- Fourth quarter EPS
$1.77 as reported, or$1.90 adjusted for realignment expenses - Strong fourth quarter segment operating margins of 14.8% as reported, or 15.6% adjusted
- Company sets guidance for fiscal year 2017 EPS in the range of
$6.15 to $6.85 as reported, or$6.40 to $7.10 adjusted for realignment expenses
For the full year, fiscal 2016 sales were
"I am pleased we ended fiscal year 2016 on such a positive note with strong fourth quarter margin and cash flow performance, which largely reflects the actions we have taken under the new Win Strategy™,” said
Segment Results
Diversified Industrial Segment: North American fourth quarter sales decreased 11% to
Aerospace Systems Segment: Fourth quarter sales increased 2% to
Orders
Parker reported the following orders for the quarter ending
- Orders decreased 1% for total Parker;
- Orders decreased 10% in the
Diversified Industrial North America businesses; - Orders increased 3% in the
Diversified Industrial International businesses; and - Orders increased 14% in the Aerospace Systems segment on a rolling 12-month average basis.
Share Repurchases
During the fourth quarter, the company repurchased approximately
Outlook
For the fiscal year ending
Williams added, “In many of our key markets we are seeing a decelerating rate of decline. While we see progress toward stabilization, we remain cautious in our outlook and are not anticipating any meaningful turnaround in global market conditions. In fiscal year 2017, we are estimating flat sales and significant margin improvement, reflecting the benefits of our Simplification and business restructuring actions and the new Win Strategy. Our primary focus will be on executing the fundamentals of the Win Strategy, which I am confident will allow us to take Parker's performance to new levels and will result in a positive impact for our customers and shareholders. While we still have much more to accomplish, Parker is in a very strong position entering fiscal year 2017.”
NOTICE OF CONFERENCE CALL:
With annual sales of
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
Note on Non-GAAP Numbers
This press release contains references to (a) segment operating margins and earnings per share without the effect of business realignment and voluntary retirement expenses; (b) the effect of business realignment expenses on forecasted earnings from continuing operations per share; and (c) cash flows from operations without the effect of a discretionary pension contribution. The effects of business realignment and voluntary retirement expenses and the discretionary pension contribution are removed to allow investors and the company to meaningfully evaluate changes in segment operating margin, earnings per share 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. All statements regarding future performance, earnings projections, events or developments are forward-looking 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. 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 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; 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 the company’s capital allocation initiatives, including timing, price and execution of share repurchases; increases in raw material costs that cannot be recovered in product pricing; the company's ability to manage costs related to insurance and employee retirement and health care benefits; 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 - JUNE 30, 2016 | ||||||||||||||||||||
CONSOLIDATED STATEMENT OF INCOME | ||||||||||||||||||||
Three Months Ended June 30, | Twelve Months Ended June 30, | |||||||||||||||||||
(Dollars in thousands except per share amounts) | 2016 | 2015 | 2016 | 2015 | ||||||||||||||||
Net sales | $ | 2,957,150 | $ | 3,144,508 | $ | 11,360,753 | $ | 12,711,744 | ||||||||||||
Cost of sales | 2,272,455 | 2,420,780 | 8,823,384 | 9,655,245 | ||||||||||||||||
Gross profit | 684,695 | 723,728 | 2,537,369 | 3,056,499 | ||||||||||||||||
Selling, general and administrative expenses | 338,572 | 391,796 | 1,359,360 | 1,544,746 | ||||||||||||||||
Interest expense | 32,715 | 34,797 | 136,517 | 118,406 | ||||||||||||||||
Other (income), net | (22,798 | ) | (6,838 | ) | (73,236 | ) | (38,893 | ) | ||||||||||||
Income before income taxes | 336,206 | 303,973 | 1,114,728 | 1,432,240 | ||||||||||||||||
Income taxes | 94,295 | 124,388 | 307,512 | 419,687 | ||||||||||||||||
Net income | 241,911 | 179,585 | 807,216 | 1,012,553 | ||||||||||||||||
Less: Noncontrolling interests | 115 | 131 | 376 | 413 | ||||||||||||||||
Net income attributable to common shareholders | $ | 241,796 | $ | 179,454 | $ | 806,840 | $ | 1,012,140 | ||||||||||||
Earnings per share attributable to common shareholders: | ||||||||||||||||||||
Basic earnings per share | $ | 1.80 | $ | 1.29 | $ | 5.96 | $ | 7.08 | ||||||||||||
Diluted earnings per share | $ | 1.77 | $ | 1.27 | $ | 5.89 | $ | 6.97 | ||||||||||||
Average shares outstanding during period - Basic | 134,385,814 | 138,674,443 | 135,353,321 | 142,925,327 | ||||||||||||||||
Average shares outstanding during period - Diluted | 136,255,977 | 141,000,940 | 136,911,690 | 145,112,150 | ||||||||||||||||
Cash dividends per common share | $ | .63 | $ | .63 | $ | 2.52 | $ | 2.37 | ||||||||||||
RECONCILIATION OF NET INCOME AND EARNINGS PER DILUTED SHARE TO ADJUSTED NET INCOME AND EARNINGS PER DILUTED SHARE | ||||||||||||||||||||
Net income | $ | 241,911 | $ | 179,585 | $ | 807,216 | $ | 1,012,553 | ||||||||||||
Adjustments: | ||||||||||||||||||||
Voluntary retirement expense | - | 15,034 | - | 15,034 | ||||||||||||||||
Business realignment charges | 17,828 | 7,014 | 78,069 | 25,180 | ||||||||||||||||
Adjusted net income | $ | 259,739 | $ | 201,633 | $ | 885,285 | $ | 1,052,767 | ||||||||||||
Earnings per diluted share | $ | 1.77 | $ | 1.27 | $ | 5.89 | $ | 6.97 | ||||||||||||
Adjustments: | ||||||||||||||||||||
Voluntary retirement expense | - | 0.11 | - | 0.11 | ||||||||||||||||
Business realignment charges | 0.13 | 0.05 | 0.57 | 0.17 | ||||||||||||||||
Adjusted earnings per diluted share | $ | 1.90 | $ | 1.43 | $ | 6.46 | $ | 7.25 | ||||||||||||
BUSINESS SEGMENT INFORMATION | ||||||||||||||||||||
Three Months Ended June 30, | Twelve Months Ended June 30, | |||||||||||||||||||
(Dollars in thousands) | 2016 | 2015 | 2016 | 2015 | ||||||||||||||||
Net sales | ||||||||||||||||||||
Diversified Industrial: | ||||||||||||||||||||
North America | $ | 1,260,203 | $ | 1,413,098 | $ | 4,955,211 | $ | 5,715,742 | ||||||||||||
International | 1,094,585 | 1,142,231 | 4,145,272 | 4,741,376 | ||||||||||||||||
Aerospace Systems | 602,362 | 589,179 | 2,260,270 | 2,254,626 | ||||||||||||||||
Total | $ | 2,957,150 | $ | 3,144,508 | $ | 11,360,753 | $ | 12,711,744 | ||||||||||||
Segment operating income | ||||||||||||||||||||
Diversified Industrial: | ||||||||||||||||||||
North America | $ | 221,158 | $ | 228,861 | $ | 789,667 | $ | 955,501 | ||||||||||||
International | 118,634 | 118,134 | 448,457 | 583,937 | ||||||||||||||||
Aerospace Systems | 97,526 | 93,494 | 337,531 | 298,994 | ||||||||||||||||
Total segment operating income | 437,318 | 440,489 | 1,575,655 | 1,838,432 | ||||||||||||||||
Corporate general and administrative expenses | 46,620 | 63,077 | 173,203 | 215,396 | ||||||||||||||||
Income before interest and other | 390,698 | 377,412 | 1,402,452 | 1,623,036 | ||||||||||||||||
Interest expense | 32,715 | 34,797 | 136,517 | 118,406 | ||||||||||||||||
Other expense | 21,777 | 38,642 | 151,207 | 72,390 | ||||||||||||||||
Income before income taxes | $ | 336,206 | $ | 303,973 | $ | 1,114,728 | $ | 1,432,240 | ||||||||||||
RECONCILIATION OF TOTAL SEGMENT OPERATING MARGIN TO ADJUSTED TOTAL SEGMENT OPERATING MARGIN | ||||||||||||||||||||
Three Months Ended June 30, 2016 |
Three Months Ended June 30, 2015 |
|||||||||||||||||||
Operating margin | Operating margin | |||||||||||||||||||
Total segment operating income | $ | 437,318 | 14.8 | % | $ | 440,489 | 14.0 | % | ||||||||||||
Adjustments: | ||||||||||||||||||||
Voluntary retirement expense | - | 18,057 | ||||||||||||||||||
Business realignment charges | 25,024 | 9,150 | ||||||||||||||||||
Adjusted total segement operating income | $ | 462,342 | 15.6 | % | $ | 467,696 | 14.9 | % | ||||||||||||
Twelve Months Ended June 30, 2016 |
Twelve Months Ended June 30, 2015 |
|||||||||||||||||||
Operating margin | Operating margin | |||||||||||||||||||
Total segment operating income | $ | 1,575,655 | 13.9 | % | $ | 1,838,432 | 14.5 | % | ||||||||||||
Adjustments: | ||||||||||||||||||||
Voluntary retirement expense | - | 18,057 | ||||||||||||||||||
Business realignment charges | 106,642 | 31,849 | ||||||||||||||||||
Adjusted total segement operating income | $ | 1,682,297 | 14.8 | % | $ | 1,888,338 | 14.9 | % | ||||||||||||
CONSOLIDATED BALANCE SHEET | ||||||||||||||||||||
June 30, | June 30, | |||||||||||||||||||
(Dollars in thousands) | 2016 | 2015 | ||||||||||||||||||
Assets | ||||||||||||||||||||
Current assets: | ||||||||||||||||||||
Cash and cash equivalents | $ | 1,221,653 | $ | 1,180,584 | ||||||||||||||||
Marketable securities and other investments | 882,342 | 733,490 | ||||||||||||||||||
Trade accounts receivable, net | 1,593,920 | 1,620,194 | ||||||||||||||||||
Non-trade and notes receivable | 232,183 | 364,534 | ||||||||||||||||||
Inventories | 1,173,329 | 1,300,459 | ||||||||||||||||||
Prepaid expenses | 104,360 | 241,684 | ||||||||||||||||||
Total current assets | 5,207,787 | 5,440,945 | ||||||||||||||||||
Plant and equipment, net | 1,568,100 | 1,664,022 | ||||||||||||||||||
Goodwill | 2,903,037 | 2,942,679 | ||||||||||||||||||
Intangible assets, net | 922,571 | 1,013,439 | ||||||||||||||||||
Other assets | 1,455,243 | 1,218,197 | ||||||||||||||||||
Total assets | $ | 12,056,738 | $ | 12,279,282 | ||||||||||||||||
Liabilities and equity | ||||||||||||||||||||
Current liabilities: | ||||||||||||||||||||
Notes payable | $ | 361,840 | $ | 223,142 | ||||||||||||||||
Accounts payable | 1,034,589 | 1,092,138 | ||||||||||||||||||
Accrued liabilities | 841,915 | 894,555 | ||||||||||||||||||
Accrued domestic and foreign taxes | 127,597 | 139,285 | ||||||||||||||||||
Total current liabilities | 2,365,941 | 2,349,120 | ||||||||||||||||||
Long-term debt | 2,675,000 | 2,723,960 | ||||||||||||||||||
Pensions and other postretirement benefits | 2,076,143 | 1,699,197 | ||||||||||||||||||
Deferred income taxes | 54,395 | 63,222 | ||||||||||||||||||
Other liabilities | 306,581 | 336,214 | ||||||||||||||||||
Shareholders' equity | 4,575,255 | 5,104,287 | ||||||||||||||||||
Noncontrolling interests | 3,423 | 3,282 | ||||||||||||||||||
Total liabilities and equity | $ | 12,056,738 | $ | 12,279,282 | ||||||||||||||||
CONSOLIDATED STATEMENT OF CASH FLOWS | ||||||||||||||||||||
Twelve Months Ended June 30, | ||||||||||||||||||||
(Dollars in thousands) | 2016 | 2015 | ||||||||||||||||||
Cash flows from operating activities: | ||||||||||||||||||||
Net income | $ | 807,216 | $ | 1,012,553 | ||||||||||||||||
Depreciation and amortization | 306,843 | 317,491 | ||||||||||||||||||
Stock incentive plan compensation | 71,293 | 96,093 | ||||||||||||||||||
Gain on sale of businesses | (10,666 | ) | (6,420 | ) | ||||||||||||||||
Loss on disposal of assets | 414 | 14,953 | ||||||||||||||||||
(Gain) loss on sale of marketable securities | (723 | ) | 3,817 | |||||||||||||||||
Net change in receivables, inventories, and trade payables | 85,414 | (13,948 | ) | |||||||||||||||||
Net change in other assets and liabilities | (47,012 | ) | (63,679 | ) | ||||||||||||||||
Other, net | (42,936 | ) | (58,919 | ) | ||||||||||||||||
Net cash provided by operating activities | 1,169,843 | 1,301,941 | ||||||||||||||||||
Cash flows from investing activities: | ||||||||||||||||||||
Acquisitions (net of cash of $3,814 in 2016 and $8,332 in 2015) | (67,552 | ) | (18,618 | ) | ||||||||||||||||
Capital expenditures | (149,407 | ) | (215,527 | ) | ||||||||||||||||
Proceeds from sale of plant and equipment | 18,821 | 19,655 | ||||||||||||||||||
Proceeds from sale of businesses | 24,325 | 37,265 | ||||||||||||||||||
Purchases of marketable securities and other investments | (1,351,464 | ) | (1,747,333 | ) | ||||||||||||||||
Maturities and sales of marketable securities and other investments | 1,300,633 | 1,391,396 | ||||||||||||||||||
Other, net | (39,995 | ) | (46,001 | ) | ||||||||||||||||
Net cash (used in) investing activities | (264,639 | ) | (579,163 | ) | ||||||||||||||||
Cash flows from financing activities: | ||||||||||||||||||||
Net payments for common stock activity | (546,304 | ) | (1,371,662 | ) | ||||||||||||||||
Net proceeds from debt | 85,843 | 667,307 | ||||||||||||||||||
Dividends | (341,962 | ) | (340,389 | ) | ||||||||||||||||
Net cash (used in) financing activities | (802,423 | ) | (1,044,744 | ) | ||||||||||||||||
Effect of exchange rate changes on cash | (61,712 | ) | (111,005 | ) | ||||||||||||||||
Net increase (decrease) in cash and cash equivalents | 41,069 | (432,971 | ) | |||||||||||||||||
Cash and cash equivalents at beginning of period | 1,180,584 | 1,613,555 | ||||||||||||||||||
Cash and cash equivalents at end of period | $ | 1,221,653 | $ | 1,180,584 | ||||||||||||||||
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 | $6.15 to $6.85 | |||||||||||||||||||
Adjustments: | ||||||||||||||||||||
Business realignment charges | .25 | |||||||||||||||||||
Adjusted forecasted earnings per diluted share | $6.40 to $7.10 | |||||||||||||||||||
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