Parker-hannifin Corporation · NYSE:PH
Parker-hannifin — Q1 FY2020 Earnings Presentation
36 slides from Parker-hannifin's earnings presentation, Oct 31, 2019
Slide 1: 1st Quarter Fiscal Year 2020 Earnings Release
Exhibit 99.2 Parker Hannifin Corporation 1st Quarter Fiscal Year 2020 Earnings Release October 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: Highlights of Quarter Results
Highlights of Quarter Results Summary of fiscal 2020 first quarter . Safety: 25% reduction in recordable incidents; Top Quartile safety incident rate . Strong Q1 margins and operating cashflow; sales reflect challenging macro conditions . EBITDA margin increased to 18.4% as reported and 19.1% adjust
Slide 5: 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 . Global distribution, service & support . Low capital investment requirements . Great generato
Slide 6: Diluted Earnings per Share 1st Quarter FY2020 vs. FY2019
Diluted Earnings per Share 1st Quarter FY2020 vs. FY2019 As Reported Adjusted $2.84 $2.79 $2.76 $2.60 FY20 Q1 FY19 Q1 FY20 Q1¹ FY19 Q1² 1 Adjusted for Business Realignment Charges, LORD and Exotic Costs to Achieve, Acquisition Related Expenses and the tax effect of such adjustments 6 2 Adjusted for
Slide 7: Influences on Adjusted Earnings per Share
Influences on Adjusted Earnings per Share 1st Quarter FY2020 vs. FY2019 $0.02 ($0.15) $0.13 $0.01 ($0.12) $0.09 ($0.15) $0.09 $2.76 $2.84 FY19 Q1 Exotic Legacy Interest Interest Other Corporate Income Average FY20 Q1 Adjusted Operating Parker Expense Income Expense G&A Tax Rate Shares Adjusted EPS¹
Slide 8: Sales & Segment Operating Margin Total Parker
Sales & Segment Operating Margin Total Parker $ in millions 1st Quarter % FY2020 Change FY2019 Sales As Reported $ 3,335 (4.2)% $ 3,479 Acquisitions1 21 0.6 % Currency (51) (1.5)% Organic Sales $ 3,365 (3.3)% % of % of FY2020 Sales FY2019 Sales Segment Operating Margin As Reported $ 567 17.0 % $ 591
Slide 9: FY2020 Q1 Acquisitions Impact on Segment Margins
FY2020 Q1 Acquisitions Impact on Segment Margins As Reported FY19 Q1 FY20 Q1 Total Total Legacy $M Parker Parker Exotic Parker Sales $3,479 $3,335 $21 $3,313 Operating Income $591 $567 $0.2 $567 Operating Margin 17.0% 17.0% 1.1% 17.1% Adjusted* FY19 Q1 FY20 Q1 Total Total Legacy $M Parker Parker Exo
Slide 10: Sales & Segment Operating Margin Diversified Industrial North America
Sales & Segment Operating Margin Diversified Industrial North America $ in millions 1st Quarter % FY2020 Change FY2019 Sales As Reported $ 1,625 (3.4)% $ 1,681 Acquisitions - - % Currency (3) (0.2)% Organic Sales $ 1,628 (3.2)% % of % of FY2020 Sales FY2019 Sales Segment Operating Margin As Reported
Slide 11: Sales & Segment Operating Margin Diversified Industrial International
Sales & Segment Operating Margin Diversified Industrial International $ in millions 1st Quarter % FY2020 Change FY2019 Sales As Reported $ 1,079 (12.6)% $ 1,234 Acquisitions - - % Currency (48) (3.9)% Organic Sales $ 1,127 (8.7)% % of % of FY2020 Sales FY2019 Sales Segment Operating Margin As Report
Slide 12: Sales & Segment Operating Margin Aerospace Systems
Sales & Segment Operating Margin Aerospace Systems $ in millions 1st Quarter % FY2020 Change FY2019 Sales As Reported $ 631 11.8 % $ 564 Acquisitions1 21 3.7 % Currency (1) (0.1)% Organic Sales $ 611 8.2 % % of % of FY2020 Sales FY2019 Sales Segment Operating Margin As Reported $ 123 19.5 % $ 110 19
Slide 13: Cash Flow from Operating Activities
Consecutive years with 10%+ Cash Flow from Operating Activities 18 CFOA margins1 YTD FY2020 vs. FY2019 25% Increase $449 $449 $359 $159 $ Millions FY20 FY19 FY20 FY19¹ As Reported Adjusted YTD FY 2020 % of Sales FY 2019 % of Sales As Reported Cash Flow From Operating Activities $ 449 13.5% $ 159 4.6
Slide 14: Order Rates
Order Rates Sep 2019 Jun 2019 Sep 2018 Jun 2018 Total Parker (2)% (3)% 5 % 8 % Diversified Industrial North America (6)% (4)% 8 % 9 % Diversified Industrial International (10)% (8)% 3 % 5 % Aerospace Systems 22 % 10 % 3 % 10 % Excludes Acquisitions, Divestitures & Currency 3-month year-over-year com
Slide 15: FY2020 Guidance Including Acquisitions
FY2020 Guidance Including Acquisitions EPS Midpoint: $8.93 As Reported, $10.50 Adjusted Sales Growth vs. Prior Year Diversified Industrial North America (1.2)% - 1.8% Diversified Industrial International (11.2)% - (8.2)% Aerospace Systems 18.2% - 21.2% Total Parker (1.3)% - 1.7% Segment Operating Ma
Slide 16: FY2020 Guidance Reconciliation of Q1 Beat and Updated Guidance
FY2020 Guidance Reconciliation of Q1 Beat and Updated Guidance Legacy PH Legacy PH + Acquisitions Q2 – Q4 Q2 – Q4 1 Adjusted for Business Realignment Charges and the tax effect of such adjustments 2 Adjusted for Business Realignment Charges, Integration Costs to Achieve, and Acquisition Related Expe
Slide 17: Impact of Acquisitions
Impact of Acquisitions As Reported FY19 FY20 Q1 FY20 Exotic + $M Total Parker Total Parker Total Parker LORD Legacy Parker Sales $14,320 $3,335 $14,348 $1,057 $13,291 Operating Income $2,431 $567 $2,187 $21 $2,166 Operating Margin 17.0% 17.0% 15.2% 2.0% 16.3% EBITDA Margin 17.9% 18.4% 16.8% 3.7% 17.
Slide 18: Key Messages
Key Messages . Pleased with continued progress . Cash flow and operating margin resilience . Parker’s transformation continues . Well on our way to best-in-class company . Confidence in reaching our FY’23 5-year targets Thanks again to our Global Team Members 18
Slide 19: Listed NYSE: PH
PH LISTED NYSE
Slide 20: Appendix
Appendix . Acquisitions Impact on FY2020 Guidance . 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 Ad
Slide 21: Acquisitions Impact on FY2020 Guidance
Acquisitions Impact on FY2020 Guidance Acquisitions EPS Impact – FY2020 Guide Combined Q1 A Q2 G 2H G FY20 Q2 G 2H G FY20 Exotic + $M Exotic Exotic Exotic Exotic LORD LORD LORD LORD Sales $21 $107 $227 $355 $181 $521 $702 $1,057 Operating Income (As Reported) $0 $0 $33 $33 ($29) $17 ($12) $21 Operat
Slide 22: Consolidated Statement of Income
Consolidated Statement of Income (Unaudited) Three Months Ended September 30, (Dollars in thousands except per share amounts) 2019 2018 Net sales $ 3,334,511 $ 3,479,294 Cost of sales 2,479,741 2,594,823 Selling, general and administrative expenses 399,179 394,322 Interest expense 69,956 44,339 Othe
Slide 23: Adjusted Amounts Reconciliation
Adjusted Amounts Reconciliation (Dollars in thousands, except per share data) (Unaudited) Year-to-Date FY 2020 Business Lord Exotic Acquisition As Reported Realignment Costs to Costs to Related Adjusted September 30, 2019 % of Sales Charges Achieve Achieve Expenses September 30, 2019 % of Sales Net
Slide 24: Adjusted Amounts Reconciliation by Segment
Adjusted Amounts Reconciliation (Dollars in thousands) (Unaudited) Year-to-Date FY 2020 Business Lord Exotic Acquisition As Reported Realignment Costs to Costs to Related Adjusted September 30, 2019 % of Sales Charges Achieve Achieve Expenses September 30, 2019 % of Sales2 Diversified Industrial: No
Slide 25: Reconciliation of Earnings per Diluted Share to Adjusted
Reconciliation of Earnings per Diluted Share to Adjusted Earnings per Diluted Share (Unaudited) Three Months Ended September 30, (Amounts in dollars) 2019 2018 Earnings per diluted share $ 2.60 $ 2.79 Adjustments: Business realignment charges 0.04 0.02 Clarcor costs to achieve - 0.05 Lord costs to a
Slide 26: Business Segment Information
Business Segment Information (Unaudited) Three Months Ended September 30, (Dollars in thousands) 2019 2018 Net sales Diversified Industrial: North America $ 1,624,605 $ 1,681,044 International 1,078,850 1,233,766 Aerospace Systems 631,056 564,484 Total net sales $ 3,334,511 $ 3,479,294 Segment opera
Slide 27: 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) September 30, 2019 September 30, 2018 Operating income Operating margin Operating income Operating margin Total segment operating incom
Slide 28: Reconciliation of EBITDA to Adjusted EBITDA
Reconciliation of EBITDA to Adjusted EBITDA (Unaudited) Three Months Ended September 30, (Dollars in thousands) 2019 2018 Net sales $ 3,334,511 $ 3,479,294 Net income $ 339,041 $ 375,899 Income taxes 94,115 83,824 Depreciation and amortization 109,071 112,491 Interest expense 69,956 44,339 EBITDA 61
Slide 29: Reconciliation of EBITDA to Adjusted EBITDA (Twelve Months)
Reconciliation of EBITDA to Adjusted EBITDA RECONCILIATION OF TOTAL SEGMENT OPERATING MARGIN TO ADJUSTED TOTAL SEGMENT OPERATING MARGIN (Unaudited) Twelve Months Ended (Dollars in thousands) June 30, 2019 Operating income Operating margin Total segment operating income $ 2,431,233 17.0 % Adjustments
Slide 30: Reconciliation of Forecasted FY2020 Segment Operating Margin and EBITDA
Reconciliation of Forecasted FY2020 Total Segment Operating Margin to Adjusted Total Segment Operating Margin and EBITDA to Adjusted EBITDA (Unaudited) (Dollars in millions) Total Parker LORD & Exotic Legacy Parker Operating income Operating margin Operating income Operating margin Operating income
Slide 31: Consolidated Balance Sheet
Consolidated Balance Sheet (Unaudited) September 30, June 30, September 30, (Dollars in thousands) 2019 2019 2018 Assets Current assets: Cash and cash equivalents $ 3,627,393 $ 3,219,767 $ 952,122 Marketable securities and other investments 282,102 150,931 40,787 Trade accounts receivable, net 1,983
Slide 32: Consolidated Statement of Cash Flows
Consolidated Statement of Cash Flows (Unaudited) Three Months Ended September 30, (Dollars in thousands) 2019 2018 Cash flows from operating activities: Net income $ 339,041 $ 375,899 Depreciation and amortization 109,071 112,491 Stock incentive plan compensation 52,633 42,941 Loss on sale of busine
Slide 33: Reconciliation of Cash Flow from Operations to Adjusted
Reconciliation of Cash Flow from Operations to Adjusted Cash Flow from Operations (Unaudited) Three Months Ended Three Months Ended (Dollars in thousands) September 30, 2019 Percent of sales September 30, 2018 Percent of sales As reported cash flow from operations $ 449,131 13.5 % $ 159,388 4.6 % Di
Slide 34: Reconciliation of Free Cash Flow Conversion
Reconciliation of Free Cash Flow Conversion (Unaudited) Three Months Ended (Dollars in thousands) September 30, 2019 Net income $ 339,041 Cash flow from operations $ 449,131 Capital Expenditures (50,345) Free cash flow $ 398,786 Free cash flow conversion (free cash flow / net income) 118 % 34
Slide 35: Reconciliation of EPS Fiscal Year 2020 Guidance
Reconciliation of EPS Fiscal Year 2020 Guidance PARKER HANNIFIN CORPORATION - SEPTEMBER 30, 2019 RECONCILIATION OF FORECASTED EARNINGS PER DILUTED SHARE TO ADJUSTED FORECASTED EARNINGS PER DILUTED (Unaudited) (Amounts in dollars) Fiscal Year 2020 Forecasted earnings per diluted share $8.53 - $9.33 A
Slide 36: Supplemental Sales Information Global Technology Platforms
Supplemental Sales Information Global Technology Platforms Three Months Ended (Unaudited) September 30, (Dollars in thousands) 2019 2018 Net sales Diversified Industrial: Motion Systems $ 766,815 $ 859,573 Flow and Process Control 1,011,354 1,061,064 Filtration and Engineered Material 925,286 994,17