Attached files
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| 8-K - 8-K - PARKER HANNIFIN CORP | coverform8-k1qfy18.htm |
| EX-99.2 - EXHIBIT 99.2 - PARKER HANNIFIN CORP | exhibit992.htm |
Exhibit 99.1
For Release: Immediately
Contact: | Media - | |
Aidan Gormley -Director, Global Communications and Branding | 216-896-3258 | |
aidan.gormley@parker.com | ||
Financial Analysts - | ||
Robin J. Davenport, Vice President, Corporate Finance | 216-896-2265 | |
rjdavenport@parker.com | ||
Stock symbol: | PH - NYSE | |
Parker Reports Fiscal 2018 First Quarter Results
– | Sales increased 23% to a first quarter record of $3.36 billion, organic sales increased 7% |
– | Total Parker order rates increased 11% |
– | Operational improvements deliver total segment operating margins of 15.6%, or 16.0% adjusted |
– | EPS increased 36% to a Q1 record of $2.10, or an increase of 40% to $2.24, on an adjusted basis |
– | Company increases fiscal 2018 full year guidance |
CLEVELAND, November 2, 2017 -- Parker Hannifin Corporation (NYSE: PH), the global leader in motion and control technologies, today reported results for the fiscal 2018 first quarter ended September 30, 2017. Fiscal 2018 first quarter sales increased 23% to $3.36 billion compared with $2.74 billion in the prior year quarter. Net income increased 36% to $285.5 million compared with $210.2 million in the prior year quarter. Fiscal 2018 first quarter earnings per share increased 36% to $2.10, compared with $1.55 in the fiscal 2017 first quarter. During the quarter, the company recognized a lower effective tax rate compared with the first quarter of fiscal 2017, due primarily to tax benefits related to stock option activity, resulting in a favorable impact to earnings of $0.12 per share. Earnings per share increased 40% to $2.24 when adjusted for business realignment expenses, CLARCOR costs to achieve and a loss related to the sale of an investment, compared with earnings per share of $1.61 in the prior year quarter, which was adjusted for business realignment expenses. Fiscal year to date, net cash provided by operating activities was $239.0 million or 7.1% of sales, compared with $113.9 million or 4.2% of sales in the prior year period. Operating cash to sales was 12.2% in the prior year period excluding discretionary pension contributions.
“This was a strong quarter reflecting growth greater than industrial production and margin expansion demonstrating the benefits of the new Win StrategyTM,” said Chairman and Chief Executive Officer, Tom
Williams. “This solid start to the year reinforces our projection of record sales and earnings for the full year.”
First Quarter Fiscal 2018 Segment Results
Diversified Industrial Segment: North American first quarter sales increased 37% to $1.6 billion, and operating income increased 28% to $256.0 million compared with $200.6 million in the same period a year ago. International first quarter sales increased 22% to $1.2 billion, and operating income increased 40% to $191.8 million compared with $137.2 million in the same period a year ago.
Aerospace Systems Segment: First quarter sales were $531.2 million, compared with $561.2 million in the prior year period, and operating income increased 6% to $77.4 million compared with $73.3 million in the same period a year ago.
Parker reported the following orders for the quarter ending September 30, 2017, compared with the same quarter a year ago:
• | Orders increased 11% for total Parker |
• | Orders increased 10% in the Diversified Industrial North America businesses |
• | Orders increased 15% in the Diversified Industrial International businesses |
• | Orders increased 4% in the Aerospace Systems Segment on a rolling 12-month average basis |
Outlook
For the fiscal year ending June 30, 2018, the company has increased guidance for earnings from continuing operations to the range of $8.45 to $9.05 per share, or $9.10 to $9.70 per share on an adjusted basis. Fiscal year 2018 guidance is adjusted on a pre-tax basis for the reported loss on investment of approximately $14 million, expected business realignment expenses of approximately $58 million and CLARCOR costs to achieve of approximately $52 million.
Williams added, “Through the combination of our sales growth, a lower cost structure, integration of CLARCOR, and the ongoing execution of the new Win StrategyTM initiatives, we expect to generate our best year ever in fiscal 2018.”
NOTICE OF CONFERENCE CALL: Parker Hannifin's conference call and slide presentation to discuss its fiscal 2018 first quarter results are available to all interested parties via live webcast today at 11:00 a.m. ET, on the company's investor information web site at www.phstock.com. To access the call, click on the "Live Webcast" link. From this link, users also may complete a pre-call system test and register for e-mail notification of future events and information available from Parker. A replay of the conference call
will also be available at www.phstock.com for one year after the call.
Parker Hannifin is a Fortune 250 global leader in motion and control technologies. For 100 years the company has engineered the success of its customers in a wide range of diversified industrial and aerospace markets. Parker has increased its annual dividend per share paid to shareholders for 61 consecutive fiscal years, among the top five longest-running dividend-increase records in the S&P 500 index. Learn more at www.parker.com or @parkerhannifin.
Note on Orders
Orders provide near-term perspective on the company's outlook, particularly when viewed in the context of prior and future quarterly order rates. However, orders are not in themselves an indication of future performance. All comparisons are at constant currency exchange rates, with the prior year restated to the current-year rates. All exclude acquisitions until they can be reflected in both the numerator and denominator. Aerospace comparisons are rolling 12-month average computations. The total Parker orders number is derived from a weighted average of the year-over-year quarterly % change in orders for Diversified Industrial North America and Diversified Industrial International, and the year-over-year 12-month rolling average of orders for the Aerospace Systems Segment.
Note on Non-GAAP Numbers
This press release contains references to (a) earnings per share and segment operating margins without the effect of business realignment charges, CLARCOR costs to achieve and a loss related to the sale of an investment; (b) the effect of business realignment charges, CLARCOR costs to achieve and a loss related to the sale of an investment on forecasted earnings from continuing operations per share; (c) and cash flows from operations without the effect of discretionary pension contributions. The effects of business realignment charges, CLARCOR costs to achieve, loss related to sale of investment and discretionary pension contributions are removed to allow investors and the company to meaningfully evaluate changes in earnings per share, segment operating margins and cash flows from operations on a comparable basis from period to period.
Forward-Looking Statements
Forward-looking statements contained in this and other written and oral reports are made based on known events and circumstances at the time of release, and as such, are subject in the future to unforeseen uncertainties and risks. These statements may be identified from use of forward-looking terminology such as “anticipates,” “believes,” “may,” “should,” “could,” “potential,” “continues,” “plans,” “forecasts,” “estimates,” “projects,” “predicts,” “would,” “intends,” “anticipates,” “expects,” “targets,” “is likely,” “will,” or the negative of these terms and similar expressions, and include all statements regarding future performance, earnings projections, events or developments. It is possible that the future performance and earnings projections of the company, including its individual segments, may differ materially from current expectations, depending on economic conditions within its mobile, industrial and aerospace markets, and the company's ability to maintain and achieve anticipated benefits associated with announced realignment activities, strategic initiatives to improve operating margins, actions taken to combat the effects of the current economic environment, and growth, innovation and global diversification initiatives. A change in the economic conditions in individual markets may have a particularly volatile effect on segment performance.
Among other factors which may affect future performance and earnings projections are: economic conditions within the company’s key markets, and the company’s ability to maintain and achieve anticipated benefits associated with announced realignment activities, strategic initiatives to improve operating margins, actions taken to combat the effects of the current economic environment, and growth, innovation and global diversification initiatives. A change in the economic conditions in individual markets may have a particularly volatile effect on segment performance. Among other factors which may affect future performance of the company are, as applicable: changes in business relationships with and purchases by or from major customers, suppliers or distributors, including delays or cancellations in shipments; disputes regarding contract terms or significant changes in financial condition, changes in contract cost and revenue estimates for new development programs and changes in product mix; ability to identify acceptable strategic acquisition targets; uncertainties surrounding timing, successful completion or integration of acquisitions and similar transactions, including the integration of CLARCOR; the ability to successfully divest businesses planned for divestiture and realize the anticipated benefits of such divestitures; the determination to undertake business realignment activities and the expected costs thereof and, if undertaken, the ability to
complete such activities and realize the anticipated cost savings from such activities; ability to implement successfully capital allocation initiatives, including timing, price and execution of share repurchases; availability, limitations or cost increases of raw materials, component products and/or commodities that cannot be recovered in product pricing; ability to manage costs related to insurance and employee retirement and health care benefits; compliance costs associated with environmental laws and regulations; potential labor disruptions; threats associated with and efforts to combat terrorism and cyber-security risks; uncertainties surrounding the ultimate resolution of outstanding legal proceedings, including the outcome of any appeals; competitive market conditions and resulting effects on sales and pricing; and global economic factors, including manufacturing activity, air travel trends, currency exchange rates, difficulties entering new markets and general economic conditions such as inflation, deflation, interest rates and credit availability. The company makes these statements as of the date of this disclosure, and undertakes no obligation to update them unless otherwise required by law.
###
PARKER HANNIFIN CORPORATION - SEPTEMBER 30, 2017 | Exhibit 99.1 | |||||||
CONSOLIDATED STATEMENT OF INCOME | ||||||||
(Unudited) | Three Months Ended September 30, | |||||||
(Dollars in thousands except per share amounts) | 2017 | 2016 | ||||||
Net sales | $ | 3,364,651 | $ | 2,743,131 | ||||
Cost of sales | 2,532,878 | 2,106,006 | ||||||
Selling, general and administrative expenses | 401,672 | 322,969 | ||||||
Interest expense | 53,555 | 34,148 | ||||||
Other expense (income), net | 2,244 | (12,237 | ) | |||||
Income before income taxes | 374,302 | 292,245 | ||||||
Income taxes | 88,767 | 82,007 | ||||||
Net income | 285,535 | 210,238 | ||||||
Less: Noncontrolling interests | 138 | 109 | ||||||
Net income attributable to common shareholders | $ | 285,397 | $ | 210,129 | ||||
Earnings per share attributable to common shareholders: | ||||||||
Basic earnings per share | $ | 2.14 | $ | 1.57 | ||||
Diluted earnings per share | $ | 2.10 | $ | 1.55 | ||||
Average shares outstanding during period - Basic | 133,176,964 | 133,679,378 | ||||||
Average shares outstanding during period - Diluted | 135,794,270 | 135,825,658 | ||||||
Cash dividends per common share | $ | 0.66 | $ | 0.63 | ||||
RECONCILIATION OF EARNINGS PER DILUTED SHARE TO ADJUSTED EARNINGS PER DILUTED SHARE | ||||||||
(Unaudited) | Three Months Ended September 30, | |||||||
2017 | 2016 | |||||||
Earnings per diluted share | $ | 2.10 | $ | 1.55 | ||||
Adjustments: | ||||||||
Loss on sale of investment | 0.07 | — | ||||||
Business realignment charges | 0.04 | 0.06 | ||||||
Clarcor costs to achieve | 0.03 | — | ||||||
Adjusted earnings per diluted share | $ | 2.24 | $ | 1.61 | ||||
PARKER HANNIFIN CORPORATION - SEPTEMBER 30, 2017 | Exhibit 99.1 | ||||||||||||||
BUSINESS SEGMENT INFORMATION | |||||||||||||||
(Unaudited) | Three Months Ended September 30, | ||||||||||||||
(Dollars in thousands) | 2017 | 2016 | |||||||||||||
Net sales | |||||||||||||||
Diversified Industrial: | |||||||||||||||
North America | $ | 1,594,691 | $ | 1,166,971 | |||||||||||
International | 1,238,774 | 1,014,923 | |||||||||||||
Aerospace Systems | 531,186 | 561,237 | |||||||||||||
Total net sales | $ | 3,364,651 | $ | 2,743,131 | |||||||||||
Segment operating income | |||||||||||||||
Diversified Industrial: | |||||||||||||||
North America | $ | 256,027 | $ | 200,611 | |||||||||||
International | 191,791 | 137,196 | |||||||||||||
Aerospace Systems | 77,434 | 73,281 | |||||||||||||
Total segment operating income | 525,252 | 411,088 | |||||||||||||
Corporate general and administrative expenses | 41,350 | 31,034 | |||||||||||||
Income before interest expense and other expense | 483,902 | 380,054 | |||||||||||||
Interest expense | 53,555 | 34,148 | |||||||||||||
Other expense | 56,045 | 53,661 | |||||||||||||
Income before income taxes | $ | 374,302 | $ | 292,245 | |||||||||||
RECONCILIATION OF TOTAL SEGMENT OPERATING MARGIN TO ADJUSTED TOTAL SEGMENT OPERATING MARGIN | |||||||||||||||
(Unaudited) | |||||||||||||||
Three Months Ended September 30, 2017 | Operating margin | Three Months Ended September 30, 2016 | Operating margin | ||||||||||||
Total segment operating income | $ | 525,252 | 15.6 | % | $ | 411,088 | 15.0 | % | |||||||
Adjustments: | |||||||||||||||
Business realignment charges | 8,226 | 10,745 | |||||||||||||
Clarcor costs to achieve | 5,800 | — | |||||||||||||
Adjusted total segment operating income | $ | 539,278 | 16.0 | % | $ | 421,833 | 15.4 | % | |||||||
Exhibit 99.1 | ||||||||||||
PARKER HANNIFIN CORPORATION - SEPTEMBER 30, 2017 | ||||||||||||
CONSOLIDATED BALANCE SHEET | ||||||||||||
(Unaudited) | September 30, | June 30, | September 30, | |||||||||
(Dollars in thousands) | 2017 | 2017 | 2016 | |||||||||
Assets | ||||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | $ | 874,766 | $ | 884,886 | $ | 1,393,850 | ||||||
Marketable securities and other investments | 99,792 | 39,318 | 746,708 | |||||||||
Trade accounts receivable, net | 1,922,288 | 1,930,751 | 1,498,384 | |||||||||
Non-trade and notes receivable | 266,421 | 254,987 | 250,520 | |||||||||
Inventories | 1,707,001 | 1,549,494 | 1,247,972 | |||||||||
Prepaid expenses | 134,350 | 120,282 | 144,444 | |||||||||
Total current assets | 5,004,618 | 4,779,718 | 5,281,878 | |||||||||
Plant and equipment, net | 1,962,846 | 1,937,292 | 1,562,933 | |||||||||
Deferred income taxes | 35,194 | 36,057 | 495,708 | |||||||||
Goodwill | 5,679,239 | 5,586,878 | 2,910,765 | |||||||||
Intangible assets, net | 2,215,297 | 2,307,484 | 901,939 | |||||||||
Other assets | 834,085 | 842,475 | 817,691 | |||||||||
Total assets | $ | 15,731,279 | $ | 15,489,904 | $ | 11,970,914 | ||||||
Liabilities and equity | ||||||||||||
Current liabilities: | ||||||||||||
Notes payable | $ | 1,144,054 | $ | 1,008,465 | $ | 595,956 | ||||||
Accounts payable | 1,304,260 | 1,300,496 | 1,017,905 | |||||||||
Accrued liabilities | 845,524 | 933,762 | 766,849 | |||||||||
Accrued domestic and foreign taxes | 173,286 | 153,137 | 113,528 | |||||||||
Total current liabilities | 3,467,124 | 3,395,860 | 2,494,238 | |||||||||
Long-term debt | 4,788,147 | 4,861,895 | 2,653,008 | |||||||||
Pensions and other postretirement benefits | 1,391,820 | 1,406,082 | 1,806,366 | |||||||||
Deferred income taxes | 212,334 | 221,790 | 55,079 | |||||||||
Other liabilities | 341,195 | 336,931 | 311,634 | |||||||||
Shareholders' equity | 5,524,940 | 5,261,649 | 4,647,281 | |||||||||
Noncontrolling interests | 5,719 | 5,697 | 3,308 | |||||||||
Total liabilities and equity | $ | 15,731,279 | $ | 15,489,904 | $ | 11,970,914 | ||||||
Exhibit 99.1 | ||||||||
PARKER HANNIFIN CORPORATION - SEPTEMBER 30, 2017 | ||||||||
CONSOLIDATED STATEMENT OF CASH FLOWS | ||||||||
(Unaudited) | Three Months Ended September 30, | |||||||
(Dollars in thousands) | 2017 | 2016 | ||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 285,535 | $ | 210,238 | ||||
Depreciation and amortization | 116,107 | 75,333 | ||||||
Stock incentive plan compensation | 43,211 | 35,818 | ||||||
(Gain) on disposal of assets | (256 | ) | (681 | ) | ||||
(Gain) on sale of marketable securities | — | (167 | ) | |||||
Loss on sale of investment | 13,777 | — | ||||||
Net change in receivables, inventories, and trade payables | (129,061 | ) | 59,690 | |||||
Net change in other assets and liabilities | (104,163 | ) | (361,999 | ) | ||||
Other, net | 13,814 | 95,700 | ||||||
Net cash provided by operating activities | 238,964 | 113,932 | ||||||
Cash flows from investing activities: | ||||||||
Acquisitions (net of cash of $1,760 in 2016) | — | (29,927 | ) | |||||
Capital expenditures | (79,336 | ) | (32,526 | ) | ||||
Proceeds from sale of plant and equipment | 12,448 | 4,498 | ||||||
Purchases of marketable securities and other investments | (70,253 | ) | (189,654 | ) | ||||
Maturities and sales of marketable securities and other investments | 12,499 | 291,372 | ||||||
Other, net | 6,365 | 1,450 | ||||||
Net cash (used in) provided by investing activities | (118,277 | ) | 45,213 | |||||
Cash flows from financing activities: | ||||||||
Net payments for common stock activity | (76,915 | ) | (131,738 | ) | ||||
Net proceeds from debt | 29,606 | 231,948 | ||||||
Dividends | (88,104 | ) | (84,749 | ) | ||||
Net cash (used in) provided by financing activities | (135,413 | ) | 15,461 | |||||
Effect of exchange rate changes on cash | 4,606 | (2,409 | ) | |||||
Net (decrease) increase in cash and cash equivalents | (10,120 | ) | 172,197 | |||||
Cash and cash equivalents at beginning of period | 884,886 | 1,221,653 | ||||||
Cash and cash equivalents at end of period | $ | 874,766 | $ | 1,393,850 | ||||
Exhibit 99.1 | |||||||
PARKER HANNIFIN CORPORATION - SEPTEMBER 30, 2017 | |||||||
RECONCILIATION OF CASH FLOW FROM OPERATIONS TO ADJUSTED CASH FLOW FROM OPERATIONS | |||||||
(Unaudited) | Three Months Ended | ||||||
September 30, 2017 | Percent of Sales | ||||||
As reported cash flow from operations | $ | 238,964 | 7.1 | % | |||
Discretionary pension contribution | — | ||||||
Adjusted cash flow from operations | $ | 238,964 | 7.1 | % | |||
Three Months Ended | |||||||
September 30, 2016 | Percent of Sales | ||||||
As reported cash flow from operations | $ | 113,932 | 4.2 | % | |||
Discretionary pension contribution | 220,000 | ||||||
Adjusted cash flow from operations | $ | 333,932 | 12.2 | % | |||
Exhibit 99.1 | ||||
PARKER HANNIFIN CORPORATION - SEPTEMBER 30, 2017 | ||||
RECONCILIATION OF FORECASTED EARNINGS PER DILUTED SHARE TO ADJUSTED FORECASTED EARNINGS PER DILUTED SHARE | ||||
(Unaudited) | ||||
(Amounts in dollars) | ||||
Fiscal Year 2018 | ||||
Forecasted earnings per diluted share | $8.45 to $9.05 | |||
Adjustments: | ||||
Business realignment charges | 0.31 | |||
Clarcor costs to achieve | 0.27 | |||
Loss on sale of investment | 0.07 | |||
Adjusted forecasted earnings per diluted share | $9.10 to $9.70 | |||