Parker-Hannifin CorporationPH

Human capital and workforce · Key personnel dependence and succession

We depend on the skills, institutional knowledge, working relationships, and continued services and contributions of key personnel, including our leadership team, engineers and others at all levels of the company, as a critical part of our human capital resources. In addition, our ability to achieve our operating and strategic goals depends on our ability to identify, hire, train and retain qualified individuals.

Supply chain and procurement · Raw material availability and cost volatility

Price and supply fluctuations of the raw materials used in our production processes and by our suppliers of component parts could negatively impact our financial results. Our supply of raw materials could be interrupted for a variety of reasons, including availability and pricing. Prices for raw materials necessary for production have fluctuated significantly in the past and significant increases could adversely affect our results of operations and profit margins.

Supply chain and procurement · Supplier operation and dependance

We rely on a limited number of suppliers for certain critical components, such as specialty electronics, rare earths, specialty chemicals, aerospace super alloys and filtration media, and recent and planned acquisitions may increase our exposure to supply concentration risk. Any disruption in supply from these sources could require us to seek alternative suppliers, potentially at higher cost or with delays that could impact production schedules.

Human capital and workforce · Talent acquisition and retention

We operate in challenging markets for talent and may fail to attract, develop and retain key personnel. We depend on the skills, institutional knowledge, working relationships, and continued services and contributions of key personnel, including our leadership team, engineers and others at all levels of the company, as a critical part of our human capital resources. We compete with other companies both within and outside of our industry for talented personnel in a highly competitive labor market.

International and currency · Foreign exchange and currency exposure

Our net sales attributable to selling locations outside of the United States were approximately 36% in each of 2026, 2025 and 2024. Our non-U.S. operations are subject to risks in addition to those facing our domestic operations, including: fluctuations in currency exchange rates and/or changes in monetary policy.

International and currency · International operations and emerging markets

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. Our non-U.S. operations are subject to risks in addition to those facing our domestic operations, including: political, social and economic instability and disruptions, including armed conflicts.

Capital structure and performance · Debt management and refinancing

Our indebtedness and restrictive covenants under our credit facilities could limit our operational and financial flexibility. We have incurred significant indebtedness, and expect to incur a significant amount of additional debt for acquisitions, including in connection with the acquisition of FGC and the pending acquisition of CIRCOR Aerospace, as well as for operations, research and development and capital expenditures.

Credit and liquidity · Access to capital and financing

Our ability to make interest and scheduled principal payments and meet restrictive covenants could be adversely impacted by changes in the availability, terms and cost of capital, changes in interest rates or changes in our credit ratings or our outlook. These changes could increase our cost of financing and limit our debt capacity, thereby limiting our ability to pursue acquisition opportunities, react to market conditions and meet operational and capital needs.

Geopolitical and trade · Trade policies tariffs and sanctions

The global nature of our business and our operations exposes us to political, economic, and other conditions in foreign countries and regions, such as the uncertainty about the future relationship between the U.S. and China, including with respect to trade policies, treaties, government regulations and tariffs, and the potential renegotiation of the United States-Mexico-Canada Agreement. Any increased trade barriers or restrictions on global trade, including trade with China or among North American trading partners, could adversely impact our business.

Geopolitical and trade · International conflicts and tensions

Our non-U.S. operations are subject to risks in addition to those facing our domestic operations, including: political, social and economic instability and disruptions, including armed conflicts.

Natural and catastrophic events · Natural disasters and extreme weather

Our operations are subject to natural and man-made unexpected events that may increase our costs, interrupt production or our supply chain or otherwise adversely affect our business, results of operations or financial condition. The occurrence of one or more unexpected events, including war, acts of terrorism or violence, civil unrest, fires, tornadoes, hurricanes, earthquakes, floods and other forms of severe weather in the United States or in other countries in which we operate or in which our suppliers are located could adversely affect our operations and financial performance.

Natural and catastrophic events · Force majeure and business interruption

The occurrence of one or more unexpected events, including war, acts of terrorism or violence, civil unrest, fires, tornadoes, hurricanes, earthquakes, floods and other forms of severe weather in the United States or in other countries in which we operate or in which our suppliers are located could adversely affect our operations and financial performance. Existing insurance coverage may not provide protection for all of the costs that may arise from such events.

Natural and catastrophic events · Climate change and environmental impact

Climate change could also present physical risks to our operations. Extreme weather events linked to climate change, including hurricanes, flooding, wildfires, high heat and water scarcity, among others, create physical risks to our operating locations and supply chains. Further, although we are working towards and intend to meet our goal of achieving near-total decarbonization (scope 1 and 2 emissions) within our operations by 2040, we may be required to expend significant resources to do so.

Economic and market conditions · Economic recession and downturns

Our business is sensitive to global macro-economic conditions. Macroeconomic downturns may have an adverse effect on our business, results of operations and financial condition, as well as our distributors, customers and suppliers, and on activity in many of the industries and markets we serve.

Economic and market conditions · Inflation and deflation pressures

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 and monetary policies, changes in government spending priorities (including defense and infrastructure spending), global pandemics, and general economic conditions such as inflation, deflation, interest rates and credit availability.

Cybersecurity and data protection · Data privacy and protection regulations

Furthermore, the Company has access to sensitive, confidential, or personal data or information that is subject to privacy and security laws, regulations, or other contractually-imposed controls. Despite our use of reasonable and appropriate controls, security breaches, theft, misplaced, lost or corrupted data, programming, or employee errors and/or malfeasance have led and could in the future lead to the compromise or improper use of such sensitive, confidential, or personal data or information.

Digital transformation and innovation · Artificial intelligence and automation

For example, artificial intelligence technologies are rapidly developing and our business may be adversely affected if we cannot successfully integrate such technologies into our internal business processes and product and service offerings, or if we cannot effectively position our products to serve the needs of artificial intelligence technology providers, including data center infrastructure, in a timely, cost-effective, compliant and responsible manner.

Market position and competition · Competitive pressure and market share loss

Changes in the competitive environment in which we operate may eliminate any competitive advantages that we currently have, which could adversely impact our business. Our operations are subject to competition from a wide variety of global, regional and local competitors, which could adversely affect our results of operations by creating downward pricing pressure and/or a decline in our margins or market shares.

Innovation and product development · Product development and randd investment risks

The development of new products and technologies requires substantial investment and is required to remain competitive in the markets we serve and new product markets. If we are unable to successfully introduce new commercial products or position our products for new product markets, our profitability could be adversely affected. For example, artificial intelligence technologies are rapidly developing and our business may be adversely affected if we cannot successfully integrate such technologies into our internal business processes and product and service offerings.

Strategic execution · Strategic transformation and turnaround risks

The Company may be subject to risks relating to organizational changes. We regularly execute organizational changes such as divestitures and realignments of existing and newly acquired businesses to support our growth and cost management strategies. We also engage in initiatives aimed to increase productivity, efficiencies and cash flow and to reduce costs. If 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 our results of operations and financial condition could be materially adversely affected.