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, 2020        June 30, 2020       December 31, 2019
     United States                60.7                  52.6                   52.4
     Eurozone countries           55.1                  47.4                   46.3
     China                        53.0                  51.2                   51.5
     Brazil                       61.5                  51.6                   50.2


At December 31, 2020, global aircraft miles flown decreased by approximately 57
percent and available revenue passenger miles decreased by approximately 66
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 approximately
four percent lower than the comparable fiscal 2020 level.
Housing starts in December 2020 were approximately five percent higher than
housing starts in December 2019 and approximately 41 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 continue to monitor 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. These developments include the availability
and effectiveness of vaccines, 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 strategically reducing costs through elimination of discretionary spending and targeted restructuring. 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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