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EX-99.2 - EXHIBIT 99.2 - PARKER HANNIFIN CORPexhibit992q2fy18.htm
8-K - 8-K - PARKER HANNIFIN CORPcoverform8-k2qfy18.htm


exhibit991image1a04a19.gif
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 Second Quarter Results

Sales increased 26% to $3.37 billion, a second quarter record
Organic sales increased 10%, order rates increased 13%
As reported EPS were $0.41; or $2.15 adjusted
As reported EPS include a one-time, tax expense adjustment of $1.65
Total segment operating margins were 14.2%, or 14.9% adjusted
Adjusted EBITDA margins increased from 15.2% to 16.3%, excluding divestiture gain in prior year
Company increases fiscal 2018 full year guidance for adjusted EPS


CLEVELAND, February 1, 2018 -- Parker Hannifin Corporation (NYSE: PH), the global leader in motion and control technologies, today reported results for the fiscal 2018 second quarter ended December 31, 2017. Fiscal 2018 second quarter sales increased 26% to $3.37 billion compared with $2.67 billion in the prior year quarter. Net income was $56.3 million compared with $241.4 million in the fiscal 2017 second quarter. Fiscal 2018 second quarter earnings per share were $0.41, compared with $1.78 in the prior year quarter. Adjusted earnings per share were $2.15, compared with adjusted earnings per share of $1.91 in the prior year quarter, which included a divestiture resulting in a pre-tax gain of $45.0 million or $0.21 per share. During the fiscal 2018 second quarter, the company recognized a net one-time adjustment to income tax expense of $224.5 million, or $1.65 per share related to U.S. Tax Reform and recorded a net pre-tax gain on the sale and writedown of assets of $8.4 million, or $0.05 per share. Business realignment expenses and CLARCOR costs to achieve totaled $25.4 million, or $0.14 per share in the current quarter. A reconciliation of earnings per share to adjusted earnings per share is included in the financial tables of this press release. Cash flow from operations for the first half of fiscal 2018 was $460.3 million or 6.8% of sales, compared with $404.2 million or 7.5% of sales in the prior year period, or 11.5% excluding a discretionary pension contribution in fiscal 2017.






“Improved market conditions together with the ongoing benefits of implementing the new Win StrategyTM continue to deliver widespread improvements across our company,” said Chairman and Chief Executive Officer, Tom Williams. “Sales were a second quarter record and increased 10% organically, while order rates increased 13% year-over-year. Solid margin performance continued. We are firmly positioned to build on the financial progress that we have made in recent years and to deliver record sales and earnings in fiscal 2018.”

Second Quarter Fiscal 2018 Segment Results
Diversified Industrial Segment: North American second quarter sales increased 40% to $1.6 billion and operating income increased 23% to $225.8 million, compared with $184.0 million in the same period a year ago. International second quarter sales increased 25% to $1.3 billion and operating income increased 29% to $164.8 million, compared with $127.5 million in the same period a year ago.

Aerospace Systems Segment: Second quarter sales were $549.7 million, compared with $543.8 million in the prior year period and operating income increased 20% to $87.1 million, compared with $72.5 million in the same period a year ago.

Parker reported the following orders for the quarter ending December 31, 2017, compared with the same quarter a year ago:
Orders increased 13% for total Parker
Orders increased 15% in the Diversified Industrial North America businesses
Orders increased 13% in the Diversified Industrial International businesses
Orders increased 8% in the Aerospace Systems Segment on a rolling 12-month average basis

Outlook
For the fiscal year ending June 30, 2018, the company has revised guidance for earnings from continuing operations to the range of $7.38 to $7.78 per share, or $9.65 to $10.05 per share on an adjusted basis.

The revised fiscal 2018 earnings guidance reflects a reduction in the U.S. Federal income tax rate, which has lowered the average effective tax rate for Parker in fiscal 2018. On an adjusted basis, forecasted earnings reflect the net one-time adjustment in income tax expense of $224.5 million, or $1.65 per share recorded in the second quarter of fiscal 2018, as well as expected business realignment expenses of approximately $58 million and CLARCOR costs to achieve of approximately $52 million. A reconciliation of forecasted earnings per share to adjusted forecasted earnings per share is included in the financial tables of this press release.






Williams added, “We see strong market conditions continuing into the second half of our fiscal year. We remain committed to driving operational improvements through our execution of the Win Strategy, progressing toward our stated long-term financial goals and delivering a record year.”
   
NOTICE OF CONFERENCE CALL: Parker Hannifin's conference call and slide presentation to discuss its fiscal 2018 second 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. A replay of the webcast will be accessible on Parker's investor relation website, www.phstock.com, approximately one hour after the completion of the call, and will remain available for one year thereafter. To register for e-mail notification of future events and information available from Parker please visit www.phstock.com.

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, U.S. Tax Reform adjustments, the gain on sale and writedown of assets, net, and acquisition-related expenses; (b) the effect of business realignment charges, CLARCOR costs to achieve, U.S. Tax Reform adjustments, the gain on sale and writedown of assets, net, and acquisition-related expenses on forecasted earnings from continuing operations per share; (c) and cash flows from operations without the effect of a discretionary pension contribution. The effects of business realignment charges, CLARCOR costs to achieve, U.S. Tax Reform adjustments, gain on sale and writedown of assets, net, acquisition-related expenses and discretionary pension contribution 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. This press release also contains references to EBITDA and adjusted EBITDA. EBITDA is defined as earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA before business realignment charges, CLARCOR costs to achieve, U.S. Tax Reform adjustments, the gain on sale and writedown of assets, net, gain on sale of a product line and acquisition-related expenses. Although EBITDA and Adjusted EBITDA are not measures of performance calculated in accordance with GAAP, we believe that it is useful to an investor in evaluating the results of this quarter versus one year ago.











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. Additionally, the actual impact of the U.S. Tax Cuts and Jobs 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 U.S. Tax Cuts and Jobs Act that may also affect these estimates and the actual impact on the company. 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 - DECEMBER 31, 2017
 
 
 
 
 
Exhibit 99.1

CONSOLIDATED STATEMENT OF INCOME
 
 
 
 
 
 
 
(Unaudited)
 
Three Months Ended December 31,
 
Six Months Ended December 31,
(Dollars in thousands except per share amounts)
2017

 
2016

 
2017

 
2016

 
 
 
 
 
 
 
 
 
Net sales
 
$
3,370,673

 
$
2,670,804

 
$
6,735,324

 
$
5,413,935

Cost of sales
 
2,569,070

 
2,044,484

 
5,101,948

 
4,150,490

Selling, general and administrative expenses
412,462

 
336,578

 
814,134

 
659,547

Interest expense
 
53,133

 
33,444

 
106,688

 
67,592

Other (income), net
 
(24,213
)
 
(64,424
)
 
(21,969
)
 
(76,661
)
Income before income taxes
 
360,221

 
320,722

 
734,523

 
612,967

Income taxes
 
303,899

 
79,322

 
392,666

 
161,329

Net income
 
56,322

 
241,400

 
341,857

 
451,638

Less: Noncontrolling interests
 
163

 
95

 
301

 
204

Net income attributable to common shareholders
$
56,159

 
$
241,305

 
$
341,556

 
$
451,434

 
 
 
 
 
 
 
 
 
Earnings per share attributable to common shareholders:
 
 
 
 
 
 
 
   Basic earnings per share
 
$
0.42

 
$
1.81

 
$
2.57

 
$
3.38

   Diluted earnings per share
 
$
0.41

 
$
1.78

 
$
2.51

 
$
3.33

 
 
 
 
 
 
 
 
 
Average shares outstanding during period - Basic
133,112,568

 
133,320,109

 
133,144,766

 
133,499,744

Average shares outstanding during period - Diluted
136,194,919

 
135,812,760

 
135,874,530

 
135,596,707

 
 
 
 
 
 
 
 
 
Cash dividends per common share
$
0.66

 
$
0.63

 
$
1.32

 
$
1.26

 
 
 
 
 
 
 
 
 
RECONCILIATION OF EARNINGS PER DILUTED SHARE TO ADJUSTED EARNINGS PER DILUTED SHARE

(Unaudited)
 
Three Months Ended December 31,
 
Six Months Ended December 31,
(Amounts in dollars)
 
2017

 
2016

 
2017

 
2016

Earnings per diluted share
$
0.41

 
$
1.78

 
$
2.51

 
$
3.33

Adjustments:
 
 
 
 
 
 
 
  Business realignment charges
0.07

 
0.04

 
0.12

 
0.10

  Clarcor costs to achieve
0.07

 

 
0.10

 

  Gain on sale and writedown of assets, net
(0.05
)
 

 
0.02

 

  U.S. Tax Reform one-time impact, net
1.65

 

 
1.65

 

  Acquisition-related expenses

 
0.09

 

 
0.09

Adjusted earnings per diluted share
$
2.15

 
$
1.91

 
$
4.40

 
$
3.52

 
 
 
 
 
 
 
 
 
RECONCILIATION OF EBITDA TO ADJUSTED EBITDA
 
 
 
 
(Unaudited)
 
 
 
 
 
 
 
 
(Dollars in thousands)
 
Three Months Ended December 31,
 
 
 
 
 
 
2017

 
2016

 
 
 
 
Net sales
 
$
3,370,673

 
$
2,670,804

 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings before income taxes
 
$
360,221

 
$
320,722

 
 
 
 
Depreciation and amortization
 
118,109

 
73,752

 
 
 
 
Interest expense
 
53,133

 
33,444

 
 
 
 
EBITDA
 
531,463

 
427,918

 
 
 
 
Adjustments:
 
 
 
 
 
 
 
 
  Gain on sale and writedown of assets, net
(8,453
)
 

 
 
 
 
  Business realignment charges
13,428

 
7,897

 
 
 
 
  Clarcor costs to achieve
11,948

 

 
 
 
 
  Acquisition-related expenses

 
15,963

 
 
 
 
  Gain on sale of a product line
 

 
(45,053
)
 
 
 
 
Adjusted EBITDA
 
$
548,386

 
$
406,725

 
 
 
 
 
 
 
 
 
 
 
 
 
EBITDA margin
 
15.8
%
 
16.0
%
 
 
 
 
Adjusted EBITDA margin
 
16.3
%
 
15.2
%
 
 
 
 






PARKER HANNIFIN CORPORATION - DECEMBER 31, 2017
 
 
 
 
 
Exhibit 99.1

BUSINESS SEGMENT INFORMATION
 
 
 
 
 
 
 
(Unaudited)
 
Three Months Ended December 31,
 
Six Months Ended December 31,
(Dollars in thousands)
 
2017

 
2016

 
2017

 
2016

Net sales
 
 
 
 
 
 
 
 
    Diversified Industrial:
 
 
 
 
 
 
 
 
       North America
 
$
1,565,416

 
$
1,121,053

 
$
3,160,107

 
$
2,288,024

       International
 
1,255,569

 
1,005,968

 
2,494,343

 
2,020,891

    Aerospace Systems
 
549,688

 
543,783

 
1,080,874

 
1,105,020

Total net sales
 
$
3,370,673

 
$
2,670,804

 
$
6,735,324

 
$
5,413,935

Segment operating income
 
 
 
 
 
 
 
 
    Diversified Industrial:
 
 
 
 
 
 
 
 
       North America
 
$
225,807

 
$
184,013

 
$
481,834

 
$
384,624

       International
 
164,806

 
127,517

 
356,597

 
264,713

    Aerospace Systems
 
87,148

 
72,516

 
164,582

 
145,797

Total segment operating income
477,761

 
384,046

 
1,003,013

 
795,134

Corporate general and administrative expenses
46,942

 
43,926

 
88,292

 
74,960

Income before interest expense and other expense
430,819

 
340,120

 
914,721

 
720,174

Interest expense
 
53,133

 
33,444

 
106,688

 
67,592

Other expense (income)
 
17,465

 
(14,046
)
 
73,510

 
39,615

Income before income taxes
 
$
360,221

 
$
320,722

 
$
734,523

 
$
612,967

 
 
 
 
 
 
 
 
 
RECONCILIATION OF TOTAL SEGMENT OPERATING MARGIN TO ADJUSTED TOTAL SEGMENT OPERATING MARGIN
(Unaudited)
 
 
 
 
 
 
 
 
(Dollars in thousands)
 
Three Months Ended
 
Three Months Ended
 
 
December 31, 2017
 
December 31, 2016
 
 
Operating income

 
Operating margin

 
Operating income

 
Operating margin

Total segment operating income
$
477,761

 
14.2
%
 
$
384,046

 
14.4
%
Adjustments:
 
 
 
 
 
 
 
 
  Business realignment charges
 
13,428

 
 
 
7,897

 
 
  Clarcor costs to achieve
 
11,948

 
 
 

 
 
Adjusted total segment operating income
$
503,137

 
14.9
%
 
$
391,943

 
14.7
%
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended
 
Six Months Ended
 
 
December 31, 2017
 
December 31, 2016
 
 
Operating income

 
Operating margin

 
Operating income

 
Operating margin

Total segment operating income
$
1,003,013

 
14.9
%
 
$
795,134

 
14.7
%
Adjustments:
 
 
 
 
 
 
 
 
  Business realignment charges
 
21,654

 
 
 
18,642

 
 
  Clarcor costs to achieve
 
17,748

 
 
 

 
 
Adjusted total segment operating income
$
1,042,415

 
15.5
%
 
$
813,776

 
15.0
%






 
 
 
 
 
 
Exhibit 99.1

PARKER HANNIFIN CORPORATION - DECEMBER 31, 2017
 
 
 
 
 
CONSOLIDATED BALANCE SHEET
 
 
 
 
 
 
(Unaudited)
 
December 31,

 
June 30,

 
December 31,

(Dollars in thousands)
 
2017

 
2017

 
2016

Assets
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
Cash and cash equivalents
 
$
1,024,770

 
$
884,886

 
$
1,520,736

Marketable securities and other investments
 
107,976

 
39,318

 
684,299

Trade accounts receivable, net
 
1,857,282

 
1,930,751

 
1,411,074

Non-trade and notes receivable
 
313,221

 
254,987

 
256,545

Inventories
 
1,780,262

 
1,549,494

 
1,241,593

Prepaid expenses
 
202,848

 
120,282

 
133,592

Total current assets
 
5,286,359

 
4,779,718

 
5,247,839

Plant and equipment, net
 
1,937,074

 
1,937,292

 
1,506,201

Deferred income taxes
 
36,668

 
36,057

 
482,136

Goodwill
 
5,698,707

 
5,586,878

 
2,813,238

Intangible assets, net
 
2,174,104

 
2,307,484

 
849,692

Other assets
 
832,269

 
842,475

 
832,507

Total assets
 
$
15,965,181

 
$
15,489,904

 
$
11,731,613

 
 
 
 
 
 
 
Liabilities and equity
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
Notes payable
 
$
1,248,212

 
$
1,008,465

 
$
581,487

Accounts payable
 
1,229,336

 
1,300,496

 
997,189

Accrued liabilities
 
896,750

 
933,762

 
720,844

Accrued domestic and foreign taxes
 
163,405

 
153,137

 
125,954

Total current liabilities
 
3,537,703

 
3,395,860

 
2,425,474

Long-term debt
 
4,798,371

 
4,861,895

 
2,653,560

Pensions and other postretirement benefits
 
1,363,466

 
1,406,082

 
1,766,209

Deferred income taxes
 
137,196

 
221,790

 
50,809

Other liabilities
 
609,235

 
336,931

 
304,583

Shareholders' equity
 
5,513,401

 
5,261,649

 
4,527,709

Noncontrolling interests
 
5,809

 
5,697

 
3,269

Total liabilities and equity
 
$
15,965,181

 
$
15,489,904

 
$
11,731,613






 
 
 
 
Exhibit 99.1

PARKER HANNIFIN CORPORATION - DECEMBER 31, 2017
 
 
 
 
CONSOLIDATED STATEMENT OF CASH FLOWS
 
 
 
 
(Unaudited)
 
Six Months Ended December 31,
(Dollars in thousands)
 
2017

 
2016

 
 
 
 
 
Cash flows from operating activities:
 
 
 
 
Net income
 
$
341,857

 
$
451,638

Depreciation and amortization
 
234,216

 
149,085

Stock incentive plan compensation
 
64,267

 
47,161

(Gain) on sale of business
 

 
(44,930
)
(Gain) loss on disposal of assets
 
(26,529
)
 
310

(Gain) on sale of marketable securities
 
(1
)
 
(230
)
Loss on sale and impairment of investments
 
33,759

 

Net change in receivables, inventories, and trade payables
 
(249,615
)
 
44,802

Net change in other assets and liabilities
 
123,864

 
(313,783
)
Other, net
 
(61,481
)
 
70,123

Net cash provided by operating activities
 
460,337

 
404,176

Cash flows from investing activities:
 
 
 
 
Acquisitions (net of cash of $1,760 in 2016)
 

 
(29,927
)
Capital expenditures
 
(144,781
)
 
(71,356
)
Proceeds from sale of plant and equipment
 
59,848

 
4,991

Proceeds from sale of business
 

 
85,610

Purchases of marketable securities and other investments
 
(78,309
)
 
(393,909
)
Maturities and sales of marketable securities and other investments
 
12,710

 
506,642

Other, net
 
5,143

 
241

Net cash (used in) provided by investing activities
 
(145,389
)
 
102,292

Cash flows from financing activities:
 
 
 
 
Net payments for common stock activity
 
(134,360
)
 
(194,110
)
Net proceeds from debt
 
127,723

 
222,425

Dividends
 
(176,187
)
 
(168,990
)
Net cash (used in) financing activities
 
(182,824
)
 
(140,675
)
Effect of exchange rate changes on cash
 
7,760

 
(66,710
)
Net increase in cash and cash equivalents
 
139,884

 
299,083

Cash and cash equivalents at beginning of period
 
884,886

 
1,221,653

Cash and cash equivalents at end of period
 
$
1,024,770

 
$
1,520,736


 
 
 
 
Exhibit 99.1

PARKER HANNIFIN CORPORATION - DECEMBER 31, 2017
 
 
 
 
 
 
 
 
 
RECONCILIATION OF CASH FLOW FROM OPERATIONS TO ADJUSTED CASH FLOW FROM OPERATIONS
(Unaudited)
 
Six Months Ended
 
 
(Dollars in thousands)
 
December 31, 2017
 
Percent of Sales

As reported cash flow from operations
 
$
460,337

 
6.8
%
  Discretionary pension contribution
 

 
 
Adjusted cash flow from operations
 
$
460,337

 
6.8
%
 
 
 
 
 
 
 
Six Months Ended
 
 
 
 
December 31, 2016
 
Percent of Sales

As reported cash flow from operations
 
$
404,176

 
7.5
%
  Discretionary pension contribution
 
220,000

 
 
Adjusted cash flow from operations
 
$
624,176

 
11.5
%
 
 
 
 
 





 
 
 
 
Exhibit 99.1
PARKER HANNIFIN CORPORATION - DECEMBER 31, 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
$7.38 to $7.78
 
 
Adjustments:
 
 
 
  Business realignment charges
0.32
 
 
  Clarcor costs to achieve
0.28
 
 
  Gain on sale and writedown of assets, net
0.02
 
 
  U.S. Tax Reform one-time impact, net
1.65
 
 
Adjusted forecasted earnings per diluted share
$9.65 to $10.05