Parker-hannifin Corporation · NYSE:PH
Parker-hannifin — Q4 FY2018 Earnings Presentation
33 slides from Parker-hannifin's earnings presentation, Aug 2, 2018
Slide 1: 4th Quarter & Fiscal Year 2018 Earnings Release
Exhibit 99.2 Parker Hannifin Corporation 4th Quarter & Fiscal Year 2018 Earnings Release August 2, 2018
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 • Highlights of Quarter and Full Year Results • Results & Outlook • Questions & Answers 3
Slide 4: Highlights of Quarter and FY18 Results
Highlights of Quarter and FY18 Results Fourth Quarter Results . Safety - 21% reduction – creating an ownership culture . All-time records for sales & segment operating margins . 4th Quarter records for Net Income, Net Income ROS & EPS . Strong organic growth, 9% and order growth, 8% . Adjusted EBITD
Slide 5: FY19 Outlook and Looking Ahead
FY19 Outlook and Looking Ahead Fiscal 2019 Guidance . Anticipating record year for sales and EPS . Adjusted EPS in the range of $10.70 to $11.50 . Solid organic growth of 2.3% to 5.1% partially offset by currency headwinds Going Forward . Positive momentum: market conditions and growth initiatives .
Slide 6: Diluted Earnings Per Share 4th Quarter & Fiscal Year 2018
Diluted Earnings Per Share 4th Quarter & Fiscal Year 2018 ¹Adjusted for Business Realignment Charges, CLARCOR Costs to Achieve, Loss on the Sale and Write Down of Assets, and U.S. Tax Reform Impact ²Adjusted for Business Realignment Charges, Acquisition-related expenses ³Adjusted for Business Realig
Slide 7: Influences on Adjusted Earnings Per Share 4th Quarter
Influences on Adjusted Earnings Per Share 4th Quarter FY2018 vs. 4th Quarter FY2017 ¹Adjusted for Business Realignment Charges, Acquisition-related expenses ²Adjusted for Business Realignment Charges, CLARCOR Costs to Achieve, Loss on the Sale and Write Down of Assets, and U.S. Tax Reform Impact 7
Slide 8: Influences on Adjusted Earnings Per Share FY2018 vs. FY2017
Influences on Adjusted Earnings Per Share FY2018 vs. FY2017 ¹Adjusted for Business Realignment Charges, Acquisition-related expenses ²Adjusted for Business Realignment Charges, CLARCOR Costs to Achieve, Net Loss on the Sale and Write Down of Assets, and U.S. Tax Reform Impact 8
Slide 9: Sales & Segment Operating Margin Total Parker
Sales & Segment Operating Margin Total Parker $ in millions 4th Quarter Full Year % % FY2018 Change FY2017 FY2018 Change FY2017 Sales As Reported $ 3,816 9.2 % $ 3,496 $14,302 18.9 % $12,029 Acquisitions - - % 971 8.1 % Divestitures (15) (0.4)% (15) (0.1)% Currency 31 0.9 % 295 2.5 % Organic Sales $
Slide 10: Sales & Segment Operating Margin Diversified Industrial North America
Sales & Segment Operating Margin Diversified Industrial North America $ in millions 4th Quarter Full Year % % FY2018 Change FY2017 FY2018 Change FY2017 Sales As Reported $ 1,805 8.4 % $ 1,665 $ 6,727 25.3 % $ 5,367 Acquisitions - - % 798 14.9 % Divestitures (6) (0.4)% (6) (0.1)% Currency (0) (0.0)%
Slide 11: Sales & Segment Operating Margin Diversified Industrial International
Sales & Segment Operating Margin Diversified Industrial International $ in millions 4th Quarter Full Year % % FY2018 Change FY2017 FY2018 Change FY2017 Sales As Reported $ 1,376 12.1 % $ 1,228 $ 5,259 20.1 % $ 4,378 Acquisitions - - % 173 3.9 % Divestitures (9) (0.7)% (9) (0.2)% Currency 31 2.6 % 26
Slide 12: Sales & Segment Operating Margin Aerospace Systems
Sales & Segment Operating Margin Aerospace Systems $ in millions 4th Quarter Full Year % % FY2018 Change FY2017 FY2018 Change FY2017 Sales As Reported $ 636 5.6 % $ 603 $ 2,316 1.4 % $ 2,285 Acquisitions - - % - - % Currency 1 0.1 % 5 0.2 % Organic Sales $ 635 5.5 % $ 2,311 1.2 % % of % of % of FY20
Slide 13: Order Rates
Order Rates Jun 2018 Mar 2018 Jun 2017 Mar 2017 Total Parker + 8 % + 11 % + 8 % + 8 % Diversified Industrial North America + 9 % + 11 % + 10 % + 9 % Diversified Industrial International + 5 % + 8 % + 10 % + 13 % Aerospace Systems + 10 % + 17 % + 1 % 0 % Excludes Acquisitions, Divestitures & Currency
Slide 14: Cash Flow from Operating Activities
Cash Flow from Operating Activities Dollars in millions ¹Adjusted for Discretionary Pension Plan Contribution Full Year FY 2018 % of Sales FY 2017 % of Sales As Reported Cash Flow From Operating Activities 1,600 11.2% 1,302 10.8% Discretionary Pension Plan Contribution 220 Adjusted Cash Flow From Op
Slide 15: Free Cash Flow Conversion
Free Cash Flow Conversion Free Cash Flow / Net Income 250% 200% 150% 100% 50% 0% * Free Cash Flow = Cash Provided by Operating Activities - Capital Expenditures + Discretionary Pension Contribution 15
Slide 16: FY2019 Guidance
FY2019 Guidance EPS Midpoint: $10.90 As Reported, $11.10 Adjusted Sales Growth vs. Prior Year Total Growth Organic Growth Diversified Industrial North America 2.6% - 5.6% 3.1% - 6.1% Diversified Industrial International (2.5)% - 0.5% 1.1% - 4.1% Aerospace Systems 2.5% - 4.5% 2.5% - 4.5% Total Parker
Slide 17: FY2019 Guidance vs FY18 Actual
FY2019 Guidance FY19 Guidance vs FY18 Actual ¹Adjusted for Business Realignment Charges, CLARCOR Costs to Achieve, Net Loss on the Sale and Write Down of Assets, and U.S. Tax Reform Impact ²Adjusted for Business Realignment Charges, CLARCOR Costs to Achieve 17
Slide 18: Key Takeaways
Key Takeaways . Anticipating another record year . The Win Strategy is working well . Two overarching themes: Top quartile performance Great generators/deployers of cash . Bright future ahead – Unique competitive advantages Parker among the best diversified industrial companies 18
Slide 19: EISTED
PH EISTED NYSE
Slide 20: 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 21: Consolidated Statement of Income
Consolidated Statement of Income Three Months Ended June 30, Tw elve Months Ended June 30, (Dollars in thousands except per share amounts) 2018 2017 2018 2017 Net sales $ 3,817,477 $ 3,496,238 $ 14,302,392 $ 12,029,312 Cost of sales 2,835,885 2,654,682 10,762,841 9,188,962 Selling, general and admin
Slide 22: Adjusted Amounts Reconciliation
Adjusted Amounts Reconciliation FOURTH QUARTER FY 2018 Loss on As Reported Business Costs to Sale of Business/ Tax Act Adjusted Jun-18 Realignment Achieve Investment W/D Impact Jun-18 Net sales 3,817,477 3,817,477 Cost of sales 2,835,885 7,873 4,793 2,823,219 Selling, general and administrative expe
Slide 23: Reconciliation of EPS
Reconciliation of EPS (Unaudited) Three Months Ended June 30, Tw elve Months Ended June 30, (Amounts in dollars) 2018 2017 2018 2017 Earnings per diluted share $ 2.62 $ 2.15 $ 7.83 $ 7.25 Adjustments: Business realignment charges 0.10 0.11 0.26 0.30 Clarcor costs to achieve 0.04 - 0.20 - Net loss on
Slide 24: Business Segment Information
Business Segment Information Three Months Ended June 30, Tw elve Months Ended June 30, (Dollars in thousands) 2018 2017 2018 2017 Net sales Diversified Industrial: North America $ 1,804,948 $ 1,665,483 $ 6,726,900 $ 5,366,809 International 1,376,118 1,227,999 5,259,793 4,377,776 Aerospace Systems 63
Slide 25: 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) June 30, 2018 June 30, 2017 Operating income Operating margin Operating income Operating margin Total segment operating income 643,568
Slide 26: Reconciliation of EBITDA to Adjusted EBITDA
Reconciliation of EBITDA to Adjusted EBITDA (Unaudited) Three Months Ended June 30, (Dollars in thousands) 2018 2017 Net sales $ 3,817,477 $ 3,496,238 Earnings before income taxes $ 497,927 $ 400,611 Depreciation and amortization 114,769 118,686 Interest expense 53,040 52,787 EBITDA 665,736 572,084
Slide 27: Consolidated Balance Sheet
Consolidated Balance Sheet June 30, June 30, (Dollars in thousands) 2018 2017 Assets Current assets: Cash and cash equivalents $ 822,137 $ 884,886 Marketable securities and other investments 32,995 39,318 Trade accounts receivable, net 2,145,517 1,930,751 Non-trade and notes receivable 328,399 254,9
Slide 28: Consolidated Statement of Cash Flows
Consolidated Statement of Cash Flows Tw elve Months Ended June 30, (Dollars in thousands) 2018 2017 Cash flows from operating activities: Net income $ 1,061,315 $ 983,844 Depreciation and amortization 466,085 355,229 Stock incentive plan compensation 118,831 80,339 Loss (Gain) on sale of businesses
Slide 29: Reconciliation of Cash Flow from Operations to Adjusted
Reconciliation of Cash Flow from Operations to Adjusted Cash Flow from Operations (Unaudited) Twelve Months Tw elve Months Ended June 30, Ended June 30, (Amounts in thousands) 2018 2017 Percent of sales Percent of sales As reported cash flow from operations $ 1,600,287 11.2% $ 1,302,471 10.8% Discre
Slide 30: Reconciliation of Free Cash Flow Conversion
Reconciliation of Free Cash Flow Conversion (Unaudited) Twelve Months Ended June 30, 2018 Net income $ 1,061,315 Cash flow from operations 1,600,287 Capital expenditures (247,667) Free cash flow $ 1,352,620 Free cash flow conversion (free cash flow/net income) 127% 30
Slide 31: Reconciliation of Organic Growth
Reconciliation of Organic Growth Fiscal Year 2019 Guidance Sales Growth Range Divestitures Currency Organic Growth Range Industrial North America 2.6% - 5.6% -0.3% -0.2% 3.1% - 6.1% Industrial International (2.5)% - 0.5% -0.6% -3.0% 1.1% - 4.1% Aerospace Systems 2.5% - 4.5% 0.0% 0.0% 2.5% - 4.5% Tot
Slide 32: Reconciliation of EPS Fiscal Year 2019 Guidance
Reconciliation of EPS Fiscal Year 2019 Guidance (Unaudited) (Amounts in dollars) Fiscal Year 2019 Forecasted earnings per diluted share $10.50 - $11.30 Adjustments: Business realignment charges 0.13 Clarcor costs to achieve 0.07 Adjusted forecasted earnings per diluted share $10.70 - $11.50 32
Slide 33: Supplemental Sales Information Global Technology Platforms
Supplemental Sales Information Global Technology Platforms (Unaudited) (Dollars in thousands) Three Months Ending Fiscal Year-to-Date September 30, December 31, March 31, June 30, September 30, December 31, March 31, June 30, 2017 2017 2018 2018 2017 2017 2018 2018 Net sales Diversified Industrial: