- First quarter sales were
- First quarter EPS were
- First quarter total segment operating margin was 17.0% as reported, or 17.3% adjusted
- EBITDA margin was 18.4% as reported, or 19.1% adjusted
- Cash flow from operations was a first quarter record at
- LORD Corporation and
- Company revises fiscal 2020 full year guidance
“We delivered increased adjusted total segment operating margin, EBITDA margin and record cash flow in the first quarter despite softness in global economic conditions," said Chairman and Chief Executive Officer,
Segment Results
Diversified Industrial Segment: North American first quarter sales decreased 3% to
Aerospace Systems Segment: First quarter sales increased 12% to
Parker reported the following orders for the quarter ending
- Orders decreased 2% for total Parker
- Orders decreased 6% in the
Diversified Industrial North America businesses - Orders decreased 10% in the
Diversified Industrial International businesses - Orders increased 22% in the Aerospace Systems Segment on a rolling 12-month average basis
Acquisitions Update
As previously announced on
As previously announced on
Detailed integration plans are underway for both acquisitions, which are expected to facilitate a smooth transition and drive synergies from the combination of the organizations.
Outlook
For the fiscal year ending
Williams added, "Continued execution of the Win Strategy will position us to deliver strong margins, earnings and cash flow for the full fiscal year. We have revised guidance based on the impact of the closing of the
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 Financial Measures
This press release contains references to non-GAAP financial information including (a) adjusted earnings per share; (b) adjusted cash flow from operations; (c) adjusted total segment operating margin; adjusted EBITDA margin; and (d) adjusted forecasted earnings from continuing operations per share. The adjusted earnings per share, cash flow from operations and total segment operating margin measures are presented to allow investors and the company to meaningfully evaluate changes in earnings per share, cash flows from operations and total segment operating margin on a comparable basis from period to period. This press release also contains references to EBITDA and EBITDA margin. EBITDA is defined as earnings before interest, taxes, depreciation and amortization. Although EBITDA and EBITDA margin are not measures of performance calculated in accordance with GAAP, we believe that they are useful to an investor in evaluating the results of this quarter versus the prior period. A reconciliation of non-GAAP measures is included in the financial tables of this press release.
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. Parker cautions readers not to place undue reliance on these 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. Additionally, the actual impact of changes in tax laws in the United States and foreign jurisdictions and any judicial or regulatory interpretations thereof on future performance and earnings projections may 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, LORD Corporation or Exotic Metals; 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.
PARKER HANNIFIN CORPORATION - SEPTEMBER 30, 2019 | ||||||||
CONSOLIDATED STATEMENT OF INCOME | ||||||||
(Unaudited) | Three Months Ended September 30, | |||||||
(Dollars in thousands except per share amounts) | 2019 | 2018 | ||||||
Net sales | $ | 3,334,511 | $ | 3,479,294 | ||||
Cost of sales | 2,479,741 | 2,594,823 | ||||||
Selling, general and administrative expenses | 399,179 | 394,322 | ||||||
Interest expense | 69,956 | 44,339 | ||||||
Other (income) expense, net | (47,521 | ) | (13,913 | ) | ||||
Income before income taxes | 433,156 | 459,723 | ||||||
Income taxes | 94,115 | 83,824 | ||||||
Net income | 339,041 | 375,899 | ||||||
Less: Noncontrolling interests | 143 | 188 | ||||||
Net income attributable to common shareholders | $ | 338,898 | $ | 375,711 | ||||
Earnings per share attributable to common shareholders: | ||||||||
Basic earnings per share | $ | 2.64 | $ | 2.84 | ||||
Diluted earnings per share | $ | 2.60 | $ | 2.79 | ||||
Average shares outstanding during period - Basic | 128,463,992 | 132,361,654 | ||||||
Average shares outstanding during period - Diluted | 130,130,076 | 134,664,496 | ||||||
CASH DIVIDENDS PER COMMON SHARE | ||||||||
(Unaudited) | Three Months Ended September 30, | |||||||
(Amounts in dollars) | 2019 | 2018 | ||||||
Cash dividends per common share | $ | 0.88 | $ | 0.76 | ||||
RECONCILIATION OF EARNINGS PER DILUTED SHARE TO ADJUSTED EARNINGS PER DILUTED SHARE | ||||||||
(Unaudited) | Three Months Ended September 30, | |||||||
(Amounts in dollars) | 2019 | 2018 | ||||||
Earnings per diluted share | $ | 2.60 | $ | 2.79 | ||||
Adjustments: | ||||||||
Business realignment charges | 0.04 | 0.02 | ||||||
Clarcor costs to achieve | — | 0.05 | ||||||
Lord costs to achieve | 0.03 | — | ||||||
Exotic costs to achieve | 0.01 | — | ||||||
Acquisition-related expenses | 0.14 | — | ||||||
Tax effect of adjustments1 | (0.06 | ) | (0.02 | ) | ||||
Adjusted earnings per diluted share | $ | 2.76 | $ | 2.84 | ||||
1This line item reflects the aggregate tax effect of all non-tax adjustments reflected in the preceding line items of the table. We estimate the tax effect of each adjustment item by applying our overall effective tax rate for continuing operations to the pre-tax amount, unless the nature of the item and/or the tax jurisdiction in which the item has been recorded requires application of a specific tax rate or tax treatment, in which case the tax effect of such item is estimated by applying such specific tax rate or tax treatment. | ||||||||
PARKER HANNIFIN CORPORATION - SEPTEMBER 30, 2019 | ||||||||
RECONCILIATION OF EBITDA TO ADJUSTED EBITDA | ||||||||
(Unaudited) | Three Months Ended September 30, | |||||||
(Dollars in thousands) | 2019 | 2018 | ||||||
Net sales | $ | 3,334,511 | $ | 3,479,294 | ||||
Net income | $ | 339,041 | $ | 375,899 | ||||
Income taxes | 94,115 | 83,824 | ||||||
Depreciation and amortization | 109,071 | 112,491 | ||||||
Interest expense | 69,956 | 44,339 | ||||||
EBITDA | 612,183 | 616,553 | ||||||
Adjustments: | ||||||||
Business realignment charges | 4,723 | 2,403 | ||||||
Clarcor costs to achieve | — | 6,210 | ||||||
Lord costs to achieve | 3,414 | — | ||||||
Exotic costs to achieve | 595 | — | ||||||
Acquisition-related expenses | 17,449 | — | ||||||
Adjusted EBITDA | $ | 638,364 | $ | 625,166 | ||||
EBITDA margin | 18.4 | % | 17.7 | % | ||||
Adjusted EBITDA margin | 19.1 | % | 18.0 | % | ||||
PARKER HANNIFIN CORPORATION - SEPTEMBER 30, 2019 | ||||||||
BUSINESS SEGMENT INFORMATION | ||||||||
(Unaudited) | Three Months Ended September 30, | |||||||
(Dollars in thousands) | 2019 | 2018 | ||||||
Net sales | ||||||||
Diversified Industrial: | ||||||||
North America | $ | 1,624,605 | $ | 1,681,044 | ||||
International | 1,078,850 | 1,233,766 | ||||||
Aerospace Systems | 631,056 | 564,484 | ||||||
Total net sales | $ | 3,334,511 | $ | 3,479,294 | ||||
Segment operating income | ||||||||
Diversified Industrial: | ||||||||
North America | $ | 275,192 | $ | 275,111 | ||||
International | 168,573 | 206,094 | ||||||
Aerospace Systems | 122,980 | 109,855 | ||||||
Total segment operating income | 566,745 | 591,060 | ||||||
Corporate general and administrative expenses | 48,902 | 50,325 | ||||||
Income before interest expense and other expense | 517,843 | 540,735 | ||||||
Interest expense | 69,956 | 44,339 | ||||||
Other expense | 14,731 | 36,673 | ||||||
Income before income taxes | $ | 433,156 | $ | 459,723 | ||||
RECONCILIATION OF TOTAL SEGMENT OPERATING MARGIN TO ADJUSTED TOTAL SEGMENT OPERATING MARGIN | |||||||||||
(Unaudited) | Three Months Ended | Three Months Ended | |||||||||
(Dollars in thousands) | September 30, 2019 | September 30, 2018 | |||||||||
Operating income |
Operating margin |
Operating income |
Operating margin |
||||||||
Total segment operating income | $ | 566,745 | 17.0 | % | $ | 591,060 | 17.0 | % | |||
Adjustments: | |||||||||||
Business realignment charges | 4,718 | 2,403 | |||||||||
Clarcor costs to achieve | — | 6,155 | |||||||||
Lord costs to achieve | 3,414 | — | |||||||||
Exotic costs to achieve | 595 | — | |||||||||
Acquisition-related expenses | 2,519 | — | |||||||||
Adjusted total segment operating income | $ | 577,991 | 17.3 | % | $ | 599,618 | 17.2 | % | |||
PARKER HANNIFIN CORPORATION - SEPTEMBER 30, 2019 | ||||||
CONSOLIDATED BALANCE SHEET | ||||||
(Unaudited) | September 30, | June 30, | September 30, | |||
(Dollars in thousands) | 2019 | 2019 | 2018 | |||
Assets | ||||||
Current assets: | ||||||
Cash and cash equivalents | $3,627,393 | $3,219,767 | $952,122 | |||
Marketable securities and other investments | 282,102 | 150,931 | 40,787 | |||
Trade accounts receivable, net | 1,983,242 | 2,131,054 | 2,065,158 | |||
Non-trade and notes receivable | 288,762 | 310,708 | 312,162 | |||
Inventories | 1,790,044 | 1,678,132 | 1,762,640 | |||
Prepaid expenses and other | 166,536 | 182,494 | 165,213 | |||
Total current assets | 8,138,079 | 7,673,086 | 5,298,082 | |||
Plant and equipment, net | 1,880,157 | 1,768,287 | 1,828,034 | |||
Deferred income taxes | 145,476 | 150,462 | 99,886 | |||
Goodwill | 5,818,613 | 5,453,805 | 5,485,144 | |||
Intangible assets, net | 2,693,756 | 1,783,277 | 1,956,101 | |||
Investments and other assets | 892,508 | 747,773 | 757,795 | |||
Total assets | $19,568,589 | $17,576,690 | $15,425,042 | |||
Liabilities and equity | ||||||
Current liabilities: | ||||||
Notes payable | $1,736,779 | $587,014 | $796,861 | |||
Accounts payable | 1,287,420 | 1,413,155 | 1,404,716 | |||
Accrued payrolls and other compensation | 310,417 | 426,285 | 318,730 | |||
Accrued domestic and foreign taxes | 188,571 | 167,312 | 238,423 | |||
Other accrued liabilities | 634,141 | 558,007 | 549,791 | |||
Total current liabilities | 4,157,328 | 3,151,773 | 3,308,521 | |||
Long-term debt | 7,366,912 | 6,520,831 | 4,313,221 | |||
Pensions and other postretirement benefits | 1,261,493 | 1,304,379 | 958,937 | |||
Deferred income taxes | 178,454 | 193,066 | 265,418 | |||
Other liabilities | 501,610 | 438,489 | 471,839 | |||
Shareholders' equity | 6,096,616 | 5,961,969 | 6,101,380 | |||
Noncontrolling interests | 6,176 | 6,183 | 5,726 | |||
Total liabilities and equity | $19,568,589 | $17,576,690 | $15,425,042 | |||
PARKER HANNIFIN CORPORATION - SEPTEMBER 30, 2019 | ||||||||
CONSOLIDATED STATEMENT OF CASH FLOWS | ||||||||
(Unaudited) | Three Months Ended September 30, | |||||||
(Dollars in thousands) | 2019 | 2018 | ||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 339,041 | $ | 375,899 | ||||
Depreciation and amortization | 109,071 | 112,491 | ||||||
Stock incentive plan compensation | 52,633 | 42,941 | ||||||
Loss on sale of businesses | — | 3,029 | ||||||
Gain on plant and equipment and intangible assets | (10,269 | ) | (3,826 | ) | ||||
Loss (gain) on marketable securities | 201 | (3,204 | ) | |||||
Gain on investments | (498 | ) | (2,536 | ) | ||||
Net change in receivables, inventories and trade payables | 53,526 | (70,973 | ) | |||||
Net change in other assets and liabilities | (77,794 | ) | (329,726 | ) | ||||
Other, net | (16,780 | ) | 35,293 | |||||
Net cash provided by operating activities | 449,131 | 159,388 | ||||||
Cash flows from investing activities: | ||||||||
Acquisitions (net of cash of $8,179 in 2019 and $690 in 2018) | (1,696,456 | ) | (2,042 | ) | ||||
Capital expenditures | (50,345 | ) | (42,106 | ) | ||||
Proceeds from sale of plant and equipment | 19,284 | 10,969 | ||||||
Proceeds from sale of businesses | — | 4,515 | ||||||
Purchases of marketable securities and other investments | (159,984 | ) | (2,844 | ) | ||||
Maturities and sales of marketable securities and other investments | 26,477 | 14,127 | ||||||
Other | 8,070 | 2,318 | ||||||
Net cash used in investing activities | (1,852,954 | ) | (15,063 | ) | ||||
Cash flows from financing activities: | ||||||||
Net payments for common stock activity | (71,985 | ) | (64,855 | ) | ||||
Net proceeds from debt | 2,023,714 | 158,477 | ||||||
Dividends | (113,352 | ) | (100,869 | ) | ||||
Net cash provided by (used in) financing activities | 1,838,377 | (7,247 | ) | |||||
Effect of exchange rate changes on cash | (26,928 | ) | (7,093 | ) | ||||
Net increase in cash and cash equivalents | 407,626 | 129,985 | ||||||
Cash and cash equivalents at beginning of period | 3,219,767 | 822,137 | ||||||
Cash and cash equivalents at end of period | $ | 3,627,393 | $ | 952,122 | ||||
RECONCILIATION OF CASH FLOW FROM OPERATIONS TO ADJUSTED CASH FLOW FROM OPERATIONS | ||||||||||||
(Unaudited) | Three Months Ended | Three Months Ended | ||||||||||
(Dollars in thousands) | September 30, 2019 | Percent of sales | September 30, 2018 | Percent of sales | ||||||||
As reported cash flow from operations | $ | 449,131 | 13.5 | % | $ | 159,388 | 4.6 | % | ||||
Discretionary pension contribution | — | 200,000 | ||||||||||
Adjusted cash flow from operations | $ | 449,131 | 13.5 | % | $ | 359,388 | 10.3 | % | ||||
PARKER HANNIFIN CORPORATION - SEPTEMBER 30, 2019 | ||
RECONCILIATION OF FORECASTED EARNINGS PER DILUTED SHARE TO ADJUSTED FORECASTED EARNINGS PER DILUTED SHARE | ||
(Unaudited) | ||
(Amounts in dollars) | Fiscal Year 2020 | |
Forecasted earnings per diluted share | $8.53 - $9.33 | |
Adjustments: | ||
Business realignment charges | 0.30 | |
Costs to achieve | 0.20 | |
One-time acquisition expenses | 1.54 | |
Tax effect of adjustments1 | (0.47) | |
Adjusted forecasted earnings per diluted share | $10.10 - $10.90 | |
1This line item reflects the aggregate tax effect of all non-tax adjustments reflected in the preceding line items of the table. We estimate the tax effect of each adjustment item by applying our overall effective tax rate for continuing operations to the pre-tax amount, unless the nature of the item and/or the tax jurisdiction in which the item has been recorded requires application of a specific tax rate or tax treatment, in which case the tax effect of such item is estimated by applying such specific tax rate or tax treatment. | ||
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 |
Source: Parker-Hannifin Corporation