Exhibit 99.1
For Release: Immediately
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Contact: | Media - | |
| Aidan Gormley - Director, Global Communications and Branding | 216-896-3258 |
| aidan.gormley@parker.com | |
| Financial Analysts - | |
| Pamela Huggins, Vice President - Treasurer | 216-896-2240 |
| phuggins@parker.com | |
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Stock symbol: | PH - NYSE | |
Parker Reports Fiscal 2015 First Quarter Sales, Net Income and Earnings per Share
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• | Earnings per diluted share increased 15 percent to $1.85, or $1.89 adjusted for restructuring |
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• | Segment operating margins strong; reflecting restructuring benefits |
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• | Order growth positive across all segments |
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• | Company increases fiscal 2015 full year guidance |
CLEVELAND, October 28, 2014 -- Parker Hannifin Corporation (NYSE: PH), the global leader in motion and control technologies, today reported results for the fiscal 2015 first quarter ended September 30, 2014. Fiscal 2015 first quarter sales were $3.27 billion, a first quarter record, compared with $3.23 billion in the prior year quarter. Net income was $280.2 million, a 15 percent increase compared with $244.3 million in the first quarter of fiscal 2014. Fiscal 2015 first quarter earnings per diluted share were $1.85, an increase of 15 percent compared with $1.61 in the prior year quarter. Excluding restructuring, earnings per diluted share for the first quarter of fiscal 2015 were $1.89, compared with $1.67 in the prior year quarter. A reconciliation of reported to adjusted earnings per share is included with the financial tables accompanying this news release. Cash flow from operations was $260.9 million or 8 percent of sales compared with $282.7 million in the prior year quarter.
“We are off to a very strong start in fiscal year 2015 reinforcing our positive view on the year,” said Chairman, CEO and President, Don Washkewicz. “As a result of the restructuring activities we engaged in last year, we are beginning to see stronger year-over-year segment operating margin performance which reached 15.9 percent this quarter or 16.1 percent adjusted. Margin performance was driven by improvements in our Diversified Industrial International and Aerospace businesses and continued strength in our Diversified Industrial North America business where we had an all-time record for quarterly operating margins. We continue to execute well.”
Segment Results
Diversified Industrial Segment: North American first quarter sales increased 6 percent to $1.47 billion, and operating income was $264.2 million compared with $234.2 million in the same period a year ago. International first quarter sales decreased 1 percent to $1.26 billion, and operating income was $189.8 million compared with $173.4 million in the same period a year ago.
Aerospace Systems Segment: First quarter sales decreased 6 percent to $534.6 million, primarily reflecting the impact of the joint venture between Parker Aerospace and GE Aviation recorded in the second quarter of fiscal 2014. Operating income was $65.3 million compared with $57.3 million in the same period a year ago.
Orders
Parker reported an increase of 5 percent in orders for the quarter ending September 30, 2014, compared with the same quarter a year ago. The company reported the following orders by business:
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• | Orders increased 6 percent in the Diversified Industrial North America businesses compared with the same quarter a year ago. |
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• | Orders increased 2 percent in the Diversified Industrial International businesses compared with the same quarter a year ago. |
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• | Orders increased 12 percent in the Aerospace Systems segment on a rolling 12-month average basis. |
Outlook
For the fiscal year ending June 30, 2015, the company has increased guidance for earnings from continuing operations to the range of $7.20 to $7.80 per diluted share, or $7.45 to $8.05 per diluted share on an adjusted basis. Fiscal year 2015 guidance is adjusted for expected restructuring expenses of approximately $0.25 per diluted share.
Washkewicz added, “We are increasing our fiscal 2015 guidance to reflect strong first quarter performance moderated by what we anticipate to be the expected negative effect of foreign currency. Macroeconomic readings indicate some uncertainty in demand levels, particularly internationally. However, savings resulting from the timely and solid execution of our restructuring activities give us confidence that we can achieve our earnings outlook and deliver a record year. Reflecting confidence in our outlook, last week the Board approved a 31 percent increase in the quarterly dividend and a new share repurchase authorization. Our goal is to repurchase $2 billion to $3 billion in shares in the next 24 months.”
NOTICE OF CONFERENCE CALL: Parker Hannifin's conference call and slide presentation to discuss its fiscal 2015 first quarter results are available to all interested parties via live webcast today at 10:00 a.m. ET, on the company's investor information web site at www.phstock.com. To access the call, click on the "Live Webcast" link. From this link, users also may complete a pre-call system test and register for e-mail notification of future events and information available from Parker. A replay of the conference call will also be available at www.phstock.com for one year after the call.
With annual sales exceeding $13 billion in fiscal year 2014, Parker Hannifin is the world's leading diversified manufacturer of motion and control technologies and systems, providing precision-engineered solutions for a wide variety of mobile, industrial and aerospace markets. The company employs approximately 57,500 people in 50 countries around the world. Parker has increased its annual dividends paid to shareholders for 58 consecutive fiscal years, among the top five longest-running dividend-
increase records in the S&P 500 index. For more information, visit the company's website at www.parker.com, or its investor information website at www.phstock.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 percent 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 Non-GAAP Numbers
This press release contains references to (a) earnings per diluted share without the effect of restructuring expense; (b) the effect of restructuring expenses on forecasted earnings from continuing operations per diluted share; and (c) segment operating margins without the effect of restructuring expense. The effects of restructuring expenses are removed to allow investors and the company to meaningfully evaluate changes in earnings per diluted share and segment operating margins on a comparable basis from period to period.
Forward-Looking Statements
Forward-looking statements contained in this and other written and oral reports are made based on known events and circumstances at the time of release, and as such, are subject in the future to unforeseen uncertainties and risks. All statements regarding future performance, earnings projections, events or developments are forward-looking statements. It is possible that the future performance and earnings projections of the company, including its individual segments, may differ materially from current expectations, depending on economic conditions within its mobile, industrial and aerospace markets, and the company's ability to maintain and achieve anticipated benefits associated with announced realignment activities, strategic initiatives to improve operating margins, actions taken to combat the effects of the current economic environment, and growth, innovation and global diversification initiatives. A change in the economic conditions in individual markets may have a particularly volatile effect on segment performance. Among other factors which may affect future performance are: changes in business relationships with and purchases by or from major customers, suppliers or distributors, including delays or cancellations in shipments, disputes regarding contract terms or significant changes in financial condition, changes in contract cost and revenue estimates for new development programs and changes in product mix; ability to identify acceptable strategic acquisition targets; uncertainties surrounding timing, successful completion or integration of acquisitions and similar transactions; the ability to successfully divest businesses planned for divestiture and realize the anticipated benefits of such divestitures; the determination to undertake business realignment activities and the expected costs thereof and, if undertaken, the ability to complete such activities and realize the anticipated cost savings from such activities; the ability to realize anticipated benefits of the consolidation of the Climate and Industrial Controls Group; ability to implement successfully the Company’s capital allocation initiatives, including timing, price and execution of share repurchases; threats associated with and efforts to combat terrorism; uncertainties surrounding the ultimate resolution of outstanding legal proceedings, including the outcome of any appeals; competitive market conditions and resulting effects on sales and pricing; increases in raw material costs that cannot be recovered in product pricing; the company's ability to manage costs related to insurance and employee retirement and health care benefits; 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.
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PARKER HANNIFIN CORPORATION - SEPTEMBER 30, 2014 | | Exhibit 99.1 |
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CONSOLIDATED STATEMENT OF INCOME | | | |
(Unaudited) | | Three Months Ended September 30, |
(Dollars in thousands except per share amounts) | 2014 |
| | 2013 |
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| | | | |
Net sales | | $ | 3,269,932 |
| | $ | 3,226,144 |
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Cost of sales | | 2,459,865 |
| | 2,476,409 |
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Gross profit | | 810,067 |
| | 749,735 |
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Selling, general and administrative expenses | 400,840 |
| | 406,930 |
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Interest expense | | 20,961 |
| | 20,958 |
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Other (income), net | | (8,369 | ) | | (2,243 | ) |
Income before income taxes | | 396,635 |
| | 324,090 |
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Income taxes | | 116,464 |
| | 79,770 |
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Net income | | 280,171 |
| | 244,320 |
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Less: Noncontrolling interests | | 82 |
| | 4 |
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Net income attributable to common shareholders | $ | 280,089 |
| | $ | 244,316 |
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Earnings per share attributable to common shareholders: | | | |
Basic earnings per share | | $ | 1.88 |
| | $ | 1.64 |
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Diluted earnings per share | | $ | 1.85 |
| | $ | 1.61 |
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Average shares outstanding during period - Basic | 148,738,828 |
| | 149,237,306 |
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Average shares outstanding during period - Diluted | 151,073,635 |
| | 151,860,261 |
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Cash dividends per common share | $ | 0.48 |
| | $ | 0.45 |
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RECONCILIATION OF EARNINGS PER DILUTED SHARE TO ADJUSTED EARNINGS PER DILUTED SHARE |
(Unaudited) | | Three Months Ended September 30, |
| | 2014 |
| | 2013 |
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Earnings per diluted share | $ | 1.85 |
| | $ | 1.61 |
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Adjustments: | | | |
Restructuring charges | 0.04 |
| | 0.06 |
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Adjusted earnings per diluted share | $ | 1.89 |
| | $ | 1.67 |
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BUSINESS SEGMENT INFORMATION BY INDUSTRY | | | | |
(Unaudited) | | Three Months Ended September 30, | |
(Dollars in thousands) | | 2014 |
| | 2013 |
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Net sales | | | | | |
Diversified Industrial: | | | | | |
North America | | $ | 1,471,812 |
| | $ | 1,387,875 |
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International | | 1,263,497 |
| | 1,270,795 |
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Aerospace Systems | | 534,623 |
| | 567,474 |
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Total | | $ | 3,269,932 |
| | $ | 3,226,144 |
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Segment operating income | | | | | |
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Diversified Industrial: | | | | | |
North America | | $ | 264,236 |
| | $ | 234,198 |
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International | | 189,805 |
| | 173,410 |
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Aerospace Systems | | 65,349 |
| | 57,298 |
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Total segment operating income | 519,390 |
| | 464,906 |
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Corporate general and administrative expenses | 55,444 |
| | 47,210 |
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Income before interest expense and other expense | 463,946 |
| | 417,696 |
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Interest expense | | 20,961 |
| | 20,958 |
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Other expense | | 46,350 |
| | 72,648 |
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Income before income taxes | | $ | 396,635 |
| | $ | 324,090 |
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RECONCILIATION OF NET SALES TO ADJUSTED NET SALES | | | |
(Unaudited) | | | | | |
| | Three Months Ended September 30, | |
| | 2014 |
| | 2013 |
| % Change |
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Total net sales | | $ | 3,269,932 |
| | $ | 3,226,144 |
| 1.4 | % |
Adjustments: | | | | | |
Sales related to GE joint venture | — |
| | 49,510 |
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Adjusted total net sales | | $ | 3,269,932 |
| | $ | 3,176,634 |
| 2.9 | % |
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Aerospace Systems net sales | $ | 534,623 |
| | $ | 567,474 |
| (5.8 | )% |
Adjustments: | | | | | |
Sales related to GE joint venture | — |
| | 49,510 |
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Adjusted Aerospace Systems net sales | $ | 534,623 |
| | $ | 517,964 |
| 3.2 | % |
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RECONCILIATION OF SEGMENT OPERATING MARGIN TO ADJUSTED SEGMENT OPERATING MARGIN |
(Unaudited) | | Three Months Ended | |
| | September 30, 2014 | |
| | Operating income |
| | Margin |
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As reported segment operating income | $ | 519,390 |
| | 15.9 | % | |
Adjustments: | | | | | |
Restructuring charges | | 5,849 |
| | 0.2 | % | |
Adjusted segment operating income | $ | 525,239 |
| | 16.1 | % | |
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| | | | Exhibit 99.1 | |
PARKER HANNIFIN CORPORATION - SEPTEMBER 30, 2014 | | | | | |
CONSOLIDATED BALANCE SHEET | | (Unaudited) |
| | | | (Unaudited) |
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| | September 30, |
| | June 30, |
| | September 30, |
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(Dollars in thousands) | | 2014 |
| | 2014 |
| | 2013 |
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Assets | | | | | | |
Current assets: | | | | | | |
Cash and cash equivalents | | $ | 1,092,137 |
| | $ | 1,613,555 |
| | $ | 1,945,623 |
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Marketable securities | | 945,431 |
| | 573,701 |
| | — |
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Trade accounts receivable, net | | 1,711,798 |
| | 1,858,176 |
| | 1,749,383 |
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Non-trade and notes receivable | | 421,085 |
| | 388,437 |
| | 219,107 |
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Inventories | | 1,441,439 |
| | 1,371,681 |
| | 1,465,431 |
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Prepaid expenses | | 116,962 |
| | 129,837 |
| | 176,245 |
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Deferred income taxes | | 147,410 |
| | 136,193 |
| | 123,390 |
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Total current assets | | 5,876,262 |
| | 6,071,580 |
| | 5,679,179 |
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Plant and equipment, net | | 1,755,254 |
| | 1,824,294 |
| | 1,833,748 |
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Goodwill | | 3,068,420 |
| | 3,171,425 |
| | 3,285,228 |
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Intangible assets, net | | 1,130,312 |
| | 1,188,282 |
| | 1,280,431 |
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Other assets | | 914,377 |
| | 1,018,781 |
| | 709,778 |
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Total assets | | $ | 12,744,625 |
| | $ | 13,274,362 |
| | $ | 12,788,364 |
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Liabilities and equity | | | | | | |
Current liabilities: | | | | | | |
Notes payable | | $ | 702,018 |
| | $ | 816,622 |
| | $ | 1,335,339 |
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Accounts payable | | 1,192,652 |
| | 1,252,040 |
| | 1,130,676 |
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Accrued liabilities | | 834,569 |
| | 960,523 |
| | 808,218 |
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Accrued domestic and foreign taxes | | 158,960 |
| | 223,611 |
| | 180,776 |
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Total current liabilities | | 2,888,199 |
| | 3,252,796 |
| | 3,455,009 |
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Long-term debt | | 1,482,492 |
| | 1,508,142 |
| | 1,506,744 |
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Pensions and other postretirement benefits | | 1,328,123 |
| | 1,346,224 |
| | 1,309,981 |
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Deferred income taxes | | 89,038 |
| | 94,819 |
| | 107,000 |
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Other liabilities | | 374,409 |
| | 409,573 |
| | 319,859 |
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Shareholders' equity | | 6,579,003 |
| | 6,659,428 |
| | 6,086,861 |
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Noncontrolling interests | | 3,361 |
| | 3,380 |
| | 2,910 |
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Total liabilities and equity | | $ | 12,744,625 |
| | $ | 13,274,362 |
| | $ | 12,788,364 |
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| | | | Exhibit 99.1 |
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PARKER HANNIFIN CORPORATION - SEPTEMBER 30, 2014 | | | | |
CONSOLIDATED STATEMENT OF CASH FLOWS | | | | |
(Unaudited) | | Three Months Ended September 30, |
(Dollars in thousands) | | 2014 |
| | 2013 |
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Cash flows from operating activities: | | | | |
Net income | | $ | 280,171 |
| | $ | 244,320 |
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Depreciation and amortization | | 81,768 |
| | 85,580 |
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Stock incentive plan compensation | | 40,559 |
| | 48,998 |
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Gain on sale of business | | (5,782 | ) | | — |
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Net change in receivables, inventories, and trade payables | | (60,018 | ) | | 16,213 |
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Net change in other assets and liabilities | | (117,527 | ) | | (106,293 | ) |
Other, net | | 41,703 |
| | (6,127 | ) |
Net cash provided by operating activities | | 260,874 |
| | 282,691 |
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Cash flows from investing activities: | | | | |
Acquisitions | | — |
| | 1,491 |
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Capital expenditures | | (54,709 | ) | | (56,651 | ) |
Proceeds from sale of business | | 22,770 |
| | — |
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Purchase of marketable securities and other investments | | (497,192 | ) | | — |
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Maturities and sales of marketable securities and other investments | | 50,528 |
| | — |
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Other, net | | (2,324 | ) | | 2,964 |
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Net cash (used in) investing activities | | (480,927 | ) | | (52,196 | ) |
Cash flows from financing activities: | | | | |
Net payments for common stock activity | | (44,494 | ) | | (44,905 | ) |
Net (payments for) proceeds from debt | | (113,565 | ) | | 1,269 |
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Dividends | | (71,607 | ) | | (67,388 | ) |
Net cash (used in) financing activities | | (229,666 | ) | | (111,024 | ) |
Effect of exchange rate changes on cash | | (71,699 | ) | | 44,740 |
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Net (decrease) increase in cash and cash equivalents | | (521,418 | ) | | 164,211 |
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Cash and cash equivalents at beginning of period | | 1,613,555 |
| | 1,781,412 |
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Cash and cash equivalents at end of period | | $ | 1,092,137 |
| | $ | 1,945,623 |
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| | | | Exhibit 99.1 |
PARKER HANNIFIN CORPORATION - SEPTEMBER 30, 2014 | | |
RECONCILIATION OF FORECASTED EARNINGS PER DILUTED SHARE TO ADJUSTED FORECASTED EARNINGS PER DILUTED SHARE |
(Unaudited) | | | | |
(Amounts in dollars) | | | | |
| | Fiscal Year 2015 | | |
Forecasted earnings per diluted share | $7.20 to $7.80 | | |
Adjustments: | | | |
Restructuring charges | 0.25 | | |
Adjusted forecasted earnings per diluted share | $7.45 to $8.05 | | |
