Parker-hannifin Corporation · NYSE:PH
Parker-hannifin — Q2 FY2021 Earnings Presentation
39 slides from Parker-hannifin's earnings presentation, Feb 4, 2021
Slide 1: Fiscal 2021 Second Quarter Earnings Release
Parker Hannifin Corporation Fiscal 2021 Second Quarter Earnings Release February 4, 2021 Exhibit 99.2
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
3 Agenda CEO Comments and Highlights of Quarter Results Results & Outlook Questions & Answers
Slide 4: Unmatched Breadth of Core Technologies
Unmatched Breadth of Core Technologies Interconnected Technologies Create Competitive Advantages 4
Slide 5: Outstanding Performance in FY21 Second Quarter
Outstanding Performance in FY21 Second Quarter 5 ▪ Top quartile safety performance; 23% reduction in recordable incidents ▪ Sales decline of 2.5% YoY; Organic decline of 6.1% YoY ▪ Q2 record net income of $447 million ▪ EBITDA margin was 23.1% as reported or 20.8% adjusted1, +230 bps vs. prior ▪ Q2
Slide 6: Strong Cash Flow Deployment
Strong Cash Flow Deployment 6 ▪ Paid down $767 million of debt during FY21 Q2 ▪ ~$2.8 billion debt reduction in last 14 months Debt Ratios FY21 Q2 FY21 Q1 Gross debt to EBITDA 2.7x 3.4x Net debt to EBITDA 2.5x 3.0x Expect all serviceable debt to be paid off in 2021Reinitiating our 10b5-1 Share Repur
Slide 7: Parker's Transformation
Parker’s Transformation PH LISTED NYSE
Slide 8: Strategy Summary
Strategy Summary 8 Why We Win The Win Strategy™ Decentralized business model Technology breadth & interconnectivity Engineered products with intellectual property Long product life cycles Global distribution, service & support Low capital investment requirements Great generators & de
Slide 9: The Win Strategy 3.0 and Our Purpose are Accelerating Performance
9 The Win Strategy 3.0 and Our Purpose are Accelerating Performance
Slide 10: What is Parker's purpose?
What is Parker's purpose? Enabling Engineering Breakthroughs that Lead to a Better Tomorrow
Slide 11: Parker is Essential to the Vaccine Value Chain
Parker is Essential to the Vaccine Value Chain 11 Development & Production • Mixing & purification control systems • Filtration & dispensing of bulk product Storage & Local Distribution • Low temp refrigeration for trailers, containers, and medical cold storage Shipping & Bulk Transport • Sterile va
Slide 12: Strategies to Grow > GIPI
Strategies to Grow > GIPI Portfolio Acquire companies with higher growth trajectory and resiliency: CLARCOR LORD Exotic Performance Strategic Positioning Innovation - Winovation PVI and NPB Simple by Design™ International Distribution Digital Leadership Annual Cash Incentive Progra
Slide 13: Summary of Fiscal 2021 2nd Quarter Results
Summary of Fiscal 2021 2nd Quarter Results PH LISTED NYSE
Slide 14: Diluted Earnings per Share 2nd Quarter FY2021 vs. FY2020
14 Diluted Earnings per Share 2nd Quarter FY2021 vs. FY2020 As Reported Adjusted1 1. Adjusted numbers include certain non-GAAP financial measures. See Appendix for additional details and reconciliations.
Slide 15: Influences on Adjusted Earnings per Share
15 Influences on Adjusted Earnings per Share 2nd Quarter FY2021 vs. FY2020 11 1. Adjusted numbers include certain non-GAAP financial measures. See Appendix for additional details and reconciliations.
Slide 16: Savings from Cost Out Actions
Savings from Cost Out Actions 16 ~50% ~45% ~55% Savings FY21 Q2 YTD FY21 Total FY21 YoY Incremental Discretionary Actions ~$190 ~$225 ~$ 50 Permanent Actions ~$125 ~$250 ~$210 Total ~$315M ~$475M* ~$260M* *Estimated savings from cost actions will vary based on demand conditions ▪ Discretionary savin
Slide 17: Sales & Segment Operating Margin Total Parker
17 Sales & Segment Operating Margin Total Parker 1: Acquisitions reflect LORD (closed 10/29/19); 2: Integration Costs to Achieve for LORD and Exotic; 3: Acquisition-Related Expenses for LORD and Exotic $ in millions 2nd Quarter FY2021 % Change FY2020 Sales As Reported $ 3,412 (2.5)% $ 3,498 Acquisit
Slide 18: Sales & Segment Operating Margin Diversified Industrial North America
18 Sales & Segment Operating Margin Diversified Industrial North America $ in millions 2nd Quarter FY2021 % Change FY2020 Sales As Reported $ 1,567 (3.0)% $ 1,616 Acquisitions1 50 3.1 % Currency (3) (0.2)% Organic Sales $ 1,520 (5.9)% FY2021 % of Sales FY2020 % of Sales Segment Operating Margin As R
Slide 19: Sales & Segment Operating Margin Diversified Industrial International
19 Sales & Segment Operating Margin Diversified Industrial International $ in millions 2nd Quarter FY2021 % Change FY2020 Sales As Reported $ 1,260 9.8 % $ 1,147 Acquisitions1 37 3.2 % Currency 41 3.5 % Organic Sales $ 1,182 3.1 % FY2021 % of Sales FY2020 % of Sales Segment Operating Margin As Repor
Slide 20: Sales & Segment Operating Margin Aerospace Systems
20 Sales & Segment Operating Margin Aerospace Systems $ in millions 2nd Quarter FY2021 % Change FY2020 Sales As Reported $ 585 (20.4)% $ 735 Acquisitions1 3 0.4 % Currency 1 0.1 % Organic Sales $ 581 (20.9)% FY2021 % of Sales FY2020 % of Sales Segment Operating Margin As Reported $ 91 15.5 % $ 121 1
Slide 21: Cash Flow Q2 YTD FY2021 vs. FY2020
21 Cash Flow Q2 YTD FY2021 vs. FY2020 ▪ Cash Flow from Operations of 20.4% of Sales ▪ Free Cash Flow of 19.0% of Sales ▪ Free Cash Flow Conversion of 164% Cash Flow from Operations $ Millions Highlights Q2 YTD Q2 YTD
Slide 22: Order Rates
22 Order Rates Excludes Acquisitions, Divestitures & Currency 3-month year-over-year comparisons of total dollars, except Aerospace Systems Aerospace Systems is calculated using a 12-month rolling average Dec 2020 Sep 2020 Dec 2019 Sep 2019 Total Parker — % (12)% (3)% (2)% Diversified Industrial Nor
Slide 23: FY2021 Guidance Increased
23 FY2021 Guidance Increased EPS Midpoint: $12.15 As Reported, $13.90 Adjusted Sales Growth vs. Prior Year Diversified Industrial North America (0.1)% - 1.9% Diversified Industrial International 10.9% - 12.9% Aerospace Systems (14.3)% - (12.3)% Total Parker 0.7% - 2.7% Segment Operating Margins As R
Slide 24: FY2021 Guidance Reconciliation of Q2 Beat and Updated Guidance
24 FY2021 Guidance Reconciliation of Q2 Beat and Updated Guidance 1: Adjusted for acquired intangible asset Amortization, Business Realignment Charges, Integration Costs to Achieve, Gain on land sale, and the tax effect of such adjustments 11 Increase to 2nd Half Guide
Slide 25: Key Messages
Key Messages Highly engaged global team Strength & interconnectivity of Parker’s portfolio Strategic portfolio transformation – CLARCOR, LORD & Exotic Improving financial performance over the cycle The Win Strategy™ 3.0 & Purpose Statement accelerates performance 25 Remain Confident in Ach
Slide 26: LISTED
PH LISTED NYSE
Slide 27: 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 28: Consolidated Statement of Income
Consolidated Statement of Income 28 (Unaudited) Three Months Ended December 31, (Dollars in thousands, except per share amounts) 2020 2019 Net sales $ 3,411,905 $ 3,497,974 Cost of sales 2,519,545 2,682,765 Selling, general and administrative expenses 356,572 491,121 Interest expense 62,990 82,891 O
Slide 29: Adjusted Amounts Reconciliation Consolidated Statement of Income
Adjusted Amounts Reconciliation Consolidated Statement of Income 29 (Dollars in thousands, except per share data) (Unaudited) Quarter-to-Date FY 2021 % of Sales Acquired Intangible Asset Amortization Business Realignment Charges Lord Costs to Achieve Exotic Costs to Achieve Gain On Sale Of Land % of
Slide 30: Adjusted Amounts Reconciliation Business Segment Information
Adjusted Amounts Reconciliation Business Segment Information 30 (Dollars in thousands) (Unaudited) Quarter-to-Date FY 2021 % of Sales Acquired Intangible Asset Amortization Business Realignment Charges Lord Costs to Achieve Exotic Costs to Achieve Gain On Sale Of Land % of Sales2 As Reported Adjuste
Slide 31: Reconciliation of Earnings per Diluted Share to Adjusted Earnings per Diluted Share
Reconciliation of Earnings per Diluted Share to Adjusted Earnings per Diluted Share 31 (Unaudited) Three Months Ended December 31, (Amounts in dollars) 2020 2019 Earnings per diluted share $ 3.41 $ 1.57 Adjustments: Acquired intangible asset amortization expense 0.62 0.57 Business realignment charge
Slide 32: Business Segment Information
32 Business Segment Information (Unaudited) Three Months Ended December 31, (Dollars in thousands) 2020 2019 Net sales Diversified Industrial: North America $ 1,566,877 $ 1,615,852 International 1,259,625 1,147,084 Aerospace Systems 585,403 735,038 Total net sales $ 3,411,905 $ 3,497,974 Segment ope
Slide 33: Reconciliation of Total Segment Operating Margin to Adjusted
33 Reconciliation of Total Segment Operating Margin to Adjusted Total Segment Operating Margin (Unaudited) Three Months Ended Three Months Ended (Dollars in thousands) December 31, 2020 December 31, 2019 Operating income Operating margin Operating income Operating margin Total segment operating inco
Slide 34: Reconciliation of EBITDA to Adjusted EBITDA
34 Reconciliation of EBITDA to Adjusted EBITDA (Unaudited) Three Months Ended December 31, (Dollars in thousands) 2020 2019 Net sales $ 3,411,905 $ 3,497,974 Net income $ 447,497 $ 204,598 Income taxes 129,015 50,148 Depreciation and amortization 149,818 144,229 Interest expense 62,990 82,891 EBITDA
Slide 35: Consolidated Balance Sheet
Consolidated Balance Sheet 35 (Unaudited) December 31, June 30, December 31, (Dollars in thousands) 2020 2020 2019 Assets Current assets: Cash and cash equivalents $ 564,734 $ 685,514 $ 948,355 Marketable securities and other investments 43,314 70,805 145,120 Trade accounts receivable, net 1,816,731
Slide 36: Consolidated Statement of Cash Flows
Consolidated Statement of Cash Flows 36 (Unaudited) Six Months Ended December 31, (Dollars in thousands) 2020 2019 Cash flows from operating activities: Net income $ 769,214 $ 543,639 Depreciation and amortization 298,260 253,300 Share incentive plan compensation 79,833 73,069 Gain on property, plan
Slide 37: Reconciliation of Free Cash Flow Conversion
Reconciliation of Free Cash Flow Conversion 37 (Unaudited) Six Months Ended December 31, 2020 (Dollars in thousands) Net income $ 769,214 Cash flow from operations $ 1,353,988 Capital Expenditures (92,907) Free cash flow $ 1,261,081 Free cash flow conversion (free cash flow / net income) 164 %
Slide 38: Supplemental Sales Information Global Technology Platforms
Supplemental Sales Information Global Technology Platforms 38 Three Months Ended (Unaudited) December 31, (Dollars in thousands) 2020 2019 Net sales Diversified Industrial: Motion Systems $ 720,315 $ 752,306 Flow and Process Control 949,949 942,249 Filtration and Engineered Materials 1,156,238 1,068
Slide 39: Reconciliation of EPS Fiscal Year 2021 Guidance
Reconciliation of EPS Fiscal Year 2021 Guidance 39 (Unaudited) (Amounts in dollars) Fiscal Year 2021 Forecasted earnings per diluted share $11.90 to $12.40 Adjustments: Business realignment charges 0.46 Costs to achieve 0.11 Acquisition-related intangible asset amortization expense 2.47 Gain on sale