Parker-hannifin Corporation · NYSE:PH
Parker-hannifin — Q4 FY2019 Earnings Presentation
36 slides from Parker-hannifin's earnings presentation, Aug 1, 2019
Slide 1: 4th Quarter & Fiscal Year 2019 Earnings Release
Exhibit 99.2 Parker Hannifin Corporation 4th Quarter & Fiscal Year 2019 Earnings Release August 1, 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 contains references to non-GAAP financial information including (a) sales amounts reported in accordance with U.S. GAAP reconciled to organic sales, which are sales amounts adjusted to remove the effects of divestitures and the effects of currency exchan
Slide 4: Agenda
Agenda • Chairman & CEO Comments • Results & Outlook • Questions & Answers 4
Slide 5: Chairman & CEO Comments
Chairman & CEO Comments . Strong Fourth Quarter – Record Year . Parker Transformation Continues . Significantly Improved Total Segment Operating Margin and EBITDA Margin Over 5 Years . Strong Cash Flow and Better Performance on EPS and Margins Over the Cycle . Acquisitions to Improve Portfolio and P
Slide 6: 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 7: Highlights of Quarter and FY19 Results
Highlights of Quarter and FY19 Results Strong Performance - 4th Quarter Fiscal 2019 . Safety – 24% reduction in incidents - high performance teams driving results . All-time quarterly record for total segment operating margin at 17.4% . All-time quarterly records for net income and EPS . Industrial
Slide 8: Diluted Earnings Per Share 4th Quarter & Fiscal Year 2019
Diluted Earnings Per Share 4th Quarter & Fiscal Year 2019 As Reported EPS Adjusted EPS 14% Increase $11.48 $11.85 $10.42 $7.83 3% Increase $3.17 $3.31 $3.22 $2.62 FY19 Q4 FY18 Q4 FY19 FY18 FY19 Q4¹ FY18 Q4² FY19³ FY18² 1 Adjusted for Business Realignment Charges, CLARCOR Costs to Achieve, LORD Acqui
Slide 9: Influences on Adjusted Earnings Per Share 4th Quarter
Influences on Adjusted Earnings Per Share 4th Quarter FY2019 vs. FY2018 $0.11 ($0.12) $0.06 $0.04 $3.31 $3.22 FY18 Q4 Corporate G&A Income Tax Average Segment FY19 Q4 Adjusted EPS¹ Interest Expense Expense Shares Operating Adjusted EPS² Other Expense Income 1 Adjusted for Business Realignment Charge
Slide 10: Influences on Adjusted Earnings Per Share Full Year
Influences on Adjusted Earnings Per Share Full Year FY2019 vs. FY2018 $0.31 $0.19 $0.14 $0.79 $11.85 $10.42 FY18 Segment Interest Income Tax Average FY19 Adjusted EPS¹ Operating Expense Expense Shares Adjusted EPS² Income 1 Adjusted for Business Realignment Charges, CLARCOR Costs to Achieve, Loss on
Slide 11: Sales & Segment Operating Margin Total Parker
Sales & Segment Operating Margin Total Parker $ in millions 4th Quarter Full Year % % FY2019 Change FY2018 FY2019 Change FY2018 Sales As Reported $ 3,681 (3.6)% $ 3,816 $ 14,320 0.1 % $ 14,302 Divestitures - - % (52) (0.4)% Currency (64) (1.7)% (305) (2.1)% Organic Sales $ 3,745 (1.9)% $ 14,677 2.6
Slide 12: Sales & Segment Operating Margin Diversified Industrial North America
Sales & Segment Operating Margin Diversified Industrial North America $ in millions 4th Quarter Full Year % % FY2019 Change FY2018 FY2019 Change FY2018 Sales As Reported $ 1,745 (3.3)% $ 1,805 $ 6,809 1.2 % $ 6,727 Divestitures - - % (21) (0.3)% Currency (2) (0.1)% (17) (0.3)% Organic Sales $ 1,747
Slide 13: Sales & Segment Operating Margin Diversified Industrial International
Sales & Segment Operating Margin Diversified Industrial International $ in millions 4th Quarter Full Year % % FY2019 Change FY2018 FY2019 Change FY2018 Sales As Reported $ 1,258 (8.6)% $ 1,376 $ 5,001 (4.9)% $ 5,259 Divestitures - - % (31) (0.6)% Currency (62) (4.5)% (284) (5.4)% Organic Sales $ 1,3
Slide 14: Sales & Segment Operating Margin Aerospace Systems
Sales & Segment Operating Margin Aerospace Systems $ in millions 4th Quarter Full Year % % FY2019 Change FY2018 FY2019 Change FY2018 Sales As Reported $ 678 6.5 % $ 636 $ 2,511 8.4 % $ 2,316 Currency (0) 0.0 % (2) (0.1)% Organic Sales $ 678 6.5 % $ 2,513 8.5 % % of % of % of FY2019 Sales FY2018 Sale
Slide 15: FY2019 Guidance Reconciliation of Q4 Beat
FY2019 Guidance Reconciliation of Q4 Beat $0.16 $0.02 $0.01 $0.06 $11.85 $11.60 FY19 Guidance Segment Corporate G&A Income Tax Average FY19 Adjusted EPS Operating Interest Expense Expense Shares Adjusted at Midpoint¹ Income Other Expense EPS² 1 Adjusted for Business Realignment Charges, CLARCOR Cost
Slide 16: Cash Flow from Operating Activities Full Year
Cash Flow from Operating Activities Full Year FY2019 vs. FY2018 2,000 As Reported Cash Flow 2,000 Adjusted Cash Flow $1,930 1,800 1,800 $1,730 1,600 1,600 $1,597 $1,597 1,400 1,400 1,200 1,200 1,000 1,000 800 800 FY19 FY18 FY19¹ FY18 $ Millions Full Year FY 2019 % of Sales FY 2018 % of Sales As Repo
Slide 17: Free Cash Flow Conversion
Free Cash Flow Conversion Free Cash Flow / Net Income 250% 18 Consecutive years with 100%+ FCF conversion 200% 150% 100% 50% 0% * Free Cash Flow = Cash Provided by Operating Activities - Capital Expenditures + Discretionary Pension Contribution 17
Slide 18: Order Rates
Order Rates Jun 2019 Mar 2019 Jun 2018 Mar 2018 Total Parker - 3 % - 4 % + 8 % + 11 % Diversified Industrial North America - 4 % - 6 % + 9 % + 11 % Diversified Industrial International - 8 % - 4 % + 5 % + 8 % Aerospace Systems + 10 % + 2 % + 10 % + 17 % Excludes Acquisitions, Divestitures & Currency
Slide 19: FY2020 Guidance
FY2020 Guidance EPS Midpoint: $11.78 As Reported, $11.90 Adjusted Sales Growth vs. Prior Year Diversified Industrial North America (2.8)% - 0.2% Diversified Industrial International (6.2)% - (3.2)% Aerospace Systems 3.0% - 5.6% Total Parker (3.0)% - 0.0% Segment Operating Margins As Reported Adjuste
Slide 20: FY2020 Guidance vs FY19 Actual
FY2020 Guidance FY20 Guidance vs FY19 Actual $0.13 ($0.04) $0.55 ($0.30) ($0.36) $0.07 $11.85 $11.90 FY19 Corporate G&A Other Average Segment Income Tax Interest FY20 Guidance Adjusted EPS¹ Expense Shares Operating Expense Expense Adjusted EPS (Income) Income at Midpoint² 1 Adjusted for Business Rea
Slide 21: Key Takeaways
Key Takeaways . Great results, continued progress . Anticipating record earnings in FY20 . Two overarching themes: . Top quartile performance, best-in-class company . Great generators/deployers of cash . Bright future ahead - The Win Strategy is working well Thanks to our Global Team 21
Slide 22: EISTED
PH EISTED NYSE
Slide 23: 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 24: Consolidated Statement of Income (Unaudited)
Consolidated Statement of Income (Unaudited) Three Months Ended June 30, Twelve Months Ended June 30, (Dollars in thousands except per share amounts) 2019 2018 2019 2018 Net sales $ 3,681,467 $ 3,817,477 $ 14,320,324 $ 14,302,392 Cost of sales 2,739,578 2,830,198 10,703,484 10,737,745 Selling, gener
Slide 25: Adjusted Amounts Reconciliation FY19Q4
Adjusted Amounts Reconciliation FY19Q4 (Amounts in thousands, except per share data) FOURTH QUARTER FY 2019 (Unaudited) Business Clarcor LORD As Reported Realignment Costs to Acquisition and Adjusted June 30, 2019 Charges Achieve Integration Costs June 30, 2019 Net sales $ 3,681,467 $ - $ - $ - $ 3,
Slide 26: Adjusted Amounts Reconciliation FY19
Adjusted Amounts Reconciliation FY19 (Amounts in thousands, except per share data) YEAR TO DATE FY 2019 (Unaudited) Business Clarcor Tax Expense LORD As Reported Realignment Costs to Related to Acquisition and Adjusted June 30, 2019 Charges Achieve U.S. Tax Reform Integration Costs June 30, 2019 Net
Slide 27: Reconciliation of EPS
Reconciliation of EPS RECONCILIATION OF EARNINGS PER DILUTED SHARE TO ADJUSTED EARNINGS PER DILUTED SHARE (Unaudited) Three Months Ended June 30, Twelve Months Ended June 30, (Amounts in dollars) 2019 2018 2019 2018 Earnings per diluted share $ 3.17 $ 2.62 $ 11.48 $ 7.83 Adjustments: Business realig
Slide 28: Business Segment Information
Business Segment Information PARKER HANNIFIN CORPORATION - JUNE 30, 2019 BUSINESS SEGMENT INFORMATION (Unaudited) Three Months Ended June 30, Twelve Months Ended June 30, (Dollars in thousands) 2019 2018 2019 2018 Net sales Diversified Industrial: North America $ 1,745,291 $ 1,804,948 $ 6,808,948 $
Slide 29: 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, 2019 June 30, 2018 Operating income Operating margin Operating income Operating margin Total segment operating income $ 640,82
Slide 30: Reconciliation of EBITDA to Adjusted EBITDA
Reconciliation of EBITDA to Adjusted EBITDA (Unaudited) Three Months Ended June 30, Twelve Months Ended June 30, (Dollars in thousands) 2019 2018 2019 2018 Net sales $ 3,681,467 $ 3,817,477 $ 14,320,324 $ 14,302,392 Earnings before income taxes $ 513,348 $ 497,927 $ 1,933,425 $ 1,702,277 Depreciatio
Slide 31: Consolidated Balance Sheet (Unaudited)
Consolidated Balance Sheet (Unaudited) June 30, June 30, (Dollars in thousands) 2019 2018 Assets Current assets: Cash and cash equivalents $ 3,219,767 $ 822,137 Marketable securities and other investments 150,931 32,995 Trade accounts receivable, net 2,131,054 2,145,517 Non-trade and notes receivabl
Slide 32: Consolidated Statement of Cash Flows (Unaudited)
Consolidated Statement of Cash Flows (Unaudited) Twelve Months Ended June 30, (Dollars in thousands) 2019 2018 Cash flows from operating activities: Net income $ 1,512,931 $ 1,061,315 Depreciation and amortization 436,189 466,085 Stock incentive plan compensation 104,078 118,831 Loss on sale of busi
Slide 33: Reconciliation of Cash Flow from Operations to Adjusted
Reconciliation of Cash Flow from Operations to Adjusted Cash Flow from Operations (Unaudited) Twelve Months Ended Twelve Months Ended (Dollars in thousands) June 30, 2019 Percent of sales June 30, 2018 Percent of sales As reported cash flow from operations $ 1,730,140 12.1 % $ 1,596,700 11.2 % Discr
Slide 34: Reconciliation of Free Cash Flow Conversion
Reconciliation of Free Cash Flow Conversion (Unaudited) Twelve Months Ended (Dollars in thousands) June 30, 2019 Net income $ 1,512,931 Cash flow from operations $ 1,730,140 Capital Expenditures (195,089) Discretionary pension contribution 200,000 Free cash flow $ 1,735,051 Free cash flow conversion
Slide 35: Reconciliation of EPS Fiscal Year 2020 Guidance
Reconciliation of EPS Fiscal Year 2020 Guidance (Unaudited) (Amounts in dollars) Fiscal Year 2020 Forecasted earnings per diluted share $11.38 - $12.18 Adjustments: Business realignment charges 0.12 Adjusted forecasted earnings per diluted share $11.50 - $12.30 35
Slide 36: Supplemental Sales Information Global Technology Platforms
Supplemental Sales Information Global Technology Platforms Three Months Ended Twelve Months Ended (Unaudited) June 30, June 30, (Dollars in thousands) 2019 2018 2019 2018 Net sales Diversified Industrial: Motion Systems $ 869,190 $ 938,881 $ 3,485,068 $ 3,502,335 Flow and Process Control 1,111,953 1