Parker-Hannifin (PH) 10-K risk factor changes: FY2019 vs FY2018

[removed: The] [added: *The] following "risk factors" identify what [removed: the Company believes] [added: we believe] to be the risks that could materially adversely affect [removed: the Company’s] [added: our] financial and/or operational performance.

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 [removed: flows.][added: flows.*]

[removed: The Company's] [added: Our] business is sensitive to global macro-economic conditions.

Future macroeconomic downturns may have an adverse effect on [removed: the] [added: our] business, results of operations and financial [removed: condition of the Company and its] [added: condition, as well as our] distributors, customers and suppliers, and on activity in many of the industries and markets [removed: in which the Company and its distributors, customers and suppliers operate.][added: we serve.]

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, tariffs and governmental trade [added: and monetary] policies, and general economic conditions such as inflation, deflation, interest rates and credit availability.

These factors may, among other things, negatively impact [removed: the] [added: our] level of purchases, capital expenditures, and [removed: creditworthiness of the Company and its] [added: creditworthiness, as well as our] distributors, customers and suppliers, and, therefore, the Company’s revenues, operating profits, margins, and order rates.

[removed: The Company] [added: We] cannot predict changes in worldwide or regional economic [removed: conditions,] [added: conditions and government policies,] as such conditions are highly volatile and beyond [removed: the Company’s] [added: our] control.

If these conditions deteriorate or remain at depressed levels for extended periods, however, [removed: the Company’s] [added: our] business, results of operations and financial condition could be materially adversely affected.

[removed: The] [added: The] Company may be subject to risks relating to [removed: its non-U.S. operations.][added: organizational changes.]

[removed: The Company’s] [added: Our] net sales derived from customers outside the United States were approximately [removed: 41%] [added: 39%] in [removed: 2018, 40%] [added: 2019, 41%] in [removed: 2017] [added: 2018] and [removed: 41%] [added: 40%] in [removed: 2016.][added: 2017.]

In addition, many of [removed: the Company’s] [added: our] manufacturing operations and suppliers are located outside the United States.

[removed: The Company’s] [added: Our] non-U.S. operations are subject to risks in addition to those facing [removed: its] [added: our] domestic operations, including:

| • | fluctuations in currency exchange [removed: rates;] [added: rates and/or changes in monetary policy;] |

| • | limitations on [removed: the Company’s] [added: our] ability to enforce legal rights and remedies; |

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

[removed: The Company may be] [added: We are] 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. [removed: ("Clarcor").][added: ("Clarcor") and the proposed acquisitions of Lord and Exotic.]

[removed: The Company expects] [added: We expect] to continue [removed: its] [added: our] strategy of identifying and acquiring businesses with complementary products and services, and entering into joint ventures, which [removed: it believes] [added: we believe] will enhance [removed: its] [added: our] operations and profitability.

However, there can be no assurance that [removed: the Company] [added: we] will be able to continue to find suitable businesses to purchase or joint venture [removed: opportunities] [added: opportunities,] or that [removed: it] [added: we] will be able to acquire such businesses or enter into such joint ventures on acceptable terms.

Furthermore, there are no assurances that [removed: the Company] [added: we] will be able to avoid acquiring or assuming unexpected liabilities.

If [removed: the Company is] [added: we are] unable to avoid these risks, [removed: its] [added: our] results of operations and financial condition could be materially adversely affected.

In addition, [removed: the Company] [added: we] may not be able to integrate successfully any businesses that [removed: it purchases] [added: we purchase] into [removed: its] [added: our] existing business [removed: or] [added: and it is possible] that any acquired businesses or joint ventures [removed: will] [added: may not] be profitable.

[removed: Specifically, the Company is devoting] [added: For example, we have devoted] significant management attention and resources to integrating the business [removed: practices] and operations of [removed: Clarcor with the businesses of the Company.][added: Clarcor.]

[removed: The Company] [added: We] may encounter or [removed: has] [added: have] encountered the following difficulties during the integration process of Clarcor:

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

The successful integration of new businesses and the success of joint ventures also depend on [removed: the Company’s] [added: our] ability to manage these new businesses and cut excess costs.

[removed: The Company’s] [added: Our] results may be adversely affected if expanded operations from the acquisition of Clarcor [added: or the proposed acquisitions of Lord and Exotic] are not effectively [removed: managed.][added: managed.]

[removed: The Company’s] [added: Our] acquisition of Clarcor greatly expanded the size and complexity of [removed: its] [added: our] business.

[removed: The Company’s] [added: Our] future success depends, in part, on the ability to manage this expanded business, which may pose or has posed 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 [removed: the Company] [added: we] will realize the expected benefits of the acquisition of [removed: Clarcor.][added: Clarcor or the proposed acquisitions of Lord and Exotic.]

[removed: The Company] [added: We] regularly [removed: executes] [added: execute] organizational changes such as acquisitions, divestitures and realignments to support [removed: its] [added: our] growth and cost management strategies.

[removed: The Company] [added: We] also [removed: engages] [added: engage] in initiatives aimed to increase productivity, efficiencies and cash flow and to reduce costs.

The Company [removed: further] commits significant resources to identify, develop and retain key employees to ensure uninterrupted leadership and direction.

If [removed: the Company is] [added: we are] 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 [removed: the Company's] [added: our] results of operations and financial condition could be materially adversely affected.

[removed: The Company also] [added: We] cannot offer assurances that any of these initiatives will [removed: 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.

[removed: The Company relies] [added: We rely] extensively on information technology systems to manage and operate [removed: its] [added: our] business, some of which are managed by third parties.

[added: 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 [removed: the Company suffers] [added: we suffer] any resulting interruption in [removed: its] [added: our] ability to manage and operate [removed: its] [added: our] business or if [removed: its] [added: our] products are effected, [removed: the Company's] [added: our] results of operations and financial condition could be materially adversely affected.

In addition to existing risks, any adoption or deployment of new technologies [added: via acquisitions or internal initiatives] may increase our exposure to risks, breaches, or failures, which could materially adversely affect [removed: the Company's] [added: our] results of operations or financial condition.

Despite [removed: the Company's] [added: our] use of reasonable and appropriate controls, material security breaches, theft, misplaced, lost or corrupted data, [removed: programming] [added: programming,] or employee [removed: errors,] [added: errors] and/or [removed: malfeasance,] [added: malfeasance] could lead to the compromise or improper use of such sensitive, confidential, or personal data or information, resulting in possible negative consequences, such as fines, penalties, loss of [removed: reputation] [added: reputation, competitiveness] or [removed: competitiveness,] [added: customers,] or other negative [added: consequences resulting in adverse] impacts to [removed: the Company's] [added: our] results of operations or financial condition.

Demand for and supply of [removed: the Company’s] [added: our] products may be adversely affected by numerous factors, some of which [removed: the Company] [added: we] cannot predict or control.

| • | changes in the market acceptance of [removed: the Company’s] [added: our] products; |

Risks arising from uncertainty in worldwide and regional economic conditions may harm our business and make it difficult to project long-term performance.

As a global business, we are exposed to economic, political and other risks in different countries in which we operate, which could materially reduce our sales, profitability or cash flows, or materially increase our liabilities.

For example, although we expect to realize certain benefits as a result of our proposed acquisitions of Lord and Exotic, there is the possibility that we may not complete these proposed acquisitions or that following our acquisitions of Lord and Exotic we may be unable to successfully integrate those businesses in order to realize the anticipated benefits of the acquisitions or to do so within the intended timeframe.

Uncertainties associated with our proposed acquisitions of Lord and Exotic may also cause a loss of management personnel and other key employees, which could adversely affect our future business, operations and financial results.

The risks and uncertainties of our proposed acquisitions of Lord and Exotic include, among others:

| • | the occurrence of any event, change or other circumstances that could delay the closing of the proposed transactions; |

| • | the possibility of non-consummation of the proposed transactions and termination of the acquisition agreements; |

| • | the failure to satisfy any of the conditions to the proposed transactions set forth in the acquisition agreements; the possibility that a governmental entity may prohibit the consummation of the proposed transactions or may delay or refuse to grant a necessary regulatory approval in connection with the proposed transactions or that in order for the parties to obtain any such regulatory approvals, conditions are imposed that adversely affect the anticipated benefits from the proposed transactions or cause the parties to abandon the proposed transactions; |

| • | adverse effects on our common stock or other securities because of the failure to complete the proposed transactions; |

| • | business disruptions due to transaction-related uncertainty or other factors making it more difficult to maintain relationships with employees, business partners or governmental entities; |

| • | the possibility that the expected synergies and value creation from the proposed transactions will not be realized or will not be realized within the expected time period; |

| • | the parties being unable to successfully implement integration strategies; and |

| • | and significant transaction costs related to the proposed transactions. |

If we are unable to avoid these risks, our results of operations and financial condition could be materially adversely affected.

The proposed acquisitions of Lord and Exotic would further expand the size and complexity of our business.

Increased cybersecurity threats and more sophisticated and targeted computer crime could pose a risk to our information technology systems.

Changes in the demand for and supply of our products may adversely affect our financial results, financial condition and cash flow.

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The development of new products and technologies requires substantial investment and is required to remain competitive in the markets we serve.

If we are unable to successfully introduce new commercial products, our profitability could be adversely affected.

Changes in the competitive environment in which we operate may eliminate any competitive advantages that we currently have, which could adversely impact our business.

Litigation and legal and regulatory proceedings against the Company could decrease our liquidity, impair our financial condition and adversely affect our results of operations.

Further, our operations are subject to certain antitrust and competition laws in the jurisdictions in which we conduct our business, in particular the United States and Europe.

These laws prohibit, among other things, anticompetitive agreements and practices.

If any of our commercial agreements or practices are found to violate or infringe such laws, we may be subject to civil and other penalties.

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

Moderate economic growth persists in the economic regions in which the Company conducts substantial operations.

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

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

If these systems, or any part of the systems, are damaged,

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

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

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

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

On December 22, 2017, the Tax Cuts and Jobs Act, or the TCJ Act, was enacted into law.

The TCJ Act significantly reforms the Internal Revenue Code of 1986, as amended, by, among other things, establishing a flat corporate U.S. income tax rate of 21 percent and creating a territorial tax system (with a one-time transition tax imposed on previously unremitted foreign earnings and profits).

For example, the Company’s estimate of the net one-time charge incurred related to the TCJ Act could differ materially from the Company’s actual liability, due to, among other things, further refinement of the calculations, changes in interpretations and assumptions the Company has made, additional guidance that may be issued by the U.S. Treasury Department and Internal Revenue Service, and any other actions the Company may make as a result of the TCJ Act.

The Company may be subject to product liability risks.

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

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

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

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

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

[removed: Forward-Looking Statements][added: Forward-Looking Statements]

| • | [removed: changes in] business relationships with and purchases by or from major customers, suppliers or distributors, including delays or cancellations in shipments; |

| • | [added: our] ability to identify acceptable strategic acquisition targets; uncertainties surrounding timing, successful completion or integration of acquisitions and similar transactions, including the integration of CLARCOR Inc. [removed: (Clarcor);] [added: ("Clarcor") and the proposed acquisitions of LORD Corporation ("Lord") and EMFCO Holdings Incorporated, parent company of Exotic Metals Forming Company LLC ("Exotic");] ability to successfully divest businesses planned for divestiture and realize the anticipated benefits of such divestitures; |

| • | [added: our] ability to implement successfully the Company's capital allocation initiatives, including timing, price and execution of share [removed: repurchases;] [added: repurchases.] |

| • | [added: our] ability to manage costs related to insurance and employee retirement and health care benefits; |

| • | compliance costs associated with environmental laws and [added: climate change] regulations; |

| • | uncertainties surrounding the ultimate resolution of outstanding legal [added: and regulatory] proceedings, including the outcome of any appeals; |

| • | global economic [added: and political] factors, including manufacturing activity, air travel trends, currency exchange [removed: rates,] [added: rates and monetary policy, trade policy and tariffs,] difficulties entering new markets and general economic conditions such as inflation, deflation, interest rates and credit [removed: availability.] [added: 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, [removed: 2018,] [added: 2019,] and undertakes no obligation to update them unless otherwise required by law.

[removed: Overview][added: Overview]

[removed: The Company's] [added: 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.

[removed: The Company believes] [added: We believe] the leading economic indicators of these markets that have a correlation to the Company's future order rates are as follows:

| • | Purchasing Managers Index [removed: (PMI)] [added: ("PMI")] on manufacturing activity specific to regions around the world with respect to most mobile and industrial markets; |

| | [removed: June] [added: June] 30, [removed: 2018] [added: 2019] | | | [removed: March] [added: March] 31, [removed: 2018] [added: 2019] | | | [removed: June] [added: June] 30, [removed: 2017] [added: 2018] | |

| United States | [removed: 60.2] [added: 50.6] | | | [removed: 59.3] [added: 55.3] | | | [removed: 57.8] [added: 60.2] | |

| Eurozone countries | [removed: 54.9] [added: 47.6] | | | [removed: 56.6] [added: 47.5] | | | [removed: 57.4] [added: 54.9] | |

| China | [removed: 51.0] [added: 49.4] | | | [removed: 51.0] [added: 50.8] | | | [removed: 50.4] [added: 51.0] | |

Global aircraft miles flown increased by approximately [removed: six] [added: four] percent and global revenue passenger miles increased approximately [removed: seven] [added: five] percent from their comparable [removed: 2017] [added: 2018] 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 [removed: 2018] [added: 2019] will increase by approximately [removed: two] [added: four] percent from [removed: their] [added: its] fiscal [removed: 2017] [added: 2018] level.

Housing starts in June [removed: 2018] [added: 2019] were [removed: 11] [added: 10] percent [removed: lower] [added: higher] than housing starts in March [removed: 2018] [added: 2019] and [removed: four] [added: six] percent [removed: lower] [added: higher] than housing starts in June [removed: 2017.][added: 2018.]

[removed: The Company believes] [added: We believe] many opportunities for profitable growth are available.

[removed: The Company believes it] [added: We believe we] can meet [removed: its] [added: our] strategic objectives by:

| • | Successfully executing [removed: its] [added: The] Win Strategy initiatives relating to engaged people, premier customer experience, profitable growth and financial performance; |

| • | Maintaining [removed: its] [added: a] decentralized division and sales company structure; |

| • | Creating a culture of empowerment through [removed: its] [added: our] values, inclusion and diversity, accountability and teamwork. |

In addition, [removed: the Company] [added: we] will continue to assess [removed: its] [added: our] existing businesses and initiate efforts to divest businesses that are not considered to be a good long-term strategic fit for the Company.

[removed: CONSOLIDATED] [added: CONSOLIDATED] STATEMENT OF [removed: INCOME][added: INCOME]

| [removed: (dollars] [added: (dollars] in [removed: millions) | | 2018 | |] [added: millions)] | | [removed: 2017] [added: 2019] | | | | [removed: 2016] [added: 2018] | | |

| Net sales | | [removed: $ | 14,302 | | | $] [added: $] | [removed: 12,029] [added: 14,320] | | | $ | [removed: 11,361] [added: 14,302] | |

| Selling, general and administrative expenses | | [removed: $ | 1,657 | | | $] [added: $] | [removed: 1,454] [added: 1,544] | | | $ | [removed: 1,359] [added: 1,640] | |

| Selling, general and administrative expenses, as a percent of sales | | [removed: 11.6 | | % | | 12.1] [added: 10.8] | | [removed: %] [added: %] | | [removed: 12.0] [added: 11.5] | | % |

| Interest expense | | [removed: $ | 214 | | | $] [added: $] | [removed: 162] [added: 190] | | | $ | [removed: 137] [added: 214] | |

| Other [removed: (income),] [added: (income) expense,] net | | [removed: (29 | | ) | | (61] [added: (61] | | [removed: )] [added: )] | | [removed: (62] [added: 13] | | [removed: )] |

| [removed: (Gain)] [added: Loss (gain)] on disposal of assets | | [removed: (4 | | ) | | (43] [added: 11] | | [removed: )] | | [removed: (11] [added: (4] | | ) |

| Effective tax rate | | [removed: 37.7 | | % | | 26.0] [added: 21.7] | | [removed: %] [added: %] | | [removed: 27.6] [added: 37.7] | | % |

| Net income attributable to common shareholders | | [removed: $ | 1,061 | | | $] [added: $] | [removed: 983] [added: 1,512] | | | $ | [removed: 807] [added: 1,061] | |

The effect of currency rate changes [removed: increased] [added: decreased] net sales in [removed: 2018] [added: 2019] by approximately [removed: $295] [added: $305] million, of which [removed: $270] [added: $285] million was attributable to the Diversified Industrial International operations.

[removed: Gross] [added: Gross] profit [removed: margin] [added: margin] (calculated as net sales less cost of sales, divided by net sales) increased in [removed: 2018] [added: 2019] primarily due to higher margins in the Aerospace Systems Segment [removed: resulting from a favorable product mix.][added: driven by increased aftermarket and original equipment manufacturer ("OEM") volume and profitability and lower engineering development costs.]

Foreign currency transaction loss [removed: (relating to cash, marketable securities and other investments and intercompany transactions)] included in cost of sales for [removed: 2018, 2017] [added: 2019] and [removed: 2016] [added: 2018] was [removed: $7.3 million, $8.1] [added: $5.9] million and [removed: $22.7] [added: $7.3] million, respectively.

Included in cost of sales in [removed: 2018, 2017] [added: 2019] and [removed: 2016] [added: 2018] were business realignment charges of [removed: $44.9 million, $35.9] [added: $14.7] million and [removed: $76.2] [added: $44.9] million, respectively.

Additionally, the actual impact of changes in tax laws in the United States and foreign jurisdictions and any judicial or regulatory interpretations thereof on future performance and earnings projections may impact the Company's tax calculations.

| • | our ability to effectively manage expanded operations from the acquisition of Clarcor or the proposed acquisitions of Lord and Exotic; |

| • | increased cybersecurity threats and sophisticated computer crime; |

| • | the development of new products and technologies requiring substantial investment; |

| • | additional liabilities relating to changes in tax rates or exposure to additional income tax liabilities; |

| • | potential product liability risks; |

| • | our ability to enter into, own, renew and maintain intellectual property and know-how; |

| • | our leverage and future debt service obligations; |

| • | potential impairment of goodwill; |

| • | compliance with federal rules, regulations, audits and investigations associated with being a provider of products to the United States government; and |

| Brazil | 51.0 | | | 52.8 | | | 49.8 | |

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Discussion of the 2017 financial statements is included in Part II, Item 7 of the Company's 2018 Annual Report on Form 10-K.

The discussion below compares the operating performance in 2019 and 2018.

| Gross profit margin | | 25.3 | | % | | 24.9 | | % |

Net sales in 2019 increased slightly from the 2018 amount.

Lower operating costs in the Diversified Industrial Segment resulting from prior-year business realignment and acquisition integration activities and the Company's simplification initiative also contributed to higher margins in 2019.

Selling, general and administrative expenses decreased 5.9 percent in 2019 primarily due to the benefits from prior-year business realignment and acquisition integration activities and the Company's simplification initiative, lower amortization expense and lower incentive compensation.

These benefits were partially offset by an increase in acquisition-related expenses and higher net expense associated with the Company's deferred compensation program and related investments.

Other (income) expense, net included the following:

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| Income related to equity method investments | | $ | (93 | ) | | $ | (50 | ) |

| Non-service components of retirement benefit cost | | 40 | | | | 42 | | |

| | | $ | (61 | ) | | $ | 13 | |

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Additionally, the actual impact of the U.S. Tax Cuts and Jobs Act (TCJ Act) may affect future performance and earnings projections as the amounts reflected in this period are preliminary estimates and exact amounts will not be determined until a later date, and there may be other judicial or regulatory interpretations of the TCJ Act that may also affect these estimates and the actual impact on the Company.

| • | potential labor disruptions; |

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

| • | global competitive market conditions, including global reactions to U.S. trade polices, and resulting effects on sales and pricing; and |

| Brazil | 49.8 | | | 53.4 | | | 50.5 | |

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| Gross profit margin | | 24.7 | | % | | 23.6 | | % | | 22.3 | | % |

Net sales in 2018 were 18.9 percent higher than 2017.

The increase in net sales in 2018 was a result of an increase in volume in both the Diversified Industrial North American and Diversified Industrial International operations and acquisitions completed during 2017, which contributed approximately $970 million to current-year incremental net sales.

Net sales in 2017 were 5.9 percent higher than 2016.

The increase in net sales in 2017 was primarily a result of acquisitions made in 2017 (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).

All segments benefited from lower operating expenses related to simplification and realignment efforts.

These benefits were partially offset by unfavorable product mix, unfavorable raw material prices and inefficiencies created by manufacturing facility consolidations which contributed to lower margins in the Diversified Industrial North American and Diversified Industrial International operations during 2018.

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.

Pension cost included in cost of sales in 2018, 2017 and 2016 was $86.1 million, $135.0 million and $172.4 million, respectively.

Selling, general and administrative expenses increased 14.0 percent in 2018 and increased 7.0 percent in 2017.

The increase in 2018 was primarily due to higher sales expense resulting from an increase in sales, higher amortization expense resulting from recent acquisitions and higher incentive compensation, partially offset by lower acquisition expenses.

Pension cost included in selling, general and administrative expenses in 2018, 2017 and 2016 was $36.9 million, $65.8 million and $74.4 million, respectively.

Interest expense in 2018 increased primarily due to higher weighted-average borrowings and higher weighted-average interest rates.

Other (income), net in 2018, 2017 and 2016 includes $50.5 million, $42.4 million, and $25.6 million of income, respectively, related to the Company's equity interests in joint ventures.

Other (income), net in 2018 also includes a writedown of an investment of $27.4 million and a loss on the sale of an investment of $13.8 million.

Excluding the impact of the TCJ Act one-time adjustments, the effective tax rate for 2018 was lower primarily due to the reduced U.S. income tax rate resulting from enactment of the TCJ Act and a net increase in discrete tax benefits, partially offset by an increase in taxes related to international activities.

The effective tax rate in 2017 was favorably impacted by an increase of discrete tax benefits, mostly related to stock-based compensation expense.

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| Assets | 13,369 | | | | 13,367 | | | | 8,729 | | |

| Return on average assets | 13.8 | | % | | 13.1 | | % | | 14.2 | | % |

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| | | 2018 | | | 2017 | |

| Acquisitions | | 14.9 | % | | 8.8 | % |

| Divestitures | | (0.1 | )% | | — | % |

| Acquisitions | | 3.9 | % | | 2.9 | % |

| Divestitures | | (0.2 | )% | | — | % |

| Currency | | 6.2 | % | | (1.6 | )% |

| Acquisitions | | 10.0 | % | | 6.1 | % |

| Currency | | 3.0 | % | | (0.9 | )% |

Acquisitions completed during 2017 contributed approximately $798 million in incremental sales in 2018, and the effect of currency exchange rates increased sales in 2018 by $20 million.

Excluding acquisitions and the effect of currency rate changes, sales in 2017 for the Diversified Industrial North American operations remained flat from 2016 levels reflecting higher demand from distributors offset by lower demand from end users in the heavy-duty truck, cars and light trucks, life sciences, and oil and gas markets.

Gains or losses on derivatives that are not [added: designated as] hedges are adjusted to fair value through the Consolidated Statement of Income.

Gains or losses on derivatives that are [added: designated as] 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.

A 100 basis point increase in near-term interest rates would increase annual interest expense on variable rate debt existing at June 30, [removed: 2018] [added: 2019] by approximately [removed: $7] [added: $9] million.

[removed: UNITED STATES][added: UNITED STATES]

[removed: SECURITIES] [added: SECURITIES] AND EXCHANGE [removed: COMMISSION][added: COMMISSION]

[removed: Washington,] [added: Washington,] D. C. [removed: 20549][added: 20549]

[removed: FORM 10-K][added: FORM 10-K]

| [removed: ý] [added: ☒] | [removed: ANNUAL] [added: ANNUAL] REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF [removed: 1934] [added: 1934] |

[removed: For] [added: For] the fiscal year [removed: ended June] [added: ended June] 30, [removed: 2018][added: 2019]

| [removed: ¨] [added: ☐] | [removed: TRANSITION] [added: TRANSITION] REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF [removed: 1934] [added: 1934] |

[removed: For] [added: For] the transition period from [removed: to][added: to]

[removed: Commission] [added: Commission] File [removed: No. 1-4982][added: No. 1-4982]

[removed: PARKER-HANNIFIN CORPORATION][added: PARKER-HANNIFIN CORPORATION]

[removed: (Exact] [added: (Exact] name of registrant as specified in its [removed: charter)][added: charter)]

| [removed: Ohio] [added: Ohio] | [removed: 34-0451060] | [added: | 34-0451060 |]

| [removed: (State] [added: (State] or other jurisdiction [removed: of Incorporation] [added: of Incorporation] or [removed: Organization)] [added: Organization)] | [removed: (I.R.S. Employer Identification No.)] | [added: | (I.R.S. Employer Identification No.) |]

| [removed: 6035] [added: 6035] Parkland [removed: Boulevard, Cleveland, Ohio] [added: Boulevard,] | [removed: 44124-4141] [added: Cleveland,] | [added: Ohio | 44124-4141 |]

| [removed: (Address] [added: (Address] of Principal Executive [removed: Offices)] [added: Offices)] | [removed: (Zip Code)] | [added: | (Zip Code) |]

[removed: Registrant’s] [added: Registrant’s] telephone number, including area code [removed: (216) 896-3000][added: (216) 896-3000]

[removed: Securities] [added: Securities] registered pursuant to Section 12(b) of the [removed: Act:][added: Act:]

| [removed: Title] [added: Title] of Each [removed: Class] [added: Class] | | [removed: Name] [added: Trading Symbol | | Name] of Each [removed: Exchange on] [added: Exchange on] which [removed: Registered] [added: Registered] |

| Common Shares, $.50 par value | | [added: PH | |] New York Stock Exchange |

[removed: Securities] [added: Securities] registered pursuant to Section 12(g) of the Act: [removed: None][added: None]

Yes [removed: ý] [added: ☒] No [removed: ¨][added: ☐]

Yes [removed: ¨] [added: ☐] No [removed: ý][added: ☒]

| Large Accelerated [removed: Filer:] [added: Filer] | [removed: ý] [added: ☒] | Accelerated [removed: Filer:] [added: Filer] | [removed: ¨] [added: ☐] |

| Non-Accelerated [removed: Filer:] [added: Filer] | [removed: ¨] [added: ☐] | Smaller Reporting [removed: Company:] [added: Company] | [removed: ¨] [added: ☐] |

| Emerging Growth Company | [removed: ¨] [added: ☐] | | |

The aggregate market value of the outstanding common stock held by non-affiliates of the Registrant as of December 31, [removed: 2017: $26,411,763,329.][added: 2018: $19,209,620,506.]

The number of Common Shares outstanding on July 31, [removed: 2018] [added: 2019] was [removed: 132,360,024.][added: 128,441,799.]

Portions of the Definitive Proxy Statement for the Company’s [removed: 2018] [added: 2019] Annual Meeting of [removed: Shareholders] [added: Shareholders,] to be held on October [removed: 24, 2018,] [added: 23, 2019,] are incorporated by reference into Part III of this Annual Report on Form 10-K.

| Item 1. | [removed: [Business](#s70A35827EB4058D19BFFAFD9A01AF1A5)] [added: [Business](#s2F8FA03E88A0531F87DE1EBF1CBE2C12)] | [removed: [2](#s70A35827EB4058D19BFFAFD9A01AF1A5)] [added: [2](#s2F8FA03E88A0531F87DE1EBF1CBE2C12)] |

| Item 1A. | [Risk [removed: Factors](#s33171880F2695B4196DB539C296BA62D)] [added: Factors](#s3A71F06307FF5E80BFBB8AE6EBE2BE09)] | [removed: [9](#s33171880F2695B4196DB539C296BA62D)] [added: [8](#s3A71F06307FF5E80BFBB8AE6EBE2BE09)] |

| Item 1B. | [Unresolved Staff [removed: Comments](#s9F5AC2F8275F550A82112CFA084184E9)] [added: Comments](#sB18BFE36A3A756ED84F58B06E5E1EE7F)] | [removed: [13](#s9F5AC2F8275F550A82112CFA084184E9)] [added: [14](#sB18BFE36A3A756ED84F58B06E5E1EE7F)] |

| Item 2. | [removed: [Properties](#s277F9032C02B557BBFB76BDD98521B58)] [added: [Properties](#s311BF277ECC255B3B0E23DD26D4DB6D5)] | [removed: [15](#s277F9032C02B557BBFB76BDD98521B58)] [added: [16](#s311BF277ECC255B3B0E23DD26D4DB6D5)] |

| Item 3. | [Legal [removed: Proceedings](#s79529CBC47545045B3874B8CC74AF665)] [added: Proceedings](#s0A955FDBFCFD59D5825C88A63AA85946)] | [removed: [15](#s79529CBC47545045B3874B8CC74AF665)] [added: [16](#s0A955FDBFCFD59D5825C88A63AA85946)] |

| Item 4. | [Mine Safety [removed: Disclosures](#s59E45D35219B59D492894B8145EFAFA9)] [added: Disclosures](#sC6CF8E9E666C566BA02E7EEA195D9C21)] | [removed: [15](#s59E45D35219B59D492894B8145EFAFA9)] [added: [16](#sC6CF8E9E666C566BA02E7EEA195D9C21)] |

| Item 5. | [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#s5900740973D653CCA2E678FCC682BC9F)] [added: Securities](#sE2D272F1802E5389AB282F9089CA1B1F)] | [removed: [16](#s5900740973D653CCA2E678FCC682BC9F)] [added: [17](#sE2D272F1802E5389AB282F9089CA1B1F)] |

| Item 6. | [Selected Financial [removed: Data](#s4CB331D87ACC581796524E1CA795DC0D)] [added: Data](#s2EF0AFAD197755C0BBE2074F0C5BF96E)] | [removed: [16](#s4CB331D87ACC581796524E1CA795DC0D)] [added: [17](#s2EF0AFAD197755C0BBE2074F0C5BF96E)] |

| Item 7. | [Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations](#sD7EF70BD68F651F49FACE6DB902C2983)] [added: Operations](#s4798C2B7BD825E20B4313CDD25298119)] | [removed: [17](#sD7EF70BD68F651F49FACE6DB902C2983)] [added: [18](#s4798C2B7BD825E20B4313CDD25298119)] |

| Item 7A. | [Quantitative and Qualitative Disclosures About Market [removed: Risk](#s646D9E50579A5CF08E05AC5A2A2C4E65)] [added: Risk](#s0F59AC17C36C59C0B8F69E16CED3DD10)] | [removed: [28](#s646D9E50579A5CF08E05AC5A2A2C4E65)] [added: [28](#s0F59AC17C36C59C0B8F69E16CED3DD10)] |

| Item 8. | [Financial Statements and Supplementary [removed: Data](#s0B7E3AC6DC435954B55D15DAE2B0A481)] [added: Data](#sC83AC28AC9045FBA89FABCAAECE5D38E)] | [removed: [29](#s0B7E3AC6DC435954B55D15DAE2B0A481)] [added: [29](#sC83AC28AC9045FBA89FABCAAECE5D38E)] |

| Item 9. | [Changes in and Disagreements with Accountants on Accounting and Financial [removed: Disclosure](#sCB9B6DB9595454BC8A17F096CE3E9C7F)] [added: Disclosure](#s9B46C083D1135ABAABC4CEDA7E6DCE0B)] | [removed: [65](#sCB9B6DB9595454BC8A17F096CE3E9C7F)] [added: [68](#s9B46C083D1135ABAABC4CEDA7E6DCE0B)] |

OR

| | | | |

| | | | | |

| --- | --- | --- | --- | --- |

| | | | | |

Yes ☒ No ☐

Yes ☒ No ☐

| | | | |

| --- | --- | --- | --- |

| | | | |

Yes ☐ No ☒

| Item 1C. | [Information about our Executive Officers](#s7CA2779FB33552A28B6141BE766E3F46) | [15](#s7CA2779FB33552A28B6141BE766E3F46) |

| [Signatures](#sE1A95CDE4C8757DB81728FC37DDC09F0) | | [75](#sE1A95CDE4C8757DB81728FC37DDC09F0) |

Instrumentation Group: high quality flow control solutions that are critical to a wide range of applications involving extreme corrosion resistance, temperatures, pressures and precise flow, including:

We offer our products over numerous, varied markets through our divisions operating in 50 countries.

Our global scope means that we have hundreds of competitors across our various markets and product offerings.

This has enabled us to obtain significant original equipment business on new aircraft programs for our systems and components as well as the follow-on repair and replacement business for these programs.

| • | decentralized business model; |

| • | technology breadth and interconnectivity; |

| • | engineered products with intellectual property; |

| • | long product life cycles; |

| • | balanced OEM vs. aftermarket; |

| --- | --- |

| • | low capital investment requirements; and |

| --- | --- |

| • | great generators and delployers of cash over the cycle. |

We own a number of patents, trademarks, copyrights and licenses related to our products.

Our reserve for environmental matters is discussed in Note 16 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K and is incorporated herein by reference.

During 2019, we entered into a definitive agreement under which we expect to acquire LORD Corporation ("Lord").

On July 29, 2019, the Company announced that it had entered into a definitive agreement to acquire EMFCO Holdings Incorporated, parent company of Exotic Metals Forming Company LLC ("Exotic").

The proposed Exotic acquisition is discussed in Note 1 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K and is incorporated herein by reference.

10-K 1 ph630201810-k.htm 10-K

OR

| | | |

| --- | --- | --- |

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 ¨.

| Item 1C. | [Executive Officers of the Registrant](#sAE469B83C40B5D23A63DA77D41EC425C) | [14](#sAE469B83C40B5D23A63DA77D41EC425C) |

| [Signatures](#s6F7C6D1977CB5DAA90358B7873125D89) | | [72](#s6F7C6D1977CB5DAA90358B7873125D89) |

ITEM 1.

Business.

Diversified Industrial Segment.

Aerospace Systems Segment.

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:

The Company offers its products over numerous, varied markets through its divisions operating in 50 countries and consequently has hundreds of competitors when viewed across its various markets and product offerings.

| • | 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 $327.9 million in 2018, $336.7 million in 2017 and $359.8 million in 2016.

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 2018, 2017 and 2016 were $40.8 million, $65.3 million and $58.0 million, respectively.

The dollar

As of June 30, 2018, the Company had a reserve of $18.0 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 $18.0 million to a maximum of $81.0 million.

The largest range of the estimated total liability for any one site is approximately $9.5 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.

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.

[removed: The Company’s] [added: Our] executive officers as of August 15, [removed: 2018,] [added: 2019,] were as follows:

| [removed: Name] [added: Name] | | [removed: Position] [added: Position] | | [removed: Officer Since(1)] [added: Officer Since(1)] | | [removed: Age] [added: Age] as [removed: of 8/15/2018] [added: of 8/15/2019] | |

| Thomas L. Williams | | Chairman of the Board, Chief Executive Officer and Director | | 2005 | | [removed: 59] [added: 60] | |

| Lee C. Banks | | President, Chief Operating Officer and Director | | 2001 | | [removed: 55] [added: 56] | |

| Catherine A. Suever | | Executive Vice President – Finance & Administration and Chief Financial Officer | | 2010 | | [removed: 59] [added: 60] | |

| Mark J. Hart | | Executive Vice President – Human Resources & External Affairs | | 2016 | | [removed: 53] [added: 54] | |

| William R. "Skip" Bowman | | Vice President and President - Instrumentation Group | | 2016 | | [removed: 60] [added: 61] | |

| [removed: William G. Eline] [added: Dinu J. Parel] | | Vice President [removed: –] [added: and] Chief Information Officer | | [removed: 2002] [added: 2018] | | [removed: 62] [added: 39] | |

| Thomas C. Gentile | | Vice President – Global Supply Chain | | 2017 | | [removed: 46] [added: 47] | |

| Todd M. Leombruno | | Vice President and Controller | | 2017 | | [removed: 48] [added: 49] | |

| Joseph R. Leonti | | Vice President, General Counsel and Secretary | | 2014 | | [removed: 46] [added: 47] | |

| Robert W. Malone | | Vice President and President – Filtration Group | | 2014 | | [removed: 54] [added: 55] | |

| M. Craig Maxwell | | Vice President – Chief Technology and Innovation Officer | | 2003 | | [removed: 60] [added: 61] | |

| Jennifer A. Parmentier | | Vice President and President – [removed: Engineered Materials] [added: Motion Systems] Group | | 2015 | | [removed: 51] [added: 52] | |

| Andrew D. Ross | | Vice President and President – Fluid Connectors Group | | 2012 | | [removed: 51] [added: 52] | |

| Roger S. Sherrard | | Vice President and President – Aerospace Group | | 2003 | | [removed: 52] [added: 53] | |

| Andrew M. Weeks | | Vice President and President – [removed: Motion Systems] [added: Engineered Materials] Group | | 2015 | | [removed: 55] [added: 56] | |

(1)Executive officers [removed: 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.

[removed: Eline, Keller,] [added: Leonti,] Maxwell, and Sherrard have served in the executive capacities indicated above [removed: opposite their respective names] during each of the past five years.

He was General Manager of the Company's domnick hunter Process Filtration Division from December 2013 to July [removed: 2017; and Vice President, Supply Chain - Filtration Group from July 2008 to December 2013.][added: 2017.]

Ms. Parmentier has been Vice President and President of the [removed: Engineered Materials] [added: Motion Systems] Group since [removed: September 2015.][added: February 2019.]

Mr. Weeks has been Vice President and President of the [removed: Motion Systems] [added: Engineered Materials] Group since [removed: September 2015.][added: February 2019.]

[removed: ITEM 2.][added: ITEM 2. Properties.]

The facilities are situated in [removed: 39] [added: 37] states within the United States and in 49 other countries.

[removed: The Company owns] [added: We own] the majority of [removed: its] [added: our] manufacturing plants, and [removed: its] [added: our] leased properties primarily consist of sales and administrative offices and distribution centers.

[removed: | | Manufacturing Plants | | | Distribution Centers | | | Sales] [added: We also maintain various sales] and [removed: Administrative Offices | |][added: administrative offices and distribution centers throughout the world.]

[removed: The Company believes] [added: We believe] that [removed: its] [added: our] properties have been adequately maintained, are in good condition generally and are suitable and adequate for [removed: its] [added: our] business as presently conducted.

The extent to which [removed: the Company uses its] [added: we utilize our] properties varies by property and from time to time.

[removed: The Company believes] [added: We believe] that [removed: its] [added: our] restructuring efforts have brought capacity levels closer to present and anticipated needs.

Most of [removed: the Company’s] [added: our] manufacturing facilities remain capable of handling volume increases.

He is also a Director of Goodyear Tire & Rubber Company.

She is also a director of Hexcel Corporation.

Mr. Parel has been Vice President and Chief Information Officer since October 2018.

He was Vice President and Chief Information Officer at Dover Corporation from May 2016 through October 2018.

Prior to Dover, he held several IT leadership roles at Baker Hughes from March 2010 to May 2016, including IT Integration Leader and Senior Director, IT North America.

She was Vice President and President of the Engineered Materials Group from September 2015 to February 2019.

He was Vice President and President of the Motion Systems Group from September 2015 to February 2019.

Our corporate headquarters is located in Cleveland, Ohio, and, at June 30, 2019, the Company maintained approximately 290 manufacturing plants.

None of these plants, administrative offices or distribution centers are individually material to our operations.

| Kurt A. Keller | | Vice President and President – Asia Pacific Group | | 2009 | | 60 | |

He is also a Director of Chart Industries, Inc.

Properties.

The Company’s corporate headquarters is located in Cleveland, Ohio, and, at June 30, 2018, the Company had 310 manufacturing plants, 119 distribution centers and 157 sales and administrative offices throughout the world, none of which were individually material to its operations.

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 | | | | | | | |

| Diversified Industrial | 291 | | | 115 | | | 144 | |

| Aerospace Systems | 19 | | | 4 | | | 13 | |

| Total | 310 | | | 119 | | | 157 | |

| | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | Geographic Location | | | | | | | | | | |

| | North America | | | Europe | | | Asia-Pacific | | | Latin America | |

| Diversified Industrial | 271 | | | 154 | | | 113 | | | 12 | |

| Aerospace Systems | 30 | | | 4 | | | 2 | | | — | |

| Total | 301 | | | 158 | | | 115 | | | 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.

| (a) | [removed: Market] [added: Market] for the Registrant’s Common [removed: Equity.] [added: Equity.] The Company’s common stock is listed for trading on the New York Stock Exchange [removed: (NYSE)] [added: ("NYSE")] under the symbol "PH". [removed: Information regarding stock price as reported on the NYSE and dividend information with respect to] [added: As of July 31, 2019,] the [removed: Company’s common stock, is included in] [added: number of shareholders of record of] the [removed: table below.] [added: Company was 3,464.] |

| (b) | [removed: Use] [added: Use] of [removed: Proceeds.] [added: Proceeds.] Not Applicable. |

[added: |] (c) [removed: Purchases] [added: | Purchases] of Equity Securities by the Issuer and Affiliated [removed: Purchasers.][added: Purchasers. |]

| [removed: ISSUER] [added: ISSUER] PURCHASES OF EQUITY [removed: SECURITIES] [added: SECURITIES] | | | | | | | | | | | | | |

| [removed: Period] [added: Period] | | [removed: (a) Total Number of Shares Purchased] [added: (a) Total Number of Shares Purchased] | | | [removed: (b) Average Price Paid Per Share] [added: (b) Average Price Paid Per Share] | | | | [removed: (c)] [added: (c)] Total Number [removed: of Shares Purchased as] [added: of Shares Purchased as] Part of [removed: Publicly Announced Plans or] [added: Publicly Announced Plans or] Programs [removed: (1)] [added: (1)] | | | [removed: (d)] [added: (d)] Maximum [removed: Number (or Approximate Dollar] [added: Number (or Approximate Dollar] Value) [removed: of Shares] [added: of Shares] that May [removed: Yet Be Purchased Under] [added: Yet Be Purchased Under] the Plans [removed: or Programs] [added: or Programs] | |

| April 1, 2019 through April 30, 2019 | | 91,600 | | | $ | 182.97 | | | 91,600 | | | 11,046,103 | |

| May 1, 2019 through May 31, 2019 | | 103,000 | | | $ | 168.89 | | | 103,000 | | | 10,943,103 | |

| June 1, 2019 through June 30, 2019 | | 96,283 | | | $ | 164.50 | | | 96,283 | | | 10,846,820 | |

| Total | | 290,883 | | | | | | | 290,883 | | | | |

| | |

| --- | --- |

| | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| (In dollars) | | 1st | | | | 2nd | | | | 3rd | | | | 4th | | | | Fiscal Year | | |

| 2018 | High | $ | 177.61 | | | $ | 200.82 | | | $ | 212.80 | | | $ | 183.91 | | | $ | 212.80 | |

| | Low | 153.65 | | | | 170.66 | | | | 167.50 | | | | 152.47 | | | | 152.47 | | |

| | Dividends | 0.66 | | | | 0.66 | | | | 0.66 | | | | 0.76 | | | | 2.74 | | |

| 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 | |

| | Low | 94.64 | | | | 93.47 | | | | 83.32 | | | | 99.10 | | | | 83.32 | | |

| | Dividends | 0.63 | | | | 0.63 | | | | 0.63 | | | | 0.63 | | | | 2.52 | | |

As of July 31, 2018, the number of shareholders of record of the Company was 3,478.

| April 1, 2018 through April 30, 2018 | | 96,100 | | | $ | 170.96 | | | 96,100 | | | 16,404,510 | |

| May 1, 2018 through May 31, 2018 | | 704,770 | | | $ | 166.21 | | | 704,770 | | | 15,699,740 | |

| June 1, 2018 through June 30, 2018 | | 97,647 | | | $ | 168.11 | | | 97,647 | | | 15,602,093 | |

| Total | | 898,517 | | | $ | 166.92 | | | 898,517 | | | 15,602,093 | |

| [removed: (Amounts] [added: (Amounts] in thousands, except per share [removed: information)] [added: information)] | | [removed: 2018] [added: 2019] | | | | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | |

| Net sales | | [removed: $] [added: $] | [removed: 14,302,392] [added: 14,320,324] | | | $ | [removed: 12,029,312] [added: 14,302,392] | | | $ | [removed: 11,360,753] [added: 12,029,312] | | | $ | [removed: 12,711,744] [added: 11,360,753] | | | $ | [removed: 13,215,971] [added: 12,711,744] | |

| Net income attributable to common shareholders | | [removed: 1,060,801] [added: 1,512,364] | | | | [removed: 983,412] [added: 1,060,801] | | | | [removed: 806,840] [added: 983,412] | | | | [removed: 1,012,140] [added: 806,840] | | | | [removed: 1,041,048] [added: 1,012,140] | | |

| Basic earnings per share | | [removed: 7.98] [added: 11.63] | | | | [removed: 7.37] [added: 7.98] | | | | [removed: 5.96] [added: 7.37] | | | | [removed: 7.08] [added: 5.96] | | | | [removed: 6.98] [added: 7.08] | | |

| Diluted earnings per share | | [removed: 7.83] [added: 11.48] | | | | [removed: 7.25] [added: 7.83] | | | | [removed: 5.89] [added: 7.25] | | | | [removed: 6.97] [added: 5.89] | | | | [removed: 6.87] [added: 6.97] | | |

| Cash dividends per share | | [removed: 2.74] [added: 3.16] | | | | [removed: 2.58] [added: 2.74] | | | | [removed: 2.52] [added: 2.58] | | | | [removed: 2.37] [added: 2.52] | | | | [removed: 1.86] [added: 2.37] | | |

| Total assets | | [removed: 15,320,087] [added: 17,576,690] | | | | [removed: 15,489,904] [added: 15,320,087] | | | | [removed: 12,034,142] [added: 15,489,904] | | | | [removed: 12,254,279] [added: 12,034,142] | | | | [removed: 13,249,907] [added: 12,254,279] | | |

| Long-term debt | | [removed: 4,318,559] [added: 6,520,831] | | | | [removed: 4,861,895] [added: 4,318,559] | | | | [removed: 2,652,457] [added: 4,861,895] | | | | [removed: 2,698,957] [added: 2,652,457] | | | | [removed: 1,498,234] [added: 2,698,957] | | |

| | | [removed: Page Number in] [added: Page Number in] Form [removed: 10-K] [added: 10-K] |

[removed: | | [Consolidated Statement of Income](#s9A24507694525E03BD84E4E35B6F81E3) | [32](#s9A24507694525E03BD84E4E35B6F81E3) |][added: CONSOLIDATED STATEMENT OF INCOME]

[removed: | | [Consolidated Statement of Comprehensive Income](#s4357EBDB0CAC5F1D8EAFCC4BAC7C7A2A) | [33](#s4357EBDB0CAC5F1D8EAFCC4BAC7C7A2A) |][added: CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME]

[removed: | | [Business Segment Information](#s07D70F5BDBED583596964A2BA43B0E1D) | [34](#s07D70F5BDBED583596964A2BA43B0E1D) |][added: BUSINESS SEGMENT INFORMATION]

[removed: | | [Consolidated Balance Sheet](#sB4F8B981935D5BAF9AC14B7C7E5BAA28) | [36](#sB4F8B981935D5BAF9AC14B7C7E5BAA28) |][added: CONSOLIDATED BALANCE SHEET]

[removed: | | [Consolidated Statement of Cash Flows](#s564470A495A15F618CE95988C77D9797) | [37](#s564470A495A15F618CE95988C77D9797) |][added: CONSOLIDATED STATEMENT OF CASH FLOWS]

[removed: | | [Consolidated Statement of Equity](#s48D053AFAA155A968C4CB0E8E6C6D6B2) | [38](#s48D053AFAA155A968C4CB0E8E6C6D6B2) |][added: CONSOLIDATED STATEMENT OF EQUITY]

[removed: | | [Notes to Consolidated Financial Statements](#sC2BBFB2EBA075D29BFB4F9F3D178FDE7) | [39](#sC2BBFB2EBA075D29BFB4F9F3D178FDE7) |][added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS]

[removed: REPORT] [added: REPORT] OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING [removed: FIRM][added: FIRM]

[removed: Opinions] [added: Opinions] on the Financial Statements and Internal Control over Financial [removed: Reporting][added: Reporting]

We have audited the accompanying consolidated balance sheets of Parker-Hannifin Corporation and subsidiaries (the "Company") as of June 30, [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] the related consolidated statements of income, comprehensive income, equity, and cash flows, for each of the three years in the period ended June 30, [removed: 2018,] [added: 2019,] and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the “financial statements”).

We also have audited the Company's internal control over financial reporting as of June 30, [removed: 2018,] [added: 2019,] based on criteria established in [removed: Internal] [added: *Internal] Control - Integrated Framework [removed: (2013)] [added: (2013)*] issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the [removed: consolidated] financial statements referred to above present fairly, in all material respects, the financial position of the Company as of June 30, [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] and the results of its operations and its cash flows for each of the three years in the period ended June 30, [removed: 2018,] [added: 2019,] in conformity with accounting principles generally accepted in the United States of America.

Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 30, [removed: 2018,] [added: 2019,] based on criteria established in [removed: Internal] [added: *Internal] Control - Integrated Framework [removed: (2013)] [added: (2013)*] issued by COSO.

[removed: Basis] [added: Basis] for [removed: Opinions][added: Opinions]

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to [removed: fraud] [added: error] or [removed: error,] [added: fraud,] and whether effective internal control over financial reporting was maintained in all material respects.

[removed: Definition] [added: Definition] and Limitations of Internal Control over Financial [removed: Reporting][added: Reporting]

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that [removed: the] controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

[removed: /S/] [added: /s/] DELOITTE & TOUCHE, [removed: LLP][added: LLP]

[removed: CONSOLIDATED STATEMENT OF INCOME][added: | | [Consolidated Statement of Income](#s296F44876DA958C9A414C96367A3F27B) | [32](#s296F44876DA958C9A414C96367A3F27B) |]

| | | [removed: For] [added: For] the years ended June [removed: 30,] [added: 30,] | | | | | | | | | | |

| [removed: (Dollars] [added: (Dollars] in thousands, except per share [removed: amounts)] [added: amounts)] | | [removed: 2018] [added: 2019] | | | | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | |

| [removed: Net Sales] [added: Net Sales] | | [removed: $] [added: $] | [removed: 14,302,392] [added: 14,320,324] | | | $ | [removed: 12,029,312] [added: 14,302,392] | | | $ | [removed: 11,360,753] [added: 12,029,312] | |

| Interest expense | | [removed: 213,873] [added: 190,138] | | | | [removed: 162,436] [added: 213,873] | | | | [removed: 136,517] [added: 162,436] | | |

| [removed: (Gain)] [added: Loss (gain)] on disposal of assets (Note [removed: 2)] [added: 3)] | | [removed: (4,483] [added: 10,585] | | [removed: )] | | [removed: (43,261] [added: (4,483] | | ) | | [removed: (11,037] [added: (43,261] | | ) |

| Income before income taxes | | [removed: 1,702,277] [added: 1,933,425] | | | | [removed: 1,328,641] [added: 1,702,277] | | | | [removed: 1,114,728] [added: 1,328,641] | | |

| Income taxes (Note [removed: 4)] [added: 5)] | | [removed: 640,962] [added: 420,494] | | | | [removed: 344,797] [added: 640,962] | | | | [removed: 307,512] [added: 344,797] | | |

| [removed: Net Income] [added: Net Income] | | [removed: 1,061,315] [added: 1,512,931] | | | | [removed: 983,844] [added: 1,061,315] | | | | [removed: 807,216] [added: 983,844] | | |

| Less: Noncontrolling interest in subsidiaries' earnings | | [removed: 514] [added: 567] | | | | [removed: 432] [added: 514] | | | | [removed: 376] [added: 432] | | |

| [removed: Net] [added: Net] Income Attributable to Common [removed: Shareholders] [added: Shareholders] | | [removed: $] [added: $] | [removed: 1,060,801] [added: 1,512,364] | | | $ | [removed: 983,412] [added: 1,060,801] | | | $ | [removed: 806,840] [added: 983,412] | |

| [removed: Earnings] [added: Earnings] per Share Attributable to Common Shareholders (Note [removed: 5)] [added: 6)] | | | | | | | | | | | | |

| Basic earnings per share | | [removed: $] [added: $] | [removed: 7.98] [added: 11.63] | | | $ | [removed: 7.37] [added: 7.98] | | | $ | [removed: 5.96] [added: 7.37] | |

| Diluted earnings per share | | [removed: $] [added: $] | [removed: 7.83] [added: 11.48] | | | $ | [removed: 7.25] [added: 7.83] | | | $ | [removed: 5.89] [added: 7.25] | |

[removed: CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME][added: | | [Consolidated Statement of Comprehensive Income](#s962683E77E6B523192B02AE38D28ECF2) | [33](#s962683E77E6B523192B02AE38D28ECF2) |]

| [removed: (Dollars] [added: (Dollars] in [removed: thousands)] [added: thousands)] | | [removed: 2018] [added: 2019] | | | | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | |

| [removed: Net Income] [added: Net Income] | | [removed: $] [added: $] | [removed: 1,061,315] [added: 1,512,931] | | | $ | [removed: 983,844] [added: 1,061,315] | | | $ | [removed: 807,216] [added: 983,844] | |

| Less: Noncontrolling interests in subsidiaries' earnings | | [removed: 514] [added: 567] | | | | [removed: 432] [added: 514] | | | | [removed: 376] [added: 432] | | |

| Net income attributable to common shareholders | | [removed: 1,060,801] [added: 1,512,364] | | | | [removed: 983,412] [added: 1,060,801] | | | | [removed: 806,840] [added: 983,412] | | |

| Other comprehensive [removed: income (loss),] [added: (loss) income,] net of tax | | | | | | | | | | | | |

| Foreign currency translation adjustment and other (net of tax of [removed: $16,964, $40,935] [added: $709, $16,964] and [removed: $(2,342)] [added: $40,935] in [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016)] [added: 2017)] | | [removed: (18,575] [added: (66,392] | | [removed: )] [added: )] | | [removed: (80,865] [added: (18,575] | | ) | | [removed: (203,299] [added: (80,865] | | ) |

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

| |

| --- |

| |

| Goodwill *\-* Refer to Notes 1 and 8 to the financial statements |

Critical Audit Matter Description

The Company tests goodwill 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 year ended June 30, 2019, the Company’s reporting units are the same as its operating segments.

Prior to fiscal year 2019, the Company’s reporting units were one level below the operating segment level.

We identified the determination of reporting units for goodwill as a critical audit matter due to the changes in the composition of reporting units made by the Company during the year ended June 30, 2019 and the significant judgments made by management to conclude that the Company’s reporting units are the same as its operating segments.

This, in turn, required a high degree of auditor judgment and an increased extent of effort to evaluate management’s conclusions regarding the changes to the composition of reporting units.

| |

| --- |

| |

| How the Critical Audit Matter Was Addressed in the Audit |

Our audit procedures related to the determination of reporting units for goodwill included the following, among others:

| • | We tested the effectiveness of the control over management’s determination of goodwill reporting units for goodwill. |

| • | We evaluated the following significant judgments made by management: |

| – | Identification of reporting units including the consideration of discrete financial information that was available and level of review of the operating results for each reporting unit. |

| – | The aggregation of single reporting units based on similar economic characteristics. |

| • | We performed a retrospective review of select reporting units identified at one level below the operating segment level to evaluate the potential existence of any impairment indicators prior to the change in the determination of reporting units at the operating segment level. |

August 23, 2019

| Cost of sales | | 10,703,484 | | | | 10,737,745 | | | | 9,119,029 | | |

| Selling, general and administrative expenses | | 1,543,939 | | | | 1,639,989 | | | | 1,412,820 | | |

| Other (income) expense, net | | (61,247 | | ) | | 12,991 | | | | 49,647 | | |

| | | For the years ended June 30, | | | | | | | | | | |

| (Dollars in thousands) | | 2019 | | | | 2018 | | | | 2017 | | |

| Interest expense | | 190,138 | | | | 213,873 | | | | 162,436 | | |

| (Dollars in thousands) | | 2019 | | | | 2018 | | | | 2017 | | |

| Net Sales: | | | | | | | | | | | | |

| | | $ | 14,320,324 | | | $ | 14,302,392 | | | $ | 12,029,312 | |

| | | For the years ended June 30, | | | | | | | | | | |

| (Dollars in thousands) | | 2019 | | | | 2018 | | | | 2017 | | |

| Net income | | $ | 1,512,931 | | | $ | 1,061,315 | | | $ | 983,844 | |

| Other assets | | 2,677 | | | | (16,880 | | ) | | (5,795 | | ) |

| Net cash provided by operating activities | | 1,730,140 | | | | 1,596,700 | | | | 1,300,563 | | |

| Other | | 19,223 | | | | 8,424 | | | | (4,205 | | ) |

| Net cash (used in) provided by investing activities | | (218,510 | | ) | | 23,677 | | | | (3,363,240 | | ) |

Cleveland, Ohio

August 24, 2018

| Cost of sales | | 10,762,841 | | | | 9,188,962 | | | | 8,823,384 | | |

| Selling, general and administrative expenses | | 1,657,152 | | | | 1,453,935 | | | | 1,359,360 | | |

| Other (income), net | | (29,268 | | ) | | (61,401 | | ) | | (62,199 | | ) |

| | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Other assets | | (13,293 | | ) | | (3,887 | | ) | | (5,033 | | ) |

| Net cash provided by operating activities | | 1,600,287 | | | | 1,302,471 | | | | 1,210,778 | | |

| Other | | 4,837 | | | | (6,113 | | ) | | (39,995 | | ) |

| Net cash provided by (used in) investing activities | | 20,090 | | | | (3,365,148 | | ) | | (264,639 | | ) |

| 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 income (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 | | |

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.

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.

The Company estimates costs to complete long-term contracts for purposes of evaluating and establishing contract reserves.

No subsequent events occurred that required adjustment to or disclosure in these financial statements.

The Company has not yet determined the effect that ASU 2018-02 will have on its financial statements.

The Company has not yet determined the effect that ASU 2017-12 will have on its financial statements.

In May 2017, the FASB issued 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.

Early adoption is permitted.

ASU 2017-09 should be applied prospectively to an award modified on or after the adoption date.

During the first quarter of fiscal 2018, the Company adopted ASU 2017-09.

The adoption of ASU 2017-09 did not affect the Company's financial statements as there were no modifications of any share-based awards during 2018.

ASU 2017-07 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017.

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.

The adoption of ASU 2017-04 did not affect the Company's financial statements as there were no instances of a reporting unit's carrying value exceeding its fair value for any goodwill impairment tests performed during 2018.

ASU 2016-16 is effective for fiscal years, and interim periods within those years, beginning after December 31, 2017.

ASU 2016-15 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017.

After consideration of the current level of transactions within the scope of ASU 2016-15, the Company does not expect that the retrospective adoption of this standard at the beginning of the first quarter of 2019 will have a material impact on its financial statements.

[added: 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, [removed: 2018.][added: 2019.]

Based on this evaluation, the Company’s principal executive officer and principal financial officer concluded that, as of June 30, [removed: 2018,] [added: 2019,] 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, [removed: 2018] [added: 2019] that materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

[removed: Management's] [added: Management's] Report On Internal Control Over Financial [removed: Reporting][added: Reporting]

We assessed the effectiveness of our internal control over financial reporting as of June 30, [removed: 2018.][added: 2019.]

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, [removed: 2018.][added: 2019.]

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, [removed: 2018,] [added: 2019,] which is included in Part II, Item 8 of this Annual Report on Form 10-K.

ITEM 9A.

Controls and Procedures.

[added: 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 [removed: 2018] [added: 2019] Annual Meeting of Shareholders, to be held October [removed: 24, 2018] [added: 23, 2019] (the [removed: "2018] [added: "2019] Proxy Statement"), and is incorporated herein by reference.

The information set forth under the caption [removed: "Other Governance Matters -] [added: "Delinquent] Section [removed: 16(a) Beneficial Ownership Reporting Compliance"] [added: 16(A) Reports"] in the [removed: 2018] [added: 2019] Proxy Statement is incorporated herein by reference.

The information set forth under the captions "Committees of Our Board of Directors - The Audit Committee" and "Report of the Audit Committee" in the [removed: 2018] [added: 2019] Proxy Statement is incorporated herein by reference.

[added: ITEM 11. Executive Compensation.] The information set forth under the captions "Compensation Discussion and Analysis," "Compensation Committee Report," and "Compensation Tables" in the [removed: 2018] [added: 2019] Proxy Statement is incorporated herein by reference.

[added: ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.] The information set forth under the captions "Principal Shareholders" in the [removed: 2018] [added: 2019] Proxy Statement is incorporated herein by reference.

[removed: Equity] [added: Equity] Compensation Plan [removed: Information.][added: Information.]

The following table sets forth certain information regarding the Company's equity compensation plans as of June 30, [removed: 2018,] [added: 2019,] unless otherwise indicated.

| [removed: Plan Category] [added: Plan Category] | [removed: Number] [added: Number] of securities to be issued upon exercise of outstanding options, warrants and [removed: rights] [added: rights] | [removed: Weighted-average] [added: Weighted-average] exercise price of outstanding options, warrants and [removed: rights] [added: rights] | [removed: Number] [added: Number] of securities remaining available for future issuance under Equity compensation [removed: plans] [added: plans] |

(1)Includes the maximum future payouts of common stock that may be issued under the calendar year [removed: 2016-17-18, 2017-18-19 and] [added: 2017-18-19,] 2018-19-20 [added: and 2019-20-21] long term incentive performance awards [removed: (LTIP awards).][added: ("LTIP awards").]

(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 [removed: 11.6] [added: 8.7] million shares are available for future issuance.

[added: ITEM 13. Certain Relationships and Related Transactions, and Director Independence.] The information set forth under the captions "Other Governance Matters - Review and Approval of Transactions with Related Persons" and "Corporate Governance: Board of Directors - Director Independence" in the [removed: 2018] [added: 2019] Proxy Statement is incorporated herein by reference.

[added: 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 [removed: 2018] [added: 2019] Proxy Statement is incorporated herein by reference.

| Equity compensation plans approved by security holders | 7,347,772(1) | $121.51 | 18,673,701(2) |

| Total | 7,347,772 | $121.51 | 18,673,701 |

ITEM 10.

Directors, Executive Officers and Corporate Governance.

ITEM 11.

Executive Compensation.

ITEM 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

| Equity compensation plans approved by security holders | 7,754,599(1) | $108.89 | 21,597,846(2) |

| Total | 7,754,599 | $108.89 | 21,597,846 |

ITEM 13.

Certain Relationships and Related Transactions, and Director Independence.

ITEM 14.

Principal Accountant Fees and Services.

| | | [removed: Page Number in] [added: Page Number in] Form [removed: 10-K] [added: 10-K] | |

| | Consolidated Statement of Income | [removed: [32](#s9A24507694525E03BD84E4E35B6F81E3)] [added: [32](#s296F44876DA958C9A414C96367A3F27B)] | |

| | Consolidated Statement of Comprehensive Income | [removed: [33](#s4357EBDB0CAC5F1D8EAFCC4BAC7C7A2A)] [added: [33](#s962683E77E6B523192B02AE38D28ECF2)] | |

| | Business Segment Information | [removed: [34](#s07D70F5BDBED583596964A2BA43B0E1D)] [added: [34](#sBE2DC72502D153238BD35CEECE081ACC)] | |

| | Consolidated Balance Sheet | [removed: [36](#sB4F8B981935D5BAF9AC14B7C7E5BAA28)] [added: [36](#s4FD9C7CF1F065E70ACF6A9676A2CB0E4)] | |

| | Consolidated Statement of Cash Flows | [removed: [37](#s564470A495A15F618CE95988C77D9797)] [added: [37](#sA3CB83507EF55F01A63A4E4CBDE19714)] | |

| | Consolidated Statement of Equity | [removed: [38](#s48D053AFAA155A968C4CB0E8E6C6D6B2)] [added: [38](#s69F5AED2031C5CC48389A0678F0F05D0)] | |

| | Notes to Consolidated Financial Statements | [removed: [39](#sC2BBFB2EBA075D29BFB4F9F3D178FDE7)] [added: [39](#sAC0D1E0DBD4F501292939B6F3B6F6D76)] | |

| | II - Valuation and Qualifying Accounts | [removed: [73](#s075E6D66F095566CBD6715540AA8A6E0)] [added: [76](#s31847EAB204F5935AF3F655566F60960)] | |

| [removed: Exhibit No.] [added: Exhibit No.] | | [removed: Description] [added: Description] of [removed: Exhibit] [added: Exhibit] |

| (3)(b) | | [removed: [Code of Regulations](http://www.sec.gov/Archives/edgar/data/76334/000007633416000220/ph9302016ex3b.htm),] [added: [Regulations, Amended and Restated] as [removed: amended,] [added: of January 24, 2019,] incorporated by reference to Exhibit [removed: 3(b)] [added: 3(a)] to Registrant’s Report on Form 10-Q for the quarterly period ended [removed: September 30, 2016] [added: December 31, 2018] (Commission File No. [removed: 1-4982).] [added: 1-4982).](http://www.sec.gov/Archives/edgar/data/76334/000007633419000018/ph10q12312018ex3a2.htm)] |

| [removed: (4)(a)] [added: (2)(b)] | | [removed: [Registration Rights Agreement,](http://www.sec.gov/Archives/edgar/data/76334/000119312517062498/d352329dex41.htm) dated February 24, 2017,] [added: [Agreement and Plan of Merger] among [removed: Registrant] [added: Parker-Hannifin Corporation, Erie Merger Sub, Inc., LORD Corporation] and [removed: Morgan Stanley & Co.] [added: Shareholder Representative Services] LLC [removed: and Citigroup Global Markets Inc.,] as [removed: Representatives of] the [removed: Initial Purchasers,] [added: shareholders' representative, dated as of April 26, 2019,] incorporated by reference to Exhibit [removed: 4.1] [added: 2.1] of Registrant's [removed: Current Report on] Form 8-K filed with the SEC on [removed: February 28, 2017] [added: April 29, 2019] (Commission File No. [removed: 1-4982).] [added: 1-4982).](http://www.sec.gov/Archives/edgar/data/76334/000095015719000495/ex2-1.htm) +] |

| [removed: (4)(b)] [added: (10)(vv)] | | [removed: [Registration Rights Agreement,](http://www.sec.gov/Archives/edgar/data/76334/000119312517062498/d352329dex42.htm) dated February 24, 2017,] [added: [Credit Agreement] among [removed: Registrant and] [added: Parker-Hannifin Corporation,] the [removed: Initial Purchasers (as defined therein),] [added: lenders party thereto and KeyBank National Association, as Administrative Agent, dated as of May 22, 2019,] incorporated by reference to Exhibit [removed: 4.2 of] [added: 10.1 to] Registrant's [removed: Current] Report on Form 8-K filed with the SEC on [removed: February 28, 2017] [added: May 24, 2019] (Commission File No. [removed: 1-4982).] [added: 1-4982).](http://www.sec.gov/Archives/edgar/data/76334/000095015719000659/form8k.htm)] |

| (10)(n) | | [Parker-Hannifin Corporation [removed: 2010] [added: 2015] Performance Bonus [removed: Plan](http://www.sec.gov/Archives/edgar/data/76334/000119312510216901/ddef14a.htm),] [added: Plan](http://www.sec.gov/Archives/edgar/data/76334/000119312510216901/ddef14a.htm)] incorporated by reference to [removed: Annex A] [added: Appendix B] to Registrant’s Definitive Proxy Statement filed with the Commission on September [removed: 27, 2010] [added: 28, 2015] (Commission File No. 1-4982). |

| [removed: (10)(o)] [added: (10)(rr)] | | [Parker-Hannifin Corporation [removed: 2015 Performance Bonus Plan](http://www.sec.gov/Archives/edgar/data/76334/000119312510216901/ddef14a.htm)] [added: Global Employee Stock Purchase Plan,](http://www.sec.gov/Archives/edgar/data/76334/000119312514347866/d765538ddef14a.htm)] incorporated by reference to Appendix [removed: B] [added: A] to [removed: Registrant’s] [added: Registrant's] Definitive Proxy Statement filed with the [removed: Commission] [added: SEC] on September [removed: 28, 2015] [added: 22, 2014] (Commission File No. 1-4982). |

| [removed: (10)(p)] [added: (10)(o)] | | [Form of [removed: 2007] [added: 2010] Notice of [removed: Grant of] Stock Options with Tandem Stock Appreciation Rights for [removed: executive officers](http://www.sec.gov/Archives/edgar/data/76334/000119312506177745/dex103.htm),] [added: Executive Officers](http://www.sec.gov/Archives/edgar/data/76334/000119312509221583/dex10d.htm),] incorporated by reference to Exhibit [removed: 10.3] [added: 10(d)] to Registrant’s Report on Form [removed: 8-K filed with] [added: 10-Q for] the [removed: SEC on August 22, 2006] [added: quarterly period ended September 30, 2009] (Commission File No. 1-4982). |

| (10)(q) | | [removed: [Form of 2008 Notice of Grant of Stock Options with Tandem] [added: [2011 Parker-Hannifin Corporation] Stock Appreciation Rights [added: Terms and Conditions] for executive [removed: officers](http://www.sec.gov/Archives/edgar/data/76334/000119312507195553/dex101.htm),] [added: officers](http://www.sec.gov/Archives/edgar/data/76334/000119312510191101/dex101.htm),] incorporated by reference to Exhibit 10.1 to Registrant’s Report on Form [removed: 8-K/A] [added: 8-K] filed with the SEC on [removed: September 5, 2007] [added: August 17, 2010] (Commission File No. 1-4982). |

| (10)(r) | | [Form of [removed: 2009 Notice of Stock Options Award with Tandem] [added: Parker-Hannifin Corporation] Stock Appreciation Rights [added: Award Agreement](http://www.sec.gov/Archives/edgar/data/76334/000119312511303648/d231608dex10a.htm)] for [removed: Executive Officers](http://www.sec.gov/Archives/edgar/data/76334/000119312508227100/dex10d.htm),] [added: executive officers,] incorporated by reference to Exhibit [removed: 10(d)] [added: 10(a)] to Registrant’s Report on Form 10-Q for the quarterly period ended September 30, [removed: 2008] [added: 2011] (Commission File No. 1-4982). |

| (10)(s) | | [removed: [Form of 2010 Notice of Stock Options with Tandem] [added: [Parker-Hannifin Corporation] Stock Appreciation Rights [added: Terms and Conditions](http://www.sec.gov/Archives/edgar/data/76334/000119312511303648/d231608dex10b.htm)] for [removed: Executive Officers](http://www.sec.gov/Archives/edgar/data/76334/000119312509221583/dex10d.htm),] [added: executive officers,] incorporated by reference to Exhibit [removed: 10(d)] [added: 10(b)] to Registrant’s Report on Form 10-Q for the quarterly period ended September 30, [removed: 2009] [added: 2011] (Commission File No. 1-4982). |

| [removed: (10)(t)] [added: (10)(p)] | | [Form of 2011 Parker-Hannifin Corporation Stock Appreciation Rights Award Agreement for executive officers](http://www.sec.gov/Archives/edgar/data/76334/000119312510191101/dex102.htm), incorporated by reference to Exhibit 10.2 to Registrant’s Report on Form 8-K filed with the SEC on August 17, 2010 (Commission File No. 1-4982). |

| (10)(u) | | [removed: [2011] [added: [2018] Parker-Hannifin Corporation Stock Appreciation Rights Terms and [removed: Conditions for executive officers](http://www.sec.gov/Archives/edgar/data/76334/000119312510191101/dex101.htm),] [added: Conditions,] incorporated by reference to Exhibit [removed: 10.1] [added: 10(e)] to [removed: Registrant’s] [added: Registrant's] Report on Form [removed: 8-K filed with] [added: 10-Q for] the [removed: SEC on August 17, 2010] [added: quarterly period ended December 31, 2018] (Commission File No. [removed: 1-4982).] [added: 1-4982)](http://www.sec.gov/Archives/edgar/data/76334/000007633419000018/ph10q12312018exhibit10e.htm)] |

| [removed: (10)(v)] [added: (10)(t)] | | [Form of [added: 2018] Parker-Hannifin Corporation Stock Appreciation Rights Award [removed: Agreement](http://www.sec.gov/Archives/edgar/data/76334/000119312511303648/d231608dex10a.htm) for executive officers,] [added: Agreement,] incorporated by reference to Exhibit [removed: 10(a)] [added: 10(d)] to [removed: Registrant’s] [added: Registrant's] Report on Form 10-Q for the quarterly period ended [removed: September 30, 2011] [added: December 31, 2018] (Commission File No. [removed: 1-4982).] [added: 1-4982).](http://www.sec.gov/Archives/edgar/data/76334/000007633419000018/ph-12312018exhibit10d.htm)] |

| [removed: (10)(w)] [added: (10)(hh)] | | [Parker-Hannifin Corporation [added: 2018 Restricted] Stock [removed: Appreciation Rights] [added: Unit] Terms and [removed: Conditions](http://www.sec.gov/Archives/edgar/data/76334/000119312511303648/d231608dex10b.htm)] [added: Conditions] for [removed: executive officers,] [added: Certain Executive Officers,] incorporated by reference to Exhibit [removed: 10(b)] [added: 10(c)] to [removed: Registrant’s] [added: Registrant's] Report on Form 10-Q for the quarterly period ended September 30, [removed: 2011] [added: 2018] (Commission File No. [removed: 1-4982).] [added: 1-4982).](http://www.sec.gov/Archives/edgar/data/76334/000007633418000119/ph9302018ex10c.htm)] |

| [removed: (10)(x)] [added: (10)(v)] | | [Parker-Hannifin Corporation Target Incentive Plan](http://www.sec.gov/Archives/edgar/data/76334/000119312510251281/dex10d.htm), incorporated by reference to Exhibit 10(d) to Registrant’s Report on Form 10-Q for the quarterly period ended September 30, 2010 (Commission File No. 1-4982). |

| [removed: (10)(y)] [added: (10)(w)] | | [Parker-Hannifin Corporation Target Incentive Plan Subject to Performance Bonus Plan](http://www.sec.gov/Archives/edgar/data/76334/000119312510251281/dex10e.htm), 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). |

| [removed: (10)(z)] [added: (10)(aa)] | | [Parker-Hannifin Corporation Long-Term Incentive Performance Plan Under the Performance Bonus [removed: Plan,](http://www.sec.gov/Archives/edgar/data/76334/000007633413000072/ph3312013ex10a.htm)] [added: Plan (as Amended and Restated), effective as of January 23, 2019,] incorporated by reference to Exhibit [removed: 10(a)] [added: 10(g)] to [removed: Registrant’s] [added: the Registrant's] Report on Form 10-Q for the quarterly period ended [removed: March] [added: December] 31, [removed: 2013] [added: 2018] (Commission File No. [removed: 1-4982).] [added: 1-4982).](http://www.sec.gov/Archives/edgar/data/76334/000007633419000018/phc10q2q12312018ex10g3.htm)] |

| [removed: (10)(aa)] [added: (10)(y)] | | [Form of [added: Notice of Award under the] Parker-Hannifin Corporation Long-Term Incentive Performance [removed: (LTIP) Award] [added: Plan] Under the Performance Bonus [removed: Plan,](http://www.sec.gov/Archives/edgar/data/76334/000119312511020036/dex102.htm)] [added: Plan (as Amended and Restated),] incorporated by reference to Exhibit [removed: 10.2] [added: 10(bb)] to [removed: Registrant’s] [added: the Registrant's Annual] Report on Form [removed: 8-K filed with] [added: 10-K for] the [removed: Commission on February 1, 2011] [added: fiscal year ended June 30, 2016] (Commission [removed: File] [added: file] No. [removed: 1-4982).] [added: 1-4982).](http://www.sec.gov/Archives/edgar/data/76334/000007633416000196/ph6302016ex10bb.htm)] |