- Second quarter EPS increased 34% to
$1.78 , or$1.91 adjusted - Fiscal 2017 second quarter includes
$0.21 per share gain associated with the sale of a product line - Segment operating margins strong, reaching a second quarter record of 14.4% or 14.7% adjusted
- Total order trends positive and increased 5% compared with the prior year quarter
- Fiscal 2017 full year earnings guidance increased
“This was a strong operational quarter for Parker driven by the benefits of the new Win Strategy™,” said Chairman and Chief Executive Officer,
Segment Results
Diversified Industrial Segment: North American second quarter sales decreased 3% to
Aerospace Systems Segment: Second quarter sales decreased 2% to
Parker reported the following orders for the quarter ending
- Orders increased 5% for total Parker;
- Orders were flat in the
Diversified Industrial North America businesses; - Orders increased 10% in the
Diversified Industrial International businesses; and - Orders increased 9% in the Aerospace Systems Segment on a rolling 12-month average basis.
CLARCOR Acquisition Update
As previously disclosed, clearance has been received with respect to the regulatory filings made for the pending
Outlook
For the fiscal year ending
Williams added, “Our results reflect the hard work of Parker team members in better aligning our operational costs and execution of the new Win Strategy™. We are increasing our organic growth forecast for the second half of the fiscal year from 2.3% to 3.3% at the midpoint in our new guidance. However, this increase in organic revenue is being offset by currency headwinds resulting in essentially flat full year reported annual sales growth versus fiscal 2016. We continue to deliver outstanding performance that positions us very well as we celebrate our 100th year as a company.”
NOTICE OF CONFERENCE CALL:
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) earnings per share and segment operating margins without the effect of business realignment and acquisition transaction expenses; (b) the effect of business realignment and acquisition transaction 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 expenses, acquisition transaction and discretionary pension contributions are removed to allow investors and the company to meaningfully evaluate changes in 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. 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.
The risks and uncertainties in connection with forward-looking statements related to the proposed transaction between CLARCOR 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 obtain CLARCOR stockholder approval of the proposed transaction or to satisfy any of the other conditions to the merger agreement; the possibility that a governmental entity may prohibit, delay or refuse to grant a necessary regulatory approval in connection with the proposed transaction; the risk that stockholder litigation in connection with the proposed transaction may affect the timing or occurrence of the proposed transaction or result in significant costs of defense, indemnification and liability; adverse effects on CLARCOR’s common stock or the company’s common stock because of the failure to complete the proposed transaction; CLARCOR’s or the company’s respective businesses 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 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 and earnings projections are: economic conditions within the company’s and CLARCOR’s key markets, and the company’s and CLARCOR’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 and/or CLARCOR are, as applicable: changes in business relationships with and purchases by or from major customers, suppliers or distributors, including delays or cancellations in shipments; CLARCOR’s potential inability to realize the anticipated benefits of the strategic supply partnership with GE; 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 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 - DECEMBER 31, 2016 | ||||||||||||||||||||
CONSOLIDATED STATEMENT OF INCOME | ||||||||||||||||||||
(Unaudited) | Three Months Ended December 31, | Six Months Ended December 31, | ||||||||||||||||||
(Dollars in thousands except per share amounts) | 2016 | 2015 | 2016 | 2015 | ||||||||||||||||
Net sales | $ | 2,670,804 | $ | 2,705,590 | $ | 5,413,935 | $ | 5,574,938 | ||||||||||||
Cost of sales | 2,044,484 | 2,140,624 | 4,150,490 | 4,341,528 | ||||||||||||||||
Gross profit | 626,320 | 564,966 | 1,263,445 | 1,233,410 | ||||||||||||||||
Selling, general and administrative expenses | 336,578 | 314,666 | 659,547 | 684,880 | ||||||||||||||||
Interest expense | 33,444 | 34,297 | 67,592 | 70,057 | ||||||||||||||||
Other (income), net | (64,424 | ) | (13,877 | ) | (76,661 | ) | (27,056 | ) | ||||||||||||
Income before income taxes | 320,722 | 229,880 | 612,967 | 505,529 | ||||||||||||||||
Income taxes | 79,322 | 46,743 | 161,329 | 127,366 | ||||||||||||||||
Net income | 241,400 | 183,137 | 451,638 | 378,163 | ||||||||||||||||
Less: Noncontrolling interests | 95 | 155 | 204 | 203 | ||||||||||||||||
Net income attributable to common shareholders | $ | 241,305 | $ | 182,982 | $ | 451,434 | $ | 377,960 | ||||||||||||
Earnings per share attributable to common shareholders: | ||||||||||||||||||||
Basic earnings per share | $ | 1.81 | $ | 1.35 | $ | 3.38 | $ | 2.78 | ||||||||||||
Diluted earnings per share | $ | 1.78 | $ | 1.33 | $ | 3.33 | $ | 2.74 | ||||||||||||
Average shares outstanding during period - Basic | 133,320,109 | 135,373,356 | 133,499,744 | 136,108,930 | ||||||||||||||||
Average shares outstanding during period - Diluted | 135,812,760 | 137,065,447 | 135,596,707 | 137,788,219 | ||||||||||||||||
Cash dividends per common share | $ | .63 | $ | .63 | $ | 1.26 | $ | 1.26 | ||||||||||||
RECONCILIATION OF EARNINGS PER DILUTED SHARE TO ADJUSTED EARNINGS PER DILUTED SHARE | ||||||||||||||||||||
(Unaudited) | Three Months Ended December 31, | Six Months Ended December 31, | ||||||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||||||
Earnings per diluted share | $ | 1.78 | $ | 1.33 | $ | 3.33 | $ | 2.74 | ||||||||||||
Adjustments: | ||||||||||||||||||||
Business realignment charges | 0.04 | 0.19 | 0.10 | 0.30 | ||||||||||||||||
Acquisition expenses | 0.09 | - | 0.09 | - | ||||||||||||||||
Adjusted earnings per diluted share | $ | 1.91 | $ | 1.52 | $ | 3.52 | $ | 3.04 | ||||||||||||
BUSINESS SEGMENT INFORMATION | ||||||||||||||||||||
(Unaudited) | Three Months Ended December 31, | Six Months Ended December 31, | ||||||||||||||||||
(Dollars in thousands) | 2016 | 2015 | 2016 | 2015 | ||||||||||||||||
Net sales | ||||||||||||||||||||
Diversified Industrial: | ||||||||||||||||||||
North America | $ | 1,121,053 | $ | 1,160,774 | $ | 2,288,024 | $ | 2,447,104 | ||||||||||||
International | 1,005,968 | 992,464 | 2,020,891 | 2,030,911 | ||||||||||||||||
Aerospace Systems | 543,783 | 552,352 | 1,105,020 | 1,096,923 | ||||||||||||||||
Total | $ | 2,670,804 | $ | 2,705,590 | $ | 5,413,935 | $ | 5,574,938 | ||||||||||||
Segment operating income | ||||||||||||||||||||
Diversified Industrial: | ||||||||||||||||||||
North America | $ | 184,013 | $ | 153,581 | $ | 384,624 | $ | 366,329 | ||||||||||||
International | 127,517 | 95,367 | 264,713 | 224,662 | ||||||||||||||||
Aerospace Systems | 72,516 | 81,764 | 145,797 | 155,767 | ||||||||||||||||
Total segment operating income | 384,046 | 330,712 | 795,134 | 746,758 | ||||||||||||||||
Corporate general and administrative expenses | 43,926 | 31,210 | 74,960 | 84,261 | ||||||||||||||||
Income before interest and other expense | 340,120 | 299,502 | 720,174 | 662,497 | ||||||||||||||||
Interest expense | 33,444 | 34,297 | 67,592 | 70,057 | ||||||||||||||||
Other (income) expense | (14,046 | ) | 35,325 | 39,615 | 86,911 | |||||||||||||||
Income before income taxes | $ | 320,722 | $ | 229,880 | $ | 612,967 | $ | 505,529 | ||||||||||||
RECONCILIATION OF TOTAL SEGMENT OPERATING MARGIN TO ADJUSTED TOTAL SEGMENT OPERATING MARGIN | ||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||
Three Months Ended December 31, 2016 |
Three Months Ended December 31, 2015 |
|||||||||||||||||||
Operating margin | Operating margin | |||||||||||||||||||
Total segment operating income | $ | 384,046 | 14.4 | % | $ | 330,712 | 12.2 | % | ||||||||||||
Adjustments: | ||||||||||||||||||||
Business realignment charges | 7,897 | 34,800 | ||||||||||||||||||
Adjusted total segment operating income | $ | 391,943 | 14.7 | % | $ | 365,512 | 13.5 | % | ||||||||||||
CONSOLIDATED BALANCE SHEET | ||||||||||||||||||||
(Unaudited) | December 31, | June 30, | December 31, | |||||||||||||||||
(Dollars in thousands) | 2016 | 2016 | 2015 | |||||||||||||||||
Assets | ||||||||||||||||||||
Current assets: | ||||||||||||||||||||
Cash and cash equivalents | $ | 1,520,736 | $ | 1,221,653 | $ | 1,047,494 | ||||||||||||||
Marketable securities and other investments | 684,299 | 882,342 | 820,682 | |||||||||||||||||
Trade accounts receivable, net | 1,411,074 | 1,593,920 | 1,419,934 | |||||||||||||||||
Non-trade and notes receivable | 256,545 | 232,183 | 293,913 | |||||||||||||||||
Inventories | 1,241,593 | 1,173,329 | 1,279,760 | |||||||||||||||||
Prepaid expenses | 133,592 | 104,360 | 141,030 | |||||||||||||||||
Total current assets | 5,247,839 | 5,207,787 | 5,002,813 | |||||||||||||||||
Plant and equipment, net | 1,506,201 | 1,568,100 | 1,598,185 | |||||||||||||||||
Deferred income taxes | 482,136 | 605,155 | 383,805 | |||||||||||||||||
Goodwill | 2,813,238 | 2,903,037 | 2,913,065 | |||||||||||||||||
Intangible assets, net | 849,692 | 922,571 | 975,515 | |||||||||||||||||
Other assets | 832,507 | 827,492 | 840,920 | |||||||||||||||||
Total assets | $ | 11,731,613 | $ | 12,034,142 | $ | 11,714,303 | ||||||||||||||
Liabilities and equity | ||||||||||||||||||||
Current liabilities: | ||||||||||||||||||||
Notes payable | $ | 581,487 | $ | 361,787 | $ | 574,302 | ||||||||||||||
Accounts payable | 997,189 | 1,034,589 | 948,157 | |||||||||||||||||
Accrued liabilities | 720,844 | 841,915 | 736,145 | |||||||||||||||||
Accrued domestic and foreign taxes | 125,954 | 127,597 | 105,130 | |||||||||||||||||
Total current liabilities | 2,425,474 | 2,365,888 | 2,363,734 | |||||||||||||||||
Long-term debt | 2,653,560 | 2,652,457 | 2,701,121 | |||||||||||||||||
Pensions and other postretirement benefits | 1,766,209 | 2,076,143 | 1,475,351 | |||||||||||||||||
Deferred income taxes | 50,809 | 54,395 | 64,721 | |||||||||||||||||
Other liabilities | 304,583 | 306,581 | 306,655 | |||||||||||||||||
Shareholders' equity | 4,527,709 | 4,575,255 | 4,799,406 | |||||||||||||||||
Noncontrolling interests | 3,269 | 3,423 | 3,315 | |||||||||||||||||
Total liabilities and equity | $ | 11,731,613 | $ | 12,034,142 | $ | 11,714,303 | ||||||||||||||
CONSOLIDATED STATEMENT OF CASH FLOWS | ||||||||||||||||||||
(Unaudited) | Six Months Ended December 31, | |||||||||||||||||||
(Dollars in thousands) | 2016 | 2015 | ||||||||||||||||||
Cash flows from operating activities: | ||||||||||||||||||||
Net income | $ | 451,638 | $ | 378,163 | ||||||||||||||||
Depreciation and amortization | 149,085 | 156,093 | ||||||||||||||||||
Stock incentive plan compensation | 47,161 | 39,026 | ||||||||||||||||||
(Gain) on sale of business | (44,930 | ) | - | |||||||||||||||||
Loss (gain) on disposal of assets | 310 | (336 | ) | |||||||||||||||||
(Gain) on sale of marketable securities | (230 | ) | (158 | ) | ||||||||||||||||
Net change in receivables, inventories, and trade payables | 44,802 | 41,866 | ||||||||||||||||||
Net change in other assets and liabilities | (313,783 | ) | (239,277 | ) | ||||||||||||||||
Other, net | 70,123 | (12,730 | ) | |||||||||||||||||
Net cash provided by operating activities | 404,176 | 362,647 | ||||||||||||||||||
Cash flows from investing activities: | ||||||||||||||||||||
Acquisitions (net of cash of $1,760 in 2016 and $3,814 in 2015) | (29,927 | ) | (67,552 | ) | ||||||||||||||||
Capital expenditures | (71,356 | ) | (75,419 | ) | ||||||||||||||||
Proceeds from sale of plant and equipment | 4,991 | 8,506 | ||||||||||||||||||
Proceeds from sale of business | 85,610 | - | ||||||||||||||||||
Purchases of marketable securities and other investments | (393,909 | ) | (575,183 | ) | ||||||||||||||||
Maturities and sales of marketable securities and other investments | 506,642 | 527,819 | ||||||||||||||||||
Other, net | 241 | (41,450 | ) | |||||||||||||||||
Net cash provided by (used in) investing activities | 102,292 | (223,279 | ) | |||||||||||||||||
Cash flows from financing activities: | ||||||||||||||||||||
Net payments for common stock activity | (194,110 | ) | (410,049 | ) | ||||||||||||||||
Net proceeds from debt | 222,425 | 356,591 | ||||||||||||||||||
Dividends | (168,990 | ) | (171,707 | ) | ||||||||||||||||
Net cash (used in) financing activities | (140,675 | ) | (225,165 | ) | ||||||||||||||||
Effect of exchange rate changes on cash | (66,710 | ) | (47,293 | ) | ||||||||||||||||
Net increase (decrease) in cash and cash equivalents | 299,083 | (133,090 | ) | |||||||||||||||||
Cash and cash equivalents at beginning of period | 1,221,653 | 1,180,584 | ||||||||||||||||||
Cash and cash equivalents at end of period | $ | 1,520,736 | $ | 1,047,494 | ||||||||||||||||
RECONCILIATION OF CASH FLOW FROM OPERATIONS TO ADJUSTED CASH FLOW FROM OPERATIONS | ||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||
Six Months Ended December 31, 2016 |
Six Months Ended December 31, 2015 |
|||||||||||||||||||
Percent of sales | Percent of sales | |||||||||||||||||||
As reported cash flow from operations | $ | 404,176 | 7.5 | % | $ | 362,647 | 6.5 | % | ||||||||||||
Discretionary pension contribution | 220,000 | 200,000 | ||||||||||||||||||
Adjusted cash flow from operations | $ | 624,176 | 11.5 | % | $ | 562,647 | 10.1 | % | ||||||||||||
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 | $6.71 to $7.21 | |||||||||||||||||||
Adjustments: | ||||||||||||||||||||
Business realignment charges | .25 | |||||||||||||||||||
Acquisition expenses | .09 | |||||||||||||||||||
Adjusted forecasted earnings per diluted share | $7.05 to $7.55 | |||||||||||||||||||
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