OVERVIEW

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. Our 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. We believe the leading economic indicators of these markets that have a strong 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 U.S. 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:


                   March 31, 2020    June 30, 2019    March 31, 2019
United States                49.1             50.6              55.3
Eurozone countries           44.5             47.6              47.5
China                        50.1             49.4              50.8
Brazil                       48.4             51.0              52.8


As of March 31, 2020, global aircraft miles flown decreased by approximately
three percent and available revenue passenger miles decreased by approximately
five percent from their comparable fiscal 2019 levels. The Company anticipates
that U.S. Department of Defense spending with regard to appropriations and
operations and maintenance for the U.S. Government's fiscal year 2020 will be
approximately two percent higher than the comparable fiscal 2019 level.
Housing starts in March 2020 were approximately one percent higher than housing
starts in March 2019 and approximately three percent lower than housing starts
in June 2019, respectively.
In March 2020, the World Health Organization declared the recent outbreak of
novel coronavirus ("COVID-19") a pandemic. Given the unpredictable nature of
COVID-19's impact on the global economy, the statistics included above may not
be reflective of recent or future activity.
While the COVID-19 outbreak did not have a material adverse effect on our
reported results for our fiscal third quarter, we are actively monitoring the
impact of the COVID-19 outbreak, which we expect will negatively impact our
business and results of operations for our fiscal fourth quarter and beyond. For
example, April 2020 orders are expected to be significantly down across the
Company when compared to April 2019 orders. Disruption within the aerospace
industry, which is facing the consequences of travel restrictions and
considerably lower demand, is expected to be significant. The extent to which
our business and results of operations will be impacted by the outbreak will
depend largely on future developments, which are highly uncertain and cannot be
accurately predicted at this time, including new information which may emerge
concerning the severity of the outbreak and actions by government authorities to
contain the outbreak or mitigate its economic, public health and other impacts.

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We have taken immediate and aggressive action to minimize the spread of COVID-19 in our workplaces and are taking measures to preserve cash and reduce costs, including but not limited to, global salary reductions, reduced work schedules, elimination of discretionary spending, targeted restructuring and reducing capital expenditures. At the same time, we are appropriately addressing the ongoing needs of our business so that we may continue to serve our customers. In the long-term, we believe many opportunities for profitable growth are available. The Company intends to focus primarily on business opportunities in the areas of energy, water, food, environment, defense, life sciences, infrastructure and transportation. We believe we can meet our strategic objectives by:



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


•     Successfully executing The Win Strategy initiatives relating to engaged
      people, premier customer experience, profitable growth and financial
      performance;

• Maintaining a decentralized division and sales company structure;

• Fostering a safety first and 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 our values, inclusion and
      diversity, accountability and teamwork.


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. During October 2019, we completed the acquisition of LORD
Corporation ("Lord") for approximately $3,455 million in cash, including the
assumption of debt. We also completed the acquisition of EMFCO Holdings
Incorporated, parent company of Exotic Metals Forming Company LLC ("Exotic") for
approximately $1,706 million in cash during September 2019. Refer to Note 4 to
the Consolidated Financial Statements for further discussion of the
acquisitions.
We continue to assess our existing businesses and may 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 Consolidated
Statement of Income, Business Segment Information, Consolidated Balance Sheet
and Consolidated Statement of Cash Flows. As used in this Quarterly Report on
Form 10-Q, unless the context otherwise requires, the terms "Company", "Parker",
"we" or "us" refer to Parker-Hannifin Corporation and its subsidiaries.

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