- Sales increased 3% to second quarter record
$3.47 billion ; organic sales increased 6% - As reported EPS were
$2.36 , or$2.51 adjusted - Total segment operating margins were a second quarter record at 16.4%
- Adjusted total segment operating margins were 16.6%, a 170 bps year-over-year improvement
- EBITDA margins were 17.0%, or 17.2% adjusted
- Company increases fiscal 2019 full year EPS guidance
“This was a strong quarter as The Win Strategy™ drove organic sales growth of 6% and second quarter records for sales, total segment operating margins, net income, and EPS,” said Chairman and Chief Executive Officer,
Second Quarter Fiscal 2019 Segment Results
Diversified Industrial Segment: North American second quarter sales increased 4% to
Aerospace Systems Segment: Second quarter sales increased 12% to
Parker reported the following orders for the quarter ending
- Orders increased 1% for total Parker
- Orders were flat in the
Diversified Industrial North America businesses - Orders decreased 2% in the
Diversified Industrial International businesses - Orders increased 10% in the Aerospace Systems Segment on a rolling 12-month average basis
Outlook
For the fiscal year ending
Williams added, “Our Win Strategy execution positions us to deliver strong profitability and record earnings in fiscal 2019, despite signs of moderating end market demand and the impact of a stronger U.S. dollar. Completing a record year in fiscal 2019, and ongoing initiatives guided by the Win Strategy, solidifies our confidence in achieving our fiscal 2023 five-year performance goals.”
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 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,
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. Additionally, the actual impact of the U.S. Tax Cuts and Jobs Act on future performance and earnings projections may change based on subsequent judicial or regulatory interpretations of the Act that impact the company’s tax calculations. 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, 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.
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
PARKER HANNIFIN CORPORATION - DECEMBER 31, 2018 |
||||||||||||||||
CONSOLIDATED STATEMENT OF INCOME |
||||||||||||||||
(Unaudited) | Three Months Ended December 31, | Six Months Ended December 31, | ||||||||||||||
(Dollars in thousands, except per share amounts) | 2018 | 2017 | 2018 | 2017 | ||||||||||||
Net sales | $ | 3,472,045 | $ | 3,370,673 | $ | 6,951,339 | $ | 6,735,324 | ||||||||
Cost of sales | 2,602,339 | 2,564,449 | 5,197,162 | 5,087,743 | ||||||||||||
Selling, general and administrative expenses | 397,259 | 408,338 | 791,581 | 805,322 | ||||||||||||
Interest expense | 47,518 | 53,133 | 91,857 | 106,688 | ||||||||||||
Other (income) expense, net | (6,225 | ) | (15,468 | ) | (20,138 | ) | 1,048 | |||||||||
Income before income taxes | 431,154 | 360,221 | 890,877 | 734,523 | ||||||||||||
Income taxes | 119,241 | 303,899 | 203,065 | 392,666 | ||||||||||||
Net income | 311,913 | 56,322 | 687,812 | 341,857 | ||||||||||||
Less: Noncontrolling interests | 176 | 163 | 364 | 301 | ||||||||||||
Net income attributable to common shareholders | $ | 311,737 | $ | 56,159 | $ | 687,448 | $ | 341,556 | ||||||||
Earnings per share attributable to common shareholders: | ||||||||||||||||
Basic earnings per share | $ | 2.39 | $ | 0.42 | $ | 5.23 | $ | 2.57 | ||||||||
Diluted earnings per share | $ | 2.36 | $ | 0.41 | $ | 5.15 | $ | 2.51 | ||||||||
Average shares outstanding during period - Basic | 130,361,273 | 133,112,568 | 131,361,463 | 133,144,766 | ||||||||||||
Average shares outstanding during period - Diluted | 132,311,210 | 136,194,919 | 133,449,673 | 135,874,530 | ||||||||||||
CASH DIVIDENDS PER COMMON SHARE | ||||||||||||||||
(Unaudited) | Three Months Ended December 31, | Six Months Ended December 31, | ||||||||||||||
(Amounts in dollars) | 2018 | 2017 | 2018 | 2017 | ||||||||||||
Cash dividends per common share | $ | 0.76 | $ | 0.66 | $ | 1.52 | $ | 1.32 | ||||||||
RECONCILIATION OF EARNINGS PER DILUTED SHARE TO ADJUSTED EARNINGS PER DILUTED SHARE |
||||||||||||||||
(Unaudited) | Three Months Ended December 31, | Six Months Ended December 31, | ||||||||||||||
(Amounts in dollars) | 2018 | 2017 | 2018 | 2017 | ||||||||||||
Earnings per diluted share | $ | 2.36 | $ | 0.41 | $ | 5.15 | $ | 2.51 | ||||||||
Adjustments: | ||||||||||||||||
Business realignment charges | 0.01 | 0.07 | 0.02 | 0.12 | ||||||||||||
Clarcor costs to achieve | 0.03 | 0.07 | 0.07 | 0.10 | ||||||||||||
(Gain) loss on sale and writedown of assets, net | - | (0.05 | ) | - | 0.02 | |||||||||||
U.S. Tax Reform one-time impact, net | 0.11 | 1.65 | 0.11 | 1.65 | ||||||||||||
Adjusted earnings per diluted share | $ | 2.51 | $ | 2.15 | $ | 5.35 | $ | 4.40 | ||||||||
RECONCILIATION OF EBITDA TO ADJUSTED EBITDA |
||||||||||||||||
(Unaudited) | Three Months Ended December 31, | Six Months Ended December 31, | ||||||||||||||
(Dollars in thousands) | 2018 | 2017 | 2018 | 2017 | ||||||||||||
Net sales | $ | 3,472,045 | $ | 3,370,673 | $ | 6,951,339 | $ | 6,735,324 | ||||||||
Earnings before income taxes | $ | 431,154 | $ | 360,221 | $ | 890,877 | $ | 734,523 | ||||||||
Depreciation and amortization | 110,052 | 118,109 | 222,543 | 234,216 | ||||||||||||
Interest expense | 47,518 | 53,133 | 91,857 | 106,688 | ||||||||||||
EBITDA | 588,724 | 531,463 | 1,205,277 | 1,075,427 | ||||||||||||
Adjustments: | ||||||||||||||||
Business realignment charges | 2,515 | 13,428 | 4,918 | 21,654 | ||||||||||||
Clarcor costs to achieve | 5,087 | 11,948 | 11,297 | 17,748 | ||||||||||||
(Gain) loss on sale and writedown of assets, net | - | (8,453 | ) | - | 5,324 | |||||||||||
Adjusted EBITDA | $ | 596,326 | $ | 548,386 | $ | 1,221,492 | $ | 1,120,153 | ||||||||
EBITDA margin | 17.0 | % | 15.8 | % | 17.3 | % | 16.0 | % | ||||||||
Adjusted EBITDA margin | 17.2 | % | 16.3 | % | 17.6 | % | 16.6 | % | ||||||||
BUSINESS SEGMENT INFORMATION |
||||||||||||||||
(Unaudited) | Three Months Ended December 31, | Six Months Ended December 31, | ||||||||||||||
(Dollars in thousands) | 2018 | 2017 | 2018 | 2017 | ||||||||||||
Net sales | ||||||||||||||||
Diversified Industrial: | ||||||||||||||||
North America | $ | 1,632,059 | $ | 1,565,416 | $ | 3,313,103 | $ | 3,160,107 | ||||||||
International | 1,223,679 | 1,255,569 | 2,457,445 | 2,494,343 | ||||||||||||
Aerospace Systems | 616,307 | 549,688 | 1,180,791 | 1,080,874 | ||||||||||||
Total | $ | 3,472,045 | $ | 3,370,673 | $ | 6,951,339 | $ | 6,735,324 | ||||||||
Segment operating income | ||||||||||||||||
Diversified Industrial: | ||||||||||||||||
North America | $ | 257,774 | $ | 225,807 | $ | 532,885 | $ | 481,834 | ||||||||
International | 189,085 | 164,806 | 395,179 | 356,597 | ||||||||||||
Aerospace Systems | 121,463 | 87,148 | 231,318 | 164,582 | ||||||||||||
Total segment operating income | 568,322 | 477,761 | 1,159,382 | 1,003,013 | ||||||||||||
Corporate general and administrative expenses | 63,890 | 46,942 | 114,215 | 88,292 | ||||||||||||
Income before interest and other expense | 504,432 | 430,819 | 1,045,167 | 914,721 | ||||||||||||
Interest expense | 47,518 | 53,133 | 91,857 | 106,688 | ||||||||||||
Other expense | 25,760 | 17,465 | 62,433 | 73,510 | ||||||||||||
Income before income taxes | $ | 431,154 | $ | 360,221 | $ | 890,877 | $ | 734,523 | ||||||||
RECONCILIATION OF TOTAL SEGMENT OPERATING MARGIN TO ADJUSTED TOTAL SEGMENT OPERATING MARGIN |
||||||||||||||||
(Unaudited) | Three Months Ended | Three Months Ended | ||||||||||||||
(Dollars in thousands) | December 31, 2018 | December 31, 2017 | ||||||||||||||
Operating income | Operating margin | Operating income | Operating margin | |||||||||||||
Total segment operating income | $ | 568,322 | 16.4 | % | $ | 477,761 | 14.2 | % | ||||||||
Adjustments: | ||||||||||||||||
Business realignment charges | 2,515 | 13,428 | ||||||||||||||
Clarcor costs to achieve | 4,867 | 11,948 | ||||||||||||||
Adjusted total segment operating income | $ | 575,704 | 16.6 | % | $ | 503,137 | 14.9 | % | ||||||||
Six Months Ended | Six Months Ended | |||||||||||||||
December 31, 2018 | December 31, 2017 | |||||||||||||||
Operating income | Operating margin | Operating income | Operating margin | |||||||||||||
Total segment operating income | $ | 1,159,382 | 16.7 | % | $ | 1,003,013 | 14.9 | % | ||||||||
Adjustments: | ||||||||||||||||
Business realignment charges | 4,918 | 21,654 | ||||||||||||||
Clarcor costs to achieve | 11,022 | 17,748 | ||||||||||||||
Adjusted total segment operating income | $ | 1,175,322 | 16.9 | % | $ | 1,042,415 | 15.5 | % | ||||||||
CONSOLIDATED BALANCE SHEET |
||||||||||||||||
(Unaudited) | December 31, | June 30, | December 31, | |||||||||||||
(Dollars in thousands) | 2018 | 2018 | 2017 | |||||||||||||
Assets | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | $ | 1,047,385 | $ | 822,137 | $ | 1,024,770 | ||||||||||
Marketable securities and other investments | 30,956 | 32,995 | 107,976 | |||||||||||||
Trade accounts receivable, net | 1,938,709 | 2,145,517 | 1,857,282 | |||||||||||||
Non-trade and notes receivable | 324,254 | 328,399 | 313,221 | |||||||||||||
Inventories | 1,804,564 | 1,621,304 | 1,780,262 | |||||||||||||
Prepaid expenses and other | 188,868 | 134,886 | 202,848 | |||||||||||||
Total current assets | 5,334,736 | 5,085,238 | 5,286,359 | |||||||||||||
Plant and equipment, net | 1,793,805 | 1,856,237 | 1,937,074 | |||||||||||||
Deferred income taxes | 98,779 | 57,623 | 36,668 | |||||||||||||
Goodwill | 5,462,555 | 5,504,420 | 5,698,707 | |||||||||||||
Intangible assets, net | 1,883,825 | 2,015,520 | 2,174,104 | |||||||||||||
Other assets | 733,987 | 801,049 | 832,269 | |||||||||||||
Total assets | $ | 15,307,687 | $ | 15,320,087 | $ | 15,965,181 | ||||||||||
Liabilities and equity | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Notes payable | $ | 1,144,347 | $ | 638,466 | $ | 1,248,212 | ||||||||||
Accounts payable | 1,307,178 | 1,430,306 | 1,229,336 | |||||||||||||
Accrued liabilities | 874,792 | 929,833 | 896,750 | |||||||||||||
Accrued domestic and foreign taxes | 182,617 | 198,878 | 163,405 | |||||||||||||
Total current liabilities | 3,508,934 | 3,197,483 | 3,537,703 | |||||||||||||
Long-term debt | 4,303,331 | 4,318,559 | 4,798,371 | |||||||||||||
Pensions and other postretirement benefits | 937,938 | 1,177,605 | 1,363,466 | |||||||||||||
Deferred income taxes | 286,622 | 234,858 | 137,196 | |||||||||||||
Other liabilities | 449,696 | 526,089 | 609,235 | |||||||||||||
Shareholders' equity | 5,815,209 | 5,859,866 | 5,513,401 | |||||||||||||
Noncontrolling interests | 5,957 | 5,627 | 5,809 | |||||||||||||
Total liabilities and equity | $ | 15,307,687 | $ | 15,320,087 | $ | 15,965,181 | ||||||||||
CONSOLIDATED STATEMENT OF CASH FLOWS |
||||||||||||||||
(Unaudited) | Six Months Ended December 31, | |||||||||||||||
(Dollars in thousands) | 2018 | 2017 | ||||||||||||||
Cash flows from operating activities: | ||||||||||||||||
Net income | $ | 687,812 | $ | 341,857 | ||||||||||||
Depreciation and amortization | 222,543 | 234,216 | ||||||||||||||
Stock incentive plan compensation | 64,615 | 64,267 | ||||||||||||||
Loss on sale of businesses | 623 | - | ||||||||||||||
Loss (gain) on plant and equipment and intangible assets | 3,428 | (26,529 | ) | |||||||||||||
Loss (gain) on sale of marketable securities | 5,701 | (1 | ) | |||||||||||||
(Gain) loss on investments | (3,213 | ) | 33,759 | |||||||||||||
Net change in receivables, inventories, and trade payables | (110,709 | ) | (249,615 | ) | ||||||||||||
Net change in other assets and liabilities | (379,687 | ) | 120,301 | |||||||||||||
Other, net | 49,927 | (61,481 | ) | |||||||||||||
Net cash provided by operating activities | 541,040 | 456,774 | ||||||||||||||
Cash flows from investing activities: | ||||||||||||||||
Acquisitions (net of cash of $690 in 2018) | (2,042 | ) | - | |||||||||||||
Capital expenditures | (94,426 | ) | (144,781 | ) | ||||||||||||
Proceeds from sale of plant and equipment | 34,121 | 59,848 | ||||||||||||||
Proceeds from sale of businesses | 19,540 | - | ||||||||||||||
Purchases of marketable securities and other investments | (2,845 | ) | (78,309 | ) | ||||||||||||
Maturities and sales of marketable securities and other investments | 14,432 | 12,710 | ||||||||||||||
Other | (90 | ) | 8,706 | |||||||||||||
Net cash (used in) investing activities | (31,310 | ) | (141,826 | ) | ||||||||||||
Cash flows from financing activities: | ||||||||||||||||
Net payments for common stock activity | (565,335 | ) | (134,360 | ) | ||||||||||||
Net proceeds from debt | 505,811 | 127,723 | ||||||||||||||
Dividends | (200,459 | ) | (176,187 | ) | ||||||||||||
Net cash (used in) financing activities | (259,983 | ) | (182,824 | ) | ||||||||||||
Effect of exchange rate changes on cash | (24,499 | ) | 7,760 | |||||||||||||
Net increase in cash and cash equivalents | 225,248 | 139,884 | ||||||||||||||
Cash and cash equivalents at beginning of period | 822,137 | 884,886 | ||||||||||||||
Cash and cash equivalents at end of period | $ | 1,047,385 | $ | 1,024,770 | ||||||||||||
RECONCILIATION OF CASH FLOW FROM OPERATIONS TO ADJUSTED CASH FLOW FROM OPERATIONS |
||||||||||||||||
(Unaudited) | ||||||||||||||||
(Dollars in thousands) | Six Months Ended December 31, 2018 |
Six Months Ended December 31, 2017 |
||||||||||||||
Percent of sales | Percent of sales | |||||||||||||||
As reported cash flow from operations | $ | 541,040 | 7.8 | % | $ | 456,774 | 6.8 | % | ||||||||
Discretionary pension contribution | 200,000 | - | ||||||||||||||
Adjusted cash flow from operations | $ | 741,040 | 10.7 | % | $ | 456,774 | 6.8 | % | ||||||||
RECONCILIATION OF FORECASTED EARNINGS PER DILUTED SHARE TO ADJUSTED FORECASTED EARNINGS PER DILUTED SHARE |
||||||||||||||||
(Unaudited) | ||||||||||||||||
(Amounts in dollars) | ||||||||||||||||
Fiscal Year | ||||||||||||||||
2019 | ||||||||||||||||
Forecasted earnings per diluted share | $11.04 - $11.54 | |||||||||||||||
Adjustments: | ||||||||||||||||
Business realignment charges | 0.11 | |||||||||||||||
Clarcor costs to achieve | 0.09 | |||||||||||||||
U.S. Tax Reform income tax expense adjustment | 0.11 | |||||||||||||||
Adjusted forecasted earnings per diluted share | $11.35 - $11.85 | |||||||||||||||
Source: Parker-Hannifin Corporation