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Parker-Hannifin Corporation$201.56$4.702.39%

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 Parker Reports Fiscal 2019 First Quarter Results
   Thursday, November 01, 2018 7:30:00 AM ET
  • Sales increased 3% to $3.48 billion; organic sales increased 6%
  • All-time quarterly records set for total segment operating margins, EPS, Net Income and ROS
  • Total segment operating margins reached 17% as reported, or 17.2% adjusted
  • EPS increased 33% to $2.79 as reported, or $2.84 adjusted
  • EBITDA margins increased 155 basis points to 17.7% as reported, or 18.0% adjusted
  • Company increases fiscal 2019 full year guidance

CLEVELAND, Nov. 01, 2018 (GLOBE NEWSWIRE) -- Parker Hannifin Corporation (NYSE: PH), the global leader in motion and control technologies, today reported results for the fiscal 2019 first quarter ended September 30, 2018.  Fiscal 2019 first quarter sales increased 3% to $3.48 billion compared with $3.36 billion in the prior year quarter.  Net income increased 32% to $375.7 million compared with $285.4 million in the prior year quarter.  Fiscal 2019 first quarter earnings per share increased 33% to $2.79, compared with $2.10 in the fiscal 2018 first quarter.  On an adjusted basis, earnings per share increased 27% to $2.84, compared with adjusted earnings per share of $2.24 in the prior year quarter.  Fiscal year to date net cash provided by operating activities was $159.4 million or 4.6% of sales.  Excluding a $200 million discretionary pension contribution, operating cash flow was 10.3% of sales, compared with 7.1% of sales in the prior year period.  A reconciliation of non-GAAP measures is included in the financial tables of this press release.  

“This was an excellent start to fiscal 2019, reflecting benefits of our continued execution of the Win Strategy™, which is driving record performance levels,” said Chairman and Chief Executive Officer, Tom Williams.  “Strong organic growth of 6% was consistent with our expectations, while sales were partially offset by higher unfavorable currency impact.  We generated record segment operating margins for the company, which increased 140 basis points.  All-time quarterly records for earnings per share, net income and return on sales further demonstrate that our actions are driving the consistent improvement of Parker’s financial performance and reinforce our confidence in achieving another record year for sales and earnings.”

First Quarter Fiscal 2019 Segment Results
Diversified Industrial Segment: North American first quarter sales increased 5% to $1.7 billion, and operating income increased 8% to $275.1 million compared with $256.0 million in the same period a year ago.  While first quarter International sales were flat at $1.2 billion, operating income increased 8% to $206.1 million compared with $191.8 million in the fiscal 2018 first quarter.

Aerospace Systems Segment: First quarter sales were $564.5 million compared with $531.2 million in the prior year period, and operating income increased 42% to $109.9 million compared with $77.4 million in the same period a year ago.

Parker reported the following orders for the quarter ending September 30, 2018, compared with the same quarter a year ago:

  • Orders increased 5% for total Parker
  • Orders increased 8% in the Diversified Industrial North America businesses
  • Orders increased 3% in the Diversified Industrial International businesses
  • Orders increased 3% in the Aerospace Systems Segment on a rolling 12-month average basis

For the fiscal year ending June 30, 2019, the company has revised guidance for earnings in the range of $10.90 to $11.50 per share, or $11.10 to $11.70 per share on an adjusted basis.  Fiscal year 2019 guidance is adjusted on a pre-tax basis for expected business realignment expenses of approximately $22 million and CLARCOR costs to achieve of approximately $13 million.  Guidance assumes organic sales growth in the range of 2.5% to 5.3%.

Williams added, “With generally positive conditions across our end markets, and our ongoing commitment to the Win Strategy initiatives, the increase of our guidance at the operating line reflects the additional earnings achieved in the first quarter as well as our confidence in the outlook for the remainder of the year.  Slightly offsetting this increase is higher tax expense for the rest of the year. We are very pleased with our first quarter performance as it reinforces our belief in achieving our fiscal 2023 performance goals.” 

NOTICE OF CONFERENCE CALL: Parker Hannifin's conference call and slide presentation to discuss its fiscal 2019 first 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 .  To access the call, click on the "Live Webcast" link.  From this link, users also may complete a pre-call system test and register for e-mail notification of future events and information available from Parker.  A replay of the webcast will be accessible on Parker's investor relations website, , 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 .

Parker Hannifin is a Fortune 250 global leader in motion and control technologies.  For over 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 62 consecutive fiscal years, among the top five longest-running dividend-increase records in the S&P 500 index.  Learn more at  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 and loss on sale of investment, (b) segment operating margins without the effect of business realignment charges and CLARCOR costs to achieve; (c) the effect of business realignment charges and CLARCOR costs to achieve 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 of investment 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 of investment.  Although EBITDA and Adjusted EBITDA are not measures of performance calculated in accordance with GAAP, we believe that it is 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.

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. A change in the economic conditions in individual markets may have a particularly volatile effect on segment performance. Additionally, the actual impact of the U.S. Tax Cuts and Jobs Act may affect future performance and earnings projections as the amounts reflected in this period are preliminary estimates and exact amounts will not be determined until a later date, and there may be other judicial or regulatory interpretations of the U.S. Tax Cuts and Jobs Act that may also affect these estimates and the actual impact on the company. A change in the economic conditions in individual markets may have a particularly volatile effect on segment performance. Among other factors which may affect future performance of the company are, as applicable: 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.

(Unaudited)   Three Months Ended September 30,            
(Dollars in thousands except per share amounts)  2018    2017            
Net sales   $  3,479,294   $  3,364,651            
Cost of sales     2,594,823      2,523,294            
Selling, general and administrative expenses    394,322      396,984            
Interest expense    44,339      53,555            
Other (income) expense, net    (13,913)    16,516            
Income before income taxes    459,723      374,302            
Income taxes    83,824      88,767            
Net income    375,899      285,535            
Less:  Noncontrolling interests    188      138            
Net income attributable to common shareholders$  375,711   $  285,397            
Earnings per share attributable to common shareholders:
  Basic earnings per share $  2.84   $  2.14            
  Diluted earnings per share $  2.79   $  2.10            
Average shares outstanding during period - Basic    132,361,654      133,176,964            
Average shares outstanding during period - Diluted    134,664,496    135,794,270            
Cash dividends per common share $  0.76   $  0.66             
(Unaudited)  Three Months Ended September 30,            
(Amounts in dollars)  2018    2017            
Earnings per diluted share $  2.79   $  2.10            
Loss on sale of investment    -       0.07            
Business realignment charges    0.01      0.04            
Clarcor costs to achieve    0.04      0.03            
Adjusted earnings per diluted share $  2.84   $  2.24            
(Unaudited)  Three Months Ended September 30,            
(Dollars in thousands)  2018    2017            
Net sales
 $  3,479,294   $  3,364,651            
Earnings before income taxes $  459,723   $  374,302            
Depreciation and amortization     112,491      116,107            
Interest expense     44,339      53,555            
EBITDA      616,553      543,964            
Loss on sale of investment    -      13,777            
Business realignment charges    2,403      8,226            
Clarcor costs to achieve    6,210      5,800            
Adjusted EBITDA   $  625,166   $  571,767            
EBITDA margin  17.7%  16.2%           
Adjusted EBITDA margin
 18.0%  17.0%           
(Unaudited)  Three Months Ended September 30,            
(Dollars in thousands)  2018    2017            
Net sales               
  Diversified Industrial              
  North America $  1,681,044   $  1,594,691            
  International    1,233,766      1,238,774            
  Aerospace Systems    564,484      531,186            
Total net sales $  3,479,294   $  3,364,651            
Segment operating income               
  Diversified Industrial              
  North America $  275,111   $  256,027            
  International    206,094      191,791            
  Aerospace Systems    109,855      77,434            
Total segment operating income
   591,060      525,252            
Corporate general and administrative expenses    50,325      41,350            
Income before interest and other expense
   540,735      483,902            
Interest expense    44,339      53,555            
Other expense    36,673      56,045            
Income before income taxes $  459,723   $  374,302            
(Unaudited)  Three Months Ended   Three Months Ended       
(Dollars in thousands) September 30, 2018 September 30, 2017       
 Operating income
   Operating margin  Operating income Operating margin       
Total segment operating income $  591,060    17.0% $  525,252 15.6%       
  Business realignment charges    2,403        8,226         
  Clarcor costs to achieve    6,155        5,800         
Adjusted total segment operating income $  599,618    17.2% $  539,278 16.0%       
(Unaudited)   September 30,
   June 30,   September 30,         
(Dollars in thousands)   2018   2018   2017         
Current assets:
Cash and cash equivalents $  952,122   $  822,137  $  874,766         
Marketable securities and other investments    40,787      32,995     99,792         
Trade accounts receivable, net    2,065,158      2,145,517     1,922,288         
Non-trade and notes receivable    312,162      328,399     266,421         
Inventories    1,762,640      1,621,304     1,707,001         
Prepaid expenses and other    165,213      134,886     134,350         
Total current assets
   5,298,082      5,085,238     5,004,618         
Plant and equipment, net    1,828,034      1,856,237     1,962,846         
Deferred income taxes    99,886      57,623     35,194         
Goodwill    5,485,144      5,504,420     5,679,239         
Intangible assets, net    1,956,101      2,015,520     2,215,297         
Other assets    757,795      801,049     834,085         
Total assets  $  15,425,042   $  15,320,087  $  15,731,279         
Liabilities and equity               
Current liabilities:               
Notes payable $  796,861   $  638,466  $  1,144,054         
Accounts payable    1,404,716      1,430,306     1,304,260         
Accrued liabilities    868,521      929,833     845,524         
Accrued domestic and foreign taxes    238,423      198,878     173,286         
Total current liabilities    3,308,521      3,197,483     3,467,124         
Long-term debt    4,313,221      4,318,559     4,788,147         
Pensions and other postretirement benefits    958,937      1,177,605     1,391,820         
Deferred income taxes    265,418      234,858     212,334         
Other liabilities    471,839      526,089     341,195         
Shareholders' equity    6,101,380      5,859,866     5,524,940         
Noncontrolling interests    5,726      5,627     5,719         
Total liabilities and equity
$  15,425,042   $  15,320,087  $  15,731,279         
(Unaudited)  Three Months Ended September 30,            
(Dollars in thousands)  2018    2017            
Cash flows from operating activities:
Net income $  375,899   $  285,535            
Depreciation and amortization    112,491      116,107            
Stock incentive plan compensation    42,941      43,211            
Loss on sale of businesses    3,029      -            
(Gain) on disposal of assets    (3,826)    (256)           
(Gain) on sale of marketable securities    (3,204)    -            
(Gain) loss on investments    (2,536)    13,777            
Net change in receivables, inventories, and trade payables   (70,973)    (129,061)           
Net change in other assets and liabilities    (329,726)    (105,127)           
Other, net    35,293      13,814            
Net cash provided by operating activities    159,388      238,000            
Cash flows from investing activities:               
Acquisitions (net of cash of $690 in 2018)    (2,042)    -            
Capital expenditures    (42,106)    (79,336)           
Proceeds from sale of plant and equipment    10,969      12,448            
Proceeds from sale of businesses    4,515      -            
Purchases of marketable securities and other investments   (2,844)    (70,253)           
Maturities and sales of marketable securities and other investments   14,127      12,499            
Other, net    2,318      7,329            
Net cash (used in) investing activities    (15,063)    (117,313)           
Cash flows from financing activities:
Net payments for common stock activity    (64,855)    (76,915)           
Net proceeds from debt    158,477      29,606            
Dividends    (100,869)    (88,104)           
Net cash (used in) financing activities
   (7,247)    (135,413)           
Effect of exchange rate changes on cash    (7,093)    4,606            
Net increase (decrease) in cash and cash equivalents    129,985      (10,120)           
Cash and cash equivalents at beginning of period    822,137      884,886            
Cash and cash equivalents at end of period
$  952,122   $  874,766            
(Dollars in thousands) Three Months Ended September 30, 2018   Three Months Ended September 30, 2017         
        Percent of sales     Percent of sales       
As reported cash flow from operations
$  159,388    4.6% $  238,000 7.1%       
  Discretionary pension contribution    200,000        -         
Adjusted cash flow from operations
$  359,388    10.3% $  238,000 7.1%       
(Amounts in dollars) Fiscal Year             
Forecasted earnings per diluted share
 $10.90 - $11.50              
  Business realignment charges  0.13              
  Clarcor costs to achieve  0.07              
Adjusted forecasted earnings per diluted share
 $11.10 - $11.70              


Contact:Media – 
 Aidan Gormley, Director, Global Communications and Branding216/896-3258  
 Financial Analysts – 
 Robin J. Davenport, Vice President, Corporate Finance 216/896-2265  


Source: Parker-Hannifin Corporation

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