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:


                   December 31, 2019    June 30, 2019    December 31, 2018
United States                   52.4             50.6                 54.1
Eurozone countries              46.3             47.6                 51.4
China                           51.5             49.4                 49.7
Brazil                          50.2             51.0                 52.6

Global aircraft miles flown and available revenue passenger miles each increased by approximately four 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 three percent higher than the comparable fiscal 2019 level. Housing starts in December 2019 were approximately 41 percent and 28 percent higher than housing starts in December 2018 and June 2019, respectively.



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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 $3,453 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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