Parker-hannifin Corporation · NYSE:PH
Parker-hannifin — Q4 FY2017 Earnings Presentation
32 slides from Parker-hannifin's earnings presentation, Aug 3, 2017
Slide 1: 4th Quarter & Fiscal Year 2017 Earnings Release
4th Quarter & Fiscal Year 2017 Earnings Release Parker Hannifin Corporation August 3, 2017 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
Agenda 3 • Chairman & CEO Comments • Results & Outlook • Questions & Answers
Slide 4: Chairman and CEO Comments
Chairman and CEO Comments 4th Quarter FY2017 Results Fourth Quarter Sales Increased 18% to $3.5B Organic Sales +6%, Acquisitions +13%, Total Parker Orders +8% Earnings per Share +21% to a record $2.15; or +29% to $2.45 Adjusted Segment Operating Margins of 15.3%; 16.8% Adjusted, up 120 bps.
Slide 5: Diluted Earnings Per Share 4th Quarter & Fiscal Year 2017
Diluted Earnings Per Share 4th Quarter & Fiscal Year 2017 5 ¹Adjusted for Business Realignment Charges, CLARCOR Acquisition Expenses ²Adjusted for Business Realignment Charges
Slide 6: Influences on Adjusted Earnings Per Share 4th Quarter
6 Influences on Adjusted Earnings Per Share 4th Quarter FY2017 vs. 4th Quarter FY2016 ¹Adjusted for Business Realignment Charges, CLARCOR Acquisition Expenses ²Adjusted for Business Realignment Charges
Slide 7: Influences on Adjusted Earnings Per Share FY2017 vs. FY2016
Influences on Adjusted Earnings Per Share FY2017 vs. FY2016 7 ¹Adjusted for Business Realignment Charges, CLARCOR Acquisition-Expenses ²Adjusted for Business Realignment Charges ³Primarily driven by $36M Stock Option Expense Tax Credit
Slide 8: Sales & Segment Operating Margin Total Parker
Sales & Segment Operating Margin Total Parker 8 *Acquisitions include: Jäger (closed 7/1/16), Helac (closed 2/1/17), CLARCOR (closed 2/28/17) FY2017 % Change FY2016 12,029$ 5.9 % 11,361$ 558 4.9 % (84) (0.7)% 11,556$ 1.7 % FY2017 % of Sales FY2016 % of Sales 1,790$ 14.9 % 1,576$ 13.9 % 56 107 58 1,9
Slide 9: Sales & Segment Operating Margin Diversified Industrial North America
Sales & Segment Operating Margin Diversified Industrial North America 9 *Acquisitions include: Jäger (closed 7/1/16), Helac (closed 2/1/17), CLARCOR (closed 2/28/17) Full Year FY2017 % Change FY2016 5,367$ 8.3 % 4,955$ 436 8.8 % (17) (0.3)% 4,947$ (0.2)% FY2017 % of Sales FY2016 % of Sales 874$ 16.3
Slide 10: Sales & Segment Operating Margin Diversified Industrial International
Sales & Segment Operating Margin Diversified Industrial International 10 *Acquisitions include: Jäger (closed 7/1/16), Helac (closed 2/1/17), CLARCOR (closed 2/28/17) Full Year FY2017 % Change FY2016 4,378$ 5.6 % 4,145$ 121 2.9 % (66) (1.6)% 4,323$ 4.3 % FY2017 % of Sales FY2016 % of Sales 579$ 13.2
Slide 11: Sales & Segment Operating Margin Aerospace Systems
Sales & Segment Operating Margin Aerospace Systems 11 $ in millions 4th Quarter FY2017 % Change FY2016 Sales As Reported 603$ 0.1 % 602$ Acquisitions - - % Currency (0) (0.0)% Organic Sales 603$ 0.1 % FY2017 % of Sales FY2016 % of Sales Segment Operating Margin As Reported 112$ 18.5 % 98$ 16.2 % Bus
Slide 12: FY17 Q4 Highlights – Legacy Parker
12 FY17 Q4 Highlights – Legacy Parker¹ As Reported FY16 Q4 FY17 Q4 Total Parker Total Parker Clarcor Legacy Parker Net Sales $2,957 $3,496 $351 $3,145 Operating Income $437 $535 ($3) $538 Operating Margin 14.8% 15.3% 17.1% Adjusted² FY16 Q4 FY17 Q4 Total Parker Total Parker Clarcor Legacy Parker Net
Slide 13: FY17 Highlights – Legacy Parker
13 FY17 Highlights – Legacy Parker¹ As Reported FY16 FY17 Total Parker Total Parker Clarcor Legacy Parker Net Sales $11,361 $12,029 $487 $11,542 Operating Income $1,576 $1,790 ($16) $1,806 Operating Margin 13.9% 14.9% 15.7% Adjusted² FY16 FY17 Total Parker Total Parker Clarcor Legacy Parker Net Sale
Slide 14: Order Rates
Jun 2017 Mar 2017 Jun 2016 Mar 2016 Total Parker 8 %+ 8 %+ 1 %- 6 %- Diversified Industrial North America 10 %+ 9 %+ 10 %- 9 %- Diversified Industrial International 10 %+ 13 %+ 3 %+ 6 %- Aerospace Systems 1 %+ 0% 14 %+ 1 %+ Order Rates 14 Excludes Acquisitions, Divestitures & Currency 3-month year-o
Slide 15: Cash Flow from Operating Activities
Cash Flow from Operating Activities 15 *Adjusted for Discretionary Pension Plan Contribution Dollars in millions As Reported Cash Flow From Operating Activities Discretionary Pension Plan Contribution Adjusted Cash Flow From Operating Activities Full Year FY 2017 % of Sales FY 2016 % of Sales 1,302$
Slide 16: Free Cash Flow Conversion
Free Cash Flow Conversion Free Cash Flow / Net Income 16 * Free Cash Flow = Cash Provided by Operating Activities - Capital Expenditures + Discretionary Pension Contribution 0% 50% 100% 150% 200% 250%
Slide 17: FY2018 Guidance
FY2017 Guidance EPS Midpoint: $8.23 As Reported, $8.80 Adjusted 17 Expected FY18 Adjusted Segment Operating Margins and Adjusted Earnings Per Share exclude Business Realignment Charges of $58M and Clarcor Costs to Achieve of $52M Sales Growth vs. Prior Year Diversified Industrial North America Diver
Slide 18: FY2018 Guidance vs FY17 Actual
18 FY2018 Guidance FY18 Guidance vs FY17 Actual ¹Adjusted for Business Realignment Charges and CLARCOR Acquisition Expense ²Adjusted for Business Realignment Charges and CLARCOR Costs to Achieve ³Projected FY18 Tax rate of 29% vs 26% Effective Tax Rate in FY17 ⁴Gain on Autoline Divestiture
Slide 19: ALY
PH ALY
Slide 20: Appendix
Appendix • CLARCOR Impact on Financial Results • 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 • Consolidated Balance Sheet • Cons
Slide 21: CLARCOR Impact on Financial Results
CLARCOR Impact on Financial Results 21 CLARCOR EPS Impact – FY2017 Q3 Actual Q4 Actual FY17 Sales $136 $351 $487 Operating Income (As Reported) $(13) $(2) $(15) Operating Income (Adjusted)* $13 $30 $43 Incremental Interest Expense $6 $19 $25 Incremental Pre-tax Income $7 $11 $18 EPS Accretion $.04 $
Slide 22: Consolidated Statement of Income
Consolidated Statement of Income 22 Three Months Ended June 30, Tw elve Months Ended June 30, (Dollars in thousands except per share amounts) 2017 2016 2017 2016 Net sales 3,496,238$ 2,957,150$ 12,029,312$ 11,360,753$ Cost of sales 2,654,682 2,272,455 9,188,962 8,823,384 Gross profit 841,556 684,695
Slide 23: Adjusted Amounts Reconciliation
Adjusted Amounts Reconciliation 23 FOURTH QUARTER 2017 U.S. GAAP TO ADJUSTED AMOUNTS RECONCILIATION INCOME STATEMENT As Reported Business Acquisition Adjusted Jun-17 Realignment Expenses Jun-17 Net sales 3,496,238 3,496,238 Cost of sales 2,654,682 10,964 2,643,718 Gross profit 841,556 (10,964) - 852
Slide 24: Reconciliation of EPS
Reconciliation of EPS 24 (Unaudited) Three Months Ended June 30, Tw elve Months Ended June 30, (Amounts in Dollars) 2017 2016 2017 2016 Earnings per diluted share 2.15$ 1.77$ 7.25$ 5.89$ Adjustments: Business realignment charges 0.11 0.13 0.30 0.57 Acquisition-related expenses 0.19 - 0.56 - Adjusted
Slide 25: Business Segment Information
Business Segment Information 25 Three Months Ended June 30, Tw elve Months Ended June 30, (Dollars in thousands) 2017 2016 2017 2016 Net sales Diversif ied Industrial: North America 1,665,483$ 1,260,203$ 5,366,809$ 4,955,211$ International 1,227,999 1,094,585 4,377,776 4,145,272 Aerospace Systems 60
Slide 26: Reconciliation of Total Segment Operating Margin to Adjusted
Reconciliation of Total Segment Operating Margin to Adjusted Total Segment Operating Margin 26 (Unaudited) (Dollars in thousands) Three Months Ended June 30, 2017 Three Months Ended June 30, 2016 Operating margin Operating margin Total segment operating income 534,740$ 15.3% 437,318$ 14.8% Adjustmen
Slide 27: Consolidated Balance Sheet
Consolidated Balance Sheet 27 June 30, June 30, (Dollars in thousands) 2017 2016 Assets Current assets: Cash and cash equivalents 884,886$ 1,221,653$ Marketable securities and other investments 39,318 882,342 Trade accounts receivable, net 1,930,751 1,593,920 Non-trade and notes receivable 254,987 2
Slide 28: Consolidated Statement of Cash Flows
Consolidated Statement of Cash Flows 28 (Unaudited) Tw elve Months Ended June 30, (Dollars in thousands) 2017 2016 Cash flows from operating activities: Net income 983,844$ 807,216$ Depreciation and amortization 355,229 306,843 Stock incentive plan compensation 80,339 71,293 (Gain) on sale of busine
Slide 29: Reconciliation of Cash Flow from Operations to Adjusted Cash Flow
Reconciliation of Cash Flow from Operations to Adjusted Cash Flow from Operations 29 (Unaudite ) (Dollars in thousands) Twelve Months Ended June 30, 2017 Twelve Months Ended June 30, 2016 Percent of sales Percent of sales As reported cash flow from operations 1,302,471$ 10.8% 1,210,778$ 10.7% Discre
Slide 30: Reconciliation of Free Cash Flow Conversion
Reconciliation of Free Cash Flow Conversion 30 (Unaudited) (Dollars in thousands) Twelve Months Ended June 30, 2017 Net income 983,844$ Cash flow from operations 1,302,471 Capital expenditures (203,748) Discretionary pension contribution 220,000 Free cash flow 1,318,723$ Free cash flow conversion (f
Slide 31: Reconciliation of EPS Fiscal Year 2018 Guidance
Reconciliation of EPS Fiscal Year 2018 Guidance 31 (Unaudited) (Amounts in dollars) Fiscal Year 2018 Forecasted earnings per diluted share $7.88 to $8.58 Adjustments: Business realignment charges .30 Clarcor costs to achieve .27 Adjusted forecasted earnings per diluted share $8.45 to $9.15
Slide 32: Supplemental Sales Information Global Technology Platforms
Supplemental Sales Information Global Technology Platforms 32 (Unaudit d) (Dollars in thousands) September 30, 2016 December 31, 2016 March 31, 2017 June 30, 2017 September 30, 2016 December 31, 2016 March 31, 2017 June 30, 2017 Net sales Diversif ied Industrial: Motion Systems 741,650$ 754,772$ 856