Parker-hannifin Corporation · NYSE:PH
Parker-hannifin — Q3 FY2019 Earnings Presentation
30 slides from Parker-hannifin's earnings presentation, May 2, 2019
Slide 1: 3rd Quarter Fiscal Year 2019 Earnings Release
Parker Hannifin Corporation Exhibit 99.2 3rd Quarter Fiscal Year 2019 Earnings Release May 2, 2019
Slide 2: Forward-Looking Statements
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 th
Slide 3: Non-GAAP Financial Measures
Non-GAAP Financial Measures This presentation reconciles (a) sales amounts reported in accordance with U.S. GAAP to organic sales, which are sales amounts adjusted to remove the effects of divestitures and the effects of currency exchange rates, (b) cash flow from operating activities and cash flow
Slide 4: Agenda
Agenda • Chairman & CEO Comments • Results & Outlook • Questions & Answers 4
Slide 5: Parker's Competitive Differentiators
Parker’s Competitive Differentiators ▪ The Win Strategy™ ▪ Decentralized business model ▪ Technology breadth & interconnectivity ▪ Engineered products with intellectual property ▪ Long product life cycles ▪ Balanced OEM vs. aftermarket ▪ Low capital investment requirements ▪ Great generators and dep
Slide 6: Highlights of Quarter Results
Highlights of Quarter Results 3rd Quarter Key Takeaways ▪ Strong operational quarter: reflects benefits of The Win Strategy™ ▪ All-time quarterly records for EPS, net income, and operating margin ▪ Outstanding total segment margin performance of 17.1%, as reported ▪ Great quarter for Aerospace Syste
Slide 7: Diluted Earnings Per Share 3rd Quarter FY2019
Diluted Earnings Per Share 3rd Quarter FY2019 As Reported EPS Adjusted EPS 3.25 3.25 $3.17 $3.14 3.00 3.00 2.75 2.75 $2.80 $2.70 2.50 2.50 FY19 Q3 FY18 Q3 FY19 Q3¹ FY18 Q3¹ 1Adjusted for Business Realignment Charges, CLARCOR Costs to Achieve 7
Slide 8: Influences on Adjusted Earnings Per Share
Influences on Adjusted Earnings Per Share 3rd Quarter FY2019 vs. 3rd Quarter FY2018 $0.11 $0.12 $0.03 ($0.04) $0.15 $3.17 $2.80 FY18 Q3 Adjusted Segment Corporate G&A Interest Expense Other Expense Average Shares FY19 Q3 Adjusted EPS¹ Operating Income EPS¹ 1Adjusted for Business Realignment Charges,
Slide 9: Sales & Segment Operating Margin Total Parker
Sales & Segment Operating Margin Total Parker $ in millions 3rd Quarter % FY2019 Change FY2018 Sales As Reported $ 3,688 (1.7)% $ 3,750 Divestitures (17) (0.5)% Currency (111) (3.0)% Organic Sales $ 3,816 1.8 % % of % of FY2019 Sales FY2018 Sales Segment Operating Margin As Reported $ 631 17.1 % $ 5
Slide 10: Sales & Segment Operating Margin Diversified Industrial North America
Sales & Segment Operating Margin Diversified Industrial North America $ in millions 3rd Quarter % FY2019 Change FY2018 Sales As Reported $ 1,751 (0.6)% $ 1,762 Divestitures (7) (0.4)% Currency (5) (0.3)% Organic Sales $ 1,763 0.1 % % of % of FY2019 Sales FY2018 Sales Segment Operating Margin As Repo
Slide 11: Sales & Segment Operating Margin Diversified Industrial International
Sales & Segment Operating Margin Diversified Industrial International $ in millions 3rd Quarter % FY2019 Change FY2018 Sales As Reported $ 1,285 (7.5)% $ 1,389 Divestitures (9) (0.7)% Currency (105) (7.5)% Organic Sales $ 1,399 0.7 % % of % of FY2019 Sales FY2018 Sales Segment Operating Margin As Re
Slide 12: Sales & Segment Operating Margin Aerospace Systems
Sales & Segment Operating Margin Aerospace Systems $ in millions 3rd Quarter % FY2019 Change FY2018 Sales As Reported $ 652 9.0 % $ 598 Currency (2) (0.2)% Organic Sales $ 654 9.2 % % of % of FY2019 Sales FY2018 Sales Segment Operating Margin As Reported $ 135 20.7 % $ 106 17.8 % Business Realignmen
Slide 13: Order Rates
Order Rates Mar 2019 Dec 2018 Mar 2018 Dec 2017 Total Parker - 4 % + 1 % + 11 % + 13 % Diversified Industrial North America - 6 % + 0 % + 11 % + 15 % Diversified Industrial International - 4 % - 2 % + 8 % + 13 % Aerospace Systems + 2 % + 10 % + 17 % + 8 % Excludes Acquisitions, Divestitures & Curren
Slide 14: Cash Flow from Operating Activities FY2019 YTD
Cash Flow from Operating Activities FY2019 YTD As Reported Cash Flow Adjusted Cash Flow $1,293 $1,093 $901 $901 FY19 YTD FY18 YTD FY19 YTD¹ FY18 YTD Year to Date FY 2019 % of Sales FY 2018 % of Sales As Reported Cash Flow From Operating Activities $ 1,093 10.3% $ 901 8.6% Discretionary Pension Plan
Slide 15: FY2019 Guidance
FY2019 Guidance EPS Midpoint: $11.32 As Reported, $11.60 Adjusted Sales Growth vs. Prior Year Diversified Industrial North America 0.9% - 1.9% Diversified Industrial International (5.3)% - (4.3)% Aerospace Systems 7.0% - 8.0% Total Parker (0.4)% - 0.6% Segment Operating Margins As Reported Adjusted¹
Slide 16: FY2019 Guidance Reconciliation of Q3 Beat and Updated Guidance
FY2019 Guidance Reconciliation of Q3 Beat and Updated Guidance Q3 FY19 Beat to Guide Other Q4 Impacts $0.06 $0.01 $0.07 ($0.16) $0.04 ($0.04) $0.01 $0.01 $11.60 $11.60 FY19 Prior Segment Corporate Tax Expense Average Segment Corporate Tax Expense Average FY19 Updated Adjusted EPS Operating G&A, Inte
Slide 17: NYSE: PH
PH EISTED NYSE
Slide 18: Appendix
Appendix • Consolidated Statement of Income • Adjusted Amounts Reconciliation • Reconciliation of EPS • Business Segment Information • Reconciliation of Total Segment Operating Margin to Adjusted Total Segment Operating Margin • Reconciliation of EBITDA to Adjusted EBITDA • Consolidated Balance Shee
Slide 19: Consolidated Statement of Income (Unaudited)
Consolidated Statement of Income (Unaudited) Three Months Ended March 31, Nine Months Ended March 31, (Dollars in thousands except per share amounts) 2019 2018 2019 2018 Net sales $ 3,687,518 $ 3,749,591 $ 10,638,857 $ 10,484,915 Cost of sales 2,766,744 2,819,804 7,963,906 7,907,547 Selling, general
Slide 20: Adjusted Amounts Reconciliation
Adjusted Amounts Reconciliation (Amounts in thousands, except per share data) THIRD QUARTER FY 2019 (Unaudited) Business Clarcor As Reported Realignment Costs to Adjusted March 31, 2019 Charges Achieve March 31, 2019 Net sales $ 3,687,518 $ - $ - $ 3,687,518 Cost of sales 2,766,744 2,599 205 2,763,9
Slide 21: Reconciliation of EPS
Reconciliation of EPS (Unaudited) Three Months Ended March 31, Nine Months Ended March 31, (Amounts in dollars) 2019 2018 2019 2018 Earnings per diluted share $ 3.14 $ 2.70 $ 8.29 $ 5.22 Adjustments: Business realignment charges 0.03 0.04 0.05 0.16 Clarcor costs to achieve - 0.06 0.07 0.16 Loss on s
Slide 22: Business Segment Information
Business Segment Information (Unaudited) Three Months Ended March 31, Nine Months Ended March 31, (Dollars in thousands) 2019 2018 2019 2018 Net sales Diversified Industrial: North America $ 1,750,554 $ 1,761,845 $ 5,063,657 $ 4,921,952 International 1,284,866 1,389,332 3,742,311 3,883,675 Aerospace
Slide 23: Reconciliation of Total Segment Operating Margin to Adjusted
Reconciliation of Total Segment Operating Margin to Adjusted Total Segment Operating Margin (Unaudited) Three Months Ended Three Months Ended (Dollars in thousands) March 31, 2019 March 31, 2018 Operating income Operating margin Operating income Operating margin Total segment operating income $ 631,
Slide 24: Reconciliation of EBITDA to Adjusted EBITDA
Reconciliation of EBITDA to Adjusted EBITDA (Unaudited) Three Months Ended March 31, Nine Months Ended March 31, (Dollars in thousands) 2019 2018 2019 2018 Net sales $ 3,687,518 $ 3,749,591 $ 10,638,857 $ 10,484,915 Earnings before income taxes $ 529,200 $ 469,827 $ 1,420,077 $ 1,204,350 Depreciatio
Slide 25: Consolidated Balance Sheet (Unaudited)
Consolidated Balance Sheet (Unaudited) March 31, June 30, March 31, (Dollars in thousands) 2019 2018 2018 Assets Current assets: Cash and cash equivalents $ 1,098,729 $ 822,137 $ 1,089,529 Marketable securities and other investments 70,190 32,995 101,206 Trade accounts receivable, net 2,117,103 2,14
Slide 26: Consolidated Statement of Cash Flows (Unaudited)
Consolidated Statement of Cash Flows (Unaudited) Nine Months Ended March 31, (Dollars in thousands) 2019 2018 Cash flows from operating activities: Net income $ 1,099,193 $ 707,987 Depreciation and amortization 330,801 351,316 Stock incentive plan compensation 84,525 89,571 Loss on sale of businesse
Slide 27: Reconciliation of Cash Flow from Operations to Adjusted Cash Flow
Reconciliation of Cash Flow from Operations to Adjusted Cash Flow from Operations (Unaudited) Nine Months Ended Nine Months Ended (Dollars in thousands) March 31, 2019 Percent of sales March 31, 2018 Percent of sales As reported cash flow from operations $ 1,092,597 10.3 % $ 901,238 8.6 % Discretion
Slide 28: Reconciliation of Free Cash Flow Conversion
Reconciliation of Free Cash Flow Conversion CALCULATION OF FREE CASH FLOW CONVERSION (Unaudited) (Dollars in thousands) Nine Months Ended March 31, 2019 Net income $ 1,099,193 Cash flow from operations $ 1,092,597 Capital expenditures (145,071) Discretionary pension contribution 200,000 Free cash fl
Slide 29: Reconciliation of Forecasted EPS
Reconciliation of Forecasted EPS (Unaudited) (Amounts in dollars) Fiscal Year 2019 Forecasted earnings per diluted share $11.17 - $11.47 Adjustments: Business realignment charges 0.09 Clarcor costs to achieve 0.08 U.S. Tax Reform income tax expense adjustment 0.11 Adjusted forecasted earnings per di
Slide 30: Supplemental Sales Information Global Technology Platforms
Supplemental Sales Information Global Technology Platforms Three Months Ended Nine Months Ended (Unaudited) March 31, March 31, (Dollars in thousands) 2019 2018 2019 2018 Net sales Diversified Industrial: Motion Systems $ 899,948 $ 928,012 $ 2,615,878 $ 2,563,454 Flow and Process Control 1,105,176 1