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CST: 15/09/2019 23:47:53   

Parker Reports Fiscal 2019 Third Quarter Results

136 Days ago

-       EPS reached an all-time quarterly record at $3.14 as reported, or $3.17 adjusted
-       Segment operating margin was an all-time record at 17.1% as reported, or 17.2% adjusted
-       Third quarter sales were $3.69 billion, with organic growth of 2% offset by currency translation
-       Strong cash flow from operations was 10.3% of sales, or 12.1%, excluding pension contribution
-       EBITDA margin was 18.6% as reported, or 18.7% adjusted

CLEVELAND, May 02, 2019 (GLOBE NEWSWIRE) -- Parker Hannifin Corporation (NYSE: PH), the global leader in motion and control technologies, today reported results for the fiscal 2019 third quarter ended March 31, 2019.  Fiscal 2019 third quarter sales were $3.69 billion compared with $3.75 billion in the prior year quarter.  Organic growth of 2% was more than offset by currency translation and a divestiture in fiscal year 2018.  Net income increased 12% to an all-time quarterly record of $411.2 million compared with $366.0 million in the third quarter of fiscal 2018.  Fiscal 2019 third quarter earnings per share increased 16% to $3.14, compared with $2.70 in the prior year quarter.  Adjusted earnings per share were $3.17, compared with adjusted earnings per share of $2.80 in the prior year quarter.  Cash flow from operations for the first nine months of fiscal 2019 was $1,092.6 million or 10.3% of sales, compared with $901.2 million or 8.6% of sales in the prior year period.  Excluding a discretionary pension contribution in fiscal 2019, cash flow from operations for the first nine months of fiscal 2019 was 12.1% of sales.  A reconciliation of non-GAAP measures is included in the financial tables of this press release.

“We delivered strong operational performance in the third quarter, achieving all-time quarterly records for total segment operating margin and earnings, and strong year-to-date cash flow from operations,”  said Chairman and Chief Executive Officer, Tom Williams.  “We eclipsed total segment operating margin of 17% for the first time in a quarter.  I am especially pleased that our Aerospace business achieved an all-time record for segment operating margin of 20.7%.  While order entry has moderated for the Diversified Industrial Segment against strong comparisons in the prior year quarter, we are confident in our ability to continue executing well and reaching another record year in fiscal 2019.”

Segment Results
Diversified Industrial Segment:  North American third quarter sales decreased 1% to $1.8 billion, and operating income increased 2% to $287.5 million compared with $280.7 million in the same period a year ago.  International third quarter sales decreased 8% to $1.3 billion, impacted primarily by unfavorable currency translation, while operating income increased 2% to $208.7 million compared with $205.3 million in the same period a year ago.

Aerospace Systems Segment:  Third quarter sales increased 9% to $652.1 million, and operating income increased 26% to $134.8 million compared with $106.7 million in the same period a year ago.

Parker reported the following orders for the quarter ending March 31, 2019, compared with the same quarter a year ago:

  • Orders decreased 4% for total Parker
  • Orders decreased 6% in the Diversified Industrial North America businesses
  • Orders decreased 4% in the Diversified Industrial International businesses
  • Orders increased 2% in the Aerospace Systems Segment on a rolling 12-month average basis

Outlook
For the fiscal year ending June 30, 2019, the company has maintained guidance for earnings from continuing operations in the range of $11.17 to $11.47 per share, or $11.45 to $11.75 per share on an adjusted basis.  Fiscal year 2019 guidance is adjusted on a pre-tax basis for expected business realignment expenses of approximately $16 million and CLARCOR costs to achieve of approximately $14 million and an income tax expense adjustment of $14 million related to U.S. Tax Reform.  Guidance assumes organic sales growth in the range of 2.0% to 3.0%.  A reconciliation of forecasted earnings per share to adjusted forecasted earnings per share is included in the financial tables of this press release.

Williams added, “Parker continues to operate exceptionally well, with strong execution from Parker team members globally.  We remain on track to achieve our fiscal 2023 financial targets through our ongoing focus on driving The Win Strategy™”

NOTICE OF CONFERENCE CALL :  Parker Hannifin's conference call and slide presentation to discuss its fiscal 2019 third quarter results are available to all interested parties via live webcast today at 11:00 a.m. ET, on the company's investor information web site at www.phstock.com.  To access the call, click on the "Live Webcast" link.  From this link, users also may complete a pre-call system test.  A replay of the webcast will be accessible on Parker's investor relations website, www.phstock.com, approximately one hour after the completion of the call, and will remain available for one year.  To register for e-mail notification of future events and information available from Parker please visit www.phstock.com.

Parker Hannifin is a Fortune 250 global leader in motion and control technologies.  For more than 100 years the company has engineered the success of its customers in a wide range of diversified industrial and aerospace markets.  Parker has increased its annual dividend per share paid to shareholders for 63 consecutive fiscal years, among the top five longest-running dividend-increase records in the S&P 500 index.  Learn more at www.parker.com or @parkerhannifin.

Note on Orders
Orders provide near-term perspective on the company's outlook, particularly when viewed in the context of prior and future quarterly order rates. However, orders are not in themselves an indication of future performance. All comparisons are at constant currency exchange rates, with the prior year restated to the current-year rates. All exclude acquisitions until they can be reflected in both the numerator and denominator. Aerospace comparisons are rolling 12-month average computations. The total Parker orders number is derived from a weighted average of the year-over-year quarterly % change in orders for Diversified Industrial North America and Diversified Industrial International, and the year-over-year 12-month rolling average of orders for the Aerospace Systems Segment.    

Note on Net Income
Net Income referenced in this press release is equal to net income attributable to common shareholders. 

Note on Non-GAAP Numbers
This press release contains references to (a) earnings per share without the effect of business realignment charges, CLARCOR costs to achieve, loss on sale and writedown of assets, net and U.S. Tax Reform one-time impact, net, (b) segment operating margins without the effect of business realignment charges and CLARCOR costs to achieve; (c) the effect of business realignment charges, CLARCOR costs to achieve and U.S. Tax Reform income tax expense adjustment on forecasted earnings from continuing operations per share; (d) and cash flows from operations without the effect of discretionary pension contributions. The effects of business realignment charges, CLARCOR costs to achieve, loss on sale and writedown of asset, net, U.S. Tax Reform one-time impact, net and discretionary pension contributions are removed to allow investors and the company to meaningfully evaluate changes in earnings per share, segment operating margins and cash flows from operations on a comparable basis from period to period. This press release also contains references to EBITDA and adjusted EBITDA. EBITDA is defined as earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA before business realignment charges, CLARCOR costs to achieve, and loss on sale and writedown of assets, net. Although EBITDA and Adjusted EBITDA are not measures of performance calculated in accordance with GAAP, we believe that they are useful to an investor in evaluating the results of this quarter versus the prior period.

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 the use of forward-looking terminology such as “anticipates,” “believes,” “may,” “should,” “could,” “potential,” “continues,” “plans,” “forecasts,” “estimates,” “projects,” “predicts,” “would,” “intends,” “anticipates,” “expects,” “targets,” “is likely,” “will,” or the negative of these terms and similar expressions, and include all statements regarding future performance, earnings projections, events or developments.  Parker cautions readers not to place undue reliance on these statements. It is possible that the future performance and earnings projections of the company, including its individual segments, may differ materially from current expectations, depending on economic conditions within its mobile, industrial and aerospace markets, and the company's ability to maintain and achieve anticipated benefits associated with announced realignment activities, strategic initiatives to improve operating margins, actions taken to combat the effects of the current economic environment, and growth, innovation and global diversification initiatives. Additionally, the actual impact of the U.S. Tax Cuts and Jobs Act on future performance and earnings projections may change based on subsequent judicial or regulatory interpretations of the Act that impact the company’s tax calculations. A change in the economic conditions in individual markets may have a particularly volatile effect on segment performance.

The risks and uncertainties in connection with forward-looking statements related to the proposed transaction between LORD Corporation and the company include, but are not limited to, the occurrence of any event, change or other circumstances that could delay the closing of the proposed transaction; the possibility of non-consummation of the proposed transaction and termination of the merger agreement; the failure to satisfy any of the conditions to the proposed transaction set forth in the merger agreement; the possibility that a governmental entity may prohibit the consummation of the proposed transaction or may delay or refuse to grant a necessary regulatory approval in connection with the proposed transaction, or that in order for the parties to obtain any such regulatory approvals, conditions are imposed that adversely affect the anticipated benefits from the proposed transaction or cause the parties to abandon the proposed transaction; adverse effects on Parker’s common stock because of the failure to complete the proposed transaction; Parker’s business experiencing disruptions due to transaction-related uncertainty or other factors making it more difficult to maintain relationships with employees, business partners or governmental entities; the possibility that the expected synergies and value creation from the proposed transaction will not be realized or will not be realized within the expected time period; the parties being unable to successfully implement integration strategies; and significant transaction costs related to the proposed transaction.

Among other factors which may affect future performance are: changes in business relationships with and purchases by or from major customers, suppliers or distributors, including delays or cancellations in shipments; disputes regarding contract terms or significant changes in financial condition, changes in contract cost and revenue estimates for new development programs and changes in product mix; ability to identify acceptable strategic acquisition targets; uncertainties surrounding timing, successful completion or integration of acquisitions and similar transactions, including the integration of CLARCOR; the ability to successfully divest businesses planned for divestiture and realize the anticipated benefits of such divestitures; the determination to undertake business realignment activities and the expected costs thereof and, if undertaken, the ability to complete such activities and realize the anticipated cost savings from such activities; ability to implement successfully capital allocation initiatives, including timing, price and execution of share repurchases; availability, limitations or cost increases of raw materials, component products and/or commodities that cannot be recovered in product pricing; ability to manage costs related to insurance and employee retirement and health care benefits; compliance costs associated with environmental laws and regulations; potential labor disruptions; threats associated with and efforts to combat terrorism and cyber-security risks; uncertainties surrounding the ultimate resolution of outstanding legal proceedings, including the outcome of any appeals; global competitive market conditions, including global reactions to U.S. trade policies, and resulting effects on sales and pricing; and global economic factors, including manufacturing activity, air travel trends, currency exchange rates, difficulties entering new markets and general economic conditions such as inflation, deflation, interest rates and credit availability. The company makes these statements as of the date of this disclosure and undertakes no obligation to update them unless otherwise required by law.

Contact: Media -   
  Aidan Gormley -Director, Global Communications and Branding 216-896-3258
  aidan.gormley@parker.com  
     
  Financial Analysts -  
  Robin J. Davenport, Vice President, Corporate Finance 216-896-2265
  rjdavenport@parker.com  



PARKER HANNIFIN CORPORATION - MARCH 31, 2019        
CONSOLIDATED STATEMENT OF INCOME        
(Unaudited)   Three Months Ended March 31,   Nine Months Ended March 31,
(Dollars in thousands except per share amounts)   2019       2018       2019       2018  
Net sales   $     3,687,518     $ 3,749,591     $   10,638,857     $ 10,484,915  
Cost of sales       2,766,744       2,819,804         7,963,906       7,907,547  
Selling, general and administrative expenses     360,865       416,457         1,152,446       1,221,779  
Interest expense       48,209       54,145         140,066       160,833  
Other (income), net       (17,500 )     (10,642 )       (37,638 )     (9,594 )
Income before income taxes       529,200       469,827         1,420,077       1,204,350  
Income taxes       117,819       103,697         320,884       496,363  
Net income       411,381       366,130         1,099,193       707,987  
Less:  Noncontrolling interests       133       141         497       442  
Net income attributable to common shareholders $   411,248     $ 365,989     $   1,098,696     $ 707,545  
                 
Earnings per share attributable to common shareholders:            
Basic earnings per share   $   3.20     $ 2.75     $   8.42     $ 5.32  
Diluted earnings per share   $   3.14     $ 2.70     $   8.29     $ 5.22  
                 
Average shares outstanding during period - Basic     128,706,137       133,032,431         130,476,355       133,107,321  
Average shares outstanding during period - Diluted     130,884,968       135,768,280         132,498,376       135,661,385  
                 
CASH DIVIDENDS PER COMMON SHARE              
(Unaudited)   Three Months Ended March 31,   Nine Months Ended March 31,
(Amounts in dollars)     2019       2018       2019       2018  
Cash dividends per common share $   0.76     $ 0.66     $   2.28     $ 1.98  
                 
RECONCILIATION OF EARNINGS PER DILUTED SHARE TO ADJUSTED EARNINGS PER DILUTED SHARE
(Unaudited)   Three Months Ended March 31,   Nine Months Ended March 31,
(Amounts in dollars)     2019       2018       2019       2018  
Earnings per diluted share $   3.14     $ 2.70     $   8.29     $ 5.22  
Adjustments:              
Business realignment charges     0.03       0.04         0.05       0.16  
Clarcor costs to achieve     -       0.06         0.07       0.16  
Loss on sale and writedown of assets, net     -       -         -       0.02  
U.S. Tax Reform one-time impact, net     -       -         0.11       1.65  
Adjusted earnings per diluted share $   3.17     $ 2.80     $   8.52     $ 7.21  
                 
                 
PARKER HANNIFIN CORPORATION - MARCH 31, 2019            
RECONCILIATION OF EBITDA TO ADJUSTED EBITDA        
(Unaudited)   Three Months Ended March 31,   Nine Months Ended March 31,
(Dollars in thousands)     2019       2018       2019       2018  
Net sales   $   3,687,518     $ 3,749,591     $   10,638,857     $ 10,484,915  
                 
Earnings before income taxes   $   529,200     $ 469,827     $   1,420,077     $ 1,204,350  
Depreciation and amortization       108,258       117,100         330,801       351,316  
Interest expense       48,209       54,145         140,066       160,833  
EBITDA       685,667       641,072         1,890,944       1,716,499  
Adjustments:                
Business realignment charges     4,366       6,822         9,284       28,476  
Clarcor costs to achieve     233       10,636         11,530       28,384  
Loss on sale and writedown of assets, net     -       -         -       5,324  
Adjusted EBITDA     $   690,266     $ 658,530     $   1,911,758     $ 1,778,683  
                 
EBITDA margin     18.6 %     17.1 %     17.8 %     16.4 %
Adjusted EBITDA margin     18.7 %     17.6 %     18.0 %     17.0 %
                 
PARKER HANNIFIN CORPORATION - MARCH 31, 2019            
BUSINESS SEGMENT INFORMATION                
(Unaudited)   Three Months Ended March 31,   Nine Months Ended March 31,
(Dollars in thousands)     2019       2018       2019       2018  
Net sales                
Diversified Industrial:                
North America   $   1,750,554     $ 1,761,845     $   5,063,657     $ 4,921,952  
International       1,284,866       1,389,332         3,742,311       3,883,675  
Aerospace Systems       652,098       598,414         1,832,889       1,679,288  
Total net sales   $   3,687,518     $ 3,749,591     $   10,638,857     $ 10,484,915  
Segment operating income                
Diversified Industrial:                
North America   $   287,526     $ 280,694     $   820,411     $ 762,528  
International       208,707       205,251         603,886       561,848  
Aerospace Systems       134,789       106,653         366,107       271,235  
Total segment operating income     631,022       592,598         1,790,404       1,595,611  
Corporate general and administrative expenses     32,802       54,138         147,017       142,430  
Income before interest expense and other expense     598,220       538,460         1,643,387       1,453,181  
Interest expense       48,209       54,145         140,066       160,833  
Other expense       20,811       14,488         83,244       87,998  
Income before income taxes   $   529,200     $ 469,827     $   1,420,077     $ 1,204,350  
                 
RECONCILIATION OF TOTAL SEGMENT OPERATING MARGIN TO ADJUSTED TOTAL SEGMENT OPERATING MARGIN
                 
(Unaudited)   Three Months Ended   Three Months Ended
(Dollars in thousands)   March 31, 2019   March 31, 2018
    Operating
income
    Operating
margin

    Operating
income
    Operating
margin
 
Total segment operating income $   631,022       17.1 %   $ 592,598       15.8 %
Adjustments:                
Business realignment charges       4,366           6,822      
Clarcor costs to achieve       233           10,636      
Adjusted total segment operating income $   635,621       17.2 %   $ 610,056       16.3 %
                 
    Nine Months Ended   Nine Months Ended
    March 31, 2019   March 31, 2018
    Operating
income

    Operating
margin

    Operating
income
    Operating
margin
 
Total segment operating income $   1,790,404       16.8 %   $ 1,595,611       15.2 %
Adjustments:                
Business realignment charges       9,284           28,476      
Clarcor costs to achieve       11,255           28,384      
Adjusted total segment operating income $   1,810,943       17.0 %   $ 1,652,471       15.8 %
               
               
PARKER HANNIFIN CORPORATION - MARCH 31, 2019            
CONSOLIDATED BALANCE SHEET              
(Unaudited)   March 31,
    June 30,     March 31,      
(Dollars in thousands)     2019       2018       2018      
Assets                
Current assets:                
Cash and cash equivalents   $   1,098,729     $ 822,137     $ 1,089,529      
Marketable securities and other investments       70,190       32,995       101,206      
Trade accounts receivable, net       2,117,103       2,145,517       2,146,408      
Non-trade and notes receivable       317,412       328,399       328,111      
Inventories       1,755,991       1,621,304       1,732,759      
Prepaid expenses and other       178,366       134,886       165,083      
Total current assets       5,537,791       5,085,238       5,563,096      
Plant and equipment, net       1,779,892       1,856,237       1,941,799      
Deferred income taxes       96,463       57,623       36,935      
Goodwill       5,459,965       5,504,420       5,746,358      
Intangible assets, net       1,834,433       2,015,520       2,134,659      
Other assets       769,391       801,049       814,637      
Total assets   $   15,477,935     $ 15,320,087     $ 16,237,484      
                 
Liabilities and equity                
Current liabilities:                
Notes payable   $   1,017,278     $ 638,466     $ 1,055,527      
Accounts payable       1,423,659       1,430,306       1,376,457      
Accrued liabilities       921,900       929,833       896,604      
Accrued domestic and foreign taxes       186,113       198,878       179,929      
Total current liabilities       3,548,950       3,197,483       3,508,517      
Long-term debt       4,284,235       4,318,559       4,818,570      
Pensions and other postretirement benefits       895,197       1,177,605       1,351,106      
Deferred income taxes       277,212       234,858       113,799      
Other liabilities       456,293       526,089       569,209      
Shareholders' equity       6,009,978       5,859,866       5,870,353      
Noncontrolling interests       6,070       5,627       5,930      
Total liabilities and equity   $   15,477,935     $ 15,320,087     $ 16,237,484      
                 
                 
PARKER HANNIFIN CORPORATION - MARCH 31, 2019            
CONSOLIDATED STATEMENT OF CASH FLOWS            
(Unaudited)   Nine Months Ended March 31,        
(Dollars in thousands)     2019       2018          
Cash flows from operating activities:                
Net income   $   1,099,193     $ 707,987          
Depreciation and amortization       330,801       351,316          
Stock incentive plan compensation       84,525       89,571          
Loss on sale of businesses       623       -          
Loss (gain) on plant and equipment and intangible assets       3,993       (26,767 )        
Loss (gain) on sale of marketable securities       4,487       (1 )        
(Gain) loss on investments       (4,175 )     33,759          
Net change in receivables, inventories and trade payables       (124,942 )     (329,428 )        
Net change in other assets and liabilities       (340,241 )     147,289          
Other, net       38,333       (72,488 )        
Net cash provided by operating activities       1,092,597       901,238          
Cash flows from investing activities:                
Acquisitions (net of cash of $690 in 2019)       (2,042 )     -          
Capital expenditures       (145,071 )     (194,307 )        
Proceeds from sale of plant and equipment       37,158       64,203          
Proceeds from sale of businesses       19,540       -          
Purchases of marketable securities and other investments       (51,736 )     (78,488 )        
Maturities and sales of marketable securities and other investments       25,103       20,260          
Other       953       8,937          
Net cash (used in) investing activities       (116,095 )     (179,395 )        
Cash flows from financing activities:                
Net payments for common stock activity       (769,820 )     (199,361 )        
Net proceeds from (payments for) debt       378,642       (71,835 )        
Dividends       (299,006 )     (264,332 )        
Net cash (used in) financing activities       (690,184 )     (535,528 )        
Effect of exchange rate changes on cash       (9,726 )     18,328          
Net increase in cash and cash equivalents       276,592       204,643          
Cash and cash equivalents at beginning of period       822,137       884,886          
Cash and cash equivalents at end of period   $     1,098,729     $ 1,089,529          
                 
RECONCILIATION OF CASH FLOW FROM OPERATIONS TO ADJUSTED CASH FLOW FROM OPERATIONS    
(Unaudited)   Nine Months Ended   Nine Months Ended
(Dollars in thousands)   March 31, 2019   Percent of sales   March 31, 2018   Percent of sales
As reported cash flow from operations   $   1,092,597       10.3 %   $ 901,238       8.6 %
Discretionary pension contribution       200,000           -      
Adjusted cash flow from operations   $   1,292,597       12.1 %   $ 901,238       8.6 %
                 
PARKER HANNIFIN CORPORATION - MARCH 31, 2019            
RECONCILIATION OF FORECASTED EARNINGS PER DILUTED SHARE TO ADJUSTED FORECASTED EARNINGS PER DILUTED SHARE        
                 
(Unaudited)                
(Amounts in dollars)   Fiscal Year 2019            
Forecasted earnings per diluted share   $11.17 - $11.47            
Adjustments:                
Business realignment charges    0.09             
Clarcor costs to achieve    0.08             
U.S. Tax Reform income tax expense adjustment    0.11             
Adjusted forecasted earnings per diluted share   $11.45 - $11.75            
                 

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