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:


                   September 30, 2020    June 30, 2020    September 30, 2019
United States                    55.4             52.6                  51.1
Eurozone countries               53.5             47.4                  45.7
China                            53.0             51.2                  51.4
Brazil                           64.9             51.6                  53.4


At September 30, 2020, global aircraft miles flown decreased by approximately 55
percent and available revenue passenger miles decreased by approximately 64
percent from their comparable prior-year period. 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 2021 will be flat compared
the fiscal 2020 level.
Housing starts in September 2020 were approximately 11 percent higher than
housing starts in September 2019 and approximately 19 percent higher than
housing starts in June 2020.
In March 2020, the World Health Organization declared the outbreak of 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.
We are actively monitoring the impact of the COVID-19 pandemic, which has
negatively impacted, and we expect will continue to negatively impact, our
business and results of operations. Disruption within the aerospace industry,
which is facing the consequences of travel restrictions and considerably lower
demand, was significant and is expected to continue. The ultimate extent to
which our business and results of operations will be impacted by the pandemic
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 pandemic and actions by government
authorities to contain the pandemic or mitigate its economic, public health and
other impacts.

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We continue to prioritize the safety of our team members. To minimize the spread of COVID-19 in our workplaces, we implemented rigorous prevention, screening and hygiene protocols. Additionally, we are preserving cash and reducing costs through elimination of discretionary spending and targeted restructuring. Salary reductions and reduced work schedules remain in effect where warranted based on local business conditions. We continue to prioritize capital expenditures related to safety and strategic investments. 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. Additionally, we will 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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