Parker-hannifin Corporation · NYSE:PH
Parker-hannifin — Q2 FY2019 Earnings Presentation
29 slides from Parker-hannifin's earnings presentation, Jan 31, 2019
Slide 1: 2nd Quarter Fiscal Year 2019 Earnings Release
Parker Hannifin Corporation Exhibit 99.2 2nd Quarter Fiscal Year 2019 Earnings Release January 31, 2019
Slide 2: Forward-Looking Statements and Non-GAAP Financial Measures
Forward-Looking Statements and Non-GAAP Financial Measures 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 stat
Slide 3: Agenda
Agenda • Chairman & CEO Comments • Results & Outlook • Questions & Answers 3
Slide 4: 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 5: Highlights of Quarter Results
Highlights of Quarter Results Key Takeaways ▪ Safety - 23% Reduction in recordable incidents ▪ Strong quarter: reflects benefits of The Win Strategy™ ▪ 2nd quarter records for sales, margins, net income and EPS ▪ Outstanding total segment margin performance of 16.4%, as reported Strong Performance i
Slide 6: Diluted Earnings Per Share 2nd Quarter FY2019
Diluted Earnings Per Share 2nd Quarter FY2019 As Reported EPS Adjusted EPS $2.51 $2.36 $2.15 $.41 FY19 Q2 FY18 Q2 FY19 Q2¹ FY18 Q2² ¹Adjusted for Business Realignment Charges, Clarcor Costs to Achieve and Tax Expense related to US Tax Reform ²Adjusted for Business Realignment Charges, Clarcor Costs
Slide 7: Influences on Adjusted Earnings Per Share
Influences on Adjusted Earnings Per Share 2nd Quarter FY2019 vs. 2nd Quarter FY2018 $0.07 $0.03 ($0.06) $0.41 ($0.09) $2.51 $2.15 FY18 Q2 Adjusted Segment Average Shares Interest Expense Tax Expense Corporate G&A FY19 Q2 Adjusted EPS¹ Operating Income EPS² ¹Adjusted for Business Realignment Charges,
Slide 8: Sales & Segment Operating Margin Total Parker
Sales & Segment Operating Margin Total Parker $ in millions 2nd Quarter % FY2019 Change FY2018 Sales As Reported $ 3,472 3.0 % $ 3,371 Divestitures (17) (0.5)% Currency (73) (2.2)% Organic Sales $ 3,562 5.7 % % of % of FY2019 Sales FY2018 Sales Segment Operating Margin As Reported $ 568 16.4 % $ 478
Slide 9: Sales & Segment Operating Margin Diversified Industrial North America
Sales & Segment Operating Margin Diversified Industrial North America $ in millions 2nd Quarter % FY2019 Change FY2018 Sales As Reported $ 1,632 4.3 % $ 1,565 Divestitures (6) (0.4)% Currency (5) (0.3)% Organic Sales $ 1,643 5.0 % % of % of FY2019 Sales FY2018 Sales Segment Operating Margin As Repor
Slide 10: Sales & Segment Operating Margin Diversified Industrial International
Sales & Segment Operating Margin Diversified Industrial International $ in millions 2nd Quarter % FY2019 Change FY2018 Sales As Reported $ 1,224 (2.5)% $ 1,256 Divestitures (10) (0.8)% Currency (67) (5.3)% Organic Sales $ 1,301 3.6 % % of % of FY2019 Sales FY2018 Sales Segment Operating Margin As Re
Slide 11: Sales & Segment Operating Margin Aerospace Systems
Sales & Segment Operating Margin Aerospace Systems $ in millions 2nd Quarter % FY2019 Change FY2018 Sales As Reported $ 616 12.1 % $ 550 Currency (1) (0.1)% Organic Sales $ 617 12.2 % % of % of FY2019 Sales FY2018 Sales Segment Operating Margin As Reported $ 121 19.7 % $ 87 15.9 % Business Realignme
Slide 12: Order Rates
Order Rates Dec 2018 Sep 2018 Dec 2017 Sep 2017 Total Parker + 1 % + 5 % + 13 % + 11 % Diversified Industrial North America + 0 % + 8 % + 15 % + 10 % Diversified Industrial International - 2 % + 3 % + 13 % + 15 % Aerospace Systems + 10 % + 3 % + 8 % + 4 % Excludes Acquisitions, Divestitures & Curren
Slide 13: Cash Flow from Operating Activities FY2019 YTD
Cash Flow from Operating Activities FY2019 YTD As Reported Cash Flow Adjusted Cash Flow $741 $541 $457 $457 FY19 YTD FY18 YTD FY19 YTD¹ FY18 YTD ¹Adjusted for Discretionary Pension Plan Contribution Year to Date FY 2019 % of Sales FY 2018 % of Sales As Reported Cash Flow From Operating Activities $
Slide 14: FY2019 Guidance
FY2019 Guidance EPS Midpoint: $11.29 As Reported, $11.60 Adjusted Sales Growth vs. Prior Year Diversified Industrial North America 1.4% - 3.9% Diversified Industrial International (4.9)% - (2.5)% Aerospace Systems 4.5% - 6.6% Total Parker (.4)% - 2.0% Segment Operating Margins As Reported Adjusted¹
Slide 15: FY2019 Guidance Reconciliation to Prior Guidance
FY2019 Guidance Reconciliation to Prior Guidance $0.20 ($0.11) ($0.03) $0.11 $0.03 $11.60 $11.40 FY19 Prior Segment Tax Expense Average Shares Corporate G&A, Interest Expense FY19 Updated Adjusted EPS Operating Income Other Expense Adjusted EPS Guidance¹ Guidance² ¹Adjusted for Expected Business Rea
Slide 16: FY2019 Guidance Reconciliation of Q2 Beat and Updated Guidance
FY2019 Guidance Reconciliation of Q2 Beat and Updated Guidance Q2 FY19 Beat to Guide Other Q3-Q4 Impacts $0.04 $0.16 ($0.10) ($0.13) ($0.01) $0.21 $0.03 Excellent operating Moderating growth reflected in ($11.60 performance, offset by market operating income, offsetting $11.40 investment losses lowe
Slide 17: NYSE
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
Consolidated Statement of Income (Unaudited) Three Months Ended December 31, Six Months Ended December 31, (Dollars in thousands, except per share amounts) 2018 2017 2018 2017 Net sales $ 3,472,045 $ 3,370,673 $ 6,951,339 $ 6,735,324 Cost of sales 2,602,339 2,564,449 5,197,162 5,087,743 Selling, gen
Slide 20: Adjusted Amounts Reconciliation
Adjusted Amounts Reconciliation SECOND QUARTER 2019 U.S. GAAP TO ADJUSTED AMOUNTS RECONCILIATION INCOME STATEMENT SECOND QUARTER FY 2019 Business Clarcor Tax Expense As Reported Realignment Costs to Related to Adjusted Dec-18 Charges Achieve U.S. Tax Reform Dec-18 Net sales $ 3,472,045 $ - $ - $ - $
Slide 21: Reconciliation of EPS
Reconciliation of EPS (Unaudited) Three Months Ended December 31, Six Months Ended December 31, (Amounts in dollars) 2018 2017 2018 2017 Earnings per diluted share $ 2.36 $ .41 $ 5.15 $ 2.51 Adjustments: Business realignment charges 0.01 0.07 0.02 0.12 Clarcor costs to achieve 0.03 0.07 0.07 0.10 (G
Slide 22: Business Segment Information
Business Segment Information (Unaudited) Three Months Ended December 31, Six Months Ended December 31, (Dollars in thousands) 2018 2017 2018 2017 Net sales Diversified Industrial: North America $ 1,632,059 $ 1,565,416 $ 3,313,103 $ 3,160,107 International 1,223,679 1,255,569 2,457,445 2,494,343 Aero
Slide 23: Reconciliation of Total Segment Operating Margin to Adjusted Total Segment Operating Margin
Reconciliation of Total Segment Operating Margin to Adjusted Total Segment Operating Margin (Unaudited) Three Months Ended Three Months Ended (Dollars in thousands) December 31, 2018 December 31, 2017 Operating income Operating margin Operating income Operating margin Total segment operating income
Slide 24: Reconciliation of EBITDA to Adjusted EBITDA
Reconciliation of EBITDA to Adjusted EBITDA (Unaudited) Three Months Ended December 31, Six Months Ended December 31, (Dollars in thousands) 2018 2017 2018 2017 Net sales $ 3,472,045 $ 3,370,673 $ 6,951,339 $ 6,735,324 Earnings before income taxes $ 431,154 $ 360,221 $ 890,877 $ 734,523 Depreciation
Slide 25: Consolidated Balance Sheet
Consolidated Balance Sheet (Unaudited) December 31, June 30, December 31, (Dollars in thousands) 2018 2018 2017 Assets Current assets: Cash and cash equivalents $ 1,047,385 $ 822,137 $ 1,024,770 Marketable securities and other investments 30,956 32,995 107,976 Trade accounts receivable, net 1,938,70
Slide 26: Consolidated Statement of Cash Flows
Consolidated Statement of Cash Flows (Unaudited) Six Months Ended December 31, (Dollars in thousands) 2018 2017 Cash flow s from operating activities: Net income $ 687,812 $ 341,857 Depreciation and amortization 222,543 234,216 Stock incentive plan compensation 64,615 64,267 Loss on sale of business
Slide 27: Reconciliation of Cash Flow from Operations to Adjusted Cash Flow from Operations
Reconciliation of Cash Flow from Operations to Adjusted Cash Flow from Operations (Unaudited) (Dollars in thousands) Six Months Ended Six Months Ended December 31, 2018 December 31, 2017 Percent of sales Percent of sales As reported cash flow from operations $ 541,040 7.8% $ 456,774 6.8% Discretiona
Slide 28: Reconciliation of Forecasted EPS
Reconciliation of Forecasted EPS (Unaudited) (Amounts in dollars) Fiscal Year 2019 Fiscal Year 2019 Prior Guide Revised Guide Forecasted earnings per diluted share $10.90 - $11.50 $11.04 - $11.54 Adjustments: Business realignment charges 0.13 0.11 Clarcor costs to achieve 0.07 0.09 U.S. Tax Reform i
Slide 29: Supplemental Sales Information Global Technology Platforms
Supplemental Sales Information Global Technology Platforms (Unaudited) (Dollars in thousands) Three Months Ending Six Months Ending December 31, December 31, 2018 2017 2018 2017 Net sales Diversified Industrial: Motion Systems $ 856,357 $ 825,695 $ 1,715,930 $ 1,635,442 Flow and Process Control 1,01