UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): February 3, 2022
(Exact Name of Registrant as Specified in Charter)
(State or other jurisdiction of Incorporation or Organization) | (Commission File Number) | (I.R.S. Employer Identification No.) | ||||||
(Address of Principal Executive Offices) | (Zip Code) | |||||||
Registrant's telephone number, including area code: (216 ) 896-3000
Not Applicable
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
240.14d-2(b))
240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol | Name of Each Exchange on which Registered | ||||||||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company | ||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition
On February 3, 2022, Parker-Hannifin Corporation issued a press release and presented a Webcast announcing results of operations for the quarter ended December 31, 2021. A copy of the press release is furnished as Exhibit 99.1 to this report. A copy of the Webcast presentation is furnished as Exhibit 99.2 to this report.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits:
104 Cover Page Interactive Data File (embedded within the Inline XBRL document)
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.
| PARKER-HANNIFIN CORPORATION | |||||||||||
| By: /s/ Todd M. Leombruno | |||||||||||
| Todd M. Leombruno | |||||||||||
| Executive Vice President and Chief Financial Officer | |||||||||||
| Date: | February 3, 2022 | ||||||||||
| For Release: | Immediately | Exhibit 99.1 | ||||||
| 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 | ||||||||
| Stock Symbol: | PH - NYSE | |||||||
Parker Reports Fiscal 2022 Second Quarter Results
- Sales increased 12% to a second quarter record at $3.82 billion, organic sales increased 13%
- Segment operating margin was a second quarter record at 19.4% as reported, or 21.6% adjusted
- Net income was $387.6 million; EPS was $2.97 as reported, or $4.46 adjusted
- Second quarter EBITDA margin was 18.2% as reported, or 22.7% adjusted
- Company increases fiscal 2022 EPS guidance
CLEVELAND, February 3, 2022 -- Parker Hannifin Corporation (NYSE: PH), the global leader in motion and control technologies, today reported results for the fiscal 2022 second quarter ended December 31, 2021. Fiscal 2022 second quarter sales were a second quarter record at $3.82 billion, an increase of 12%, compared with $3.41 billion in the second quarter of fiscal 2021. Net income was $387.6 million, compared with $448.4 million in the prior year quarter. Fiscal 2022 second quarter adjusted net income was $582.2 million, compared with $451.6 million in fiscal 2021. Adjustments include an unrealized pre-tax loss of $149 million in the fiscal 2022 second quarter on the deal contingent forward contracts related to the previously announced acquisition of Meggitt plc. Earnings per share were $2.97, compared with $3.42 in the second quarter of fiscal 2021. Adjusted earnings per share increased 29% to $4.46, compared with adjusted earnings per share of $3.45 in the prior year quarter. Fiscal year-to-date cash flow from operations was $1.01 billion, or 13% of sales, compared with $1.35 billion in the prior year period. A reconciliation of non-GAAP measures is included in the financial tables of this press release.
"Our teams executed extremely well in the second quarter in an environment of strong demand against a backdrop of inflationary pressures and supply chain challenges together with disruptions brought on by the ongoing COVID-19 pandemic,” said Chairman and Chief Executive Officer, Tom Williams. "We delivered record second quarter sales, driven by strong organic growth across all of our businesses and regions. Importantly, we also delivered record total segment operating margin and our adjusted EBITDA margin increased by 180 basis points compared with the prior year period. Our results reflect the impact
of The Win Strategy™ and significant changes we have made to our portfolio. Parker team members continue to demonstrate remarkable resiliency and agility as they respond to very dynamic and uncertain circumstances in the global supply chain."
Segment Results
Diversified Industrial Segment: North American second quarter sales increased 15% to $1.81 billion and operating income was $337.4 million compared with $281.6 million in the same period a year ago. International second quarter sales increased 11% to $1.40 billion and operating income was $291.6 million compared with $220.2 million in the same period a year ago.
Aerospace Systems Segment: Second quarter sales increased 6% to $618.4 million and operating income was $114.8 million compared with $90.7 million in the same period a year ago.
Parker reported the following orders for the quarter ending December 31, 2021, compared with the same quarter a year ago:
· Orders increased 12% for total Parker
· Orders increased 17% in the Diversified Industrial North America businesses
· Orders increased 14% in the Diversified Industrial International businesses
· Orders decreased 7%* in the Aerospace Systems Segment on a rolling 12-month average basis.
*Aerospace orders increased mid-teens excluding sizable multi-year military orders in the prior period.
Outlook
For the fiscal year ending June 30, 2022, the company has increased guidance for earnings per share to the range of $14.42 to $14.92, or $17.80 to $18.30 on an adjusted basis. Guidance assumes organic sales growth of approximately 10% to 12% compared with the prior year. Fiscal year 2022 guidance is adjusted on a pre-tax basis for acquisition-related expenses of $71 million, a loss of $149 million on deal contingent forward contracts related to the acquisition of Meggitt plc and expected business realignment expenses of approximately $30 million, LORD costs to achieve of approximately $5 million and acquisition-related intangible asset amortization of approximately $320 million. A reconciliation of forecasted earnings per share to adjusted forecasted earnings per share is included in the financial tables of this press release.
Williams added, “For the remainder of this fiscal year, we expect positive demand trends to continue and are confident in our ability to navigate the Omicron variant and supply chain challenges ahead. We are also encouraged with the progress being made on the regulatory clearances required for the closure of the Meggitt acquisition. With disciplined execution of the Win Strategy 3.0 and the
transformation of our portfolio continuing, we remain strongly positioned to deliver sustainable long-term growth and top quartile performance."
NOTICE OF CONFERENCE CALL: Parker Hannifin's conference call and slide presentation to discuss its fiscal 2022 second quarter results are available to all interested parties via live webcast today at 11:00 a.m. ET, at www.phstock.com. A replay of the webcast will be available on the site 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 please visit www.phstock.com.
About Parker Hannifin
Parker Hannifin is a Fortune 250 global leader in motion and control technologies. For more than a century the company has been enabling engineering breakthroughs that lead to a better tomorrow. Parker has increased its annual dividend per share paid to shareholders for 65 consecutive fiscal years, among the top five longest-running dividend-increase records in the S&P 500 index. Learn more at www.parker.com or @parkerhannifin.
Offer to Acquire Meggitt PLC
The acquisition of Meggitt plc, announced August 2, 2021, remains subject to satisfaction or waiver of the conditions set out in the scheme document, including regulatory clearances. It is currently expected that completion of the transaction will occur during the third quarter of calendar year 2022. For copies of all announcements and further information, please visit the dedicated transaction microsite at www.aerospacegrowth.com.
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 Financial Measures
This press release contains references to non-GAAP financial information including (a) adjusted net income; (b) adjusted earnings per share; (c) adjusted total segment operating margin; (d) EBITDA margin; and (e) adjusted EBITDA margin. The adjusted net income, earnings per share and total segment operating margin measures are presented to allow investors and the company to meaningfully evaluate changes in net income, earnings per share and total segment operating margin on a comparable basis from period to period. This press release also contains references to EBITDA, EBITDA margin and adjusted EBITDA margin. EBITDA is defined as earnings before interest, taxes, depreciation and amortization. Although EBITDA, EBITDA margin and adjusted 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. Often but not always, these statements may be identified from the use of forward-looking terminology such as “anticipates,” “believes,” “may,” “should,” “could,” “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. Neither Parker nor any of its respective associates or directors, officers or advisers, provides any representation, assurance or guarantee that the occurrence of the events expressed or implied in any forward-looking statements in this press release will actually occur. 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 past performance or current expectations.
The risks and uncertainties in connection with such forward-looking statements related to the proposed acquisition of Meggitt include, but are not limited to, the occurrence of any event, change or other circumstances that could delay or prevent the closing of the proposed acquisition, including the failure to satisfy any of the conditions to the proposed acquisition; the possibility that in order for the parties to obtain regulatory approvals, conditions are imposed that prevent or otherwise adversely affect the anticipated benefits from the proposed acquisition or cause the parties to abandon the proposed acquisition; adverse effects on Parker’s common stock because of the failure to complete the proposed acquisition; Parker’s business experiencing disruptions due to acquisition-related uncertainty or other factors making it more difficult to maintain relationships with employees, business partners or governmental entities; the possibility that the expected synergies and value creation from the proposed acquisition will not be realized or will not be realized within the expected time period, due to unsuccessful implementation strategies or otherwise; and significant transaction costs related to the proposed acquisition.
Among other factors which may affect future performance are: the impact of the global outbreak of COVID-19 and governmental and other actions taken in response; 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 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 business and operating initiatives, including the timing, price and execution of share repurchases and other capital initiatives; availability, cost increases of or other limitations on our access to raw materials, component products and/or commodities if associated costs cannot be recovered in product pricing; ability to manage costs related to insurance and employee retirement and health care benefits; legal and regulatory developments and changes; compliance costs associated
with environmental laws and regulations; potential supply chain and labor disruptions, including as a result of labor shortages; 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; local and global political and 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 (including fluctuations associated with any potential credit rating decline) and credit availability; inability to obtain, or meet conditions imposed for, required governmental and regulatory approvals; changes in consumer habits and preferences; government actions, including the impact of changes in the tax laws in the United States and foreign jurisdictions and any judicial or regulatory interpretation thereof; and large scale disasters, such as floods, earthquakes, hurricanes, industrial accidents and pandemics. Readers should consider these forward-looking statements in light of risk factors discussed in Parker’s Annual Report on Form 10-K for the fiscal year ended June 30, 2021 and other periodic filings made with the SEC.
###
| PARKER HANNIFIN CORPORATION - DECEMBER 31, 2021 | Exhibit 99.1 | |||||||||||||||||||||||||
| CONSOLIDATED STATEMENT OF INCOME | ||||||||||||||||||||||||||
| (Unaudited) | Three Months Ended December 31, | Six Months Ended December 31, | ||||||||||||||||||||||||
| (Dollars in thousands, except per share amounts) | 2021 | 2020* | 2021 | 2020* | ||||||||||||||||||||||
| Net sales | $ | 3,824,580 | $ | 3,411,905 | $ | 7,587,389 | $ | 6,642,445 | ||||||||||||||||||
| Cost of sales | 2,764,725 | 2,518,165 | 5,478,622 | 4,904,614 | ||||||||||||||||||||||
| Selling, general and administrative expenses | 380,710 | 356,572 | 788,475 | 726,423 | ||||||||||||||||||||||
| Interest expense | 61,360 | 62,990 | 120,710 | 128,948 | ||||||||||||||||||||||
| Other expense (income), net | 127,461 | (103,714) | 137,513 | (108,606) | ||||||||||||||||||||||
| Income before income taxes | 490,324 | 577,892 | 1,062,069 | 991,066 | ||||||||||||||||||||||
| Income taxes | 102,595 | 129,350 | 222,877 | 222,413 | ||||||||||||||||||||||
| Net income | 387,729 | 448,542 | 839,192 | 768,653 | ||||||||||||||||||||||
| Less: Noncontrolling interests | 129 | 191 | 435 | 499 | ||||||||||||||||||||||
| Net income attributable to common shareholders | $ | 387,600 | $ | 448,351 | $ | 838,757 | $ | 768,154 | ||||||||||||||||||
| Earnings per share attributable to common shareholders: | ||||||||||||||||||||||||||
| Basic earnings per share | $ | 3.02 | $ | 3.48 | $ | 6.52 | $ | 5.96 | ||||||||||||||||||
| Diluted earnings per share | $ | 2.97 | $ | 3.42 | $ | 6.42 | $ | 5.89 | ||||||||||||||||||
| Average shares outstanding during period - Basic | 128,493,725 | 129,013,781 | 128,610,223 | 128,860,763 | ||||||||||||||||||||||
| Average shares outstanding during period - Diluted | 130,581,665 | 131,075,655 | 130,585,212 | 130,482,564 | ||||||||||||||||||||||
| CASH DIVIDENDS PER COMMON SHARE | ||||||||||||||||||||||||||
| (Unaudited) | Three Months Ended December 31, | Six Months Ended December 31, | ||||||||||||||||||||||||
| (Amounts in dollars) | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||
| Cash dividends per common share | $ | 1.03 | $ | 0.88 | $ | 2.06 | $ | 1.76 | ||||||||||||||||||
| RECONCILIATION OF NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS TO ADJUSTED NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS | ||||||||||||||||||||||||||
| (Unaudited) | Three Months Ended December 31, | Six Months Ended December 31, | ||||||||||||||||||||||||
| (Dollars in thousands) | 2021 | 2020* | 2021 | 2020* | ||||||||||||||||||||||
| Net income attributable to common shareholders | $ | 387,600 | $ | 448,351 | $ | 838,757 | $ | 768,154 | ||||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||
| Acquired intangible asset amortization expense | 78,741 | 81,237 | 158,512 | 162,940 | ||||||||||||||||||||||
| Business realignment charges | 3,645 | 18,767 | 6,659 | 34,468 | ||||||||||||||||||||||
| Integration costs to achieve | 807 | 3,592 | 2,009 | 7,539 | ||||||||||||||||||||||
| Acquisition-related expenses | 19,142 | — | 71,341 | — | ||||||||||||||||||||||
| Loss on deal-contingent forward contracts | 149,382 | — | 149,382 | — | ||||||||||||||||||||||
| Gain on sale of land | — | (100,893) | — | (100,893) | ||||||||||||||||||||||
Tax effect of adjustments1 | (57,139) | 572 | (87,780) | (22,738) | ||||||||||||||||||||||
| Adjusted net income attributable to common shareholders | $ | 582,178 | $ | 451,626 | $ | 1,138,880 | $ | 849,470 | ||||||||||||||||||
| *Prior period has been adjusted to reflect the change in inventory accounting method, as described in the Company's fiscal 2021 Annual Report on Form 10-K. | ||||||||||||||||||||||||||
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 - DECEMBER 31, 2021 | Exhibit 99.1 | |||||||||||||||||||||||||
| 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) | 2021 | 2020* | 2021 | 2020* | ||||||||||||||||||||||
| Earnings per diluted share | $ | 2.97 | $ | 3.42 | $ | 6.42 | $ | 5.89 | ||||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||
| Acquired intangible asset amortization expense | 0.60 | 0.62 | 1.21 | 1.25 | ||||||||||||||||||||||
| Business realignment charges | 0.03 | 0.14 | 0.05 | 0.26 | ||||||||||||||||||||||
| Integration costs to achieve | 0.01 | 0.02 | 0.02 | 0.05 | ||||||||||||||||||||||
| Acquisition-related expenses | 0.15 | — | 0.55 | — | ||||||||||||||||||||||
| Loss on deal-contingent forward contracts | 1.14 | — | 1.14 | — | ||||||||||||||||||||||
| Gain on sale of land | — | (0.77) | — | (0.77) | ||||||||||||||||||||||
Tax effect of adjustments1 | (0.44) | 0.02 | (0.67) | (0.16) | ||||||||||||||||||||||
| Adjusted earnings per diluted share | $ | 4.46 | $ | 3.45 | $ | 8.72 | $ | 6.52 | ||||||||||||||||||
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. | ||||||||||||||||||||||||||
| RECONCILIATION OF EBITDA TO ADJUSTED EBITDA | ||||||||||||||||||||||||||
| (Unaudited) | Three Months Ended December 31, | Six Months Ended December 31, | ||||||||||||||||||||||||
| (Dollars in thousands) | 2021 | 2020* | 2021 | 2020* | ||||||||||||||||||||||
| Net sales | $ | 3,824,580 | $ | 3,411,905 | $ | 7,587,389 | $ | 6,642,445 | ||||||||||||||||||
| Net income | $ | 387,729 | $ | 448,542 | $ | 839,192 | $ | 768,653 | ||||||||||||||||||
| Income taxes | 102,595 | 129,350 | 222,877 | 222,413 | ||||||||||||||||||||||
| Depreciation | 65,362 | 68,581 | 131,113 | 135,320 | ||||||||||||||||||||||
| Amortization | 78,741 | 81,237 | 158,512 | 162,940 | ||||||||||||||||||||||
| Interest expense | 61,360 | 62,990 | 120,710 | 128,948 | ||||||||||||||||||||||
| EBITDA | 695,787 | 790,700 | 1,472,404 | 1,418,274 | ||||||||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||
| Business realignment charges | 3,645 | 18,767 | 6,659 | 34,468 | ||||||||||||||||||||||
| Integration costs to achieve | 807 | 3,592 | 2,009 | 7,539 | ||||||||||||||||||||||
| Acquisition-related expenses | 19,142 | — | 71,341 | — | ||||||||||||||||||||||
| Loss on deal-contingent forward contracts | 149,382 | — | 149,382 | — | ||||||||||||||||||||||
| Gain on sale of land | — | (100,893) | — | (100,893) | ||||||||||||||||||||||
| Adjusted EBITDA | $ | 868,763 | $ | 712,166 | $ | 1,701,795 | $ | 1,359,388 | ||||||||||||||||||
| EBITDA margin | 18.2 | % | 23.2 | % | 19.4 | % | 21.4 | % | ||||||||||||||||||
| Adjusted EBITDA margin | 22.7 | % | 20.9 | % | 22.4 | % | 20.5 | % | ||||||||||||||||||
| *Prior period has been adjusted to reflect the change in inventory accounting method, as described in the Company's fiscal 2021 Annual Report on Form 10-K. | ||||||||||||||||||||||||||
| PARKER HANNIFIN CORPORATION - DECEMBER 31, 2021 | Exhibit 99.1 | |||||||||||||||||||||||||
| BUSINESS SEGMENT INFORMATION | ||||||||||||||||||||||||||
| (Unaudited) | Three Months Ended December 31, | Six Months Ended December 31, | ||||||||||||||||||||||||
| (Dollars in thousands) | 2021 | 2020* | 2021 | 2020* | ||||||||||||||||||||||
| Net sales | ||||||||||||||||||||||||||
| Diversified Industrial: | ||||||||||||||||||||||||||
| North America | $ | 1,807,024 | $ | 1,566,877 | $ | 3,600,739 | $ | 3,094,988 | ||||||||||||||||||
| International | 1,399,179 | 1,259,625 | 2,775,615 | 2,388,876 | ||||||||||||||||||||||
| Aerospace Systems | 618,377 | 585,403 | 1,211,035 | 1,158,581 | ||||||||||||||||||||||
| Total net sales | $ | 3,824,580 | $ | 3,411,905 | $ | 7,587,389 | $ | 6,642,445 | ||||||||||||||||||
| Segment operating income | ||||||||||||||||||||||||||
| Diversified Industrial: | ||||||||||||||||||||||||||
| North America | $ | 337,417 | $ | 281,619 | $ | 671,119 | $ | 550,452 | ||||||||||||||||||
| International | 291,555 | 220,213 | 582,731 | 407,114 | ||||||||||||||||||||||
| Aerospace Systems | 114,796 | 90,729 | 233,047 | 177,495 | ||||||||||||||||||||||
| Total segment operating income | 743,768 | 592,561 | 1,486,897 | 1,135,061 | ||||||||||||||||||||||
| Corporate general and administrative expenses | 42,587 | 38,720 | 91,659 | 75,455 | ||||||||||||||||||||||
| Income before interest expense and other expense | 701,181 | 553,841 | 1,395,238 | 1,059,606 | ||||||||||||||||||||||
| Interest expense | 61,360 | 62,990 | 120,710 | 128,948 | ||||||||||||||||||||||
| Other expense (income) | 149,497 | (87,041) | 212,459 | (60,408) | ||||||||||||||||||||||
| Income before income taxes | $ | 490,324 | $ | 577,892 | $ | 1,062,069 | $ | 991,066 | ||||||||||||||||||
| *Prior period has been adjusted to reflect the change in inventory accounting method, as described in the Company's fiscal 2021 Annual Report on Form 10-K. | ||||||||||||||||||||||||||
| RECONCILIATION OF TOTAL SEGMENT OPERATING MARGIN TO ADJUSTED TOTAL SEGMENT OPERATING MARGIN | ||||||||||||||||||||||||||
| (Unaudited) | Three Months Ended | Three Months Ended | ||||||||||||||||||||||||
| (Dollars in thousands) | December 31, 2021 | December 31, 2020 | ||||||||||||||||||||||||
| Operating income | Operating margin | Operating income | Operating margin | |||||||||||||||||||||||
| Total segment operating income | $ | 743,768 | 19.4 | % | $ | 592,561 | 17.4 | % | ||||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||
| Acquired intangible asset amortization expense | 78,741 | 81,237 | ||||||||||||||||||||||||
| Business realignment charges | 3,645 | 17,922 | ||||||||||||||||||||||||
| Integration costs to achieve | 807 | 3,592 | ||||||||||||||||||||||||
| Adjusted total segment operating income | $ | 826,961 | 21.6 | % | $ | 695,312 | 20.4 | % | ||||||||||||||||||
| Six Months Ended | Six Months Ended | |||||||||||||||||||||||||
| December 31, 2021 | December 31, 2020 | |||||||||||||||||||||||||
| Operating income | Operating margin | Operating income | Operating margin | |||||||||||||||||||||||
| Total segment operating income | $ | 1,486,897 | 19.6 | % | $ | 1,135,061 | 17.1 | % | ||||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||
| Acquired intangible asset amortization expense | 158,512 | 162,940 | ||||||||||||||||||||||||
| Business realignment charges | 6,659 | 32,445 | ||||||||||||||||||||||||
| Integration costs to achieve | 2,009 | 7,539 | ||||||||||||||||||||||||
| Adjusted total segment operating income | $ | 1,654,077 | 21.8 | % | $ | 1,337,985 | 20.1 | % | ||||||||||||||||||
| PARKER HANNIFIN CORPORATION - DECEMBER 31, 2021 | Exhibit 99.1 | |||||||||||||||||||
| CONSOLIDATED BALANCE SHEET | ||||||||||||||||||||
| (Unaudited) | December 31, | June 30, | December 31, | |||||||||||||||||
| (Dollars in thousands) | 2021 | 2021 | 2020* | |||||||||||||||||
| Assets | ||||||||||||||||||||
| Current assets: | ||||||||||||||||||||
| Cash and cash equivalents | $ | 449,481 | $ | 733,117 | $ | 564,734 | ||||||||||||||
| Marketable securities and other investments | 40,511 | 39,116 | 43,314 | |||||||||||||||||
| Trade accounts receivable, net | 2,041,953 | 2,183,594 | 1,816,731 | |||||||||||||||||
| Non-trade and notes receivable | 314,897 | 326,315 | 312,590 | |||||||||||||||||
| Inventories | 2,307,306 | 2,090,642 | 2,019,772 | |||||||||||||||||
| Prepaid expenses and other | 2,753,501 | 243,966 | 191,362 | |||||||||||||||||
| Total current assets | 7,907,649 | 5,616,750 | 4,948,503 | |||||||||||||||||
| Property, plant and equipment, net | 2,202,932 | 2,266,476 | 2,302,142 | |||||||||||||||||
| Deferred income taxes | 146,567 | 104,251 | 134,325 | |||||||||||||||||
| Investments and other assets | 794,814 | 774,239 | 795,073 | |||||||||||||||||
| Intangible assets, net | 3,343,612 | 3,519,797 | 3,695,194 | |||||||||||||||||
| Goodwill | 7,999,901 | 8,059,687 | 8,101,016 | |||||||||||||||||
| Total assets | $ | 22,395,475 | $ | 20,341,200 | $ | 19,976,253 | ||||||||||||||
| Liabilities and equity | ||||||||||||||||||||
| Current liabilities: | ||||||||||||||||||||
| Notes payable and long-term debt payable within one year | $ | 2,201,653 | $ | 2,824 | $ | 610,909 | ||||||||||||||
| Accounts payable, trade | 1,597,025 | 1,667,878 | 1,343,011 | |||||||||||||||||
| Accrued payrolls and other compensation | 335,417 | 507,027 | 345,973 | |||||||||||||||||
| Accrued domestic and foreign taxes | 294,255 | 236,384 | 218,624 | |||||||||||||||||
| Other accrued liabilities | 829,141 | 682,390 | 688,566 | |||||||||||||||||
| Total current liabilities | 5,257,491 | 3,096,503 | 3,207,083 | |||||||||||||||||
| Long-term debt | 6,250,525 | 6,582,053 | 6,602,309 | |||||||||||||||||
| Pensions and other postretirement benefits | 959,741 | 1,055,638 | 1,843,209 | |||||||||||||||||
| Deferred income taxes | 558,986 | 553,981 | 456,842 | |||||||||||||||||
| Other liabilities | 600,452 | 639,355 | 631,825 | |||||||||||||||||
| Shareholders' equity | 8,755,082 | 8,398,307 | 7,218,663 | |||||||||||||||||
| Noncontrolling interests | 13,198 | 15,363 | 16,322 | |||||||||||||||||
| Total liabilities and equity | $ | 22,395,475 | $ | 20,341,200 | $ | 19,976,253 | ||||||||||||||
| *Prior period has been adjusted to reflect the change in inventory accounting method, as described in the Company's fiscal 2021 Annual Report on Form 10-K. | ||||||||||||||||||||
| PARKER HANNIFIN CORPORATION - DECEMBER 31, 2021 | Exhibit 99.1 | |||||||||||||
| CONSOLIDATED STATEMENT OF CASH FLOWS | ||||||||||||||
| (Unaudited) | Six Months Ended December 31, | |||||||||||||
| (Dollars in thousands) | 2021 | 2020* | ||||||||||||
| Cash flows from operating activities: | ||||||||||||||
| Net income | $ | 839,192 | $ | 768,653 | ||||||||||
| Depreciation and amortization | 289,625 | 298,260 | ||||||||||||
| Share incentive plan compensation | 79,385 | 79,833 | ||||||||||||
| Gain on sale of business | (1,520) | — | ||||||||||||
| Gain on disposal of property, plant and equipment | (7,880) | (102,565) | ||||||||||||
| Gain on marketable securities | (4,948) | (6,959) | ||||||||||||
| Gain on investments | (1,487) | (4,783) | ||||||||||||
| Net change in receivables, inventories and trade payables | (147,481) | 270,063 | ||||||||||||
| Net change in other assets and liabilities | (16,498) | 47,707 | ||||||||||||
| Other, net | (22,919) | 3,779 | ||||||||||||
| Net cash provided by operating activities | 1,005,469 | 1,353,988 | ||||||||||||
| Cash flows from investing activities: | ||||||||||||||
| Capital expenditures | (105,606) | (92,907) | ||||||||||||
| Proceeds from sale of property, plant and equipment | 22,392 | 124,428 | ||||||||||||
| Proceeds from sale of businesses | 2,466 | — | ||||||||||||
| Purchases of marketable securities and other investments | (10,150) | (16,029) | ||||||||||||
| Maturities and sales of marketable securities and other investments | 13,742 | 52,019 | ||||||||||||
| Other | 2,789 | 11,183 | ||||||||||||
| Net cash (used in) provided by investing activities | (74,367) | 78,694 | ||||||||||||
| Cash flows from financing activities: | ||||||||||||||
| Net payments for common stock activity | (317,512) | (57,688) | ||||||||||||
| Net proceeds from (payments for) debt | 1,900,844 | (1,324,348) | ||||||||||||
| Financing fees paid | (52,108) | — | ||||||||||||
| Dividends paid | (265,556) | (227,228) | ||||||||||||
| Net cash provided by (used in) financing activities | 1,265,668 | (1,609,264) | ||||||||||||
| Effect of exchange rate changes on cash | 6,978 | 55,802 | ||||||||||||
| Net increase (decrease) in cash, cash equivalents and restricted cash | 2,203,748 | (120,780) | ||||||||||||
| Cash, cash equivalents and restricted cash at beginning of year | 733,117 | 685,514 | ||||||||||||
| Cash, cash equivalents and restricted cash at end of period | $ | 2,936,865 | $ | 564,734 | ||||||||||
| *Prior period has been adjusted to reflect the change in inventory accounting method, as described in the Company's fiscal 2021 Annual Report on Form 10-K. | ||||||||||||||
| PARKER HANNIFIN CORPORATION - DECEMBER 31, 2021 | Exhibit 99.1 | |||||||
| RECONCILIATION OF FORECASTED EARNINGS PER DILUTED SHARE TO ADJUSTED FORECASTED EARNINGS PER DILUTED SHARE | ||||||||
| (Unaudited) | ||||||||
| (Amounts in dollars) | Fiscal Year 2022 | |||||||
| Forecasted earnings per diluted share | $14.42 to $14.92 | |||||||
| Adjustments: | ||||||||
| Business realignment charges | 0.22 | |||||||
| Costs to achieve | 0.04 | |||||||
| Acquisition-related intangible asset amortization expense | 2.43 | |||||||
| Acquisition-related expenses | 0.55 | |||||||
| Loss on deal-contingent forward contracts | 1.14 | |||||||
Tax effect of adjustments1 | (1.00) | |||||||
| Adjusted forecasted earnings per diluted share | $17.80 to $18.30 | |||||||
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 Fiscal 2022 Second Quarter Earnings Presentation February 3, 2022 Exhibit 99.2
Forward-Looking Statements and Non-GAAP Financial Measures 2 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. Often but not always, these statements may be identified from the use of forward-looking terminology such as “anticipates,” “believes,” “may,” “should,” “could,” “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. Neither Parker nor any of its respective associates or directors, officers or advisers, provides any representation, assurance or guarantee that the occurrence of the events expressed or implied in any forward-looking statements will actually occur. 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 past performance or current expectations. The risks and uncertainties in connection with such forward-looking statements related to the proposed acquisition of Meggitt include, but are not limited to, the occurrence of any event, change or other circumstances that could delay or prevent the closing of the proposed acquisition, including the failure to satisfy any of the conditions to the proposed acquisition; the possibility that in order for the parties to obtain regulatory approvals, conditions are imposed that prevent or otherwise adversely affect the anticipated benefits from the proposed acquisition or cause the parties to abandon the proposed acquisition; adverse effects on Parker’s common stock because of the failure to complete the proposed acquisition; Parker’s business experiencing disruptions due to acquisition-related uncertainty or other factors making it more difficult to maintain relationships with employees, business partners or governmental entities; the possibility that the expected synergies and value creation from the proposed acquisition will not be realized or will not be realized within the expected time period, due to unsuccessful implementation strategies or otherwise; and significant transaction costs related to the proposed acquisition. Among other factors which may affect future performance are: the impact of the global outbreak of COVID-19 and governmental and other actions taken in response; 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 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 business and operating initiatives, including the timing, price and execution of share repurchases and other capital initiatives; availability, cost increases of or other limitations on our access to raw materials, component products and/or commodities if associated costs cannot be recovered in product pricing; ability to manage costs related to insurance and employee retirement and health care benefits; legal and regulatory developments and changes; compliance costs associated with environmental laws and regulations; potential supply chain and labor disruptions, including as a result of labor shortages; 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; local and global political and 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 (including fluctuations associated with any potential credit rating decline) and credit availability; inability to obtain, or meet conditions imposed for, required governmental and regulatory approvals; changes in consumer habits and preferences; government actions, including the impact of changes in the tax laws in the United States and foreign jurisdictions and any judicial or regulatory interpretation thereof; and large scale disasters, such as floods, earthquakes, hurricanes, industrial accidents and pandemics. Readers should consider these forward-looking statements in light of risk factors discussed in Parker’s Annual Report on Form 10-K for the fiscal year ended June 30, 2021 and other periodic filings made with the SEC. This presentation contains references to non-GAAP financial information for Parker, including organic sales for Parker and by segment, adjusted earnings per share, adjusted operating margin for Parker and by segment, adjusted net income, EBITDA, adjusted EBITDA, EBITDA margin, adjusted EBITDA margin, adjusted net debt to EBITDA, and free cash flow. EBITDA is defined as earnings before interest, taxes, depreciation and amortization. For Parker, adjusted EBITDA is defined as EBITDA before business realignment, Integration costs to achieve, acquisition related expenses, and other one-time items. Free cash flow is defined as cash flow from operations less capital expenditures. Although organic sales, adjusted earnings per share, adjusted operating margin for Parker and by segment, adjusted net income, EBITDA, adjusted EBITDA, EBITDA margin, adjusted net debt to EBITDA, and free cash flow are not measures of performance calculated in accordance with GAAP, we believe that they are useful to an investor in evaluating the company performance for the period presented. Detailed reconciliations of these non-GAAP financial measures to the comparable GAAP financial measures have been included in the appendix to this presentation. Please visit www.PHstock.com for more information
FY22 Q2: Exceptional Execution in a Challenging Environment 3 ▪ Focus on safety continues, leveraging high-performance teams and kaizen ▪ Sales growth of 12% YoY; Organic growth 13% YoY ▪ Second quarter records for Sales and Total Segment Operating Margin ▪ EBITDA margin was 18.2% as reported or 22.7% adjusted1, +180 bps vs. prior year ▪ Robust demand environment continues ▪ Execution driven by The Win Strategy™ 2.0 & 3.0 1. Adjusted numbers include certain non-GAAP financial measures. See Appendix for additional details and reconciliations. Strategic Portfolio Transformation - Longer Cycle & More Resilient
What Drives Parker? Great Generators and Deployers of Cash Living Up to Our Purpose Top Quartile Performance vs. Proxy Peers 4
$6.99 $8.86 $11.57 $13.10 $12.44 $15.04 FY16 FY17 FY18 FY19 FY20 FY21 FY22 G Adjusted EPS1 1. Adjusted numbers include certain non-GAAP financial measures. See Appendix for additional details and reconciliations. $5.89 $7.25 $7.83 $11.57 $9.26 $13.35 $14.67As Reported EPS Performance Our People, Portfolio & Strategy Transform Performance 14.7% 16.7% 17.5% 18.3% 19.3% 21.3% FY16 FY17 FY18 FY19 FY20 FY21 FY22 H1 Adjusted EBITDA1 Increased 770 bps Midpoint $18.05 Midpoint 2.5x EPS growth > 22.4% YTD $0.81B $0.98B $1.06B $1.53B $1.20B $1.75B $0.84BAs Reported Net Income 5
Continued Progress on Meggitt Transaction 6 Compelling Strategic Aerospace Combination
Positioned for Growth Opportunities from Secular Trends Aerospace Electrification DigitalizationESG 7
9 Financial Summary FY22 Q2 vs. FY21 Q2 1. Sales figures As Reported. Adjusted numbers include certain non-GAAP financial measures. See Appendix for additional details and reconciliations. Note: FY21 Q2 As Reported: Segment Operating Margin of 17.4%, EBITDA Margin of 23.2%, Net Income of $448M, EPS of $3.42. $ Millions, except per share amounts Q2 FY22 Q2 FY22 Q2 FY21 YoY Change As Reported Adjusted¹ Adjusted¹ Adjusted Sales $3,825 $3,825 $3,412 +12.1% Segment Operating Margin 19.4% 21.6% 20.4% +120 bps EBITDA Margin 18.2% 22.7% 20.9% +180 bps Net Income $388 $582 $452 +29% EPS $2.97 $4.46 $3.45 +29%
10 Adjusted Earnings per Share Bridge FY21 Q2 to FY22 Q2 1. FY21 Q2 As Reported EPS of $3.42. FY22 Q2 As Reported EPS of $2.97. Adjusted numbers include certain non-GAAP financial measures. See Appendix for additional details and reconciliations.
11 FY22 Q2 Segment Performance Sales As Reported $ Organic %¹ Segment Operating Margin As Reported Segment Operating Margin Adjusted1 Order Rates2 Commentary $1,807M +15.3% Organic 18.7% 21.3% Flat YoY +17% • Excellent performance in a challenging operating environment • Broad based growth continues $1,399M +14.1% Organic 20.8% 22.4% +210 bps YoY +14% • Mid-teens organic growth in all regions • Sustainable benefits from regional realignment actions $618M +5.8% Organic 18.6% 20.7% +270 bps YoY (7)% • Strong commercial OEM & MRO growth • Order rate +mid-teens excluding sizable multi-year military orders in prior period $3,825M +13.2% Organic 19.4% 21.6% +120 bps YoY +12% • Strong secular growth • 32% incremental margin1, 48% excluding prior year discretionary savings of $65M 1. Adjusted numbers include certain non-GAAP financial measures. See Appendix for additional details and reconciliations. 2. Order Rates exclude acquisitions, divestitures, & currency. Industrial is a 3 month YoY comparison of total dollars. Aerospace is a rolling 12 month YoY comparison. Diversified Industrial International Diversified Industrial North America Parker Aerospace Systems
12 FY22 Cash Flow Performance Cash Flow from Operations of 13.3% Free Cash Flow of 11.9% Free Cash Flow Conversion of 107% Net change in Working capital2 • Use of cash of 1.9% of sales 1. Adjusted numbers include certain non-GAAP financial measures. See Appendix for additional details and reconciliations. 2. Defined as net change in accounts receivable, inventory, and accounts payable trade per the statement of cash flows $ Millions % to Sales 13.3% 11.9% 20.4% 19.0% Forecast Mid-Teens CFOA for FY22
Capital Deployment Activity Quarterly dividend of $1.03 declared January 27th • 65 consecutive years of increased dividends paid Meggitt Financing Progress • Deal Contingent Forward Contracts secured for FX risk mitigation • $2.5B Restricted Cash Escrow funded via Commercial Paper issuance and Cash Leverage at FY22 Q2 • Gross Debt / EBITDA = 2.7x • Net Debt / EBITDA = 2.5x • Net Debt / EBITDA, excluding $2.5B restricted cash escrow = 1.8x1 13 1. Adjusted numbers include certain non-GAAP financial measures. See Appendix for additional details and reconciliations.
14 FY22 Guidance Increased EPS Midpoint: $14.67 As Reported, $18.05 Adjusted Sales Growth vs. Prior Year Diversified Industrial North America 11% - 13% Diversified Industrial International 7% - 9% Aerospace Systems 5% - 7% Parker 9% - 11% Segment Operating Margins As Reported Adjusted1 Diversified Industrial North America 19.2% - 19.6% 21.8% - 22.2% Diversified Industrial International 20.3% - 20.7% 22.2% - 22.6% Aerospace Systems 19.1% - 19.5% 21.2% - 21.6% Parker 19.6% - 20.0% 21.9% - 22.3% Additional Items As Reported Adjusted1 Corporate G&A, Interest and Other $656M $435M Full Year Reported Tax Rate ~22% Diluted Shares Outstanding 130.7M Earnings Per Share As Reported Adjusted1 Range $14.42 - $14.92 $17.80 - $18.30 1. Adjusted numbers include certain non-GAAP financial measures. See Appendix for additional details and reconciliations. 2. Reflects expenses incurred to date. Future expenses related to Meggitt are not guided and will be adjusted as they occur. Detail of Pre-Tax Adjustments to: Segment Margins Below Segment Acquired Intangible Asset Amortization ~$320M — Business Realignment Charges ~$30M — LORD Costs to Achieve ~$5M — Meggitt Acquisition Related Expenses — $71M2 Meggitt Deal Contingent Forward Contracts — $149M2
Key Messages Highly engaged global team living up to our purpose The Win Strategy 3.0 drives current and future performance Strategic portfolio transformation - longer cycle & more resilient Positioned for growth from secular trends 15 Our People, Portfolio & Strategy Transform Performance
Upcoming Event Calendar 2022 Virtual Investor Meeting March 8, 2022, 9am-12pm ET 3Q FY22 Earnings May 5, 2022 4Q FY22 Earnings & FY23 Guidance August 4, 2022 Annual Meeting of Shareholders October 26, 2022
Appendix Reconciliation of Organic Growth Adjusted Amounts Reconciliation Reconciliation of EPS Reconciliation of Total Segment Operating Margin to Adjusted Total Segment Operating Margin Reconciliation of EBITDA to Adjusted EBITDA Reconciliation of Free Cash Flow Conversion Reconciliation of Adjusted Net Debt to EBITDA Supplemental Sales Information – Global Technology Platforms Reconciliation of Forecasted EPS 17
Reconciliation of Organic Growth (Dollars in thousands) (Unaudited) Quarter-to-Date As Reported Currency Organic As Reported Net Sales December 31, 2021 December 31, 2021 December 31, 2020 Diversified Industrial: North America $ 1,807,024 $ (1,131) $ 1,805,893 $ 1,566,877 International 1,399,179 37,780 1,436,959 1,259,625 Total Diversified Industrial 3,206,203 36,649 3,242,852 2,826,502 Aerospace Systems 618,377 921 619,298 585,403 Total Parker Hannifin $ 3,824,580 $ 37,570 $ 3,862,150 $ 3,411,905 As reported Currency Organic Diversified Industrial: North America 15.3 % — % 15.3 % International 11.1 % (3.0)% 14.1 % Total Diversified Industrial 13.4 % (1.3)% 14.7 % Aerospace Systems 5.6 % (0.2)% 5.8 % Total Parker Hannifin 12.1 % (1.1)% 13.2 % 18
Adjusted Amounts Reconciliation Consolidated Statement of Income (Dollars in thousands, except per share data) (Unaudited) Quarter-to-Date FY 2022 % of Sales Acquired Intangible Asset Amortization Business Realignment Charges Integration Costs to Achieve Acquisition Related Expenses Loss on Deal- Contingent Forward Contracts % of Sales As Reported Adjusted December 31, 2021 December 31, 2021 Net Sales $ 3,824,580 100.0 % $ — $ — $ — $ — $ — $ 3,824,580 100.0 % Cost of Sales 2,764,725 72.3 % — 1,710 263 — — 2,762,752 72.2 % Selling, general, and admin. expenses 380,710 10.0 % 78,741 1,935 544 8,880 — 290,610 7.6 % Interest expense 61,360 1.6 % — — — — — 61,360 1.6 % Other expense (income), net 127,461 3.3 % — — — 10,262 149,382 (32,183) (0.8)% Income before income taxes 490,324 12.8 % (78,741) (3,645) (807) (19,142) (149,382) 742,041 19.4 % Income taxes 102,595 2.7 % 17,874 827 183 4,345 33,910 159,734 4.2 % Net Income 387,729 10.1 % (60,867) (2,818) (624) (14,797) (115,472) 582,307 15.2 % Less: Noncontrollable interests 129 0.0 % — — — — — 129 0.0 % Net Income - common shareholders $ 387,600 10.1 % $ (60,867) $ (2,818) $ (624) $ (14,797) $ (115,472) $ 582,178 15.2 % Diluted earnings per share $ 2.97 $ (0.47) $ (0.02) $ — $ (0.12) $ (0.88) $ 4.46 19
Adjusted Amounts Reconciliation Consolidated Statement of Income (Dollars in thousands, except per share data) (Unaudited) Quarter-to-Date FY 2021 % of Sales Acquired Intangible Asset Amortization Business Realignment Charges Lord Costs to Achieve Exotic Costs to Achieve Gain On Sale of Land As Reported Adjusted December 31, 2020* December 31, 2020* % of Sales Net sales $ 3,411,905 100.0 % $ — $ — $ — $ — $ — $ 3,411,905 100.0 % Cost of sales 2,518,165 73.8 % — 14,183 393 — — 2,503,589 73.4 % Selling, general and admin. expenses 356,572 10.5 % 81,237 3,923 2,856 343 — 268,213 7.9 % Interest expense 62,990 1.8 % — — — — — 62,990 1.8 % Other (income) expense, net (103,714) (3.0)% — 661 — — (100,893) (3,482) (0.1)% Income before income taxes 577,892 16.9 % (81,237) (18,767) (3,249) (343) 100,893 580,595 17.0 % Income taxes 129,350 3.8 % 18,766 4,335 751 79 (24,503) 128,778 3.8 % Net income 448,542 13.1 % (62,471) (14,432) (2,498) (264) 76,390 451,817 13.2 % Less: Noncontrolling interests 191 0.0 % — — — — — 191 0.0 % Net income - common shareholders $ 448,351 13.1 % $ (62,471) $ (14,432) $ (2,498) $ (264) $ 76,390 $ 451,626 13.2 % Diluted earnings per share $ 3.42 $ (0.48) $ (0.11) $ (0.02) $ — $ 0.58 $ 3.45 *Prior periods have been adjusted to reflect the change in inventory accounting method 20
Adjusted Amounts Reconciliation Business Segment Information (Dollars in thousands) (Unaudited) Quarter-to-Date FY 2022 % of Sales Acquired Intangible Asset Amortization Business Realignment Charges Integration Costs to Achieve Acquisition Related Expenses Loss on Deal- Contingent Forward Contracts % of Sales2 As Reported Adjusted December 31, 2021 December 31, 2021 Diversified Industrial North America1 $ 337,417 18.7 % $ 47,024 $ 660 $ 329 $ — $ — $ 385,430 21.3 % International1 291,555 20.8 % 18,958 2,387 478 — — 313,378 22.4 % Aerospace Systems1 114,796 18.6 % 12,759 598 — — — 128,153 20.7 % Total segment operating income 743,768 19.4 % (78,741) (3,645) (807) — — 826,961 21.6 % Corporate administration 42,587 1.1 % — — — — — 42,587 1.1 % Income before interest and other 701,181 18.3 % (78,741) (3,645) (807) — — 784,374 20.5 % Interest expense 61,360 1.6 % — — — — — 61,360 1.6 % Other (income) expense 149,497 3.9 % — — — 19,142 149,382 (19,027) (0.5)% Income before income taxes $ 490,324 12.8 % $ (78,741) $ (3,645) $ (807) $ (19,142) $ (149,382) $ 742,041 19.4 % 1Segment operating income as a percent of sales is calculated on as reported segment sales. 2Adjusted amounts as a percent of sales are calculated on as reported segment sales. 21
Reconciliation of Earnings per Diluted Share to Adjusted Earnings per Diluted Share (Unaudited) Three Months Ended December 31, (Amounts in dollars) 2021 2020* Earnings per diluted share $ 2.97 $ 3.42 Adjustments: Acquired intangible asset amortization expense 0.60 0.62 Business realignment charges 0.03 0.14 Integration costs to achieve 0.01 0.02 Acquisition-related expenses 0.15 — Loss on deal-contingent forward contracts 1.14 — Gain on sale of land — (0.77) Tax effect of adjustments1 (0.44) 0.02 Adjusted earnings per diluted share $ 4.46 $ 3.45 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. *Prior periods have been adjusted to reflect the change in inventory accounting method 22
Reconciliation of Earnings per Diluted Share to Adjusted Earnings per Diluted Share 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. *FY19 and FY20 have been adjusted to reflect the change in inventory accounting method 23
Reconciliation of Total Segment Operating Margin to Adjusted Total Segment Operating Margin (Unaudited) Three Months Ended Three Months Ended (Dollars in thousands) December 31, 2021 December 31, 2020 Operating income Operating margin Operating income Operating margin Total segment operating income $ 743,768 19.4 % $ 592,561 17.4 % Adjustments: Acquired intangible asset amortization expense 78,741 81,237 Business realignment charges 3,645 17,922 Integration costs to achieve 807 3,592 Adjusted total segment operating income $ 826,961 21.6 % $ 695,312 20.4 % 24
Reconciliation of EBITDA to Adjusted EBITDA (Unaudited) Three Months Ended December 31, Six Months Ended December 31, (Dollars in thousands) 2021 2020* 2021 Net sales $ 3,824,580 $ 3,411,905 $ 7,587,389 Net income $ 387,729 $ 448,542 $ 839,192 Income taxes 102,595 129,350 222,877 Depreciation 65,362 68,581 131,113 Amortization 78,741 81,237 158,512 Interest expense 61,360 62,990 120,710 EBITDA 695,787 790,700 1,472,404 Adjustments: Business realignment charges 3,645 18,767 6,659 Integration costs to achieve 807 3,592 2,009 Acquisition-related expenses 19,142 — 71,341 Loss on deal-contingent forward contracts 149,382 — 149,382 Gain on sale of land — (100,893) — Adjusted EBITDA $ 868,763 $ 712,166 $ 1,701,795 EBITDA margin 18.2 % 23.2 % 19.4 % Adjusted EBITDA margin 22.7 % 20.9 % 22.4 % *Prior periods have been adjusted to reflect the change in inventory accounting method 25
Reconciliation of Free Cash Flow Conversion (Unaudited) Six Months Ended December 31, 2021 Six Months Ended December 31, 2020*(Dollars in thousands) Net income $ 839,192 $ 768,653 Cash flow from operations $ 1,005,469 $ 1,353,988 Capital Expenditures (105,606) (92,907) Free cash flow $ 899,863 $ 1,261,081 Free cash flow conversion (free cash flow / net income) 107 % 164 % *Prior periods have been adjusted to reflect the change in inventory accounting method26
Reconciliation of Adjusted Net Debt to EBITDA 27
Supplemental Sales Information Global Technology Platforms (Unaudited) Three Months Ended December 31, Six Months Ended December 31, (Dollars in thousands) 2021 2020 2021 2020 Net sales Diversified Industrial: Motion Systems $ 843,655 $ 720,315 $ 1,672,327 $ 1,377,456 Flow and Process Control 1,103,404 949,949 2,188,827 1,874,074 Filtration and Engineered Materials 1,259,144 1,156,238 2,515,200 2,232,334 Aerospace Systems 618,377 585,403 1,211,035 1,158,581 Total $ 3,824,580 $ 3,411,905 $ 7,587,389 $ 6,642,445 28
Reconciliation of EPS Fiscal Year 2022 Guidance (Unaudited) (Amounts in dollars) Fiscal Year 2022 Forecasted earnings per diluted share $14.42 to $14.92 Adjustments: Business realignment charges 0.22 Costs to achieve 0.04 Acquisition-related intangible asset amortization expense 2.43 Acquisition-related expenses 0.55 Loss on deal-contingent forward contracts 1.14 Tax effect of adjustments1 (1.00) Adjusted forecasted earnings per diluted share $17.80 to $18.30 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. 29