EX-99.1 2 exhibit9913qfy17.htm EXHIBIT 99.1 Exhibit


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Exhibit 99.1    
For Release:    Immediately                    

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
 
 
 
 
Stock symbol:
PH - NYSE
 

Parker Reports Fiscal 2017 Third Quarter Results

–
Third quarter sales increased 10% to $3.12 billion, organic sales increased 6%, order rates increased 8%
–
Total segment operating margins strong at 14.8% as reported
–
16.1% adjusted segment operating margins, a year-over-year increase of 140 bps
–
EPS increased 28% to $1.75, or an increase of 40% to $2.11, on an adjusted basis
–
Year-to-date operating cash flow strong at 9.2%, or 11.8% of sales excluding pension contribution
–
CLARCOR acquisition completed and integration underway to capture meaningful synergies
–
Fiscal 2017 full year earnings guidance increased

CLEVELAND, April 27, 2017 -- Parker Hannifin Corporation (NYSE: PH), the global leader in motion and control technologies, today reported results for the fiscal 2017 third quarter ended March 31, 2017. Fiscal 2017 third quarter sales increased 10% to $3.12 billion compared with $2.83 billion in the prior year quarter. Net income increased 28% to $238.8 million compared with $187.1 million in the prior year quarter. Fiscal 2017 third quarter earnings per share increased 28% to $1.75, compared with $1.37 in the fiscal 2016 third quarter. Earnings per share were $2.11, when adjusted for business realignment and acquisition related expenses, compared with $1.51 in the prior year quarter, which was adjusted for business realignment expenses. Cash flow from operations for the first nine months of fiscal 2017 was $789.3 million or 9.2% of sales, compared with $704.6 million or 8.4% of sales in the prior year period. Excluding discretionary pension contributions, year-to-date cash flow from operations was 11.8% of sales compared with 10.8% of sales in the prior year period.

“Accelerated sales growth combined with the benefits of ongoing execution of our Win Strategy™ initiatives, contributed to another strong quarter for Parker across many measures,” said Chairman and Chief Executive Officer, Tom Williams. “While sales growth included the CLARCOR acquisition, we were




particularly pleased that organic sales increased 6%. We drove meaningful year-over-year adjusted segment operating margin improvement of 140 basis points with total segment operating margins reaching 16.1%. With the completion of the CLARCOR acquisition, we are well underway with the integration of our two great filtration businesses designed to achieve significant synergies. We were also pleased at Parker’s ability to be a consistent generator of cash with strong year-to-date operating cash flow performance.”

Segment Results
Diversified Industrial Segment: North American third quarter sales increased 13% to $1.4 billion, and operating income increased 12% to $227.4 million compared with $202.2 million in the same period a year ago. International third quarter sales increased 11% to $1.1 billion, and operating income increased 45% to $153.0 million compared with $105.2 million in the same period a year ago.

Aerospace Systems Segment: Third quarter sales increased 3% to $577.0 million, and operating income decreased 5% to $80.0 million compared with $84.2 million in the same period a year ago.

Parker reported the following orders for the quarter ending March 31, 2017, compared with the same quarter a year ago:
•
Orders increased 8% for total Parker;
•
Orders increased 9% in the Diversified Industrial North America businesses;
•
Orders increased 13% in the Diversified Industrial International businesses; and
•
Orders were flat in the Aerospace Systems Segment on a rolling 12-month average basis.

Outlook
For the fiscal year ending June 30, 2017, the company has increased guidance for earnings from continuing operations to the range of $6.90 to $7.20 per share, or $7.70 to $8.00 per share on an adjusted basis. Fiscal year 2017 guidance is adjusted for expected business realignment expenses of approximately $0.25 per share and acquisition related expenses of approximately $0.55 per share. Full fiscal year 2017 earnings guidance has been updated to include acquisitions.

Williams added, “Our results reflect the hard work of Parker team members in executing the Win Strategy as we continue with actions targeted at achieving top quartile financial performance among our peer companies. In addition, we see broad based improvements in many end markets and regions, which is reflected in our strong order growth in the third quarter.”
   
NOTICE OF CONFERENCE CALL: Parker Hannifin's conference call and slide presentation to discuss its fiscal 2017 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 and register for e-mail notification of future events and information available from Parker. A replay of the conference call will also be available at www.phstock.com for one year after the call.

Parker Hannifin is a Fortune 250 global leader in motion and control technologies. For 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 61 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 Non-GAAP Numbers
This press release contains references to (a) earnings per share and segment operating margins without the effect of business realignment charges and acquisition related expenses; (b) the effect of business realignment charges and acquisition related expenses on forecasted earnings from continuing operations per share; and (c) cash flows from operations without the effect of discretionary pension contributions. The effects of business realignment charges, acquisition related expenses 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.

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 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.


Among other factors which may affect future performance and earnings projections are: economic conditions within the company’s key 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. 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; competitive market conditions 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.






###

















PARKER HANNIFIN CORPORATION - MARCH 31, 2017
 
 
 
 
 
Exhibit 99.1

CONSOLIDATED STATEMENT OF INCOME
 
 
 
 
 
 
 
(Unaudited)
 
Three Months Ended March 31,
 
Nine Months Ended March 31,
(Dollars in thousands except per share amounts)
2017

 
2016

 
2017

 
2016

 
 
 
 
 
 
 
 
 
Net sales
 
$
3,119,139

 
$
2,828,665

 
$
8,533,074

 
$
8,403,603

Cost of sales
 
2,383,790

 
2,209,401

 
6,534,280

 
6,550,929

Gross profit
 
735,349

 
619,264

 
1,998,794

 
1,852,674

Selling, general and administrative expenses
392,036

 
335,908

 
1,051,583

 
1,020,788

Interest expense
 
42,057

 
33,745

 
109,649

 
103,802

Other (income), net
 
(13,807
)
 
(23,382
)
 
(90,468
)
 
(50,438
)
Income before income taxes
 
315,063

 
272,993

 
928,030

 
778,522

Income taxes
 
76,216

 
85,851

 
237,545

 
213,217

Net income
 
238,847

 
187,142

 
690,485

 
565,305

Less: Noncontrolling interests
 
174

 
58

 
378

 
261

Net income attributable to common shareholders
$
238,673

 
$
187,084

 
$
690,107

 
$
565,044

 
 
 
 
 
 
 
 
 
Earnings per share attributable to common shareholders:
 
 
 
 
 
 
 
   Basic earnings per share
 
$
1.79

 
$
1.39

 
$
5.17

 
$
4.16

   Diluted earnings per share
 
$
1.75

 
$
1.37

 
$
5.09

 
$
4.12

 
 
 
 
 
 
 
 
 
Average shares outstanding during period - Basic
133,232,378

 
134,809,610

 
133,410,622

 
135,675,823

Average shares outstanding during period - Diluted
136,102,974

 
136,552,769

 
135,527,195

 
137,311,848

 
 
 
 
 
 
 
 
 
Cash dividends per common share
$
0.66

 
$
0.63

 
$
1.92

 
$
1.89

 
 
 
 
 
 
 
 
 
RECONCILIATION OF EARNINGS PER DILUTED SHARE TO ADJUSTED EARNINGS PER DILUTED SHARE

(Unaudited)
 
Three Months Ended March 31,
 
Nine Months Ended March 31,
 
 
2017

 
2016

 
2017

 
2016

Earnings per diluted share
$
1.75

 
$
1.37

 
$
5.09

 
$
4.12

Adjustments:
 
 
 
 
 
 
 
  Business realignment charges
0.09

 
0.14

 
0.19

 
0.44

  Acquisition-related expenses
0.27

 
—

 
0.36

 
—

Adjusted earnings per diluted share
$
2.11

 
$
1.51

 
$
5.64

 
$
4.56






PARKER HANNIFIN CORPORATION - MARCH 31, 2017
 
 
 
 
 
Exhibit 99.1

BUSINESS SEGMENT INFORMATION
 
 
 
 
 
 
 
(Unaudited)
 
Three Months Ended March 31,
 
Nine Months Ended March 31,
(Dollars in thousands)
 
2017

 
2016

 
2017

 
2016

Net sales
 
 
 
 
 
 
 
 
    Diversified Industrial:
 
 
 
 
 
 
 
 
       North America
 
$
1,413,302

 
$
1,247,904

 
$
3,701,326

 
$
3,695,008

       International
 
1,128,886

 
1,019,776

 
3,149,777

 
3,050,687

    Aerospace Systems
 
576,951

 
560,985

 
1,681,971

 
1,657,908

Total net sales
 
$
3,119,139

 
$
2,828,665

 
$
8,533,074

 
$
8,403,603

Segment operating income
 
 
 
 
 
 
 
 
    Diversified Industrial:
 
 
 
 
 
 
 
 
       North America
 
$
227,419

 
$
202,180

 
$
612,043

 
$
568,509

       International
 
152,995

 
105,161

 
417,708

 
329,823

    Aerospace Systems
 
79,967

 
84,238

 
225,764

 
240,005

Total segment operating income
460,381

 
391,579

 
1,255,515

 
1,138,337

Corporate general and administrative expenses
45,747

 
42,322

 
120,707

 
126,583

Income before interest expense and other expense
414,634

 
349,257

 
1,134,808

 
1,011,754

Interest expense
 
42,057

 
33,745

 
109,649

 
103,802

Other expense
 
57,514

 
42,519

 
97,129

 
129,430

Income before income taxes
 
$
315,063

 
$
272,993

 
$
928,030

 
$
778,522

 
 
 
 
 
 
 
 
 
RECONCILIATION OF TOTAL SEGMENT OPERATING MARGIN TO ADJUSTED TOTAL SEGMENT OPERATING MARGIN
 
 
(Unaudited)
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Three Months Ended
 
 
March 31, 2017
 
March 31, 2016
 
 
Operating income

 
Operating margin

 
Operating income

 
Operating margin

Total segment operating income
$
460,381

 
14.8
%
 
$
391,579

 
13.8
%
Adjustments:
 
 
 
 
 
 
 
 
  Business realignment charges
 
16,318

 
 
 
25,030

 
 
  Acquisition-related expenses
 
26,226

 
 
 
—

 
 
Adjusted total segment operating income
$
502,925

 
16.1
%
 
$
416,609

 
14.7
%





 
 
 
 
Exhibit 99.1
 
PARKER HANNIFIN CORPORATION - MARCH 31, 2017
 
 
 
 
 
CONSOLIDATED BALANCE SHEET
 
 
 
 
 
 
(Unaudited)
 
March 31,

 
June 30,

 
March 31,

(Dollars in thousands)
 
2017

 
2016

 
2016

Assets
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
Cash and cash equivalents
 
$
819,563

 
$
1,221,653

 
$
1,034,971

Marketable securities and other investments
 
36,758

 
882,342

 
1,069,658

Trade accounts receivable, net
 
1,869,303

 
1,593,920

 
1,587,785

Non-trade and notes receivable
 
235,924

 
232,183

 
245,248

Inventories
 
1,538,644

 
1,173,329

 
1,248,213

Prepaid expenses
 
118,962

 
104,360

 
124,025

Total current assets
 
4,619,154

 
5,207,787

 
5,309,900

Plant and equipment, net
 
1,945,739

 
1,568,100

 
1,598,758

Deferred income taxes
 
65,152

 
605,155

 
379,541

Goodwill
 
5,508,712

 
2,903,037

 
2,948,284

Intangible assets, net
 
2,338,364

 
922,571

 
961,206

Other assets
 
848,212

 
827,492

 
831,880

Total assets
 
$
15,325,333

 
$
12,034,142

 
$
12,029,569

 
 
 
 
 
 
 
Liabilities and equity
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
Notes payable
 
$
776,159

 
$
361,787

 
$
576,548

Accounts payable
 
1,209,351

 
1,034,589

 
999,159

Accrued liabilities
 
904,297

 
841,915

 
801,716

Accrued domestic and foreign taxes
 
158,634

 
127,597

 
118,802

Total current liabilities
 
3,048,441

 
2,365,888

 
2,496,225

Long-term debt
 
5,255,156

 
2,652,457

 
2,651,906

Pensions and other postretirement benefits
 
1,787,311

 
2,076,143

 
1,483,641

Deferred income taxes
 
159,666

 
54,395

 
68,108

Other liabilities
 
327,033

 
306,581

 
302,706

Shareholders' equity
 
4,742,139

 
4,575,255

 
5,023,612

Noncontrolling interests
 
5,587

 
3,423

 
3,371

Total liabilities and equity
 
$
15,325,333

 
$
12,034,142

 
$
12,029,569





 
 
 
 
Exhibit 99.1

PARKER HANNIFIN CORPORATION - MARCH 31, 2017
 
 
 
 
CONSOLIDATED STATEMENT OF CASH FLOWS
 
 
 
 
(Unaudited)
 
Nine Months Ended March 31,
(Dollars in thousands)
 
2017

 
2016

 
 
 
 
 
Cash flows from operating activities:
 
 
 
 
Net income
 
$
690,485

 
$
565,305

Depreciation and amortization
 
236,543

 
231,777

Stock incentive plan compensation
 
60,916

 
53,735

(Gain) on sale of business
 
(42,994
)
 
(10,668
)
Loss on disposal of assets
 
513

 
76

(Gain) on sale of marketable securities
 
(1,032
)
 
(535
)
Net change in receivables, inventories, and trade payables
 
(35,469
)
 
(19,661
)
Net change in other assets and liabilities
 
(169,403
)
 
(115,201
)
Other, net
 
49,734

 
(262
)
Net cash provided by operating activities
 
789,293

 
704,566

Cash flows from investing activities:
 
 
 
 
Acquisitions (net of cash of $157,426 in 2017 and $3,814 in 2016)
 
(4,067,755
)
 
(67,552
)
Capital expenditures
 
(145,236
)
 
(110,804
)
Proceeds from sale of plant and equipment
 
8,452

 
14,112

Proceeds from sale of business
 
85,610

 
24,325

Purchases of marketable securities and other investments
 
(451,561
)
 
(1,188,594
)
Maturities and sales of marketable securities and other investments
 
1,264,721

 
974,417

Other, net
 
(2,590
)
 
(40,364
)
Net cash (used in) investing activities
 
(3,308,359
)
 
(394,460
)
Cash flows from financing activities:
 
 
 
 
Net payments for common stock activity
 
(262,248
)
 
(464,367
)
Net proceeds from debt
 
2,687,761

 
305,555

Dividends
 
(257,161
)
 
(256,890
)
Net cash provided by (used in) financing activities
 
2,168,352

 
(415,702
)
Effect of exchange rate changes on cash
 
(51,376
)
 
(40,017
)
Net (decrease) in cash and cash equivalents
 
(402,090
)
 
(145,613
)
Cash and cash equivalents at beginning of period
 
1,221,653

 
1,180,584

Cash and cash equivalents at end of period
 
$
819,563

 
$
1,034,971

 
 
 
 
 
RECONCILIATION OF CASH FLOW FROM OPERATIONS TO ADJUSTED CASH FLOW FROM OPERATIONS
(Unaudited)
 
Nine Months Ended
 
 
 
 
March 31, 2017
 
Percent of Sales

As reported cash flow from operations
 
$
789,293

 
9.2
%
  Discretionary pension contribution
 
220,000

 
 
Adjusted cash flow from operations
 
$
1,009,293

 
11.8
%
 
 
 
 
 
 
 
Nine Months Ended
 
 
 
 
March 31, 2016
 
Percent of Sales

As reported cash flow from operations
 
$
704,566

 
8.4
%
  Discretionary pension contribution
 
200,000

 
 
Adjusted cash flow from operations
 
$
904,566

 
10.8
%




 
 
 
 
Exhibit 99.1
PARKER HANNIFIN CORPORATION - MARCH 31, 2017
 
 
 
 
RECONCILIATION OF FORECASTED EARNINGS PER DILUTED SHARE TO ADJUSTED FORECASTED EARNINGS PER DILUTED SHARE
(Unaudited)
 
 
 
 
(Amounts in dollars)
 
 
 
 
 
 
Fiscal Year 2017
 
 
Forecasted earnings per diluted share
 $6.90 to $7.20
 
 
Adjustments:
 
 
 
  Business realignment charges
0.25
 
 
  Acquisition-related expenses
0.55
 
 
Adjusted forecasted earnings per diluted share
 $7.70 to $8.00