Parker Reports Fiscal 2019 First Quarter Results

  • 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 Branding 216/896-3258  
  Financial Analysts –  
  Robin J. Davenport, Vice President, Corporate Finance  216/896-2265  


Source: Parker-Hannifin Corporation