompany transactions. A significant portion of the foreign currency transaction gain in 2015 related to intercompany loans and was attributable to the Swiss National Bank lifting the cap on the fluctuation of the exchange rate used to measure the Swiss Franc against the Euro. The ~~Company has since settled these particular intercompany loans. The decrease in stock compensation~~lower pension expense in ~~2016~~2017 is primarily due to ~~fewer stock awards granted. The decrease in stock compensation expense in 2015 is primarily due~~the use of the spot yield curve approach to estimate the interest cost component of net periodic pension cost. Previously, this cost component of net periodic pension cost was estimated using a ~~lower fair value calculated for 2015 stock awards as well as fewer stock awards granted. Included in divestitures~~single-weighted average discount rate. Divestitures and asset sales and writedowns ~~for 2014 is~~in 2017 includes a gain on the sale of ~~approximately $413 million resulting from~~ the ~~deconsolidation~~Company's Autoline product line. Acquisition expenses in 2017 primarily relate to the Clarcor acquisition (see Note 2 to the Consolidated Financial Statements in Part II, Item 8 of ~~a subsidiary.~~this Annual Report on Form 10-K for further discussion).

Discussion of Consolidated Balance Sheet

The Consolidated Balance Sheet shows the Company's financial position at year-end, compared with the previous year-end. This discussion provides information to assist in assessing factors such as the Company's liquidity and financial resources.


(dollars in millions)	2016		2015		2017		2016
Cash	$	2,104	$	1,914	$	924	$	2,104
Trade accounts receivable, net	1,594		1,620		1,931		1,594
Inventories	1,173		1,300		1,549		1,173
Deferred income tax asset					36		605
Intangible assets					2,307		923
Goodwill					5,587		2,903
Notes payable and long-term debt payable within one year					1,008		362
Long-term debt					4,862		2,652
Shareholders' equity	4,575		5,104		5,262		4,575
Working capital	$	2,842	$	3,092	$	1,384	$	2,842
Current ratio	2.2		2.3		1.4		2.2

Cash (comprised of cash and cash equivalents and marketable securities and other investments) includes ~~$2,065~~$874 million and ~~$1,777~~$2,065 million held by the Company's foreign subsidiaries at June 30, ~~2016~~2017 and June 30, ~~2015,~~2016, respectively. Generally, cash and cash equivalents and marketable securities and other investments held by foreign subsidiaries are not readily available for use in the United States without adverse tax consequences. During 2017, the Company utilized approximately $1,774 million in cash from its foreign subsidiaries principally to fund the acquisition of Clarcor stock and foreign assets. The Company's principal sources of liquidity are its cash flows provided by operating activities, commercial paper borrowings or borrowings directly from its line of credit. The Company does not believe the level of its non-U.S. cash position will have an adverse effect on working capital needs, planned growth, repayment of maturing debt, benefit plan funding, dividend payments or share repurchases.

Trade accounts receivable, net are receivables due from customers for sales of product. Days sales outstanding relating to trade receivables for the Company was 51 days in 2017 and 49 days in ~~2016 and 48 days in 2015.~~2016. The Company believes that its receivables are collectible and appropriate allowances for doubtful accounts have been recorded.

Inventories ~~decreased $127~~increased $376 million from ~~2015~~2016 primarily due to acquisitions (which ~~includes a decrease of $17 million from the effect of foreign currency translation and~~accounted for an increase of ~~$7 million from current-year acquisitions). The decrease~~$295 million), as well an increase in inventories ~~was primarily~~ in ~~the~~

~~Diversified Industrial Segment, with the decrease occurring evenly between the Diversified Industrial North American businesses and~~ the Diversified Industrial International ~~businesses.~~businesses and the Aerospace Systems Segment. Days supply of inventory on hand was 67 days in 2017 and 62 days in 2016.

Deferred income tax asset as of June 30, 2017 decreased compared to June 30, 2016 primarily as a result of the Clarcor acquisition. Refer to Note 4 to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for further discussion.

Intangible assets and ~~65 days~~goodwill as of June 30, 2017 both increased compared to June 30, 2016 primarily due to current-year acquisitions. Refer to Note 7 to the Consolidated Financial Statements in ~~2015.~~Part II, Item 8 of this Annual Report on Form 10-K for further discussion.

Notes payable and long-term debt payable within one year and long-term debt as of June 30, 2017 increased from the June 30, 2016 amounts due primarily to new debt issuances as well as higher commercial paper notes outstanding. Refer to Notes 8 and 9 to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for further discussion.

Shareholders' equity activity during ~~2016~~2017 included a decrease of ~~$558~~$265 million related to share repurchases, a decrease of ~~$205~~$82 million related to foreign currency translation adjustments and ~~a decrease~~an increase of ~~$286~~$385 million related to pensions and postretirement benefits.

Discussion of Consolidated Statement of Cash Flows

The Consolidated Statement of Cash Flows reflects cash inflows and outflows from the Company's operating, investing and financing activities.

A summary of cash flows follows:


(dollars in millions)	2016			2015			2014			2017			2016			2015
Cash provided by (used in):
Operating activities	$	1,170		$	1,302		$	1,388		$	1,302		$	1,211		$	1,363
Investing activities	(265		)	(579		)	(646		)	(3,365		)	(265		)	(579		)
Financing activities	(802		)	(1,045		)	(958		)	1,783			(843		)	(1,106		)
Effect of exchange rates	(62		)	(111		)	48			(57		)	(62		)	(111		)
Net increase (decrease) in cash and cash equivalents	$	41		$	(433	)	$	(168	)
Net (decrease) increase in cash and cash equivalents										$	(337	)	$	41		$	(433	)

Cash Flows From Operating Activities in 2017 reflects an increase in net income from 2016 of $177 million and a reduction of $28 million for cash used by working capital items. Cash flows from operating activities in 2016 reflects a decrease in net income from 2015 of $205 million and an increase of $120 million for cash provided by working capital items. Cash flows from operating activities in 2015 reflects a reduction of $257 million for cash used by working capital items. Cash flow from operating activities in 2014 benefited from a $294 million increase in cash provided by working capital items, partially offset by a $184 million decrease in net income after consideration of non-cash items, including a $413 million gain on the deconsolidation of a subsidiary and a $189 million impairment charge. The Company also made voluntary cash contributions to the Company's domestic qualified defined benefit plan of $220 million in 2017 and $200 million in ~~2016 and $75 million in 2014.~~2016.

Cash Flows Used In Investing Activities in ~~2016 and 2015~~2017 includes ~~$51~~$4,069 million ~~and $356 million, respectively, in net purchases of marketable securities and other investments.~~related to acquisition activity, primarily related to Clarcor. Cash flows used in investing activities in ~~2014~~2017, 2016 and 2015 includes ~~$625~~$814 million, $(51) million and $(356) million, respectively, in ~~purchases~~net maturities (purchases) of marketable securities and other ~~investments and $202 million in proceeds from the sale of a 50 percent equity interest in a subsidiary related to the joint venture with GE Aviation.~~investments.

Cash Flows Used In Financing Activities during ~~2015 includes~~2017 included the issuance of ~~$1,500~~approximately $2,646 million of ~~medium-term notes and~~notional borrowings of long-term debt as well as the repayment of ~~commercial paper notes outstanding at~~long-term debt of approximately $381 million, which includes debt assumed in the ~~time of the debt issuance.~~Clarcor acquisition. The Company repurchased 2.0 million common shares for $265 million during 2017 as compared to the repurchase of 5.1 million common shares for $558 million ~~during~~in 2016 ~~as compared to the repurchase of~~and 11.1 million common shares for $1,394 million in ~~2015 and 1.7 million common shares for $200 million in 2014.~~2015.

Dividends have been paid for ~~264~~268 consecutive quarters, including a yearly increase in dividends for the last 6061 years. The current annual dividend rate is ~~$2.52~~$2.64 per common share.

The ~~Company's~~Company’s goal is to maintain no less than an ~~"A"~~“A” rating on senior debt to ensure availability and reasonable cost of external funds. ~~As a means~~In periods following significant capital deployment, including for share repurchases or acquisitions, certain of ~~achieving this objective,~~ the ~~Company has established a financial goal of maintaining a ratio of~~ratings assigned to the Company's senior debt ~~to debt-shareholders' equity of no more than 37 percent. From time to time, such as~~may be, and at June 30, ~~2016, fluctuations~~2017 were, lower than the stated goal. The Company's ability to borrow funds at desirable tenors and interest rates in ~~cash flows from operations or capital deployment actions may cause the ratio of~~February 2017 was not significantly impacted by certain ratings on senior debt ~~to debt-shareholders' equity to exceed the 37 percent goal.~~that were below an "A" level. The Company does not believe that its ability to borrow funds in the future at desirable tenors and affordable interest rates ~~has been or~~ will be impacted ~~when~~if certain of its ratings are below an "A" level at the time of such borrowings. At June 30, 2017, the long-term credit ratings assigned to the Company's senior debt ~~to debt-shareholders' equity ratio temporarily exceeds 37 percent.~~

securities by the credit rating agencies engaged by the Company were as follows:

Debt to Debt-Shareholders' Equity Ratio (dollars in millions) 2016 2015
  Debt $ 3,037
$ 2,947
  Debt & Shareholders' Equity 7,612
8,051
  Ratio 39.9 % 36.6 %



Fitch Ratings		A-
Moody's Investor Services, Inc.		Baa1
Standard & Poor's		A

As of June 30, ~~2016,~~2017, the Company had a line of credit totaling $2,000 million through a multi-currency revolving credit agreement with a group of banks, ~~$1,696~~$1,466 million of which was available at June 30, ~~2016.~~2017. Refer to Note 8 to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for further discussion.

The Company is currently authorized to sell up to ~~$1,850~~$2,000 million of short-term commercial paper notes. There were ~~$304~~$534 million outstanding commercial paper notes as of June 30, ~~2016,~~2017, and the largest amount of commercial paper notes outstanding during the last quarter of ~~2016~~2017 was ~~$541~~$827 million.

Contractual Obligations - The total amount of gross unrecognized tax benefits, including interest, for uncertain tax positions was ~~$152~~$163 million at June 30, ~~2016.~~2017. Payment of these obligations would result from settlements with worldwide taxing authorities. Due to the difficulty in determining the timing of the settlements, these obligations are not included in the following summary of the Company's fixed contractual obligations. References to Notes are to the Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.


(dollars in millions)	Payments due by period										Payments due by period
Contractual obligations	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years		Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Long-term debt (Note 9)	$	2,733	$	58	$	550	$	—	$	2,125	$	5,383	$	475	$	569	$	114	$	4,225
Interest on long-term debt	1,708		122		211		181		1,194		2,649		190		318		299		1,842
Operating leases (Note 9)	195		69		72		24		30		239		81		92		34		32
Retirement benefits (Note 10)	367		312		14		13		28		123		75		12		11		25
Total	$	5,003	$	561	$	847	$	218	$	3,377	$	8,394	$	821	$	991	$	458	$	6,124

Off-Balance Sheet Arrangements

The Company does not have off-balance sheet arrangements.

Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The policies discussed below are considered by management to be more critical than other policies because their application places the most significant demands on management's judgment.

Revenue Recognition - Substantially all of the Diversified Industrial Segment revenues are recognized when persuasive evidence of an arrangement exists, product has shipped and the risks and rewards of ownership have transferred or services have been rendered, the price to the customer is fixed and determinable and collectibility is reasonably assured, which is generally at the time the product is shipped. The Aerospace Systems Segment recognizes revenues primarily using the percentage-of-completion method and the extent of progress toward completion is primarily measured using the units-of-delivery method. The Company estimates costs to complete long-term contracts for purposes of evaluating and establishing contract reserves. The estimation of these costs requires judgment on the part of management due to the duration of the contractual agreements as well as the technical nature of the products involved. Adjustments to cost estimates are made on a consistent basis and a contract reserve is established when the estimated costs to complete a contract exceed the expected contract revenues.

Impairment of Goodwill and Long-Lived Assets - Goodwill is tested for impairment, at the reporting unit level, on an annual basis and between annual tests whenever events or circumstances indicate that the carrying value of a reporting unit may exceed its fair value. For the Company, a reporting unit is one level below the operating segment level. Determining whether an impairment has occurred requires the valuation of the respective reporting unit, which the Company has consistently estimated using primarily a discounted cash flow model. The Company believes that the use of a discounted cash flow model

results in the most accurate calculation of a reporting unit's fair value since the market value for a reporting unit is not readily available. The discounted cash flow analysis requires several assumptions including future sales growth and operating margin levels as well as assumptions regarding future industry specific market conditions. Each reporting unit regularly prepares discrete operating forecasts and uses these forecasts as the basis for the assumptions used in the discounted cash flow analysis. The Company has consistently used a discount rate commensurate with its cost of capital, adjusted for inherent business risks, and an appropriate terminal growth factor. The Company also reconciles the estimated aggregate fair value of its reporting units as derived from the discounted cash flow analysis to the Company's overall market capitalization.

The results of the Company's ~~2016~~2017 annual goodwill impairment test performed as of December 31, ~~2015~~2016 indicated that no goodwill impairment existed. During 2014, the Company made a decision to restructure and change the strategic direction of its Worldwide Energy Products Division (EPD). The Company calculated the fair value of EPD using assumptions reflecting the Company's current strategic direction for this reporting unit, the results of which indicated that the carrying value of EPD exceeded its fair value. As a result, the Company estimated the implied fair value of EPD's goodwill, which resulted in a non-cash impairment charge of $140 million. The fair value of EPD was calculated using both a discounted cash flow analysis and estimated fair market values of comparable businesses.

The Company continually monitors its reporting units for impairment indicators and updates assumptions used in the most recent calculation of the fair value of a reporting unit as appropriate. The Company is unaware of any current market trends that are contrary to the assumptions made in the estimation of the fair value of any of its reporting units. If actual experience is not consistent with the assumptions made in the estimation of the fair value of the reporting units, especially assumptions regarding penetration into new markets and the recovery of the current economic environment, it is possible that the estimated fair value of certain reporting units could fall below their carrying value resulting in the necessity to conduct additional goodwill impairment tests.

Long-lived assets held for use, which primarily includes finite-lived intangible assets and plant and equipment, are evaluated for impairment whenever events or circumstances indicate that the undiscounted net cash flows to be generated by their use over their expected useful lives and eventual disposition are less than their carrying value. The long-term nature of these assets requires the estimation of their cash inflows and outflows several years into the future and only takes into consideration technological advances known at the time of the impairment test. During ~~2016,~~2017, there were no events or circumstances that indicated that the carrying value of the Company's long-lived assets held for use were not recoverable. During 2014, in connection with the goodwill impairment review discussed above, the Company determined certain intangible assets of EPD, primarily trademarks and customer lists, and plant and equipment were impaired resulting in a non-cash impairment charge of $49 million. The fair value of EPD's intangible assets and plant and equipment were determined using the income approach for each asset.

Pensions - The annual net periodic expense and benefit obligations related to the Company's defined benefit plans are determined on an actuarial basis. This determination requires critical assumptions regarding the discount rate, long-term rate of return on plan assets, increases in compensation levels and amortization periods for actuarial gains and losses. Assumptions are determined based on Company data and appropriate market indicators, and are evaluated each year as of the plans' measurement date. Changes in the assumptions to reflect actual experience as well as the amortization of actuarial gains and losses could result in a material change in the annual net periodic expense and benefit obligations reported in the financial statements. Beginning in 2017, the Company ~~will change~~changed the method used to estimate the service and interest cost components of net periodic pension and other postretirement benefit costs. The new method uses the spot yield curve approach to estimate the service and interest costs by applying the specific spot rates along the yield curve used to determine the benefit obligations to

relevant cash outflows. Previously, these costs were determined using a single-weighted average discount rate. The change does not affect the measurement of the Company's benefit obligations. The new method provides a more precise measure of service and interest costs by improving the correlation between projected benefit cash flows and the discrete spot yield curve rates and ~~will be~~was accounted for as a change in estimate prospectively beginning in the first quarter of 2017. Annual net periodic pension expense in 2017 ~~is expected to be~~was lower by approximately ~~$33~~$30 million compared to the previous method. Annual net periodic postretirement cost iswas not ~~expected to be~~ materially different.

For the Company's domestic qualified defined benefit plan, a 50 basis point change in the assumed long-term rate of return on plan assets is estimated to have a ~~$12~~$14 million effect on annual pension expense and a 50 basis point decrease in the discount rate is estimated to increase annual pension expense by ~~$31~~$26 million. As of June 30, ~~2016, $1,535~~2017, $1,081 million of past years' net actuarial losses related to the Company's domestic qualified defined benefit plan are subject to amortization in the future. These losses will generally be amortized over approximately ~~eight~~seven years and will negatively affect earnings in the future. Actuarial gains experienced in future years will help reduce the effect of the actuarial loss amortization. Further information on pensions is provided in Note 10 to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.

Income Taxes - Significant judgment is required in determining the Company's income tax expense and in evaluating tax positions. Deferred income tax assets and liabilities have been recorded for the differences between the financial accounting and income tax basis of assets and liabilities. Factors considered by the Company in determining the probability of realizing deferred income tax assets include forecasted operating earnings, available tax planning strategies and the time period over which the temporary differences will reverse. The Company reviews its tax positions on a regular basis and adjusts the balances as new information becomes available. For those tax positions where it is more likely than not that a tax benefit will be sustained, the largest amount of tax benefit with a greater than 50 percent likelihood of being realized upon examination by a taxing authority that has full knowledge of all relevant information will be recorded. For those income tax positions where it is not more likely than not that a tax benefit will be sustained, no tax benefit has been recognized in the Consolidated Financial Statements. Further information on income taxes is provided in Note 4 to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.

Loss Contingencies - The Company has a number of loss exposures incurred in the ordinary course of business such as environmental claims, product liability and litigation reserves. Establishing loss accruals for these matters requires management's estimate and judgment with regards to risk exposure and ultimate liability or realization. These loss accruals are reviewed periodically and adjustments are made to reflect the most recent facts and circumstances.

Recently Issued Accounting Pronouncements

Recently issued accounting pronouncements are described in Note 1 to the Consolidated Financial Statements, included in Part II, Item 8 of this Annual Report on Form 10-K.

ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk. The Company manages foreign currency transaction and translation risk by utilizing derivative and non-derivative financial instruments, including forward exchange contracts, costless collar contracts, cross-currency swap contracts and certain foreign denominated debt designated as net investment hedges. 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.

Derivative financial instruments are recognized on the Consolidated Balance Sheet as either assets or liabilities and are measured at fair value. Further information on the fair value of these contracts is provided in Part II, Item 8 of this Annual Report on Form 10-K. Gains or losses on derivatives that are not hedges are adjusted to fair value through the Consolidated Statement of Income. Gains or losses on derivatives that are hedges are adjusted to fair value through accumulated other comprehensive income (loss) in the Consolidated Balance Sheet until the hedged item is recognized in earnings. The translation of the foreign denominated debt that has been designated as a net investment hedge is recorded in accumulated other comprehensive income (loss) and remains there until the underlying net investment is sold or substantially liquidated.

The Company's debt portfolio contains variable rate debt, inherently exposing the Company to interest rate risk. The Company's objective is to maintain a 60/40 mix between fixed rate and variable rate debt thereby limiting its exposure to changes in near-term interest rates. A 100 basis point increase in near-term interest rates would increase annual interest expense on variable rate debt existing at June 30, ~~2016~~2017 by approximately $6$12 million.

ITEM 8. Financial Statements and Supplementary Data.



		Page Number in Form 10-K
Financial Statements
	Consolidated Statement of Income	2932
	Consolidated Statement of Comprehensive Income	3033
	Business Segment Information	3134
	Consolidated Balance Sheet	3336
	Consolidated Statement of Cash Flows	3437
	Consolidated Statement of Equity	3538
	Notes to Consolidated Financial Statements	3639

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

Parker-Hannifin Corporation

Cleveland, Ohio

We have audited the accompanying consolidated balance sheets of Parker-Hannifin Corporation and subsidiaries (the "Company") as of June 30, ~~2016~~2017 and ~~2015,~~2016, and the related consolidated statements of income, comprehensive income, equity, and cash flows for each of the three years in the period ended June 30, ~~2016.~~2017. Our audits also included the financial statement schedule listed in the Index at Item 15. We also have audited the Company's internal control over financial reporting as of June 30, ~~2016,~~2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company's management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on these financial statements and financial statement schedule and an opinion on the Company's internal control over financial reporting based on our audits.

As described in Management's Report on Internal Control Over Financial Reporting, management excluded from its assessment the internal control over financial reporting at three entities, which were acquired on various dates during the year ended June 30, 2017, and whose financial statements constitute approximately 32.0 percent and 4.7 percent of total assets and net sales, respectively, of the consolidated financial statement amounts as of and for the year ended June 30, 2017. Accordingly, our audit did not include the internal control over financial reporting at the three entities acquired during the year ended June 30, 2017.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Parker-Hannifin Corporation and subsidiaries as of June 30, ~~2016~~2017 and ~~2015,~~2016, the results of their operations and their cash flows for each of the three years in the period ended June 30, ~~2016,~~2017, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 30, ~~2016,~~2017, based on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

/s/ DELOITTE & TOUCHE LLP

Cleveland, Ohio

August ~~26, 2016~~25, 2017

Consolidated Statement of Income


	For the years ended June 30,									For the years ended June 30,
(Dollars in thousands, except per share amounts)	2016			2015			2014			2017			2016			2015
Net Sales	$	11,360,753		$	12,711,744		$	13,215,971		$	12,029,312		$	11,360,753		$	12,711,744
Cost of sales	8,823,384			9,655,245			10,188,227			9,188,962			8,823,384			9,655,245
Gross profit	2,537,369			3,056,499			3,027,744			2,840,350			2,537,369			3,056,499
Selling, general and administrative expenses	1,359,360			1,544,746			1,633,992			1,453,935			1,359,360			1,544,746
Goodwill and intangible asset impairment (Note 7)	—			—			188,870
Interest expense	136,517			118,406			82,566			162,436			136,517			118,406
Other (income), net	(62,199		)	(43,374		)	(25,513		)	(61,401		)	(62,199		)	(43,374		)
(Gain) loss on disposal of assets (Note 2)	(11,037		)	4,481			(408,891		)	(43,261		)	(11,037		)	4,481
Income before income taxes	1,114,728			1,432,240			1,556,720			1,328,641			1,114,728			1,432,240
Income taxes (Note 4)	307,512			419,687			515,302			344,797			307,512			419,687
Net Income	807,216			1,012,553			1,041,418			983,844			807,216			1,012,553
Less: Noncontrolling interest in subsidiaries' earnings	376			413			370			432			376			413
Net Income Attributable to Common Shareholders	$	806,840		$	1,012,140		$	1,041,048		$	983,412		$	806,840		$	1,012,140

Earnings per Share Attributable to Common Shareholders (Note 5)
Basic earnings per share	$	5.96		$	7.08		$	6.98		$	7.37		$	5.96		$	7.08
Diluted earnings per share	$	5.89		$	6.97		$	6.87		$	7.25		$	5.89		$	6.97

The accompanying notes are an integral part of the consolidated financial statements.

Consolidated Statement of Comprehensive Income


	For the years ended June 30,									For the years ended June 30,
(Dollars in thousands)	2016			2015			2014			2017			2016			2015
Net Income	$	807,216		$	1,012,553		$	1,041,418		$	983,844		$	807,216		$	1,012,553
Less: Noncontrolling interests in subsidiaries' earnings	376			413			370			432			376			413
Net income attributable to common shareholders	806,840			1,012,140			1,041,048			983,412			806,840			1,012,140

Other comprehensive income (loss), net of tax
Foreign currency translation adjustment and other (net of tax of $(2,342), $(31,024) and $4,591 in 2016, 2015 and 2014)	(203,299		)	(765,659		)	193,130
Retirement benefits plan activity (net of tax of $152,203, $88,547 and $(54,473) in 2016, 2015 and 2014)	(286,044		)	(149,710		)	91,182
Foreign currency translation adjustment and other (net of tax of $40,935, $(2,342) and $(31,024) in 2017, 2016 and 2015)										(80,865		)	(203,299		)	(765,659		)
Retirement benefits plan activity (net of tax of $(218,590), $152,203 and $88,547 in 2017, 2016 and 2015)										384,784			(286,044		)	(149,710		)
Other comprehensive income (loss)	(489,343		)	(915,369		)	284,312			303,919			(489,343		)	(915,369		)
Less: Other comprehensive (loss) for noncontrolling interests	(196		)	(249		)	(23		)
Less: Other comprehensive income (loss) for noncontrolling interests										358			(196		)	(249		)
Other comprehensive income (loss) attributable to common shareholders	(489,147		)	(915,120		)	284,335			303,561			(489,147		)	(915,120		)
Total Comprehensive Income Attributable to Common Shareholders	$	317,693		$	97,020		$	1,325,383		$	1,286,973		$	317,693		$	97,020

The accompanying notes are an integral part of the consolidated financial statements.

Business Segment Information


(Dollars in thousands)	2016		2015		2014			2017		2016		2015
Net Sales:
Diversified Industrial:
North America	$	4,955,211	$	5,715,742	$	5,693,527		$	5,366,809	$	4,955,211	$	5,715,742
International	4,145,272		4,741,376		5,287,916			4,377,776		4,145,272		4,741,376
Aerospace Systems	2,260,270		2,254,626		2,234,528			2,284,727		2,260,270		2,254,626
	$	11,360,753	$	12,711,744	$	13,215,971		$	12,029,312	$	11,360,753	$	12,711,744
Segment Operating Income:
Diversified Industrial:
North America	$	789,667	$	955,501	$	946,493		$	873,552	$	789,667	$	955,501
International	448,457		583,937		572,476			579,207		448,457		583,937
Aerospace Systems	337,531		298,994		271,238			337,496		337,531		298,994
Total segment operating income	1,575,655		1,838,432		1,790,207			1,790,255		1,575,655		1,838,432
Corporate administration	173,203		215,396		181,926			172,632		173,203		215,396
Income before interest expense and other	1,402,452		1,623,036		1,608,281			1,617,623		1,402,452		1,623,036
Interest expense	136,517		118,406		82,566			162,436		136,517		118,406
Other expense (income)	151,207		72,390		(31,005		)
Other expense								126,546		151,207		72,390
Income before income taxes	$	1,114,728	$	1,432,240	$	1,556,720		$	1,328,641	$	1,114,728	$	1,432,240

Assets (a):
Assets:
Diversified Industrial	$	8,728,671	$	8,734,942	$	9,470,822		$	13,366,981	$	8,728,671	$	8,734,942
Aerospace Systems ~~(b)~~(a)	1,430,577		1,375,845		1,359,063			1,412,707		1,430,577		1,375,845
Corporate ~~(c)~~(b)	1,897,490		2,168,495		2,429,930			710,216		1,874,894		2,143,492
	$	12,056,738	$	12,279,282	$	13,259,815		$	15,489,904	$	12,034,142	$	12,254,279

Property Additions:
Diversified Industrial	$	134,618	$	190,580	$	189,832		$	148,765	$	134,618	$	190,580
Aerospace Systems	10,857		18,427		23,261			16,929		10,857		18,427
Corporate	3,932		6,520		3,247			38,054		3,932		6,520
	$	149,407	$	215,527	$	216,340		$	203,748	$	149,407	$	215,527

Depreciation:
Diversified Industrial	$	163,014	$	174,102	$	187,347		$	176,823	$	163,014	$	174,102
Aerospace Systems	18,469		19,509		19,193			17,484		18,469		19,509
Corporate	8,825		9,165		8,425			8,561		8,825		9,165
	$	190,308	$	202,776	$	214,965		$	202,868	$	190,308	$	202,776


(Dollars in thousands)	2016		2015		2014		2017		2016		2015
By Geographic Area ~~(d)~~(c)
Net Sales:
North America	$	7,144,481	$	7,891,571	$	7,853,603	$	7,585,689	$	7,144,481	$	7,891,571
International	4,216,272		4,820,173		5,362,368		4,443,623		4,216,272		4,820,173
	$	11,360,753	$	12,711,744	$	13,215,971	$	12,029,312	$	11,360,753	$	12,711,744
Long-Lived Assets:
North America	$	817,872	$	856,947	$	861,300	$	1,145,127	$	817,872	$	856,947
International	750,228		807,075		962,994		792,165		750,228		807,075
	$	1,568,100	$	1,664,022	$	1,824,294	$	1,937,292	$	1,568,100	$	1,664,022

The accounting policies of the business segments are the same as those described in the Significant Accounting Policies footnote except that the business segment results are prepared on a basis that is consistent with the manner in which the Company’s management disaggregates financial information for internal review and decision-making.


(a)	~~Amounts in 2015 and 2014 have been adjusted to reflect the retrospective adoption of Accounting Standards Update (ASU) 2015-17 in the fourth quarter of 2016.~~


~~(b)~~	Includes an investment in a joint venture in which ownership is 50 percent or less and in which the Company does not have operating control ~~(2016~~(2017 - $240,182; 2016 - $241,728; 2015 - ~~$251,365; 2014 - $263,246)~~$251,365).

~~(c)~~(b)

Amounts in 2016 and 2015 have been adjusted to reflect the retrospective adoption of Accounting Standards Update 2015-03 in the first quarter of 2017. Corporate assets are principally cash and cash equivalents, marketable securities and other investments, domestic deferred income taxes, deferred compensation plan assets, headquarters facilities and the major portion of the Company’s domestic data processing equipment.


~~(d)~~(c)	Net sales are attributed to countries based on the location of the selling unit. North America includes the United States, Canada and Mexico. No country other than the United States represents greater than 10 percent of consolidated sales. Long-lived assets are comprised of plant and equipment based on physical location.

Consolidated Balance Sheet


(Dollars in thousands)
June 30,	2016			2015			2017			2016
Assets
Current Assets
Cash and cash equivalents (Note 1)	$	1,221,653		$	1,180,584		$	884,886		$	1,221,653
Marketable securities and other investments (Note 1)	882,342			733,490			39,318			882,342
Trade accounts receivable, net (Note 1)	1,593,920			1,620,194			1,930,751			1,593,920
Non-trade and notes receivable (Note 1)	232,183			364,534			254,987			232,183
Inventories (Note 6)	1,173,329			1,300,459			1,549,494			1,173,329
Prepaid expenses	104,360			241,684			120,282			104,360
Total Current Assets	5,207,787			5,440,945			4,779,718			5,207,787
Plant and equipment (Note 1)	4,737,141			4,862,611			5,186,748			4,737,141
Less: Accumulated depreciation	3,169,041			3,198,589			3,249,456			3,169,041
	1,568,100			1,664,022
Plant and equipment, net							1,937,292			1,568,100
Deferred income taxes (Notes 1 and 4)	605,155			406,267			36,057			605,155
Investments and other assets (Note 1)	850,088			811,930			842,475			827,492
Intangible assets, net (Notes 1 and 7)	922,571			1,013,439			2,307,484			922,571
Goodwill (Notes 1 and 7)	2,903,037			2,942,679			5,586,878			2,903,037
Total Assets	$	12,056,738		$	12,279,282		$	15,489,904		$	12,034,142

Liabilities and Equity
Current Liabilities
Notes payable and long-term debt payable within one year (Notes 8 and 9)	$	361,840		$	223,142		$	1,008,465		$	361,787
Accounts payable, trade	1,034,589			1,092,138			1,300,496			1,034,589
Accrued payrolls and other compensation	382,945			409,762			435,911			382,945
Accrued domestic and foreign taxes	127,597			139,285			153,137			127,597
Other accrued liabilities	458,970			484,793			497,851			458,970
Total Current Liabilities	2,365,941			2,349,120			3,395,860			2,365,888
Long-term debt (Note 9)	2,675,000			2,723,960			4,861,895			2,652,457
Pensions and other postretirement benefits (Note 10)	2,076,143			1,699,197			1,406,082			2,076,143
Deferred income taxes (Notes 1 and 4)	54,395			63,222			221,790			54,395
Other liabilities	306,581			336,214			336,931			306,581
Total Liabilities	7,478,060			7,171,713			10,222,558			7,455,464
Equity (Note 11)
Shareholders' Equity
Serial preferred stock, $.50 par value, authorized 3,000,000 shares; none issued	—			—			—			—
Common stock, $.50 par value, authorized 600,000,000 shares; issued 181,046,128 shares in 2016 and 2015	90,523			90,523
Common stock, $.50 par value, authorized 600,000,000 shares; issued 181,046,128 shares in 2017 and 2016							90,523			90,523
Additional capital	628,451			622,729			543,879			628,451
Retained earnings	10,302,866			9,841,885			10,930,348			10,302,866
Accumulated other comprehensive (loss)	(2,227,765		)	(1,738,618		)	(1,924,204		)	(2,227,765		)
Treasury shares at cost: 47,033,896 in 2016 and 42,487,389 in 2015	(4,218,820		)	(3,712,232		)
Treasury shares at cost: 47,854,475 in 2017 and 47,033,896 in 2016							(4,378,897		)	(4,218,820		)
Total Shareholders' Equity	4,575,255			5,104,287			5,261,649			4,575,255
Noncontrolling interests	3,423			3,282			5,697			3,423
Total Equity	4,578,678			5,107,569			5,267,346			4,578,678
Total Liabilities and Equity	$	12,056,738		$	12,279,282		$	15,489,904		$	12,034,142

The accompanying notes are an integral part of the consolidated financial statements.

Consolidated Statement of Cash Flows


	For the years ended June 30,									For the years ended June 30,
(Dollars in thousands)	2016			2015			2014			2017			2016			2015
Cash Flows From Operating Activities
Net income	$	807,216		$	1,012,553		$	1,041,418		$	983,844		$	807,216		$	1,012,553
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	190,308			202,776			214,965			202,868			190,308			202,776
Amortization	116,535			114,715			121,737			152,361			116,535			114,715
Goodwill and intangible asset impairment	—			—			188,870
Stock incentive plan compensation	71,293			96,093			103,161			80,339			71,293			96,093
Deferred income taxes	(65,686		)	18,865			(74,139		)	37,024			(65,686		)	18,865
Foreign currency transaction loss (gain)	22,750			(77,784		)	5,398			8,060			22,750			(77,784		)
Loss on disposal of assets	414			14,953			2,997
Gain on sale of businesses	(10,666		)	(6,420		)	—
Net gain on deconsolidation	—			—			(412,612		)
Loss on sale of plant and equipment										1,494			414			14,953
(Gain) on sale of businesses										(41,285		)	(10,666		)	(6,420		)
(Gain) loss on sale of marketable securities	(723		)	3,817			—			(1,032		)	(723		)	3,817
Changes in assets and liabilities, net of effects from acquisitions:
Accounts receivable	17,549			143,179			(99,144		)	(95,347		)	17,549			143,179
Inventories	120,243			(70,377		)	(3,816		)	(73,673		)	120,243			(70,377		)
Prepaid expenses	136,034			(116,561		)	58,117			2,410			136,034			(116,561		)
Other assets	(5,033		)	20,976			(79,158		)	(3,887		)	(5,033		)	20,976
Accounts payable, trade	(52,378		)	(86,750		)	92,927			174,761			(52,378		)	(86,750		)
Accrued payrolls and other compensation	(22,865		)	(12,657		)	20,840			5,922			(22,865		)	(12,657		)
Accrued domestic and foreign taxes	(17,430		)	(66,870		)	86,745			18,165			(6,285		)	(43,441		)
Other accrued liabilities	(61,424		)	(46,633		)	(23,480		)	(59,738		)	(31,633		)	(8,770		)
Pensions and other postretirement benefits	(45,796		)	156,859			99,569			(103,866		)	(45,796		)	156,859
Other liabilities	(30,498		)	1,207			43,498			14,051			(30,499		)	1,207
Net cash provided by operating activities	1,169,843			1,301,941			1,387,893			1,302,471			1,210,778			1,363,233
Cash Flows From Investing Activities
Acquisitions (less cash acquired of $3,814 in 2016, $8,332 in 2015 and $1,780 in 2014)	(67,552		)	(18,618		)	(17,593		)
Acquisitions (less cash acquired of $157,426 in 2017, $3,814 in 2016 and $8,332 in 2015)										(4,069,197		)	(67,552		)	(18,618		)
Capital expenditures	(149,407		)	(215,527		)	(216,340		)	(203,748		)	(149,407		)	(215,527		)
Proceeds from disposal of assets	18,821			19,655			14,368
Proceeds from sale of plant and equipment										14,648			18,821			19,655
Proceeds from sale of businesses	24,325			37,265			—			85,610			24,325			37,265
Net proceeds from deconsolidation	—			—			202,498
Purchase of marketable securities and other investments	(1,351,464		)	(1,747,333		)	(624,880		)	(465,666		)	(1,351,464		)	(1,747,333		)
Maturities and sales of marketable securities and other investments	1,300,633			1,391,396			—			1,279,318			1,300,633			1,391,396
Other	(39,995		)	(46,001		)	(4,454		)	(6,113		)	(39,995		)	(46,001		)
Net cash (used in) investing activities	(264,639		)	(579,163		)	(646,401		)	(3,365,148		)	(264,639		)	(579,163		)
Cash Flows From Financing Activities
Proceeds from exercise of stock options	126			3,355			8,013			2,202			126			3,355
Payments for common shares	(557,575		)	(1,398,446		)	(204,043		)	(338,078		)	(587,365		)	(1,436,309		)
Tax benefit from stock incentive plan compensation	11,145			23,429			33,732
Proceeds from (payments for) notes payable, net	303,624			(815,171		)	(515,387		)	230,499			303,624			(815,171		)
Proceeds from long-term borrowings	2,287			1,483,015			748			2,614,463			2,287			1,483,015
Payments for long-term borrowings	(220,068		)	(537		)	(2,934		)	(381,078		)	(220,068		)	(537		)
Dividends paid	(341,962		)	(340,389		)	(278,244		)	(345,380		)	(341,962		)	(340,389		)
Net cash (used in) financing activities	(802,423		)	(1,044,744		)	(958,115		)
Net cash provided by (used in) financing activities										1,782,628			(843,358		)	(1,106,036		)
Effect of exchange rate changes on cash	(61,712		)	(111,005		)	48,766			(56,718		)	(61,712		)	(111,005		)
Net increase (decrease) in cash and cash equivalents	41,069			(432,971		)	(167,857		)
Net (decrease) increase in cash and cash equivalents										(336,767		)	41,069			(432,971		)
Cash and cash equivalents at beginning of year	1,180,584			1,613,555			1,781,412			1,221,653			1,180,584			1,613,555
Cash and cash equivalents at end of year	$	1,221,653		$	1,180,584		$	1,613,555		$	884,886		$	1,221,653		$	1,180,584
Supplemental Data:
Cash paid during the year for:
Interest	$	133,999		$	105,202		$	77,144		$	131,937		$	133,999		$	105,202
Income taxes	250,155			515,350			472,369			268,127			250,155			515,350

The accompanying notes are an integral part of the consolidated financial statements.

Consolidated Statement of Equity


(Dollars in thousands)	Common Stock		Additional Capital			Retained Earnings			Accumulated Other Comprehensive (Loss)			Treasury Shares			Noncontrolling Interests			Total			Common Stock		Additional Capital			Retained Earnings			Accumulated Other Comprehensive (Loss)			Treasury Shares			Noncontrolling Interests			Total
Balance June 30, 2013	$	90,523	$	608,752		$	8,421,270		$	(1,107,833	)	$	(2,274,286	)	$	3,055		$	5,741,481
Balance June 30, 2014																					$	90,523	$	595,498		$	9,174,189		$	(823,498	)	$	(2,377,284	)	$	3,380		$	6,662,808
Net income																										1,012,140									413			1,012,553
Other comprehensive income (loss)																													(915,120		)				(249		)	(915,369		)
Dividends paid																										(340,132		)							(257		)	(340,389		)
Stock incentive plan activity																							27,231			(4,312		)				58,630						81,549
Liquidation Activity																																			(5		)	(5		)
Shares purchased at cost																																(1,393,578		)				(1,393,578		)
Balance June 30, 2015																					$	90,523	$	622,729		$	9,841,885		$	(1,738,618	)	$	(3,712,232	)	$	3,282		$	5,107,569
Net income						1,041,048									370			1,041,418								806,840									376			807,216
Other comprehensive income (loss)									284,335						(23		)	284,312											(489,147		)				(196		)	(489,343		)
Dividends paid						(278,222		)							(22		)	(278,244		)						(341,923		)							(39		)	(341,962		)
Stock incentive plan activity			(13,254		)	(9,907		)				97,002						73,841					5,722			(3,936		)				50,916						52,702
Shares purchased at cost												(200,000		)				(200,000		)												(557,504		)				(557,504		)
Balance June 30, 2014	$	90,523	$	595,498		$	9,174,189		$	(823,498	)	$	(2,377,284	)	$	3,380		$	6,662,808
Balance June 30, 2016																					$	90,523	$	628,451		$	10,302,866		$	(2,227,765	)	$	(4,218,820	)	$	3,423		$	4,578,678
Net income						1,012,140									413			1,012,553								983,412									432			983,844
Other comprehensive income (loss)									(915,120		)				(249		)	(915,369		)
Other comprehensive income																													303,561						358			303,919
Dividends paid						(340,132		)							(257		)	(340,389		)						(345,042		)							(338		)	(345,380		)
Stock incentive plan activity			27,231			(4,312		)				58,630						81,549					(84,572		)	(10,888		)				104,615						9,155
Liquidation activity															(5		)	(5		)
Acquisition activity																																			1,822			1,822
Shares purchased at cost												(1,393,578		)				(1,393,578		)												(264,692		)				(264,692		)
Balance June 30, 2015	$	90,523	$	622,729		$	9,841,885		$	(1,738,618	)	$	(3,712,232	)	$	3,282		$	5,107,569
Net income						806,840									376			807,216
Other comprehensive (loss)									(489,147		)				(196		)	(489,343		)
Dividends paid						(341,923		)							(39		)	(341,962		)
Stock incentive plan activity			5,722			(3,936		)				50,916						52,702
Shares purchased at cost												(557,504		)				(557,504		)
Balance June 30, 2016	$	90,523	$	628,451		$	10,302,866		$	(2,227,765	)	$	(4,218,820	)	$	3,423		$	4,578,678
Balance June 30, 2017																					$	90,523	$	543,879		$	10,930,348		$	(1,924,204	)	$	(4,378,897	)	$	5,697		$	5,267,346

The accompanying notes are an integral part of the consolidated financial statements.

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

The term "year" and references to specific years refer to the applicable fiscal years.


1.	Significant Accounting Policies

The significant accounting policies followed in the preparation of the accompanying consolidated financial statements are summarized below.

Nature of Operations - The Company is a leading worldwide diversified manufacturer of motion and control technologies and systems, providing precision engineered solutions for a wide variety of mobile, industrial and aerospace markets. The Company evaluates performance based on segment operating income before corporate ~~and~~ administrative expenses, interest expense and income taxes.

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. Diversified Industrial Segment products are marketed primarily through field sales employees and independent distributors. The Diversified Industrial North American operations have manufacturing plants and distribution networks throughout the United States, Canada and Mexico and primarily service North America. The Diversified Industrial International operations provide Parker products and services to 4647 countries throughout Europe, Asia Pacific, Latin America, the Middle East and Africa.

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 and also performs a vital role in naval vessels and land-based weapons systems. This ~~Segment~~segment serves original equipment and maintenance, repair and overhaul customers worldwide. Aerospace Systems Segment products are marketed by field sales employees and are sold directly to manufacturers and end-users.

There are no individual customers to whom sales are more than ~~four~~three percent of the Company's consolidated sales. Due to the diverse group of customers throughout the world, the Company does not consider itself exposed to any concentration of credit risks.

The Company manufactures and markets its products throughout the world. Although certain risks and uncertainties exist, the diversity and breadth of the Company's products and geographic operations mitigate the risk that adverse changes with respect to any particular product and geographic operation would materially affect the Company's operating results.

Use of Estimates - The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Basis of Consolidation - The consolidated financial statements include the accounts of all majority-owned domestic and foreign subsidiaries. All intercompany transactions and profits have been eliminated in the consolidated financial statements. The Company does not have off-balance sheet arrangements. Within the Business Segment Information, intersegment and interarea sales have been eliminated.

Revenue Recognition - Revenue is recognized when persuasive evidence of an arrangement exists, product has shipped and the risks and rewards of ownership have transferred or services have been rendered, the price to the customer is fixed and determinable and collectibility is reasonably assured, which is generally at the time the product is shipped. Shipping and handling costs billed to customers are included in net sales and the related costs in cost of sales. Taxes collected from customers and remitted to governmental authorities are excluded from revenue.

Long-term Contracts - The Company enters into long-term contracts primarily for the production of aerospace products. For financial statement purposes, revenues are primarily recognized using the percentage-of-completion method. The extent of progress toward completion is primarily measured using the units-of-delivery method. Unbilled costs on these contracts are included in inventory. Progress payments are netted against the inventory balances. The Company estimates costs to complete long-term contracts for purposes of evaluating and establishing contract reserves. Adjustments to cost estimates are made on a consistent basis and a contract reserve is established when the estimated costs to complete a contract exceed the expected contract revenues.

Cash - Cash equivalents consist of short-term highly liquid investments, with a three-month or less maturity, carried at cost plus accrued interest, which are readily convertible into cash.

Marketable Securities and Other Investments - Consist of short-term highly liquid investments, with stated maturities of greater than three months from the date of purchase, carried at cost plus accrued interest, and investments classified as available-for-sale, which are carried at fair value with unrealized gains and losses recorded in accumulated other comprehensive (loss). Gains and losses on available-for-sale investments are calculated based on the first-in, first-out method. The Company has the ability to liquidate the available-for-sale investments after giving appropriate notice to the issuer.

Trade Accounts Receivable, Net - Trade accounts receivable are initially recorded at their net collectible amount and are generally recorded at the time the revenue from the sales transaction is recorded. Receivables are written off to bad debt primarily when, in the judgment of the Company, the receivable is deemed to be uncollectible due to the insolvency of the debtor. Allowance for doubtful accounts was ~~$8,010~~$14,336 and ~~$9,284~~$8,010 at June 30, ~~2016~~2017 and June 30, ~~2015,~~2016, respectively.

Non-Trade and Notes Receivable - The non-trade and notes receivable caption in the Consolidated Balance Sheet is comprised of the following components:

June 30, 2016
2015
Notes receivable $ 102,400
$ 90,470
Reverse repurchase agreements —
113,558
Accounts receivable, other 129,783
160,506
Total $ 232,183
$ 364,534

Reverse repurchase agreements are collateralized lending arrangements and have a maturity longer than three months from the date of purchase. The Company does not record an asset or liability for the collateral associated with the reverse repurchase agreements.



June 30,	2017		2016
Notes receivable	$	118,351	$	102,400
Accounts receivable, other	136,636		129,783
Total	$	254,987	$	232,183

Plant, Equipment and Depreciation - Plant and equipment are recorded at cost and are depreciated principally using the straight-line method for financial reporting purposes. Depreciation rates are based on estimated useful lives of the assets, generally 40 years for buildings, 15 years for land improvements and building equipment, seven to 10 years for machinery and equipment, and three to eight years for vehicles and office equipment. Improvements, which extend the useful life of property, are capitalized, and maintenance and repairs are expensed. The Company reviews plant and equipment for impairment whenever events or changes in circumstances indicate that their carrying value may not be recoverable. When plant and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the appropriate accounts and any gain or loss is included in current income.

The plant and equipment caption in the Consolidated Balance Sheet is comprised of the following components:


June 30,	2016		2015		2017		2016
Land and land improvements	$	291,122	$	294,537	$	321,331	$	291,122
Buildings and building equipment	1,437,601		1,457,650		1,575,464		1,437,601
Machinery and equipment	2,933,818		3,017,011		3,167,885		2,933,818
Construction in progress	74,600		93,413		122,068		74,600
Total	$	4,737,141	$	4,862,611	$	5,186,748	$	4,737,141

Investments and Other Assets - Investments in joint-venture companies in which ownership is 50 percent or less and in which the Company does not have operating control are stated at cost plus the Company's equity in undistributed earnings and amounted to $~~355,876~~341,869 and $~~315,989~~355,876 at June 30, ~~2016~~2017 and June 30, ~~2015~~2016, respectively. A significant portion of the underlying net assets of the joint ventures are related to goodwill. The Company's share of earnings from ~~these~~ investments in joint-venture companies were ~~immaterial to the Company's results of operations.~~$42,352, $25,650 and $23,204 in 2017, 2016 and 2015, respectively.

Intangible Assets - Intangible assets primarily include patents, trademarks and customer lists and are recorded at cost and amortized on a straight-line method. Patents are amortized over the shorter of their remaining useful or legal life. Trademarks are amortized over the estimated time period over which an economic benefit is expected to be received. Customer lists are amortized over a period based on anticipated customer attrition rates. The Company reviews intangible assets for impairment whenever events or changes in circumstances indicate that their carrying value may not be recoverable.

Goodwill - The Company conducts a formal impairment test of goodwill on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value.

Income Taxes - Income taxes are provided based upon income for financial reporting purposes. Tax credits and similar tax incentives are applied to reduce the provision for income taxes in the year in which the credits arise. The Company recognizes accrued interest related to unrecognized tax benefits in income tax expense. Penalties, if incurred, are recognized in income tax expense. Deferred income taxes arise from temporary differences in the recognition of income and expense for tax purposes.

During the fourth quarter of 2016, the Company adopted ASU 2015-17, "Income Taxes - Balance Sheet Classification of Deferred Taxes." ASU 2015-17 requires companies to present deferred tax assets and deferred tax liabilities as noncurrent in the statement of financial position. The following captions within the Consolidated Balance Sheet at June 30, 2015 have been revised:

As Previously
Reported
Revised
Current Assets
Deferred income taxes $ 142,147
$ —
Noncurrent Assets
Deferred income taxes —
406,267
Investments and other assets 1,091,805
811,930
Current Liabilities
Accrued domestic and foreign taxes 140,295
139,285
Noncurrent Liabilities
Deferred income taxes 77,967
63,222

Foreign Currency Translation - Assets and liabilities of foreign subsidiaries are translated at current exchange rates, and income and expenses are translated using weighted-average exchange rates. The effects of these translation adjustments, as well as gains and losses from certain intercompany transactions, are reported in the accumulated other comprehensive (loss) component of shareholders' equity. Such adjustments will affect net income only upon sale or liquidation of the underlying foreign investments, which is not contemplated at this time. Exchange losses (gains) ~~losses~~ from transactions in a currency other than the local currency of the entity involved are included within the cost of ~~goods sold~~sales caption in the Consolidated Statement of Income and were $8,060, $22,750 ~~$(77,784)~~ and ~~$5,398,~~$(77,784), in 2017, 2016 ~~2015~~ and ~~2014,~~2015, respectively.

Subsequent Events - The Company has evaluated subsequent events that have occurred through the date of filing of this Annual Report on Form 10-K for the year ended June 30, ~~2016~~2017. No subsequent events occurred that required adjustment to or disclosure in these financial statements.

Recent Accounting Pronouncements - In ~~June 2016,~~May 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2017-09, "Scope of Modification Accounting." ASU 2017-09 provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. An entity should account for the effects of a modification unless all of the following are met: (1) the fair value of the modified award is the same as fair value of the original award; (2) the vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified; and (3) the classification of the award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. ASU 2017-09 is effective for fiscal years, and interim periods within those years, beginning after December 31, 2017. Early adoption is permitted as of the beginning of an annual period for which financial statements (interim or annual) have not been issued. ASU 2017-09 should be applied prospectively to an award modified on or after the adoption date. The Company has not historically modified share-based payments awards after their original issuance so the impact of adopting ASU 2017-09 on the Company's financial statements is not expected to be material.

In March 2017, the FASB issued ASU 2017-07, "Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost." ASU 2017-07 requires that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. ASU 2017-07 also provides that only the service cost component is eligible for capitalization, when applicable. ASU 2017-07 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted as of the beginning of an annual period for which financial statements (interim or annual) have not been issued. ASU 2017-07 should be applied retrospectively for the income statement presentation of net periodic pension cost and net periodic postretirement benefit cost and prospectively, on or after the effective date, for the capitalization of the service cost component of net periodic pension cost and net periodic postretirement benefit cost. The Company has not yet determined the effect that ASU 2017-07 will have on its financial statements.

In January 2017, the FASB issued ASU 2017-04, "Simplifying the Test for Goodwill Impairment." ASU 2017-04 eliminates Step 2 from the goodwill impairment test. Under the amendments in this Update, an entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. ASU 2017-04 also eliminates the requirement for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. ASU 2017-04 is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company does not believe the adoption of ASU 2017-04 will have a material effect on its financial statements.

In October 2016, the FASB issued ASU 2016-16, "Intra-Entity Transfers of Assets Other Than Inventory." ASU 2016-16 provides that an entity should recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. Consequently, the amendments in ASU 2016-16 eliminate the exception for an intra-entity transfer of an asset other than inventory. ASU 2016-16 is effective for fiscal years, and interim periods within those years, beginning after December 31, 2017. Early adoption is permitted. The Company is evaluating ASU 2016-16 for potential early adoption in the first quarter of fiscal 2018 and currently estimates that the adoption of ASU 2016-16 will eliminate a $57 million income tax deferred charge recorded in the Consolidated Balance Sheet as of June 30, 2017.

In August 2016, the FASB issued ASU 2016-15, "Classification of Certain Cash Receipts and Cash Payments." ASU 2016-15 provides specific guidance on several cash flow classification issues to reduce diversity in practice in how certain transactions are classified within the statement of cash flows. ASU 2016-15 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted. The Company has not yet determined the effect that ASU 2016-15 will have on its financial statements.

In June 2016, the FASB issued ASU 2016-13, "Measurement of Credit Losses on Financial Instruments." ASU 2016-13 requires a financial asset (or a group of financial assets) measured at amortized cost to be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset. Credit losses relating to available-for-sale debt securities should be recorded through an allowance for credit losses. ASU 2016-13 is effective for fiscal years, and interim periods ~~with~~within those years, beginning after December 15, 2019. Early adoption is permitted. The Company has not yet determined the effect that ASU 2016-13 will have on its financial statements.

In March 2016, the FASB issued ASU 2016-09, "Improvements to Employee Share-Based Payment Accounting." Under ASU 2016-09, all excess tax benefits and deficiencies arising from employee share-based payment awards, and dividends on those awards, will be recognized in the income statement during the period in which they occur. ASU 2016-09 allows companies to make an accounting policy election to estimate forfeitures, as required today, or record them when they occur and allows companies to withhold an amount up to the maximum statutory tax rate without causing the award to be classified as a liability. Within the statement of cash flows, ASU 2016-09 requires excess tax benefits to be classified as an operating activity and cash payments to tax authorities in connection with shares withheld to be classified as a financing activity. The Company adopted ASU 2016-09 ~~is effective for annual periods, and interim periods within the annual periods, beginning after December 15, 2016. The Company intends to adopt ASU 2016-09 during~~in the first quarter of fiscal 2017. ~~The impact~~In fiscal 2017, the Company applied the recognition of the excess tax benefits and deficiencies requirement on a prospective basis and recognized a discrete income tax benefit, which was recorded as a reduction to income tax expense, of $35,589 in 2017. Prior to the adoption of ASU 2016-09, ~~will generally be dependent on the amount of employee exercises of share-based awards.~~

~~In March 2016, the FASB issued ASU 2016-07, "Simplifying the Transition~~this excess tax benefit was recorded as an increase to the Equity Method of Accounting." ASU 2016-07 eliminates the requirement to apply the equity method of accounting, upon obtaining significant influence, as if it was applied to the investment from inception. Instead, at the date significant influence is obtained, companies should add the cost of the additional interest acquired to the current basis of the investment and apply the equity method prospectively. If an available-for-sale security becomes eligible for the equity method of accounting, any unrealized gains or losses within accumulated other comprehensive income should be recognized within earnings on the date the investment becomes qualified for use of the equity method. During fourth quarter of 2016, the Company adopted ASU 2016-07.capital. The ~~adoption~~cash flow classification requirements of ASU ~~2016-07 did not affect~~2016-09 were applied retrospectively. As a result, for 2016 and 2015, cash flows from operating activities was increased by $40,935 and $61,292, respectively, and cash flows from financing activities was decreased by $40,935 and $61,292, respectively. The Company elected to continue to estimate forfeitures expected to occur rather than electing to account for forfeitures as they occur. The other provisions of ASU 2016-09 related to accounting for income taxes and minimum statutory share withholding tax requirements had no impact on the Company's financial statements.

In February 2016, the FASB issued ASU 2016-02, "Leases." ASU 2016-02 requires lessees to put most leases on their balance sheet by recognizing a liability to make lease payments and an asset representing their right to use the asset during the lease term. Lessee recognition, measurement, and presentation of expenses and cash flows will not change significantly from existing guidance. Lessor accounting is also largely unchanged from existing guidance. ASU 2016-02 requires qualitative and quantitative disclosures that provide information about the amount, timing, and uncertainty of cash flows arising from leases. ASU 2016-02 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. Early adoption is permitted. The Company has not yet determined the effect that ASU 2016-02 will have on its financial statements.

In January 2016, the FASB issued ASU 2016-01, "Recognition and Measurement of Financial Assets and Liabilities." ASU 2016-01 requires equity investments (excluding equity method investments and investments that are consolidated) to be measured at fair value with changes in fair value recognized in net income. Equity investments that do not have a readily determinable fair value may be measured at cost, adjusted for impairment and observable price changes. The ASU also simplifies the impairment assessment of equity investments, eliminates the disclosure of the assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at cost on the balance sheet and requires the exit price to be used when measuring fair value of financial instruments for disclosure purposes. Under ASU 2016-01, changes in fair value (resulting from instrument-specific credit risk) will be presented separately in other comprehensive income for liabilities measured using the fair value option and financial assets and liabilities will be presented separately by measurement category and type either on the balance sheet or in the financial statement disclosures. ASU 2016-01 is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company has not yet determined the effect that ASU 2016-01 will have on its financial statements.

In September 2015, the FASB issued ASU 2015-16, "Business Combinations - Simplifying the Accounting for Measurement-Period Adjustments." ASU 2015-16 requires the recognition of adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustments are determined. The effects of the adjustments to provisional amounts on depreciation, amortization or other income effects should be recognized in current-period earnings as if the accounting had been completed at the acquisition date. Disclosure of the portion of the adjustment recorded in current-period earnings that would have been reported in prior reporting periods if the adjustment to the provisional amounts had been recognized at the acquisition date is also required. During the first quarter of 2016, the Company adopted ASU 2015-16. The adoption of ASU 2015-16 did not materially affect the Company's financial statements.

In July 2015, the FASB issued ASU 2015-11, "Inventory - Simplifying the Measurement of Inventory." ASU 2015-11 requires companies to measure inventory (valued using first-in, first-out or average cost methods) at the lower of cost or net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. The measurement of inventory valued using the last-in, first-out method is unchanged. During the fourth quarter of 2016, the Company adopted ASU 2015-11. The adoption of ASU 2015-11 did not materially affect the Company's financial statements.

In April 2015, the FASB issued ASU 2015-03, "Interest - Imputation of Interest." ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in the ASU. ASU 2015-03 is effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. ~~Early adoption is permitted. The~~During the first quarter of 2017, the Company ~~does not expect that~~retrospectively adopted ASU 2015-03 ~~will have a material impact on its financial statements.~~and has revised the following captions within the Consolidated Balance Sheet at June 30, 2016:



	As Previously Reported		Revised
Investments and other assets	$	850,088	$	827,492
Notes payable and long-term debt payable within one year	361,840		361,787
Long-term debt	2,675,000		2,652,457

In May 2014, the FASB issued ASU 2014-09, "Revenue from Contracts with Customers." ASU 2014-09 requires revenue recognition to depict the transfer of goods or services to customers in an amount that reflects the consideration that a company expects to be entitled to in exchange for the goods or services. To achieve this principle, a company must apply five steps including identifying the contract with a customer, identifying the performance obligations in the contract, determining the transaction price, allocating the transaction price to the performance obligations, and recognizing revenue when (or as) the company satisfies the performance obligations. Additional quantitative and qualitative disclosure to enhance the understanding about the nature, amount, timing, and uncertainty of revenue and cash flows is also required. ASU 2014-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. In April 2016, the FASB issued ASU 2016-10, "Identifying Performance Obligations and Licensing." ASU 2016-10 clarifies the following two aspects of ASU

2014-09: identifying performance obligations and licensing implementation guidance. The effective date of ASU 2016-10 is the same as the effective date of ASU 2014-09. The Company ~~has not yet determined~~currently anticipates using the ~~effect that~~modified retrospective method to adopt ASU 2014-09. The Company is still in the process of quantifying the impact of the adoption of ASU 2014-09, ~~and ASU 2016-10 will~~but at this time the Company does not expect the adoption to have a material impact on its financial statements.


2.	Acquisitions and ~~Deconsolidation of Subsidiary~~Divestiture

Acquisitions - During ~~2016,~~2017, the Company completed ~~two~~three acquisitions whose aggregate sales for their most recent fiscal year prior to acquisition were approximately ~~$48~~$1,522 million. Total purchase price for the ~~two~~three acquisitions was approximately ~~$71~~$4,227 million in cash and $316 million in assumed debt.

During 2016, the Company completed two acquisitions whose aggregate sales for their most recent fiscal year prior to acquisition were approximately $48 million. Total purchase price for the two acquisitions was approximately $71 million in cash and $2 million in assumed debt.

During 2015, the Company completed four acquisitions whose aggregate sales for their most recent fiscal year prior to acquisition were approximately $27 million. Total purchase price for the four acquisitions was approximately $27 million in cash.

~~During 2014, the Company completed~~ ~~three~~ ~~acquisitions whose aggregate sales for their most recent fiscal year prior to acquisition were approximately~~ ~~$14 million. Total purchase price for the~~ ~~three~~ ~~acquisitions was approximately~~ ~~$19 million~~ ~~in cash.~~

The results of operations for all acquisitions are included as of the respective dates of acquisition. Assets acquired and liabilities assumed were recognized at their respective fair values as of the acquisition date. The process of estimating the fair values of certain tangible assets, identifiable intangible assets and assumed liabilities requires the use of judgment in determining the appropriate assumptions and estimates. The assets acquired and liabilities assumed presented in the table below are based on available information and may be revised during the measurement period, not to exceed 12 months, as valuations are finalized, additional information becomes available and as additional analysis is performed. Such revisions may have a material impact on the Company's results of operations and financial position. The initial purchase price allocation and subsequent purchase price adjustments for acquisitions in 2017, 2016, ~~2015~~ and ~~2014~~2015 are ~~presented below. Some of the~~ ~~2016~~ ~~acquisitions are still subject to purchase price adjustments.~~as follows.


	2016		2015		2014		2017		2016		2015
Assets:
Accounts receivable	$	6,793	$	7,656	$	954	$	263,616	$	6,793	$	7,656
Inventories	12,041		3,099		2,184		302,422		12,041		3,099
Prepaid expenses	1,350		91		57		18,342		1,350		91
Deferred income taxes	—		5		189		4,658		—		5
Plant and equipment	5,647		1,123		11,211		376,826		5,647		1,123
Intangible and other assets	26,849		7,794		5,646		1,526,909		26,849		7,794
Goodwill	31,134		10,430		3,195		2,677,489		31,134		10,430
	83,814		30,198		23,436		5,170,262		83,814		30,198
Liabilities:
Notes payable	720		—		—		20,162		720		—
Accounts payable, trade	2,536		2,689		915		84,753		2,536		2,689
Accrued payrolls and other compensation	1,310		243		263		45,942		1,310		243
Accrued domestic and foreign taxes	604		777		1		5,435		604		777
Other accrued liabilities	1,804		5,267		3,864		80,515		1,804		5,267
Long-term debt	1,743		—		—		296,240		1,743		—
Pensions and other postretirement benefits							33,929		—		—
Deferred income taxes	7,545		2,604		—		520,389		7,545		2,604
Other liabilities	—		—		800		11,878		—		—
Noncontrolling interests							1,822		—		—
	16,262		11,580		5,843		1,101,065		16,262		11,580
Net assets acquired	$	67,552	$	18,618	$	17,593	$	4,069,197	$	67,552	$	18,618

~~Deconsolidation of Subsidiary~~ ~~- During 2014,~~Goodwill is calculated as the ~~Company and GE Aviation, a non-related party, finalized a joint venture in which the Company sold a 50 percent equity interest in one of its wholly-owned subsidiaries. The sale~~excess of the ~~50 percent equity interest~~purchase price over the net assets acquired, primarily all of which is not deductible for tax purposes. With respect to the Clarcor acquisition, goodwill represents cost synergies and enhancements to the Company's existing filtration technologies. See Note 7 for additional information about intangible assets.

The remaining disclosures in Note 2 pertain only to the ~~wholly-owned subsidiary resulted in~~Clarcor acquisition as the other two acquisitions completed during 2017 were immaterial.

Clarcor is a ~~loss~~major manufacturer of ~~control~~filtration products under more than a dozen respected brands, including CLARCOR, Baldwin, Fuel Manager, PECOFacet, Airguard, Altair, BHA, Clearcurrent, Clark Filter, Hastings, United Air Specialists, Keddeg and Purolator. Clarcor had annual sales of approximately $1,400 million for its fiscal 2016. For segment reporting purposes, Clarcor is part of the ~~subsidiary, and therefore it was deconsolidated from the Company's financial statements during 2014.~~Diversified Industrial Segment.

The Company ~~recognized~~believes that Clarcor is a highly complementary acquisition that provides the Company with additional proprietary media, industrial and process filtration products and technologies, as well as a broad portfolio of replacement filters. The acquisition of Clarcor also offers significant expected operating synergies.

The Company's results of operations for 2017 include Clarcor's results of operations from the date of acquisition, February 28, 2017, through June 30, 2017. Net sales and segment operating (loss) attributable to Clarcor during this period was $487,388 and $(16,164), respectively.

The following unaudited pro forma information gives effect to the Company's acquisition of Clarcor as if the acquisition had occurred on July 1, 2015, and Clarcor had been included in the Company's results of operations for 2017 and 2016.



	2017		2016
Net sales	$	12,935,834	$	12,772,097
Net income attributable to common shareholders	1,027,693		748,634
Diluted earnings per share	7.58		5.47

The unaudited pro forma financial information in the table above includes adjustments related to amortization expense, depreciation, interest expense and transaction costs incurred as well as adjustments to cost of sales for the step-up in inventory to estimated acquisition-date fair value and related income tax effects and is based on a preliminary purchase price allocation using currently available information. Transaction costs incurred (which are reflected in the selling, general and administrative expenses caption in the Consolidated Statement of Income) and the adjustment to cost of sales for the step-up in inventory to estimated acquisition-date fair value are considered to be non-recurring. Adjustments for non-recurring items increased pro forma net income attributable to common shareholders by $108,078 for 2017 and decreased pro forma net income attributable to common shareholders by $39,121 for 2016. The unaudited pro forma financial information does not give effect to any synergies, operating efficiencies or cost savings that may result from the Clarcor acquisition.

Divestiture - During 2017, the Company divested its Autoline product line, which was part of the Diversified Industrial Segment. The operating results and net assets of the Autoline product line were immaterial to the Company's consolidated results of operations and financial position. The Company recorded a net pre-tax gain in 2017 of ~~$413~~approximately $45 million on the deconsolidation, measured as the fair value of the consideration received for the 50 percent equity interest in the former subsidiary and the fair value of the retained investment less the carrying amount of the former subsidiary's net assets. Approximately $186 million of the pre-tax gain is attributablerelated to the ~~remeasurement of the retained investment in the former subsidiary to its current fair value.~~divestiture. The gain is reflected in the ~~(gain)loss on disposal of assets~~other (income), net caption in the Consolidated Statement of Income and the other expense ~~(income)~~ caption in the Business Segment Information.


3.	Charges Related to Business Realignment

To structure its businesses in light of current and anticipated customer demand, the Company incurred business realignment charges in ~~2016~~2017, ~~2015~~2016 and ~~2014~~2015.

Business realignment charges presented in the Business Segment Information are as follows:


	2016		2015		2014		2017		2016		2015
Diversified Industrial	$	91,404	$	30,882	$	101,524	$	52,939	$	91,404	$	30,882
Aerospace Systems	3,629		967		925		2,674		3,629		967
Corporate administration	2,215		458		—		—		2,215		458
Other expense (income)	116		2,399		1,331
Other expense							784		116		2,399

Work force reductions related to the business realignment charges in the Business Segment Information are as follows:


	2016	2015	2014	2017	2016	2015
Diversified Industrial	3,515	668	1,581	1,102	3,515	668
Aerospace Systems	81	21	44	89	81	21
Corporate administration	53	18	—	—	53	18

The charges primarily consist of severance costs related to actions taken under the Company's ~~Simplification~~simplification initiative aimed at reducing organizational and process complexity, as well as plant closures, with the majority of charges incurred in Europe and North America. In connection with a plant closure during 2016, the Company recognized an expense associated with enhanced retirement benefits (refer to Note 10 for further discussion). The Company believes the realignment actions taken will positively impact future results of operations, but will not have a material effect on liquidity and sources and uses of capital.

The business realignment charges are presented in the Consolidated Statement of Income as follows:


	2016		2015		2014		2017		2016		2015
Cost of sales	$	76,197	$	19,419	$	63,575	$	35,932	$	76,197	$	19,419
Selling, general and administrative expenses	21,051		12,888		38,874		19,681		21,051		12,888
(Gain) loss on disposal of assets	116		2,399		1,331		784		116		2,399

As of June 30, ~~2016,~~2017, approximately ~~$55~~$23 million in severance payments have been made relating to charges incurred during ~~2016,~~2017, the remainder of which are expected to be paid by ~~March 31, 2017.~~June 30, 2018. Severance payments relating to prior-year actions are being made as required. Remaining severance payments related to current-year and prior-year actions of approximately ~~$40~~$33 million are primarily reflected within the other accrued liabilities caption in the Consolidated Balance Sheet. Additional charges may be recognized in future periods related to the realignment actions described above, the timing and amount of which are not known at this time.


4.	Income Taxes

Income before income taxes was derived from the following sources:

2016
2015
2014
United States $ 672,907
$ 779,782
$ 1,115,010
Foreign 441,821
652,458
441,710
$ 1,114,728
$ 1,432,240
$ 1,556,720



	2017		2016		2015
United States	$	722,925	$	672,907	$	779,782
Foreign	605,716		441,821		652,458
	$	1,328,641	$	1,114,728	$	1,432,240

Income taxes include the following:


	2016			2015			2014			2017			2016			2015
Federal
Current	$	235,557		$	185,761		$	377,404		$	132,420		$	235,557		$	185,761
Deferred	(45,797		)	28,108			(45,643		)	37,316			(45,797		)	28,108
Foreign
Current	113,146			189,826			168,177			157,518			113,146			189,826
Deferred	(7,006		)	(11,208		)	(28,016		)	(5,319		)	(7,006		)	(11,208		)
State and local
Current	24,495			25,235			43,860			17,835			24,495			25,235
Deferred	(12,883		)	1,965			(480		)	5,027			(12,883		)	1,965
	$	307,512		$	419,687		$	515,302		$	344,797		$	307,512		$	419,687

A reconciliation of the Company's effective income tax rate to the statutory Federal rate follows:


	2016		2015		2014		2017		2016		2015
Statutory Federal income tax rate	35.0	%	35.0	%	35.0	%	35.0	%	35.0	%	35.0	%
State and local income taxes	0.6		1.1		1.8		1.7		0.6		1.1
Goodwill and intangible asset impairment	—		—		4.5
Tax related to international activities	(5.2	)	(4.5	)	(5.6	)	(5.5	)	(5.2	)	(4.5	)
Cash surrender value of life insurance	0.2		(0.1	)	(0.9	)	(0.9	)	0.2		(0.1	)
Federal manufacturing deduction	(1.0	)	(1.6	)	(1.0	)	(0.9	)	(1.0	)	(1.6	)
Research tax credit	(1.9	)	(0.8	)	(0.3	)	(0.8	)	(1.9	)	(0.8	)
Share-based compensation							(2.7	)	—		—
Other	(0.1	)	0.2		(0.4	)	0.1		(0.1	)	0.2
Effective income tax rate	27.6	%	29.3	%	33.1	%	26.0	%	27.6	%	29.3	%

Deferred income taxes are provided for the temporary differences between the financial reporting basis and the tax basis of assets and liabilities. The differences comprising the net deferred taxes shown on the Consolidated Balance Sheet at June 30 were as follows:


	2016			2015			2017			2016
Retirement benefits	$	815,545		$	614,127		$	571,022		$	815,545
Other liabilities and reserves	126,524			127,838			144,885			126,524
Long-term contracts	64,371			49,929			61,375			64,371
Stock-based incentive compensation	67,138			66,015
Stock-based compensation							59,725			67,138
Loss carryforwards	326,707			316,994			678,486			326,707
Unrealized currency exchange gains and losses	(19,491		)	(17,218		)	22,212			(19,491		)
Inventory	14,693			16,659			17,809			14,693
Foreign tax credit carryforward	24,051			29,965			23,050			24,051
Depreciation and amortization	(536,070		)	(531,258		)	(1,080,218		)	(536,070		)
Valuation allowance	(332,708		)	(330,006		)	(684,079		)	(332,708		)
Net deferred tax asset	$	550,760		$	343,045
Net deferred tax (liability) asset							$	(185,733	)	$	550,760

Change in net deferred tax asset:
Provision for deferred tax	$	65,686		$	(18,865	)	$	(37,024	)	$	65,686
Items of other comprehensive (loss)	149,861			57,523			(177,655		)	149,861
Acquisitions and other	(7,832		)	(1,225		)	(521,814		)	(7,832		)
Total change in net deferred tax	$	207,715		$	37,433		$	(736,493	)	$	207,715

As of June 30, ~~2016~~2017, the Company has recorded deferred tax assets of $~~326,707~~678,486 resulting from $~~1,145,475~~2,529,303 in loss carryforwards. A valuation allowance of $~~313,554~~665,399 related to the loss carryforwards has been established due to the uncertainty of their realization. Of this valuation allowance, $~~288,515~~633,581 relates to non-operating entities whose loss carryforward utilization is considered to be remote. Some of the loss carryforwards can be carried forward indefinitely; others can be carried forward from three years to 20 ~~years~~.years. In addition, a valuation allowance of $~~19,154~~18,680 related to future deductible items has been established due to the uncertainty of their realization. These future deductible items are recorded in the other liabilities and reserves line in the table above.

Provision has not been made for additional U.S. or foreign taxes on undistributed earnings of certain international operations as those earnings will continue to be reinvested. It is not practicable to estimate the additional taxes, including applicable foreign withholding taxes, that might be payable on the eventual remittance of such earnings. Accumulated undistributed earnings reinvested in international operations amounted to approximately $~~3,200,000~~2,900,000 at June 30, ~~2016~~2017.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:


	2016			2015			2014			2017			2016			2015
Balance July 1	$	145,688		$	164,813		$	107,440		$	139,907		$	145,688		$	164,813
Additions for tax positions related to current year	7,025			6,090			7,752			4,735			7,025			6,090
Additions for tax positions of prior years	2,582			14,989			55,136			2,618			2,582			14,989
Additions for acquisitions										3,939			—			—
Reductions for tax positions of prior years	(627		)	(6,945		)	(1,359		)	(1,175		)	(627		)	(6,945		)
Reductions for settlements	(10,284		)	—			(1,856		)	(3,020		)	(10,284		)	—
Reductions for expiration of statute of limitations	(4,142		)	(6,251		)	(5,005		)	(2,792		)	(4,142		)	(6,251		)
Effect of foreign currency translation	(335		)	(27,008		)	2,705			3,294			(335		)	(27,008		)
Balance June 30	$	139,907		$	145,688		$	164,813		$	147,506		$	139,907		$	145,688

The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was $~~80,722~~95,460, $~~83,471~~80,722 and $~~71,898~~83,471 as of June 30, ~~2016~~2017, ~~2015~~2016 and ~~2014~~2015, respectively. If recognized, a significant portion of the gross unrecognized tax benefits as of June 30, ~~2016~~2017 would be offset against an asset currently recorded in the Consolidated Balance Sheet. The accrued interest related to the gross unrecognized tax benefits, excluded from the amounts above, was $~~12,357~~15,432, $~~9,514~~12,357 and $~~8,198~~9,514 as of June 30, ~~2016~~2017, ~~2015~~2016 and ~~2014~~2015, respectively.

It is reasonably possible that within the next 12 months, the amount of gross unrecognized tax benefits could be reduced by up to approximately $100,000 as a result of the revaluation of existing uncertain tax positions arising from developments in the examination process or the closure of tax statutes. Any increase in the amount of unrecognized tax benefits within the next 12 months is expected to be insignificant.

The Company and its subsidiaries file income tax returns in the United States and in various foreign jurisdictions. In the normal course of business, the Company is subject to examination by taxing authorities throughout the world. The Company is open to assessment of its federal income tax returns by the U.S. Internal Revenue Service for years after 2011, and its state and local tax returns for years after ~~2006.~~2011. The Company is open to assessment for significant foreign jurisdictions for years after 2007.


5.	Earnings Per Share

Basic earnings per share are computed using the weighted-average number of common shares outstanding during the year. Diluted earnings per share are computed using the weighted-average number of common shares and common share equivalents outstanding during the year. Common share equivalents represent the dilutive effect of outstanding stock-based awards. The computation of net income per share was as follows:


	2016		2015		2014		2017		2016		2015
Numerator:
Net income attributable to common shareholders	$	806,840	$	1,012,140	$	1,041,048	$	983,412	$	806,840	$	1,012,140
Denominator:
Basic - weighted-average common shares	135,353,321		142,925,327		149,099,448		133,377,547		135,353,321		142,925,327
Increase in weighted-average common shares from dilutive effect of stock-based awards	1,558,369		2,186,823		2,344,655		2,182,217		1,558,369		2,186,823
Diluted - weighted-average common shares, assuming exercise of stock-based awards	136,911,690		145,112,150		151,444,103		135,559,764		136,911,690		145,112,150
Basic earnings per share	$	5.96	$	7.08	$	6.98	$	7.37	$	5.96	$	7.08
Diluted earnings per share	$	5.89	$	6.97	$	6.87	$	7.25	$	5.89	$	6.97

For ~~2016~~2017, ~~2015~~2016 and ~~2014~~2015, 1.4 million, 3.1 million, and 1.1 ~~million~~ ~~and~~ ~~1.2~~ million common shares, respectively, subject to stock-based awards were excluded from the computation of diluted earnings per share because the effect of their exercise would be anti-dilutive.


6.	Inventories

The majority of domestic inventories are valued by the last-in, first-out (LIFO) cost method and the balance of the Company's inventories are valued by the first-in, first-out (FIFO) cost method. Inventories valued by the FIFO cost method are stated at the lower of cost or net realizable value. Inventories valued by the LIFO cost method are stated at lower of cost or market.

Inventories valued on the LIFO cost method were approximately 39 percent of total inventories in 2017 and 30 percent of total inventories in 2016 ~~and~~ 32 ~~percent of total inventories in~~ ~~2015~~. The current cost of these inventories exceeds their valuation determined on the LIFO basis by $193,933 in 2017 and $200,247 in 2016 ~~and~~ ~~$206,233~~ in ~~2015~~. Progress payments of $44,231 in 2017 and $51,104 in 2016 ~~and~~ ~~$34,820~~ in ~~2015~~are netted against inventories.

The inventories caption in the Consolidated Balance Sheet is comprised of the following components:


June 30,	2016		2015		2017		2016
Finished products	$	458,657	$	526,708	$	642,788	$	458,657
Work in process	639,907		688,727		723,133		639,907
Raw materials	74,765		85,024		183,573		74,765
Total	$	1,173,329	$	1,300,459	$	1,549,494	$	1,173,329


7.	Goodwill and Intangible Assets

The changes in the carrying amount of goodwill are as follows:


	Diversified Industrial Segment			Aerospace Systems Segment			Total			Diversified Industrial Segment			Aerospace Systems Segment		Total
Balance June 30, 2014	$	3,072,724		$	98,701		$	3,171,425
Acquisitions	10,430			—			10,430
Divestitures	(4,757		)	—			(4,757		)
Foreign currency translation and other	(234,352		)	(67		)	(234,419		)
Balance June 30, 2015	$	2,844,045		$	98,634		$	2,942,679		$	2,844,045		$	98,634	$	2,942,679
Acquisitions	31,134			—			31,134			31,134			—		31,134
Foreign currency translation and other	(70,776		)	—			(70,776		)	(70,776		)	—		(70,776		)
Balance June 30, 2016	$	2,804,403		$	98,634		$	2,903,037		$	2,804,403		$	98,634	$	2,903,037
Acquisitions										2,677,489			—		2,677,489
Divestitures										(22,618		)	—		(22,618		)
Foreign currency translation and other										28,962			8		28,970
Balance June 30, 2017										$	5,488,236		$	98,642	$	5,586,878

Acquisitions represent the original goodwill allocation, purchase price adjustments and final adjustments to the purchase price allocation for the acquisitions during the measurement period subsequent to the applicable acquisition dates. The impact of the purchase price adjustments and final adjustments to the purchase price allocation on the Company's results of operations and financial position were immaterial.

~~In 2014,~~ Divestitures primarily represent goodwill associated with the ~~Company made~~sale of a decision to restructure and change the strategic direction of its Worldwide Energy Products Division (EPD). The Company calculated the fair value of EPD using assumptions reflecting the Company's updated strategic directionproduct line (see Note 2 for this reporting unit, the results of which indicated that the carrying value of EPD exceeded its fair value. As a result, the Company estimated the implied fair value of EPD's goodwill, which resulted in a non-cash impairment charge of $140,334. The impairment charge is reflected in the goodwill and intangible asset impairment caption in the Consolidated Statement of Income and in the other expense (income) caption in the Business Segment Information. The fair value of EPD was calculated using both a discounted cash flow analysis and estimated fair market values of comparable businesses with each valuation method having equal weight. Fair value calculated using a discounted cash flow analysis is classified within level 3 of the fair value hierarchy and requires several assumptions including a risk-adjusted interest rate and future sales and operating margin levels.further discussion).

The Company's annual impairment tests performed in ~~2016~~2017, ~~2015~~2016 and ~~2014~~2015 resulted in no impairment loss being recognized.

Intangible assets are amortized on a straight-line method over their legal or estimated useful life. The gross carrying value and accumulated amortization for each major category of intangible asset at June 30 are as follows:


	2016				2015				2017				2016
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Patents	$	150,914	$	95,961	$	149,066	$	88,540	$	254,049	$	100,860	$	150,914	$	95,961
Trademarks	340,805		179,156		355,108		172,187		553,691		200,413		340,805		179,156
Customer lists and other	1,362,521		656,552		1,369,380		599,388		2,566,983		765,966		1,362,521		656,552
Total	$	1,854,240	$	931,669	$	1,873,554	$	860,115	$	3,374,723	$	1,067,239	$	1,854,240	$	931,669

During ~~2016~~2017, the Company acquired intangible assets, either individually or as part of a group of assets, with an initial purchase price allocation and weighted-average life as follows:


	Purchase Price Allocation		Weighted-Average Life	Purchase Price Allocation		Weighted-Average Life
Patents	$	565	12 years	$	108,810	13 years
Trademarks	761		5 years	212,060		17 years
Customer lists and other	25,523		11 years	1,197,573		11 years
Total	$	26,849	11 years	$	1,518,443	12 years

Total intangible asset amortization expense in ~~2016~~2017, ~~2015~~2016 and ~~2014~~2015 was $145,128, $108,019 ~~$109,887~~ and ~~$118,782,~~$109,887, respectively. Estimated intangible asset amortization expense for the five years ending June 30, ~~2017~~2018 through ~~2021~~2022 is $~~95,873~~219,238, $~~91,902~~209,047, $~~85,091~~200,242, $~~78,297~~191,520 and $~~70,252~~155,482, respectively.

Intangible assets are evaluated for impairment whenever events or circumstances indicate that the undiscounted net cash flows to be generated by their use over their expected useful lives and eventual disposition may be less than their net carrying value. ~~In 2014,~~No such events occurred in connection with the goodwill impairment review of EPD, the Company determined that certain intangible assets of EPD, primarily trademarks and customer lists, were impaired resulting in the recognition of a non-cash impairment charge of $43,664. The impairment charge is reflected in the goodwill and intangible asset impairment caption in the Consolidated Statement of Income and in the other expense (income) caption in the Business Segment Information. The fair value of EPD's intangible assets were determined using an income approach for the individual intangible assets. Fair value calculated using an income approach is classified within level 3 of the fair value hierarchy and requires several assumptions including future sales and operating margins expected to be generated from the use of the individual intangible asset.2017, 2016 or 2015.


8.	Financing Arrangements

The Company has a line of credit totaling $2,000,000 through a multi-currency revolving credit agreement with a group of banks, ~~$1,696,300~~$1,465,800 of which was available at June 30, ~~2016.~~2017. The credit agreement expires in October ~~2017;~~2021; however, the Company has the right to request a one-year extension of the expiration date on an annual basis, which request may result in changes to the current terms and conditions of the credit agreement. Advances from the credit agreement can be used for general corporate purposes, including acquisitions, and for the refinancing of existing indebtedness. The credit agreement requires the payment of an annual facility fee, the amount of which may increase in the event the Company's credit ratings are lowered. Although a lowering of the Company's credit ratings would likely 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.

The Company is currently authorized to sell up to ~~$1,850,000~~$2,000,000 of short-term commercial paper notes. At June 30, ~~2016, $303,700~~2017, $534,200 of commercial paper notes were outstanding and no$303,700 commercial paper notes were outstanding at June 30, ~~2015.~~2016.

In addition to commercial paper notes, notes payable includes short-term lines of credit and borrowings from foreign banks. At June 30, ~~2016~~2017, the Company had $~~64,310~~62,946 in lines of credit from various foreign banks, none of which ~~was~~had amounts outstanding at June 30, ~~2016~~2017. or at June 30, 2016. Most of these agreements are renewed annually. The weighted-average interest rate on notes payable during both ~~2016~~2017 and 2016 was 0.3 ~~percent and was 0.2 percent during~~ ~~2015~~.percent.

The Company's foreign locations in the ordinary course of business may enter into financial guarantees through financial institutions which enable customers to be reimbursed in the event of nonperformance by the Company.

The Company's credit agreements and indentures governing certain debt agreements contain various covenants, the violation of which would limit or preclude the use of the applicable agreements for future borrowings, or might accelerate the maturity of the related outstanding borrowings covered by the applicable agreements. AtBased on the Company's ~~present~~ rating level at June 30, 2017, the most restrictive financial covenant ~~contained in the credit agreements and the indentures~~ provides that the ratio of ~~secured~~ debt to ~~net tangible assets be less than 10 percent.~~debt-shareholders' equity cannot exceed 0.60 to 1.0. As of June 30, ~~2016,~~2017, the ~~Company does not have any secured~~Company's debt ~~outstanding.~~to debt-shareholders' equity ratio was 0.529 to 1.0. The Company is in compliance with all covenants.


9.	Debt


June 30,	2016		2015		2017			2016
Domestic:
Fixed rate medium-term notes 3.30% to 6.55%, due 2018-2045	$	2,675,000	$	2,675,000
Fixed rate medium-term notes, 3.30% to 6.55%, due 2018-2045					$	2,675,000		$	2,675,000
Senior Notes, 3.25% to 4.10%, due 2027 - 2047					1,300,000			—
Term loan, Libor plus 100 bps, due 2020					493,750			—
Foreign:
Bank loans, including revolving credit 1% to 11.75%, due 2016	—		322
Euro bonds 4.125%, due 2016	—		222,820
Japanese Yen credit facility JPY Libor plus 55 bps, due 2017	58,140		48,960
Euro Senior Notes, 1.125%, due 2025					799,890			—
Euro Term loan, Libor plus 150 bps, due 2022					114,270			—
Japanese Yen credit facility, JPY Libor plus 55 bps, due 2017					—			58,140
Other long-term debt					433			—
Deferred debt issuance costs					(47,183		)	(22,596		)
Total long-term debt	2,733,140		2,947,102		5,336,160			2,710,544
Less: Long-term debt payable within one year	58,140		223,142		474,265			58,087
Long-term debt, net	$	2,675,000	$	2,723,960	$	4,861,895		$	2,652,457

The Company issued the Senior Notes and entered into term loans during 2017. Interest payments are paid semi-annually for the Senior Notes due 2027 and 2047, paid annually for the Senior Notes due 2025 and are generally paid quarterly for the term loans. Total debt issuance costs were approximately $27,782 and will be amortized over the respective debt terms. The Company primarily used the proceeds from these debt issuances for the Clarcor acquisition.

Principal amounts of long-term debt payable in the five years ending June 30, ~~2017~~2018 through ~~2021~~2022 are ~~$58,140, $450,000, $100,000, $0~~$475,143, $100,107, $468,822, $32 and ~~$0,~~$114,280, respectively. The principal amounts of long-term debt payable exclude the impact of the amortization of debt issuance costs.

Lease Commitments - Future minimum rental commitments as of June 30, ~~2016~~2017, under non-cancelable operating leases, which expire at various dates, are as follows: ~~2017~~-~~$68,718~~; 2018-$~~44,506~~81,400; 2019-$~~27,412~~56,974; 2020-$~~15,009~~35,467; 2021-$~~9,338~~21,189; 2022-$13,220 and after ~~2021~~2022-$~~29,946~~31,994.

Rental expense in ~~2016~~2017, ~~2015~~2016 and ~~2014~~2015 was $~~119,004~~118,723, $~~125,657~~119,004 and $~~131,948~~125,657, respectively.


10.	Retirement Benefits

Pensions - The Company has noncontributory defined benefit pension plans covering eligible employees, including certain employees in foreign countries. Plans for most salaried employees provide pay-related benefits based on years of service. Plans for hourly employees generally provide benefits based on flat-dollar amounts and years of service. The Company also has arrangements for certain key employees which provide for supplemental retirement benefits. In general, the Company's policy is to fund these plans based on legal requirements, tax considerations, local practices and investment opportunities. The Company also sponsors defined contribution plans and participates in government-sponsored programs in certain foreign countries.

A summary of the Company's defined benefit pension plans follows:


	2016			2015			2014			2017			2016			2015
Benefit cost
Service cost	$	94,650		$	97,960		$	99,929		$	94,356		$	94,650		$	97,960
Interest cost	181,469			176,556			190,999			126,131			181,469			176,556
Special termination cost	7,088			21,174			—			—			7,088			21,174
Settlement cost	5,102			—			—			—			5,102			—
Expected return on plan assets	(221,629		)	(218,938		)	(226,884		)	(239,537		)	(221,629		)	(218,938		)
Amortization of prior service cost	7,470			9,437			14,644			8,116			7,470			9,437
Amortization of unrecognized actuarial loss	170,407			152,664			159,584			212,433			170,407			152,664
Amortization of initial net obligation	17			17			19			18			17			17
Net periodic benefit cost	$	244,574		$	238,870		$	238,291		$	201,517		$	244,574		$	238,870


	2016			2015			2017			2016
Change in benefit obligation
Benefit obligation at beginning of year	$	4,867,703		$	4,749,447		$	5,315,655		$	4,867,703
Service cost	94,650			97,960			94,356			94,650
Interest cost	181,469			176,556			126,131			181,469
Acquisition							201,283			—
Special termination cost	7,088			21,174			—			7,088
Actuarial loss	487,523			237,896
Plan amendments							3,265			2,992
Divestiture							(851		)	—
Actuarial (gain) loss							(268,370		)	487,523
Benefits paid	(230,551		)	(261,473		)	(250,289		)	(230,551		)
Plan amendments	2,992			3,033
Foreign currency translation and other	(95,219		)	(156,890		)	(3,323		)	(95,219		)
Benefit obligation at end of year	$	5,315,655		$	4,867,703		$	5,217,857		$	5,315,655

Change in plan assets
Fair value of plan assets at beginning of year	$	3,238,307		$	3,499,274		$	3,307,047		$	3,238,307
Actual gain on plan assets	97,165			51,514			341,344			97,165
Acquisition							168,264			—
Employer contributions	279,140			62,852			330,932			279,140
Benefits paid	(230,551		)	(261,473		)	(250,289		)	(230,551		)
Foreign currency translation and other	(77,014		)	(113,860		)	(1,297		)	(77,014		)
Fair value of plan assets at end of year	$	3,307,047		$	3,238,307		$	3,896,001		$	3,307,047
Funded status	$	(2,008,608	)	$	(1,629,396	)	$	(1,321,856	)	$	(2,008,608	)


Amounts recognized on the Consolidated Balance Sheet
Other accrued liabilities	$	(42,763	)	$	(31,206	)	$	(12,793	)	$	(42,763	)
Pensions and other postretirement benefits	(1,965,845		)	(1,598,190		)	(1,309,063		)	(1,965,845		)
Net amount recognized	$	(2,008,608	)	$	(1,629,396	)	$	(1,321,856	)	$	(2,008,608	)

Amounts recognized in Accumulated Other Comprehensive (Loss)
Net actuarial loss	$	2,047,103		$	1,639,010		$	1,461,017		$	2,047,103
Prior service cost	27,723			32,126			22,761			27,723
Transition obligation	103			103			77			103
Net amount recognized	$	2,074,929		$	1,671,239		$	1,483,855		$	2,074,929

The presentation of the amounts recognized on the Consolidated Balance Sheet and in accumulated other comprehensive (loss) is on a debit (credit) basis and excludes the effect of income taxes.

Beginning in 2017, the Company changed the method used to estimate the service and interest cost components of net periodic pension and other postretirement benefit costs. The new method uses the spot yield curve approach to estimate the service and interest costs by applying the specific spot rates along the yield curve used to determine the benefit obligations to relevant cash outflows. Previously, these costs were determined using a single-weighted average discount rate. The change does not affect the measurement of the Company's benefit obligations. The new method provides a more precise measure of service and interest costs by improving the correlation between projected benefit cash flows and the discrete spot yield curve rates and is accounted for as a change in estimate prospectively beginning the first quarter of fiscal 2017. As a result of the method change, net pension benefit cost for 2017 is lower than the net pension benefit cost for 2016 by $29,777.

During 2016, the Company provided enhanced retirement benefits in connection with a plant closure, which resulted in an increase in net pension benefit cost of $7,088. During 2015, the Company initiated a voluntary retirement program under which certain participants in its U.S. qualified defined benefit pension plan were offered enhanced retirement benefits, which resulted in an increase in net pension benefit cost of $21,174.

During 2015, the Company offered lump-sum distributions to certain participants in its U.S. qualified defined benefit plan. Included in benefits paid in 2015 is $81,496, related to participants who elected to receive lump-sum distributions.

The estimated amount of net actuarial loss, prior service cost and transition obligation that will be amortized from accumulated other comprehensive (loss) into net periodic benefit pension cost in ~~2017~~2018 is $~~200,725~~141,399, $~~6,579~~6,055 and $1917, respectively.

The accumulated benefit obligation for all defined benefit plans was $~~4,884,985~~4,890,058 and $~~4,451,047~~4,884,985 at June 30, ~~2016~~2017 and ~~2015~~2016, respectively. The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for pension plans with accumulated benefit obligations in excess of plan assets were $5,120,268, $4,805,485 and $3,793,696, respectively, at June 30, 2017, and $5,211,768, $4,796,860 and $3,206,287, respectively, at June 30, 2016~~, and~~ ~~$4,761,438~~, ~~$4,352,369~~ ~~and~~ ~~$3,129,803, respectively, at~~ ~~June 30, 2015~~. The projected benefit obligation and fair value of plan assets for pension plans with projected benefit obligations in excess of plan assets were $5,142,881 and $3,815,815, respectively, at June 30, 2017, and $5,310,979 and $3,302,370, respectively, at June 30, 2016~~, and~~ ~~$4,821,675~~ ~~and~~ ~~$3,188,293, respectively, at~~ ~~June 30, 2015~~.

The Company expects to make cash contributions of approximately $~~306~~68 million to its defined benefit pension plans in ~~2017~~2018, the majority of which relate to its ~~U.S. qualified~~non-U.S. defined benefit ~~plan.~~plans. Estimated future benefit payments in the five years ending June 30, ~~2017~~2018 through ~~2021~~2022 are $~~239,898~~231,732, $~~220,006~~236,968, $~~224,569~~243,956, $~~248,085~~260,645 and $~~272,250~~296,949, respectively and $~~1,381,405~~1,448,318 in the aggregate for the five years ending June 30, ~~2021~~2023 through June 30, ~~2025.~~2027.

The assumptions used to measure net periodic benefit cost for the Company's significant defined benefit plans are:


	2016		2015		2014		2017		2016		2015
U.S. defined benefit plans
Discount rate	4.19	%	4.05	%	4.52	%	3.33	%	4.19	%	4.05	%
Average increase in compensation	5.14	%	5.12	%	5.13	%	5.02	%	5.14	%	5.12	%
Expected return on plan assets	7.5	%	7.5	%	8.0	%	7.5	%	7.5	%	7.5	%
Non-U.S. defined benefit plans
Discount rate	0.7 to 6.0%		0.9 to 4.2%		1.5 to 4.59%		0.23 to 7.75%		0.7 to 6.0%		0.9 to 4.2%
Average increase in compensation	2.0 to 5.5%		2.0 to 5.0%		2.0 to 6.0%		2.0 to 5.5%		2.0 to 5.5%		2.0 to 5.0%
Expected return on plan assets	1.0 to 5.75%		1.0 to 6.25%		1.0 to 6.25%		1.0 to 5.75%		1.0 to 5.75%		1.0 to 6.25%

The assumptions used to measure the benefit obligation for the Company's significant defined benefit plans are:


	2016		2015		2017		2016
U.S. defined benefit plans
Discount rate	3.33	%	4.19	%	3.64	%	3.33	%
Average increase in compensation	5.02	%	5.14	%	3.89	%	5.02	%
Non-U.S. defined benefit plans
Discount rate	0.23 to 7.75%		0.7 to 6.0%		0.30 to 7.57%		0.23 to 7.75%
Average increase in compensation	2.0 to 5.5%		2.0 to 5.5%		2.0 to 5.5%		2.0 to 5.5%

The discount rate assumption is based on current rates of high-quality long-term corporate bonds over the same estimated time period that benefit payments will be required to be made. The expected return on plan assets assumption is based on the weighted-average expected return of the various asset classes in the plans' portfolio. The asset class return is developed using historical asset return performance as well as current market conditions such as inflation, interest rates and equity market performance.

Beginning in 2017, the Company will change the method used to estimate the service and interest cost components of net periodic pension cost. The new method uses the spot yield curve approach to estimate the service and interest costs by applying the specific spot rates along the yield curve used to determine the benefit obligation to the relevant projected cash outflows. Previously, these cost components were determined using a single-weighted average discount rate. This change does not affect the measurement of the Company benefit obligation.

The weighted-average allocation of the majority of the assets related to defined benefit plans is as follows:


	2016		2015		2017		2016
Equity securities	39	%	41	%	45	%	39	%
Debt securities	51	%	47	%	47	%	51	%
Other investments	10	%	12	%	8	%	10	%
	100	%	100	%	100	%	100	%

The weighted-average target asset allocation as of June 30, ~~2016~~2017 is 41 percent equity securities, 47 percent debt securities and 12 percent other investments. The investment strategy for the Company's worldwide defined benefit pension plan assets focuses on achieving prudent actuarial funding ratios while maintaining acceptable levels of risk in order to provide adequate liquidity to meet immediate and future benefit requirements. This strategy requires investment portfolios that are broadly diversified across various asset classes and external investment managers. Assets held in the U.S. defined benefit plans account for approximately 7375 percent of the Company's total defined benefit plan assets. The Company's overall investment strategy with respect to the Company's U.S. defined benefit plans is to opportunistically migrate from its traditional mix between

growth seeking assets (primarily consisting of global public equities in developed and emerging countries and hedge fund of fund strategies) and income generating assets (primarily consisting of high quality bonds, both domestic and global, emerging market bonds, high yield bonds and Treasury Inflation Protected Securities) to an allocation more heavily weighted toward income generating assets. Over time, long duration fixed income assets are being added to the portfolio. These securities are highly correlated with the Company's pension liabilities and will serve to hedge a portion of the Company's interest rate risk.

The fair values of pension plan assets at June 30, ~~2016~~2017 and at June 30, ~~2015~~2016, by asset class, are as follows:


	June 30, 2016		Quoted Prices In Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		June 30, 2017			Quoted Prices In Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Cash and cash equivalents	$	46,052	$	45,474	$	578	$	—	$	76,057		$	75,370	$	687		$	—
Equity securities
U.S. based companies	292,138		292,138		—		—		416,830			416,830		—			—
Non-U.S. based companies	191,647		191,647		—		—		236,134			236,134		—			—
Fixed income securities
Corporate bonds	141,549		73,685		67,864		—		176,135			91,982		84,153			—
Government issued securities	203,000		141,935		61,065		—		199,389			144,616		54,773			—
Mutual funds
Equity funds	149,807		149,807		—		—		306,168			306,168		—			—
Fixed income funds	151,649		151,649		—		—		204,628			204,628		—			—
Mutual funds measured at net asset value	246,075								233,234
Common/Collective trusts
Equity funds	65,404		65,404		—		—		70,389			70,389		—			—
Fixed income funds	43,981		43,981		—		—		46,003			46,003		—			—
Common/Collective trusts measured at net asset value	1,487,170								1,677,942
Limited Partnerships measured at net asset value	280,248								262,092
Miscellaneous	8,327		—		8,327		—		(9,000		)	—		(9,000		)	—
Total at June 30, 2016	$	3,307,047	$	1,155,720	$	137,834	$	—
Total at June 30, 2017									$	3,896,001		$	1,592,120	$	130,613		$	—


	June 30, 2015		Quoted Prices In Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		June 30, 2016		Quoted Prices In Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash and cash equivalents	$	75,015	$	75,015	$	—	$	—	$	46,052	$	45,474	$	578	$	—
Equity securities
U.S. based companies	299,321		299,321		—		—		292,138		292,138		—		—
Non-U.S. based companies	203,199		203,199		—		—		191,647		191,647		—		—
Fixed income securities
Corporate bonds	165,226		77,224		88,002		—		141,549		73,685		67,864		—
Government issued securities	143,697		90,785		52,912		—		203,000		141,935		61,065		—
Mutual funds
Equity funds	149,383		149,383		—		—		149,807		149,807		—		—
Fixed income funds	135,949		135,949		—		—		151,649		151,649		—		—
Mutual funds measured at net asset value	5,564								246,075
Common/Collective trusts
Equity funds	77,429		77,429		—		—		65,404		65,404		—		—
Fixed income funds	46,184		46,184		—		—		43,981		43,981		—		—
Common/Collective trusts measured at net asset value	1,635,135								1,487,170
Limited Partnerships measured at net asset value	290,904								280,248
Miscellaneous	11,301		—		11,301		—		8,327		—		8,327		—
Total at June 30, 2015	$	3,238,307	$	1,154,489	$	152,215	$	—
Total at June 30, 2016									$	3,307,047	$	1,155,720	$	137,834	$	—

Cash and cash equivalents, which include repurchase agreements and other short-term investments, are valued at cost, which approximates fair value.

Equity securities are valued at the closing price reported on the active market on which the individual securities are traded. U.S. based companies include Company stock with a fair value of $212,480 as of June 30, 2017 and $143,652 as of June 30, 2016 ~~and~~ ~~$154,660~~ ~~as of~~ ~~June 30, 2015~~.

Fixed income securities are valued using both market observable inputs for similar assets that are traded on an active market and the closing price on the active market on which the individual securities are traded.

Mutual funds are valued using the closing market price reported on the active market on which the fund is traded or at net asset value per share and primarily consist of equity and fixed income funds. The equity funds primarily provide exposure to U.S. and international equities, real estate and commodities. The fixed income funds primarily provide exposure to high-yield securities and emerging market fixed income instruments. Mutual funds measured at fair value using the net asset value per share practical expedient have not been categorized in the fair value hierarchy and are being presented in the tables above to permit a reconciliation of the fair value hierarchy to the Consolidated Balance Sheet.

Common/Collective trusts primarily consist of equity and fixed income funds and are valued using the closing market price reported on the active market on which the fund is traded or at net asset value per share. Common/Collective trust investments can be redeemed ~~daily and~~ without ~~restriction. Redemption~~restriction after giving appropriate notice to the issuer. Generally, redemption of the entire investment balance ~~generally~~ requires a ~~30-day~~60-day notice period. The equity funds provide exposure to large, mid and small cap U.S. equities, international large and small cap equities and emerging market equities. The fixed income funds provide exposure to U.S., international and emerging market debt securities. Common/Collective trusts measured at fair value using the net asset value per share practical expedient have not been categorized in the fair value hierarchy and are being presented in the tables above to permit a reconciliation of the fair value hierarchy to the Consolidated Balance Sheet.

Limited Partnerships primarily consist of hedge funds valued using a net asset value per share and provide exposure to a variety of hedging strategies including long/short equity, relative value, event driven and global macro. Limited Partnership investments can be redeemed ~~daily~~either monthly or quarterly and without ~~restriction.~~restriction after giving appropriate notice to the issuer. Redemption of the entire investment balance generally requires no more than a ~~30-day~~95-day notice period. Limited Partnerships measured at fair value using the net asset value per share practical expedient have not been categorized in the fair value hierarchy and are being presented in the tables above to permit a reconciliation of the fair value hierarchy to the Consolidated Balance Sheet.

Miscellaneous primarily includes real estate funds, insurance contracts held in the asset portfolio of the Company's non-U.S. defined benefit pension plans, and net payables for securities purchased but not settled in the asset portfolio of the Company's U.S. defined benefit pension plans. Insurance contracts are valued at the present value of future cash flows promised under the terms of the insurance contracts.

The primary investment objective of equity securities and equity funds, within both the mutual fund and common/collective trust asset class, is to obtain capital appreciation in an amount that at least equals various market-based benchmarks. The primary investment objective of fixed income securities and fixed income funds, within both the mutual fund and common/collective trust asset class, is to provide for a constant stream of income while preserving capital. The primary investment objective of limited partnerships is to achieve capital appreciation through an investment program focused on specialized investment strategies. The primary investment objective of insurance contracts, included in the miscellaneous asset class, is to provide a stable rate of return over a specified period of time.

Employee Savings Plan - The Company sponsors an employee stock ownership plan (ESOP) as part of its existing savings and investment 401(k) plan. The ESOP is available to eligible domestic employees. Company matching contributions, up to a maximum of four percent of an employee's annual compensation, are recorded as compensation expense. ~~Prior to August 1, 2014, Company stock was used to match employee contributions. Effective August 1, 2014, participants~~Participants may direct company matching contributions to any investment option within the savings and investment 401(k) plan.


	2016		2015		2014		2017		2016		2015
Shares held by ESOP	7,728,332		8,407,858		8,944,697		6,911,436		7,728,332		8,407,858
Company matching contributions	$	58,922	$	63,914	$	63,441	$	57,766	$	58,922	$	63,914

In addition to shares within the ESOP, as of June 30, ~~2016~~2017, employees have elected to invest in ~~2,317,924~~1,883,024 shares of common stock within a company stock fund of the savings and investment 401(k) plan.

The Company has a retirement income account (RIA) within the employee savings plan. The Company makes a cash contribution to the participant's RIA each year, the amount of which is based on the participant's age and years of service. Participants do not contribute to the RIA. The Company recognized $~~25,780~~29,309, $~~29,570~~25,780 and $~~25,247~~29,570 in expense related to the RIA in ~~2016~~2017, ~~2015~~2016 and ~~2014~~2015, respectively.

During 2017, the Company assumed various defined contribution plans previously sponsored by Clarcor. The Company recognized expense of $2,199 in 2017 related to these defined contribution plans.

Other Postretirement Benefits - The Company provides postretirement medical and life insurance benefits to certain retirees and eligible dependents. Most plans are contributory, with retiree contributions adjusted annually. The plans are unfunded and pay stated percentages of covered medically necessary expenses incurred by retirees, after subtracting payments by Medicare or other providers and after stated deductibles have been met. For most plans, the Company has established cost maximums to more effectively control future medical costs. The Company has reserved the right to change these benefit plans.

The Company recognized $4,357, $8,754 ~~$4,340~~ and ~~$4,478~~$4,340 in expense related to other postretirement benefits in 2017, 2016 ~~2015~~ and ~~2014,~~2015, respectively. During 2016, the Company provided enhanced retirement benefits in connection with a plant closure, which resulted in an increase in expense related to other postretirement benefits of $4,521.

2016
2015
Change in benefit obligation
Benefit obligation at beginning of year $ 75,953
$ 76,207
Service cost 591
632
Interest cost 2,834
2,723
Special termination cost 4,521
—
Actuarial loss 10,217
655
Benefits paid (4,331 ) (4,264 )
Benefit obligation at end of year $ 89,785
$ 75,953
Funded status $ (89,785 ) $ (75,953 )

2016
2015
Amounts recognized on the Consolidated Balance Sheet
Other accrued liabilities $ (6,216 ) $ (5,629 )
Pensions and other postretirement benefits (83,569 ) (70,324 )
Net amount recognized $ (89,785 ) $ (75,953 )

Amounts recognized in Accumulated Other Comprehensive (Loss)
Net actuarial loss $ 22,914
$ 13,626
Prior service credit (556 ) (676 )
Net amount recognized $ 22,358
$ 12,950



	2017			2016
Change in benefit obligation
Benefit obligation at beginning of year	$	89,785		$	75,953
Service cost	469			591
Interest cost	1,922			2,834
Acquisition	291			—
Special termination cost	—			4,521
Actuarial (gain) loss	(8,235		)	10,217
Benefits paid	(4,299		)	(4,331		)
Benefit obligation at end of year	$	79,933		$	89,785
Funded status	$	(79,933	)	$	(89,785	)



Amounts recognized on the Consolidated Balance Sheet
Other accrued liabilities	$	(6,532	)	$	(6,216	)
Pensions and other postretirement benefits	(73,401		)	(83,569		)
Net amount recognized	$	(79,933	)	$	(89,785	)

Amounts recognized in Accumulated Other Comprehensive (Loss)
Net actuarial loss	$	12,828		$	22,914
Prior service credit	(435		)	(556		)
Net amount recognized	$	12,393		$	22,358

The presentation of the amounts recognized on the Consolidated Balance Sheet and in accumulated other comprehensive (loss) is on a debit (credit) basis and is before the effect of income taxes. The amount of net actuarial loss and prior service credit that will be amortized from accumulated other comprehensive (loss) into net periodic postretirement cost in ~~2017~~2018 is $~~2,101~~1,095 and $(121), respectively.

The assumptions used to measure the net periodic benefit cost for postretirement benefit obligations are:


	2016		2015		2014		2017		2016		2015
Discount rate	3.96	%	3.74	%	4.10	%	3.15	%	3.96	%	3.74	%
Current medical cost trend rate (Pre-65 participants)	7.61	%	7.75	%	7.75	%	7.35	%	7.61	%	7.75	%
Current medical cost trend rate (Post-65 participants)	9.00	%	7.75	%	7.75	%	8.68	%	9.00	%	7.75	%
Ultimate medical cost trend rate	4.50	%	5.00	%	5.00	%	4.50	%	4.50	%	5.00	%
Medical cost trend rate decreases to ultimate in year	2025		2021		2021		2025		2025		2021

The discount rate assumption used to measure the benefit obligation was 3.46 percent in 2017 and 3.15 percent in 2016 ~~and~~ ~~3.96 percent~~ in ~~2015~~.

Estimated future benefit payments for other postretirement benefits in the five years ending June 30, ~~2017~~2018 through ~~2021~~2022 are $~~6,216~~6,532, $~~6,796~~6,426, $~~6,717~~6,034, $~~6,349~~5,870 and $~~6,287~~5,629, respectively, and $~~27,882~~25,142 in the aggregate for the five years ending June 30, ~~2021~~2023 through June 30, ~~2025.~~2027.

A one percentage point change in assumed health care cost trend rates would not have a material effect on the benefit cost or benefit obligation.

Other - The Company has established nonqualified deferred compensation programs, which permit officers, directors and certain management employees annually to elect to defer a portion of their compensation, on a pre-tax basis, until their retirement. The retirement benefit to be provided is based on the amount of compensation deferred, Company matching contributions and earnings on the deferrals. In addition, the Company maintains a defined contribution nonqualified supplemental executive pension plan in which the Company is the only contributor. During ~~2016~~2017, ~~2015~~2016 and ~~2014~~2015, the Company recorded expense (income) ~~expense~~ relating to ~~deferred compensation~~these programs of $~~(2,917)~~20,400, $~~5,676~~(2,917) and $~~24,549~~5,676, respectively.

The Company has invested in corporate-owned life insurance policies to assist in meeting the obligation under these programs. The policies are held in a rabbi trust and are recorded as assets of the Company.


11.	Equity

Changes in accumulated other comprehensive (loss) in shareholders' equity by component:


	Foreign Currency Translation Adjustment and Other			Retirement Benefit Plans			Total			Foreign Currency Translation Adjustment and Other			Retirement Benefit Plans			Total
Balance June 30, 2014	$	124,392		$	(947,890	)	$	(823,498	)
Other comprehensive (loss) before reclassifications	(769,431		)	(253,206		)	(1,022,637		)
Amounts reclassified from accumulated other comprehensive (loss)	4,021			103,496			107,517
Balance June 30, 2015	$	(641,018	)	$	(1,097,600	)	$	(1,738,618	)	$	(641,018	)	$	(1,097,600	)	$	(1,738,618	)
Other comprehensive (loss) before reclassifications	(202,444		)	(400,053		)	(602,497		)	(202,444		)	(400,053		)	(602,497		)
Amounts reclassified from accumulated other comprehensive (loss)	(659		)	114,009			113,350			(659		)	114,009			113,350
Balance June 30, 2016	$	(844,121	)	$	(1,383,644	)	$	(2,227,765	)	$	(844,121	)	$	(1,383,644	)	$	(2,227,765	)
Other comprehensive (loss) before reclassifications										(80,189		)	242,414			162,225
Amounts reclassified from accumulated other comprehensive (loss)										(1,032		)	142,368			141,336
Balance June 30, 2017										$	(925,342	)	$	(998,862	)	$	(1,924,204	)

Significant reclassifications out of accumulated other comprehensive (loss) in shareholders' equity during ~~2016:~~2017:


Details about Accumulated Other Comprehensive (Loss) Components	Income (Expense) Reclassified from Accumulated Other Comprehensive (Loss)			Consolidated Statement of Income Classification	Income (Expense) Reclassified from Accumulated Other Comprehensive (Loss)			Consolidated Statement of Income Classification
Retirement benefit plans
Amortization of prior service cost and initial net obligation	$	(7,366	)	See Note 10	$	(8,014	)	See Note 10
Recognized actuarial loss	(171,337		)	See Note 10	(214,284		)	See Note 10
Total before tax	(178,703		)		(222,298		)
Tax benefit	64,694			Income taxes	79,930			Income taxes
Net of tax	$	(114,009	)		$	(142,368	)

Significant reclassifications out of accumulated other comprehensive (loss) in shareholders' equity during ~~2015:~~2016:


Details about Accumulated Other Comprehensive (Loss) Components	Income (Expense) Reclassified from Accumulated Other Comprehensive (Loss)			Consolidated Statement of Income Classification	Income (Expense) Reclassified from Accumulated Other Comprehensive (Loss)			Consolidated Statement of Income Classification
Retirement benefit plans
Amortization of prior service cost and initial net obligation	$	(9,333	)	See Note 10	$	(7,366	)	See Note 10
Recognized actuarial loss	(153,770		)	See Note 10	(171,337		)	See Note 10
Total before tax	(163,103		)		(178,703		)
Tax benefit	59,607			Income taxes	64,694			Income taxes
Net of tax	$	(103,496	)		$	(114,009	)

Share Repurchases - The Company has a program to repurchase its common shares. On October 22, 2014, the Board of Directors of the Company approved an increase in the overall number of shares authorized to repurchase under the program so that, beginning on such date, the aggregate number of shares authorized for repurchase was 35 million. There is no limitation on the number of shares that can be repurchased in a year. Repurchases may be funded primarily from operating cash flows and commercial paper borrowings and the shares are initially held as treasury shares. The number of common shares repurchased at the average purchase price follows:


	2016		2015		2014		2017		2016		2015
Shares repurchased	5,121,051		11,091,759		1,741,143		1,976,778		5,121,051		11,091,759
Average price per share	$	108.87	$	125.64	$	114.87	$	133.90	$	108.87	$	125.64


12.	Stock Incentive Plans

The Company's ~~2009~~2016 Omnibus Stock Incentive Plan provides for the granting of share-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 authorized for issuance under the 2016 Omnibus Stock Incentive Plan is 16 million. At June 30, 2017, 14.7 million common shares were available for future issuance. As of October 26, 2016, the Company terminated the 2009 Omnibus Stock Incentive Plan ~~is 14.7 million. At June 30, 2016, 3.4 million common~~and all available shares remaining for grant were ~~reserved for issuance in connection with stock incentive plans.~~canceled.

The Company satisfies share-based incentive award obligations by issuing shares of common stock out of treasury, which have been repurchased pursuant to the Company's share repurchase program described in Note 11, or through the issuance of previously unissued common stock.

~~Stock Options/~~SARs - ~~Stock options allow the participant to purchase shares of common stock at a price not less than 100 percent of the fair market value of the stock on the date of grant.~~ 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. ~~Stock options and~~ SARs are exercisable from one to three years after the date of grant and expire no more than 10 years after grant.

The fair value of each ~~stock option and~~ SAR award granted in ~~2016~~2017, ~~2015~~2016 and ~~2014~~2015 was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions:


	2016			2015			2014			2017			2016			2015
Risk-free interest rate	1.9		%	2.0		%	1.55		%	1.4		%	1.9		%	2.0		%
Expected life of award	5.4 yrs			5.4 yrs			5.1 yrs			5.3 yrs			5.4 yrs			5.4 yrs
Expected dividend yield of stock	1.9		%	1.8		%	1.9		%	2.0		%	1.9		%	1.8		%
Expected volatility of stock	28.7		%	32.3		%	39.1		%	28.5		%	28.7		%	32.3		%
Weighted-average fair value	$	26.88		$	30.50		$	32.57		$	27.39		$	26.88		$	30.50

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 Company's historical dividend rate and stock price over a period similar to the expected life of the award. The expected volatility of stock was derived by referring to changes in the Company's historical common stock prices over a time-frame similar to the expected life of the award.

~~Stock option and~~ SAR activity during ~~2016~~2017 is as follows (aggregate intrinsic value in millions):

Number of Shares Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term Aggregate Intrinsic Value
Outstanding June 30, 2015 8,134,206
$ 79.84

Granted 968,445
113.23

Exercised (945,191 ) 67.65

Canceled (101,012 ) 108.32

Outstanding June 30, 2016 8,056,448
$ 84.93
5.3 years $ 199.2
Exercisable June 30, 2016 6,018,552
$ 75.80
4.3 years $ 198.4



	Number of Shares		Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding June 30, 2016	8,056,448		$	84.93
Granted	1,065,739		$	124.36
Exercised	(2,510,398	)	$	76.58
Canceled	(78,383	)	$	117.28
Outstanding June 30, 2017	6,533,406		$	94.18	5.7	years	$	428.8
Exercisable June 30, 2017	4,585,837		$	83.62	4.5	years	$	349.4

A summary of the status and changes of shares subject to ~~stock option and~~ SAR awards and the related average price per share follows:


	Number of Shares		Weighted-Average Grant Date Fair Value		Number of Shares		Weighted-Average Grant Date Fair Value
Nonvested June 30, 2015	2,310,089		$	30.71
Nonvested June 30, 2016					2,037,896		$	29.46
Granted	968,445		26.88		1,065,739		$	27.39
Vested	(1,164,552	)	29.80		(1,083,278	)	$	30.55
Canceled	(76,086	)	29.31		(72,788	)	$	27.60
Nonvested June 30, 2016	2,037,896		$	29.46
Nonvested June 30, 2017					1,947,569		$	27.80

At June 30, ~~2016~~2017, $~~15,844~~15,194 of expense with respect to nonvested ~~stock option and~~ SAR awards has yet to be recognized and will be amortized into expense over a weighted-average period of approximately 1816 months. The total fair value of shares vested during ~~2016~~2017, ~~2015~~2016 and ~~2014~~2015 was $~~34,706~~33,094, $~~34,064~~34,706 and $~~42,363~~34,064, respectively.

Information related to ~~stock option and~~ SAR awards exercised during ~~2016~~2017, ~~2015~~2016 and ~~2014~~2015 is as follows:


	2016		2015		2014		2017		2016		2015
Net cash proceeds	$	126	$	3,355	$	8,013	$	2,202	$	126	$	3,355
Intrinsic value	40,612		72,140		155,903		153,908		40,612		72,140
Income tax benefit	7,188		17,355		37,993		31,193		7,188		17,355

During ~~2016~~2017, ~~2015~~2016 and ~~2014~~2015, the Company recognized stock-based compensation expense of $~~28,129~~28,535, $~~34,617~~28,129 and $~~49,998~~34,617, respectively, relating to ~~stock option and~~ SAR awards. The Company derives a tax deduction measured by the excess of the market value over the grant price at the date stock-based awards are exercised. The related income tax benefit iswas credited to income tax expense in 2017 and to additional capital ~~as the Company is currently~~ in ~~a windfall tax benefit position.~~2016 and 2015.

Shares surrendered upon exercise of ~~stock options and~~ SARs:2017 - 371,246; 2016 - 158,808; 2015 - 243,799; ~~2014~~ - ~~775,163~~.

RSUs - RSUs constitute an agreement to deliver shares of common stock to the participant at the end of a vesting period. Generally, the RSUs granted to employees vest and the underlying stock is issued ratably over a three-year graded vesting period. Unvested RSUs may not be transferred and do not have dividend or voting rights. For each unvested 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.

The fair value of each RSU award granted in 2017, 2016 ~~2015~~ and ~~2014~~2015 was based on the fair market value of the Company's common stock on the date of grant. A summary of the status and changes of shares subject to RSU awards and the related average price per share follows:


	Number of Shares		Weighted-Average Grant Date Fair Value		Number of Shares		Weighted-Average Grant Date Fair Value
Nonvested June 30, 2015	449,288		$	105.63
Nonvested June 30, 2016					374,168		$	111.82
Granted	180,487		113.19		249,892		$	128.30
Vested	(210,777	)	100.45		(194,844	)	$	110.74
Canceled	(44,830	)	108.68		(34,887	)	$	133.12
Nonvested June 30, 2016	374,168		$	111.82
Nonvested June 30, 2017					394,329		$	120.92

During ~~2016~~2017, ~~2015~~2016 and ~~2014~~2015, the Company recognized stock-based compensation expense of $~~21,190~~23,025, $~~22,547~~21,190 and $~~21,475~~22,547 respectively, relating to RSU awards. At June 30, ~~2016~~2017, $~~14,714~~19,915 of expense with respect to nonvested RSU awards has yet to be recognized and will be amortized into expense over a weighted-average period of approximately 1724 months. The total fair value of RSU awards vested during ~~2016~~2017, ~~2015~~2016 and ~~2014~~2015 was $~~21,173~~21,576, $~~18,953~~21,173 and $~~18,007~~18,953, respectively. The Company recognized aan income tax benefit of $~~870~~939, $~~704~~870 and ~~$2,509~~$704 relating to the issuance of common stock for RSU awards that vested during ~~2016~~2017, ~~2015~~2016 and ~~2014,~~2015, respectively.

In 2017 and 2016, 12,430 and 14,404 RSU awards, with a one-year vesting period, were granted to certain non-employee members of the Board of Directors. Although unvested shares do not have dividend or voting rights, recipients receive a dividend equivalent payable in common shares, equal to the cash dividend per share paid to common shareholders. In 2017 and 2016, the Company recognized expense of $1,560 and $824, respectively, with respect to these awards. At June 30, 2017, $505 of expense with respect to nonvested RSU awards granted to the Board of Directors has yet to be recognized and will be amortized into expense over a weighted-average period of approximately four months. During 2017, the Company recognized an income tax benefit of $105 related to these RSU awards.

LTIP - 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 the Company's revenue growth, earnings per share growth and return on invested capital during the three-year performance period. No dividends or dividend equivalents are paid on unearned shares.


Stock issued for LTIP	2016		2015		2014		2017		2016		2015
LTIP three-year plan	2013-14-15		2012-13-14		2011-12-13		2014-15-16		2013-14-15		2012-13-14
Number of shares issued	175,291		185,063		298,813		227,707		175,291		185,063
Average share value on date of issuance	$	113.91	$	119.06	$	126.17	$	157.07	$	113.91	$	119.06
Total value	$	19,967	$	22,034	$	37,701	$	35,766	$	19,967	$	22,034

Under the Company's ~~2014-15-16~~2015-16-17 LTIP, a payout of unrestricted stock will be issued in April ~~2017.~~2018.

The fair value of each LTIP award granted in ~~2016~~2017, ~~2015~~2016 and ~~2014~~2015 was based on the fair market value of the Company's common stock on the date of grant. A summary of the status and changes of shares relating to the LTIP and the related average price per share follows:


	Number of Shares		Weighted-Average Grant Date Fair Value		Number of Shares		Weighted-Average Grant Date Fair Value
Nonvested June 30, 2015	876,171		$	109.27
Nonvested June 30, 2016					813,762		$	108.37
Granted	262,032		88.63		248,076		$	147.87
Vested	(298,105	)	93.05		(305,176	)	$	114.00
Canceled	(26,336	)	115.60		(21,918	)	$	101.86
Nonvested June 30, 2016	813,762		$	108.37
Nonvested June 30, 2017					734,744		$	119.56

During ~~2016~~2017, ~~2015~~2016 and ~~2014~~2015, the Company recorded stock-based compensation expense of $~~21,150~~27,219, $~~38,929~~21,150 and $~~31,688~~38,929, respectively, relating to the LTIP. During 2017, 2016 ~~2015~~ and ~~2014,~~2015, the Company recognized aan income tax benefit ~~(cost)~~ of $1,701, $3,119 ~~$5,373~~ and ~~$(6,983),~~$5,373, respectively, relating to the LTIP.

Shares surrendered in connection with the LTIP: 2017 - 113,074; 2016 - 78,173; 2015 - ~~42,394; 2014 - 140,406.~~42,394.

Restricted Shares - In 2015, ~~and 2014,~~ 12,716 ~~and 12,353~~ restricted shares ~~respectively,~~ were issued to non-employee members of the Board of Directors. Transferability of the restricted shares is restricted for one to three years following issuance, and they vest ratably, on an annual basis, over the term of office of the director. The fair value of the restricted shares was based on the fair market value of the Company's common stock on the date of grant. During 2016 ~~2015~~ and ~~2014~~2015, the Company recognized expense of $468 ~~$1,401~~ and ~~$1,304,~~$1,401, respectively, related to the restricted shares. During ~~2016,~~ ~~2015~~2016 and ~~2014~~2015, the Company recognized a tax ~~(cost) benefit~~cost of $(32)~~, $(3)~~ and $~~212~~(3), respectively, related to ~~the~~ restricted shares.


13.	Shareholders' Protection Rights Agreement

~~On January 25, 2007, the Board of Directors of the Company declared a dividend of one Shareholders' Right for each common share outstanding on February 17, 2007 in relation to the~~The Company's Shareholders Protection Rights ~~Agreement. As~~Agreement dated as of ~~June 30, 2016~~February 8, 2007, between the Company and Wells Fargo Bank, N.A. (as successor to National City Bank), ~~134,012,232~~ ~~common shares were reserved for issuance under this Agreement. Under certain conditions involving acquisition of, or an offer for,~~ ~~15 percent~~ ~~or more of the Company's common shares, all holders of Shareholders'~~as Rights ~~would be entitled to purchase~~ ~~one~~ ~~common share at an exercise price currently set at~~ ~~$160~~. In addition, in certain circumstances, all holders of Shareholders' Rights (other than the acquiring entity) would be entitled to purchase a number of common shares equal to twice the exercise price, or at the option of the Board of Directors, to exchange each Shareholders' Right for one common share. The Shareholders' Rights remain in existence untilAgent, expired on its own terms on February 17, 2017, ~~unless extended by the Board of Directors~~and was not renewed or ~~earlier redeemed (at one cent per Shareholders' Right), exercised or exchanged under the terms of the agreement~~. In the event of an unfriendly business combination attempt, the Shareholders' Rights will cause substantial dilution to the person attempting the business combination. The Shareholders' Rights should not interfere with any merger or other business combination that is in the best interest of the Company and its shareholders since the Shareholders' Rights may be redeemed.replaced.


14.	Research and Development

Research and development costs amounted to $336,675 in 2017, $359,796 in 2016, and $403,085 in 2015 ~~and~~ ~~$410,132~~ in ~~2014~~. These amounts include both costs incurred by the Company related to independent research and development initiatives as well as costs incurred in connection with research and development contracts. Costs incurred in connection with research and development contracts amounted to $65,292 in 2017, $57,999 in 2016, and $57,799 in 2015 ~~and~~ ~~$55,916~~ in ~~2014~~. These costs are included in the total research and development cost for each of the respective years.


15.	Financial Instruments

The Company’s financial instruments consist primarily of cash and cash equivalents, marketable securities and other investments, 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.

Marketable securities and other investments include deposits, which are recorded at cost, and investments classified as available-for-sale, which are recorded at fair value with unrealized gains and losses recorded in accumulated other comprehensive (loss). Gross unrealized gains and losses were not material as of June 30, ~~2016~~2017 and ~~2015.~~2016. Substantially all of the available-for-sale investments in an unrealized loss position have been in that position for less than 12 months. There were no facts or circumstances that indicated the unrealized losses were other than temporary.

The contractual maturities of available-for-sale investments at June 30, ~~2016~~2017 and ~~2015~~2016 are as follows:


	June 30, 2016				June 30, 2015				June 30, 2017				June 30, 2016
	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
Less than one year	$	29,960	$	29,990	$	13,561	$	13,555	$	690	$	693	$	29,960	$	29,990
One to three years	144,100		144,625		188,539		188,057		7,865		7,924		144,100		144,625
Over three years	34,276		34,275		15,673		15,587		2,108		2,113		34,276		34,275

Actual maturities of available-for-sale investments may differ from their contractual maturities as the Company has the ability to liquidate the available-for-sale investments after giving appropriate notice to the issuer.

The carrying value of long-term debt and estimated fair value of long-term debt at June 30 are as follows:


	2016		2015		2017		2016
Carrying value of long-term debt	$	2,733,140	$	2,947,102	$	5,383,343	$	2,733,140
Estimated fair value of long-term debt	3,133,989		3,107,735		5,645,529		3,133,989

The fair value of long-term debt was determined based on observable market prices in the active market in which the security is traded and is classified within level 2 of the fair value hierarchy.

The Company utilizes derivative and non-derivative financial instruments, including forward exchange contracts, costless collar contracts, cross-currency swap contracts and certain foreign denominated debt designated as net investment hedges, 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.

The Company’s Senior Notes due 2025, Euro bonds, which matured in November 2015, and Japanese Yen credit facility, which matured in March 2017, have each been designated as a hedge of the Company’s net investment in certain foreign subsidiaries. The translation of the Senior Notes due 2025, Euro bonds and Japanese Yen credit facility into U.S. dollars is recorded in accumulated other comprehensive (loss) and remains there until the underlying net investment is sold or substantially liquidated.

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 in the Consolidated Balance Sheet are as follows:


	Balance Sheet Caption	2016		2015		Balance Sheet Caption	2017		2016
Net investment hedges
Cross-currency swap contracts	Other assets	$	24,771	$	17,994	Other assets	$	15,135	$	24,771
Cash flow hedges
Costless collar contracts	Non-trade and notes receivable	—		5,627		Non-trade and notes receivable	430		—
Costless collar contracts	Other accrued liabilities	8,368		1,970		Other accrued liabilities	2,027		8,368

The cross-currency swap and costless collar contracts are reflected on a gross basis in the Consolidated Balance Sheet. The Company has not entered into any master netting arrangements.

Gains or losses on derivatives that are not hedges are adjusted to fair value through the cost of sales caption in the Consolidated Statement of Income. Gains or losses on derivatives that are hedges are adjusted to fair value through accumulated other comprehensive (loss) in the Consolidated Balance Sheet until the hedged item is recognized in earnings.

The cross-currency swap contracts have been designated as hedging instruments. The costless collar contracts have not been designated as hedging instruments and are considered to be economic hedges of forecasted transactions.

Gains ~~(losses)~~or losses on derivative financial instruments that were recorded in the Consolidated Statement of Income during 2017, 2016 ~~2015~~ and ~~2014~~2015 were not material.

Gains (losses) on derivative and non-derivative financial instruments that were recorded in accumulated other comprehensive (loss) in the Consolidated Balance Sheet are as follows:


	2016			2015		2017			2016
Cross-currency swap contracts	$	6,869		$	39,406	$	(6,003	)	$	6,869
Foreign denominated debt	(8,180		)	37,871		(16,175		)	(8,180		)

There was no ineffectiveness of the cross-currency swap contracts or foreign denominated debt, nor were any portion of these financial instruments excluded from the effectiveness testing, during 2017, 2016 ~~2015~~ and ~~2014.~~2015.

A summary of financial assets and liabilities that were measured at fair value on a recurring basis at June 30, ~~2016~~2017 and ~~2015~~2016 are as follows:


	June 30, 2016		Quoted Prices In Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		June 30, 2017		Quoted Prices In Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Equity securities	$	1,296	$	1,296	$	—	$	—	$	3,008	$	3,008	$	—	$	—
Government bonds	15,764		15,764		—		—
Corporate bonds	184,380		184,380		—		—		5,968		5,968		—		—
Asset-backed and mortgage-backed securities	8,746		—		8,746		—		4,762		—		4,762		—
Derivatives	25,303		—		25,303		—		16,496		—		16,496		—
Investments measured at net asset value	361,770								7,073
Liabilities:
Derivatives	13,028		—		13,028		—		16,064		—		16,064		—


	June 30, 2015		Quoted Prices In Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		June 30, 2016		Quoted Prices In Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Equity securities									$	1,296	$	1,296	$	—	$	—
Government bonds	$	60,512	$	60,512	$	—	$	—	15,764		15,764		—		—
Corporate bonds	145,717		145,717		—		—		184,380		184,380		—		—
Asset-backed and mortgage-backed securities	10,970		—		10,970		—		8,746		—		8,746		—
Derivatives	23,598		—		23,598		—		25,303		—		25,303		—
Investments measured at net asset value	187,534								361,770
Liabilities:
Derivatives	1,970		—		1,970		—		13,028		—		13,028		—

The fair values of the equity securities, government bonds, corporate bonds and asset-backed and mortgage-backed securities are determined using the closing market price reported in the active market in which the fund is traded or the market price for similar assets that are traded in an active market.

Derivatives consist of forward exchange, costless collar and cross-currency swap contracts, the fair values of which are calculated using 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 that has been adjusted to reflect the credit risk of either the Company or the counterparty.

Investments measured at net asset value primarily consist of investments in fixed income mutual funds, which are measured at fair value using the net asset value per share practical expedient. These investments have not been categorized in the fair value hierarchy and are presented in the table above is to permit reconciliation of the fair value hierarchy to the Consolidated Balance Sheet. The Company has the ability to liquidate these investments after giving appropriate notice to the issuer.

The primary investment objective for all investments is the preservation of principal and liquidity while earning income.

There are no other financial assets or financial liabilities that are marked to market on a recurring basis. Fair values are transferred between levels of the fair value hierarchy when facts and circumstances indicate that a change in the method of estimating the fair value of a financial asset or financial liability is warranted.


16.	Contingencies

The Company is involved in various litigation matters arising in the normal course of business, including proceedings based on product liability claims, workers' compensation claims and alleged violations of various environmental laws. The Company is self-insured in the United States for health care, workers' compensation, general liability and product liability up to predetermined amounts, above which third party insurance applies. Management regularly reviews the probable outcome of these proceedings, the expenses expected to be incurred, the availability and limits of the insurance coverage and the established accruals for liabilities. While the outcome of pending proceedings cannot be predicted with certainty, management believes that any liabilities that may result from these proceedings will not have a material adverse effect on the Company's liquidity, financial condition or results of operations.

Environmental - The Company is currently responsible for environmental remediation at various manufacturing facilities presently or formerly operated by the Company and has been named as a “potentially responsible party,” along with other companies, at off-site waste disposal facilities and regional sites.

As of June 30, ~~2016~~2017, the Company had an accrual of $~~15,152~~20,810 for environmental matters, which are probable and reasonably estimable. The accrual is recorded based upon the best estimate of costs to be incurred in light of the progress made in determining the magnitude of remediation costs, the timing and extent of remedial actions required by governmental authorities and the amount of the Company's liability in proportion to other responsible parties.

The Company's estimated total liability for environmental matters ranges from a minimum of $~~15.2~~20.8 million to a maximum of $~~80.6~~83.3 million. The largest range for any one site is approximately $~~7.6~~7.4 million. The actual costs to be incurred by the Company will be dependent on final determination of contamination and required remedial action, negotiations with governmental authorities with respect to cleanup levels, changes in regulatory requirements, innovations in investigatory and remedial technologies, effectiveness of remedial technologies employed, the ability of other responsible parties to pay, and any insurance or other third-party recoveries.


17.	Quarterly Information (Unaudited)


2016	1st		2nd		3rd		4th		Total
2017											1st		2nd		3rd		4th		Total
Net sales	$	2,869,348	$	2,705,590	$	2,828,665	$	2,957,150	$	11,360,753	$	2,743,131	$	2,670,804	$	3,119,139	$	3,496,238	$	12,029,312
Gross profit	668,444		564,966		619,264		684,695		2,537,369		637,125		626,320		735,349		841,556		2,840,350
Net income attributable to common shareholders	194,978		182,982		187,084		241,796		806,840		210,129		241,305		238,673		293,305		983,412
Diluted earnings per share	1.41		1.33		1.37		1.77		5.89		1.55		1.78		1.75		2.15		7.25


2015	1st		2nd		3rd		4th		Total
2016											1st		2nd		3rd		4th		Total
Net sales	$	3,269,932	$	3,134,993	$	3,162,311	$	3,144,508	$	12,711,744	$	2,869,348	$	2,705,590	$	2,828,665	$	2,957,150	$	11,360,753
Gross profit	810,067		733,409		789,295		723,728		3,056,499		668,444		564,966		619,264		684,695		2,537,369
Net income attributable to common shareholders	280,089		267,252		285,345		179,454		1,012,140		194,978		182,982		187,084		241,796		806,840
Diluted earnings per share	1.85		1.80		2.02		1.27		6.97		1.41		1.33		1.37		1.77		5.89

Earnings per share amounts are computed independently for each of the quarters presented, therefore, the sum of the quarterly earnings per share amounts may not equal the total computed for the year.

ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None.

ITEM 9A. Controls and Procedures. The Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s principal executive officer and principal financial officer, of the effectiveness of the Company’s disclosure controls and procedures as of June 30, ~~2016.~~2017. Based on this evaluation, the Company’s principal executive officer and principal financial officer concluded that, as of June 30, ~~2016,~~2017, the Company’s disclosure controls and procedures were effective.

There was no change in the Company’s internal control over financial reporting during the quarter ended June 30, ~~2016~~2017 that materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Management's Report On Internal Control Over Financial Reporting

Our management, including the principal executive officer and the principal financial officer, is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)). We assessed the effectiveness of our internal control over financial reporting as of June 30, ~~2016.~~2017. We have excluded three entities from our evaluation of internal control over financial reporting as of June 30, 2017 because these entities were acquired in purchase business combinations during the year ended June 30, 2017. On a combined basis, the entities represent approximately 32.0 percent of total assets and 4.7 percent of net sales as of and for the fiscal year ended June 30, 2017. In making this assessment, we used the criteria established by the Committee of Sponsoring Organizations of the Treadway Commission in “Internal Control-Integrated Framework (2013).” We concluded that based on our assessment, the Company's internal control over financial reporting was effective as of June 30, ~~2016.~~2017.

Deloitte & Touche LLP, the independent registered public accounting firm that audited the Company's consolidated financial statements, has issued an attestation report on the Company's internal control over financial reporting as of June 30, ~~2016,~~2017, which is included in Part II, Item 8 of this Annual Report on Form 10-K.

ITEM 9B. Other Information. None.

PART III

ITEM 10. Directors, Executive Officers and Corporate Governance. Information required with respect to the Directors of the Company is set forth under the caption "Item I – Election of Directors" in the definitive Proxy Statement for the Company’s ~~2016~~2017 Annual Meeting of Shareholders, to be held October ~~26, 2016~~25, 2017 (the ~~"2016~~"2017 Proxy Statement"), and is incorporated herein by reference. Information with respect to the executive officers of the Company is included in Part I, Item 1C of this Annual Report on Form 10-K under the caption "Executive Officers of the Registrant."

The information set forth under the caption ~~"Section~~"Other Governance Matters - Section 16(a) Beneficial Ownership Reporting Compliance" in the ~~2016~~2017 Proxy Statement is incorporated herein by reference.

The Company has adopted a Global Code of Business Conduct that applies to its Chief Executive Officer, Chief Financial Officer and Controller. The Global Code of Business Conduct is posted on the Company’s investor relations internet website at www.phstock.com under the Corporate Governance page. Any amendment to, or waiver from, a provision of the Company’s Global Code of Business Conduct that applies to its Chief Executive Officer, Chief Financial Officer or Controller will also be posted at www.phstock.com under the Corporate Governance page.

The information set forth under the captions ~~"The~~"Committees of Our Board of Directors - The Audit Committee" and "Report of the Audit Committee" in the ~~2016~~2017 Proxy Statement is incorporated herein by reference.

ITEM 11. Executive Compensation. The information set forth under the captions "Compensation Discussion and Analysis," "Compensation Committee Report," and "Compensation Tables" in the ~~2016~~2017 Proxy Statement is incorporated herein by reference.

ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. The information set forth under the captions "Principal Shareholders" ~~and "Equity Compensation Plan Information"~~ in the ~~2016~~2017 Proxy Statement is incorporated herein by reference.

Equity Compensation Plan Information. The following table sets forth certain information regarding the Company's equity compensation plans as of June 30, 2017, unless otherwise indicated.



Plan Category	Number of Securities to be issued upon exercise of outstanding options, warrants and rights	Weighted-average exercise price of outstanding options, warrants and rights	Number of securities remaining available for future issuance under Equity compensation plans
Equity compensation plans approved by security holders	8,436,447 (1)	$95.75	24,681,693 (2)
Equity compensation plans not approved by security holders	—	—	—
Total	8,436,447	$95.75	24,681,693

(1)Includes the maximum future payouts of common stock that may be issued under the calendar year 2015-16-17, 2016-17-18 and 2017-18-19 long term incentive performance awards, or LTIP Awards. For these LTIP Awards, payouts will be determined based on our achieving an average return on average equity of 4% or an average free cash flow margin of 4%. If these performance measures are achieved, the participants will be eligible to receive the maximum payout of 200%. The Human Resources and Compensation Committee will then compare our performance to that of a group of our peers and, if appropriate, apply its discretion to reduce the final payouts based on any performance measures that the Committee determines to be appropriate.

(2)The maximum number of shares of our common stock that may be issued under the 2016 Omnibus Stock Incentive Plan is 16 million shares of which approximately 14.7 million shares are available for future issuance. As of October 26, 2016, the Company terminated the 2009 Omnibus Stock Incentive Plan and all available shares remaining for grant were canceled. The maximum number of shares that may be issued under the Global Employee Stock Purchase Plan is 10 million shares of which approximately 9.9 million shares are still available for future issuance.

ITEM 13. Certain Relationships and Related Transactions, and Director Independence. The information set forth under the captions ~~"Review~~"Other Governance Matters - Review and Approval of Transactions with Related Persons" and ~~"Director~~"Corporate Governance: Board of Directors - Director Independence" in the ~~2016~~2017 Proxy Statement is incorporated herein by reference.

ITEM 14. Principal Accountant Fees and Services. The information set forth under the captions "Audit Fees," "Audit-Related Fees," "Tax Fees," "All Other Fees" and "Audit Committee Pre-Approval Policies and Procedures" in the ~~2016~~2017 Proxy Statement is incorporated herein by reference.

PART IV

ITEM 15. Exhibits and Financial Statement Schedules.

a. The following are filed as part of this report:



		Page Number in Form 10-K
1. Financial Statements
	Consolidated Statement of Income	2932
	Consolidated Statement of Comprehensive Income	3033
	Business Segment Information	3134
	Consolidated Balance Sheet	3336
	Consolidated Statement of Cash Flows	3437
	Consolidated Statement of Equity	3538
	Notes to Consolidated Financial Statements	3639

2. Schedule
	II - Valuation and Qualifying Accounts	6571

3. Exhibits
	The exhibits listed in the accompanying Exhibit Index and required by Item 601 of Regulation S-K (numbered in accordance with Item 601 of Regulation S-K) are filed, furnished or incorporated by reference as part of this Annual Report on Form 10-K.

Individual financial statements and related applicable schedules for the Registrant (separately) have been omitted because the Registrant is primarily an operating company and its subsidiaries are considered to be wholly-owned.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



	PARKER-HANNIFIN CORPORATION

	By:		/s/ ~~Jon P. Marten~~Catherine A. Suever
			~~Jon P. Marten~~Catherine A. Suever
			Executive Vice President - Finance &
			Administration and Chief Financial Officer

August ~~26, 2016~~25, 2017

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.

Signature and Title

THOMAS L. WILLIAMS, Chairman of the Board of Directors and Principal Executive Officer; ~~CATHERINE A. SUEVER,~~TODD M. LEOMBRUNO, Principal Accounting Officer; LEE C. BANKS, Director; ROBERT G. BOHN, Director; LINDA S. HARTY, Director; ROBERT J. KOHLHEPP, Director; KEVIN A. LOBO, Director; KLAUS-PETER MÜLLER, Director; CANDY M. OBOURN, Director; JOSEPH SCAMINACE, Director; WOLFGANG R. SCHMITT, Director; ÅKE SVENSSON, Director; JAMES R. VERRIER, Director; and JAMES L. WAINSCOTT, ~~Director; and DONALD E. WASHKEWICZ,~~ Director.

Date: August ~~26, 2016~~25, 2017



/s/ ~~Jon P. Marten~~Catherine A. Suever
~~Jon P. Marten,~~Catherine A. Suever, Executive Vice President – Finance & Administration and Chief Financial Officer (Principal Financial Officer and Attorney-in-Fact)

PARKER-HANNIFIN CORPORATION

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

FOR THE YEARS ENDED June 30, ~~2014,~~ 2015, 2016 and ~~2016~~2017

(Dollars in Thousands)


Column A	Column B		Column C			Column D			Column E		Column B		Column C			Column D			Column E
Description	Balance at Beginning Of Period		Additions Charged to Costs and Expenses			Other (Deductions)/ Additions (A)			Balance At End Of Period		Balance at Beginning Of Period		Additions Charged to Costs and Expenses			Other (Deductions)/ Additions (A)			Balance At End Of Period
Allowance for doubtful accounts:
Year ended June 30, 2014	$	14,824	$	9,649		$	(8,433	)	$	16,040
Year ended June 30, 2015	$	16,040	$	2,685		$	(9,441	)	$	9,284	$	16,040	$	2,685		$	(9,441	)	$	9,284
Year ended June 30, 2016	$	9,284	$	1,419		$	(2,693	)	$	8,010	$	9,284	$	1,419		$	(2,693	)	$	8,010
Year ended June 30, 2017											$	8,010	$	3,559		$	2,767		$	14,336
Deferred tax asset valuation allowance:
Year ended June 30, 2014	$	273,413	$	74,032		$	1,392		$	348,837
Year ended June 30, 2015	$	348,837	$	(18,831	)	$	—		$	330,006	$	348,837	$	(18,831	)	$	—		$	330,006
Year ended June 30, 2016	$	330,006	$	2,702		$	—		$	332,708	$	330,006	$	2,702		$	—		$	332,708
Year ended June 30, 2017											$	332,708	$	349,803		$	1,568		$	684,079


(A)	For allowance for doubtful accounts, net balance is comprised of deductions due to uncollectible accounts charged off, additions due to acquisitions or recoveries, and currency translation adjustments. For deferred tax asset valuation allowance, the balance primarily represents adjustments due to acquisitions.

Exhibit Index



Exhibit No.		Description of Exhibit
(2)(a)		Agreement and Plan of Merger among Parker-Hannifin Corporation, CLARCOR, Inc. and Parker Eagle Corporation dated as of December 1, 2016, incorporated by reference to Exhibit 2.1 of Registrant's Form 8-K filed with the SEC on December 1, 2016 (Commission File No. 1-4982). +
		Articles of Incorporation and By-Laws:

(3)(a)		Amended Articles of Incorporation.*Incorporation, incorporated by reference to Exhibit 3(a) to Registrant's Report on Form 10-K for the fiscal year ended June 30, 2016 (Commission File No. 1-4982).

(3)(b)		Code of Regulations, as amended, incorporated by reference to Exhibit ~~3(ii)~~3(b) to ~~the~~ Registrant’s Report on Form 10-Q for the quarterly period ended ~~December 31, 2007~~September 30, 2016 (Commission File No. 1-4982).

		Instruments Defining Rights of Security Holders:

(4)(a)		~~Shareholder Protection~~Registration Rights Agreement, dated ~~as of~~ February ~~8, 2007, between the~~24, 2017, among Registrant and ~~Wells Fargo Bank, N.A. (as successor to National City Bank)~~Morgan Stanley & Co. LLC and Citigroup Global Markets Inc., as ~~Rights Agent,~~Representatives of the Initial Purchasers, incorporated by reference to Exhibit ~~1 to~~4.1 of Registrant's Current Report on Form 8-K filed with the ~~Registrant’s Form 8-A filed~~SEC on February ~~8, 2007~~28, 2017 (Commission File No. 1-4982).

(4)(b)		~~First Amendment to Shareholder Protection~~Registration Rights Agreement, dated ~~as of July 6, 2009, between the~~February 24, 2017, among Registrant and ~~Wells Fargo Bank, N.A.~~the Initial Purchasers (as ~~successor to National City Bank)~~defined therein), ~~as Rights Agent,~~ incorporated by reference to Exhibit ~~4(a) to the Registrant’s~~4.2 of Registrant's Current Report on Form ~~10-K for~~8-K filed with the ~~fiscal year ended June 30, 2009~~SEC on February 28, 2017 (Commission File No. 1-4982).

		The Registrant is a party to other instruments, copies of which will be furnished to the Commission upon request, defining the rights of holders of its long-term debt identified in Note 9 of the Notes to Consolidated Financial Statements included within Part II, Item 8 of this Annual Report on ~~From~~Form 10-K.

		Material Contracts:

(10)(a)		Form of Parker-Hannifin Corporation Amended and Restated Change in Control Severance Agreement entered into by ~~the~~ Registrant and its executive officers, incorporated by reference to Exhibit 10(a) to ~~the~~ Registrant’s Report on Form 10-Q for the quarterly period ended September 30, 2008 (Commission File No. 1-4982).

(10)(b)		Termination Amendment to Parker-Hannifin Corporation Amended and Restated Change in Control Severance Agreement between Donald E. Washkewicz and the Registrant effective February 1, 2015 incorporated by reference to Exhibit 10(b) to the Registrant’s Report on Form 10-Q for the quarterly period ended March 31, 2015 (Commission File No. 1-4982).

~~(10)(c)~~		Form of Parker-Hannifin Corporation Change in Control Severance Agreement for executive officers elected after September 1, 2015 at or above Grade 29.*29, incorporated by reference to Exhibit 10(c) to Registrant's Report on Form 10-K for the fiscal year ended June 30, 2016 (Commission File No. 1-4982).

(10)~~(d)~~(c)		Form of Parker-Hannifin Corporation Change in Control Severance Agreement for executive officers elected after September 1, 2015 below Grade 29.*29, incorporated by reference to Exhibit 10(d) to Registrant's Report on Form 10-K for the fiscal year ended June 30, 2016 (Commission File No. 1-4982).

(10)~~(e)~~(d)		Parker-Hannifin Corporation Amended and Restated Change in Control Severance Plan, incorporated by reference to Exhibit 10(b) to ~~the~~ Registrant’s Report on Form 10-Q for the quarterly period ended September 30, 2008 (Commission File No. 1-4982).

(10)~~(f)~~(e)		Form of Indemnification Agreement entered into by the Registrant and its directors and executive officers, incorporated by reference to Exhibit 10(c) to ~~the~~ Registrant’s Report on Form 10-K for the fiscal year ended June 30, 2003 (Commission File No. 1-4982).

(10)~~(g)~~(f)		Description of the Parker-Hannifin Corporation Officer Life Insurance Plan, incorporated by reference to Exhibit 10(h) to ~~the~~ Registrant’s Report on Form 10-K for the fiscal year ended June 30, 2005 (Commission File No. 1-4982).

(10)~~(h)~~(g)		Parker-Hannifin Corporation Amended and Restated Supplemental Executive Retirement Benefits Program, effective July 1, 2014, incorporated by reference to Exhibit 10(a) to ~~the~~ Registrant’s Report on Form 10-Q for the quarterly period ended March 31, 2016 (Commission File No. 1-4982).

(10)~~(i)~~(h)		Parker-Hannifin Corporation Amended and Restated Defined Contribution Supplemental Executive Retirement Program, effective January 22, 2015, incorporated by reference to Exhibit 10(c) to ~~the~~ Registrant’s Report on Form 10-Q for the quarterly period ended December 31, 2015 (Commission File No. 1-4982).

~~(10)(j)~~		Summary of the Parker-Hannifin Corporation Executive Disability Insurance Plan.*



(10)~~(k)~~(i)		Summary of the Parker-Hannifin Corporation Executive Disability Insurance Plan, incorporated by reference to Exhibit 10(j) to Registrant's Report on Form 10-K for the fiscal year ended June 30, 2016 (Commission File No. 1-4982).

(10)(j)		Parker-Hannifin Corporation Amended and Restated 2003 Stock Incentive Plan, incorporated by reference to Exhibit 10(b) to ~~the~~ Registrant’s Report on Form 10-Q for the quarterly period ended September 30, 2010 (Commission File No. 1-4982).

(10)~~(l)~~(k)		Parker-Hannifin Corporation Amended and Restated 2009 Omnibus Stock Incentive Plan, incorporated by reference to Appendix A to ~~the~~ Registrant’s Definitive Proxy Statement filed with the Commission on September 24, 2012 (Commission File No. 1-4982).

(10)(l)		Parker-Hannifin Corporation 2016 Omnibus Stock Incentive Plan, incorporated by reference to Annex B to Registrant's Definitive Proxy Statement on Schedule 14A, filed with the SEC on September 26, 2016 (Commission File No. 1-4982).

(10)(m)		Parker-Hannifin Corporation First amendment to 2016 Omnibus Stock Incentive Plan, effective April 1, 2017, incorporated by reference to Exhibit 10(a) to Registrant's Report on Form 10-Q for the quarterly period ended March 31, 2017 (Commission File No. 1-4982).

(10)(n)		Parker-Hannifin Corporation 2010 Performance Bonus Plan, incorporated by reference to ~~Exhibit~~Annex A to ~~the~~ Registrant’s Definitive Proxy Statement filed with the Commission on September 27, 2010 (Commission File No. 1-4982).

(10)~~(n)~~(o)		Parker-Hannifin Corporation 2015 Performance Bonus Plan, incorporated by reference to Appendix B to ~~the~~ Registrant’s Definitive Proxy Statement filed with the Commission on September 28, 2015 (Commission File No. 1-4982).

(10)~~(o)~~(p)		Form of 2007 Notice of Grant of Stock Options with Tandem Stock Appreciation Rights for executive officers, incorporated by reference to Exhibit 10.3 to ~~the~~ Registrant’s Report on Form 8-K filed with the ~~Commission~~SEC on August 22, 2006 (Commission File No. 1-4982).

(10)~~(p)~~(q)		Form of 2008 Notice of Grant of Stock Options with Tandem Stock Appreciation Rights for executive officers, incorporated by reference to Exhibit 10.1 to ~~the~~ Registrant’s Report on Form 8-K/A filed with the ~~Commission~~SEC on September 5, 2007 (Commission File No. 1-4982).

(10)~~(q)~~(r)		Form of 2009 Notice of Stock Options Award with Tandem Stock Appreciation Rights for ~~executive officers~~Executive Officers, incorporated by reference to Exhibit 10(d) to ~~the~~ Registrant’s Report on Form 10-Q for the quarterly period ended September 30, 2008 (Commission File No. 1-4982).

(10)~~(r)~~(s)		Form of 2010 Notice of Stock Options with Tandem Stock Appreciation Rights for ~~executive officers~~Executive Officers, incorporated by reference to Exhibit 10(d) to ~~the~~ Registrant’s Report on Form 10-Q for the quarterly period ended September 30, 2009 (Commission File No. 1-4982).

(10)~~(s)~~(t)		Form of ~~FY2011~~2011 Parker-Hannifin Corporation Stock Appreciation Rights Award Agreement for executive officers, incorporated by reference to Exhibit 10.2 to ~~the~~ Registrant’s Report on Form 8-K filed with the ~~Commission~~SEC on August 17, 2010 (Commission File No. 1-4982).

(10)~~(t)~~(u)		~~FY2011~~2011 Parker-Hannifin Corporation Stock Appreciation Rights Terms and Conditions for executive officers, incorporated by reference to Exhibit 10.1 to ~~the~~ Registrant’s Report on Form 8-K filed with the ~~Commission~~SEC on August 17, 2010 (Commission File No. 1-4982).

(10)~~(u)~~(v)		Form of Parker-Hannifin Corporation Stock Appreciation Rights Award Agreement for executive officers, incorporated by reference to Exhibit 10(a) to ~~the~~ Registrant’s Report on Form 10-Q for the quarterly period ended September 30, 2011 (Commission File No. 1-4982).

(10)~~(v)~~(w)		Parker-Hannifin Corporation Stock Appreciation Rights Terms and Conditions for executive officers, incorporated by reference to Exhibit 10(b) to ~~the~~ Registrant’s Report on Form 10-Q for the quarterly period ended September 30, ~~2011(Commission File No. 1-4982).~~

~~(10)(w)~~		~~Parker-Hannifin Corporation Target Incentive Plan incorporated by reference to Exhibit 10(d) to the Registrant’s Report on Form 10-Q for the quarterly period ended September 30, 2010~~2011 (Commission File No. 1-4982).

(10)(x)		Parker-Hannifin Corporation Target Incentive Plan, ~~Subject to Performance Bonus Plan~~ incorporated by reference to Exhibit ~~10(e)~~10(d) to ~~the~~ Registrant’s Report on Form 10-Q for the quarterly period ended September 30, 2010 (Commission File No. 1-4982).

(10)(y)		Parker-Hannifin Corporation Target Incentive Plan Subject to Performance Bonus Plan, incorporated by reference to Exhibit 10(e) to Registrant’s Report on Form 10-Q for the quarterly period ended September 30, 2010 (Commission File No. 1-4982).

(10)(z)		Parker-Hannifin Corporation Long-Term Incentive Performance Plan Under the Performance Bonus Plan, incorporated by reference to Exhibit 10(a) to ~~the~~ Registrant’s Report on Form 10-Q for the quarterly period ended March 31, 2013 (Commission File No. 1-4982).



(10)~~(z)~~(aa)		Form of Parker-Hannifin Corporation Long-Term Incentive Performance (LTIP) Award Under the Performance Bonus Plan, incorporated by reference to Exhibit 10.2 to ~~the~~ Registrant’s Report on Form 8-K filed with the Commission on February 1, 2011 (Commission File No. 1-4982).

(10)~~(aa)~~(bb)		Parker-Hannifin Corporation Long-Term Incentive Performance Plan Under the Performance Bonus Plan, as amended and restated, effective January 20, 2016.*2016, incorporated by reference to Exhibit 10(aa) to Registrant's Annual Report on Form 10-K for the fiscal year ended June 30, 2016 (Commission file No. 1-4982).

(10)~~(bb)~~(cc)		Form of Notice of Award under the Parker-Hannifin Corporation Long-Term Incentive Performance Plan Under the Performance Bonus Plan, as amended and restated.*



~~(10)(cc)~~		~~Parker-Hannifin Corporation Restricted Stock Unit Award Agreement dated August 14, 2013 for Jeffery A. Cullman~~restated, incorporated by reference to Exhibit ~~10(a)~~10(bb) to the Registrant's Annual Report on Form ~~10-Q~~10-K for the ~~quarterly period~~fiscal year ended ~~September~~June 30, ~~2014~~2016 (Commission ~~File~~file No. 1-4982).

(10)(dd)		Parker-Hannifin Corporation Restricted Stock Unit ~~Terms and Conditions~~Award Agreement dated August 17, 2016 for ~~Jeffery A. Cullman~~Lee C. Banks, incorporated by reference to Exhibit ~~10(b)~~10(a) to ~~the~~ Registrant's Report on Form 10-Q for the quarterly period ended September 30, 2014 (Commission File No. 1-4982).

(10)(ee)		Parker-Hannifin Corporation ~~Profitable Growth Incentive Plan~~Restricted Stock Unit Terms and Conditions for Lee C. Banks, incorporated by reference to Exhibit ~~10(c)~~10(b) to ~~the~~ Registrant's Report on Form 10-Q for the quarterly period ended September 30, 2014 (Commission File No. 1-4982).

(10)(ff)		Parker-Hannifin Corporation Profitable Growth Incentive Plan, incorporated by reference to Exhibit 10(c) to Registrant's Report on Form 10-Q for the quarterly period ended September 30, 2014 (Commission File No. 1-4982).

(10)(gg)		Form of Notice of RONA Bonus Award Under the Parker-Hannifin Corporation Performance Bonus Plan, incorporated by reference to Exhibit 10(h) to ~~the~~ Registrant’s Report on Form 10-Q for the quarterly period ended September 30, 2009 (Commission File No. 1-4982).

(10)~~(gg)~~(hh)		Parker-Hannifin Corporation RONA Plan Subject to Performance Bonus Plan, incorporated by reference to Exhibit 10(f) to ~~the~~ Registrant’s Report on Form 10-Q for the quarterly period ended September 30, 2010 (Commission File No. 1-4982).

(10)~~(hh)~~(ii)		Parker-Hannifin Corporation Summary of RONA Bonus Awards in Lieu of Certain Executive Perquisites, incorporated by reference to Exhibit 10(h) to ~~the~~ Registrant’s Report on Form 10-Q for the quarterly period ended September 30, 2008 (Commission File No. 1-4982).

(10)~~(ii)~~(jj)		Parker-Hannifin Corporation ~~Amended~~amended and ~~Restated~~restated Savings Restoration Plan, as of September 1, 2004, incorporated by reference to Exhibit 10(t) to ~~the~~ Registrant’s Report on Form 10-K for the fiscal year ended June 30, 2004 (Commission File No. 1-4982).

(10)~~(jj)~~(kk)		Parker-Hannifin Corporation Amended and Restated Savings Restoration Plan, effective January ~~22, 2015,~~1, 2016, incorporated by reference to Exhibit 10(d) to ~~the~~ Registrant’s Report on Form 10-Q for the quarterly period ended December 31, ~~2015~~2016 (Commission File No. 1-4982).

~~(10)(kk)~~		Parker-Hannifin Corporation Amended and Restated Savings Restoration Plan, effective July 1, 2016.*

(10)(ll)		Parker-Hannifin Corporation Amended and Restated Pension Restoration Plan, effective ~~January 22, 2015,~~July 1, 2016, incorporated by reference to Exhibit ~~10(e)~~10(mm) to ~~the Registrant’s~~Registrant's Report on Form ~~10-Q~~10-K for the ~~quarterly period~~fiscal year ended ~~December 31, 2015~~June 30, 2016 (Commission File No. 1-4982).

(10)(mm)		Parker-Hannifin Corporation ~~Amended~~amended and Restated Pension Restoration Plan, effective July 1, 2016.*

~~(10)(nn)~~		~~Parker-Hannifin Corporation Amended and Restated~~restated Executive Deferral Plan, as of September 1, 2004, incorporated by reference to Exhibit 10(v) to ~~the~~ Registrant’s Report on Form 10-K for the fiscal year ended June 30, 2004 (Commission File No. 1-4982).

(10)~~(oo)~~(nn)		Parker-Hannifin Corporation Amended and Restated Executive Deferral Plan, effective ~~January 22,~~September 2, 2015, incorporated by reference to Exhibit ~~10(f)~~10(pp) to ~~the Registrant’s~~Registrant's Report on Form ~~10-Q~~10-K for the ~~quarterly period~~fiscal year ended ~~December 31, 2015~~June 30, 2016 (Commission File No. 1-4982).

(10)(oo)		Parker-Hannifin Corporation Global Employee Stock Purchase Plan, incorporated by reference to Appendix A to Registrant's Definitive Proxy Statement filed with the SEC on September 22, 2014 (Commission File No. 1-4982).

(10)(pp)		Parker-Hannifin Corporation Amended and Restated Executive Deferral Plan, effective September 2, 2015.*

~~(10)(qq)~~		Parker-Hannifin Corporation Global Employee Stock Purchase Plan incorporated by reference to Appendix A to the Registrant's Definitive Proxy Statement filed with the Securities and Exchange Commission on September 22, 2014 (Commission File No. 1-4982).

~~(10)(rr)~~		~~Parker-Hannifin Corporation~~ Claw-back Policy, incorporated by reference to Exhibit 10.2 to ~~the~~ Registrant’s Report on Form 8-K filed with the ~~Commission~~SEC on August 18, 2009 (Commission File No. 1-4982).

(10)~~(ss)~~(qq)		Parker-Hannifin Corporation Amended and Restated 2004 Non-Employee Directors’ Stock Incentive Plan, incorporated by reference to Exhibit 10(aa) to ~~the~~ Registrant’s Report on Form 10-K for the fiscal year ended June 30, 2009 (Commission File No. 1-4982).

~~(10)(tt)~~		Form of Parker-Hannifin Corporation Non-Employee Directors’ Restricted Stock Award Agreement incorporated by reference to Exhibit 10(a) to the Registrant’s Report on Form 10-Q for the quarterly period ended December 31, 2011 (Commission File No. 1-4982).

~~(10)(uu)~~		Parker-Hannifin Corporation Non-Employee Directors’ Restricted Stock Award Terms and Conditions incorporated by reference to Exhibit 10(b) to the Registrant’s Report on Form 10-Q for the quarterly period ended December 31, 2011 (Commission File No. 1-4982).



(10)~~(vv)~~(rr)		Form of Parker-Hannifin Corporation Non-Employee Directors' Restricted Stock Unit Award Agreement, incorporated by reference to Exhibit 10(g) to ~~the~~ Registrant's Report on Form 10-Q for the quarterly period ended December 31, 2015 (Commission File No. 1-4982).

(10)~~(ww)~~(ss)		Parker-Hannifin Corporation Non-Employee Directors' Restricted Stock Unit Award Terms and Conditions, incorporated by reference to Exhibit 10(h) to ~~the~~ Registrant's Report on Form 10-Q for the quarterly period ended December 31, 2015 (Commission File No. 1-4982).

(10)~~(xx)~~(tt)		Amended and Restated Deferred Compensation Plan for Directors of Parker-Hannifin Corporation, effective January 22, 2015, incorporated by reference to Exhibit 10(i) to ~~the~~ Registrant's Report on Form 10-Q for the quarterly period ended December 31, 2015 (Commission File No. 1-4982).

(10)~~(yy)~~(uu)		Summary of the Compensation of the Non-Employee Members of the Board of Directors, effective October ~~22, 2014,~~26, 2016, incorporated by reference to Exhibit ~~10(b)~~10(c) to ~~the~~ Registrant’s Report on Form 10-Q for the quarterly period ended ~~December 31, 2014~~September 30, 2016 (Commission File No. 1-4982).

(12)		Computation of Ratio of Earnings to Fixed Charges as of June 30, ~~2016.~~2017.*

(21)		List of subsidiaries of ~~the~~ Registrant.*

(23)		Consent of Independent Registered Public Accounting Firm.*

(24)		Power of Attorney.*

(31)(a)		Certification of the Principal Executive Officer Pursuant to 17 CFR 240.13a-14(a), as Adopted Pursuant to §302 of the Sarbanes-Oxley Act of 2002.*

(31)(b)		Certification of the Principal Financial Officer Pursuant to 17 CFR 240.13a-14(a), as Adopted Pursuant to §302 of the Sarbanes-Oxley Act of 2002.*

(32)		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to §906 of the Sarbanes-Oxley Act of 2002.*

101.INS		XBRL Instance Document.*

101.SCH		XBRL Taxonomy Extension Schema Document.*

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document.*

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document.*

101.LAB		XBRL Taxonomy Extension Label Linkbase Document.*

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document.*

+ Certain schedules have been omitted and the Company agrees to furnish supplementally to the Commission a copy of any omitted exhibits and schedules upon request.


*	Submitted electronically herewith.

Attached as Exhibit 101 to this ~~report~~Annual Report are the following formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Statement of Income for the years ended June 30, 2017, 2016 ~~2015~~ and ~~2014,~~2015, (ii) Consolidated Statement of Comprehensive Income for the years ended June 30, ~~2016~~2017, ~~2015~~2016 and ~~2014,~~2015, (iii) Consolidated Balance Sheet at June 30, ~~2016~~2017 and ~~2015,~~2016, (iv) Consolidated Statement of Cash Flows for the years ended June 30, 2017, 2016 ~~2015~~ and ~~2014,~~2015, (v) Consolidated Statement of Equity for the years ended June 30, 2017, 2016 ~~2015~~ and ~~2014,~~2015, and (vi) Notes to Consolidated Financial Statements.

Shareholders may request a copy of any of the exhibits to this Annual Report on Form 10-K by writing to the Secretary, Parker-Hannifin Corporation, 6035 Parkland Boulevard, Cleveland, Ohio 44124-4141.

6975