3rd Quarter Fiscal Year 2017
Earnings Release
Parker Hannifin Corporation
April 27, 2017
Exhibit 99.2
Forward-Looking Statements and
Non-GAAP Financial Measures
Forward-looking statements contained in this and other written and oral reports are made based on known events and circumstances at the time of release, and as such, are subject in
the future to unforeseen uncertainties and risks. These statements may be identified from use of forward-looking terminology such as “anticipates,” “believes,” “may,” “should,” “could,”
“potential,” “continues,” “plans,” “forecasts,” “estimates,” “projects,” “predicts,” “would,” “intends,” “anticipates,” “expects,” “targets,” “is likely,” “will,” or the negative of these terms and
similar expressions, and include all statements regarding future performance, earnings projections, events or developments. It is possible that the future performance and earnings
projections of the company, including its individual segments, may differ materially from current expectations, depending on economic conditions within its mobile, industrial and
aerospace markets, and the company's ability to maintain and achieve anticipated benefits associated with announced realignment activities, strategic initiatives to improve operating
margins, actions taken to combat the effects of the current economic environment, and growth, innovation and global diversification initiatives. A change in the economic conditions in
individual markets may have a particularly volatile effect on segment performance.
Among other factors which may affect future performance and earnings projections are: economic conditions within the company’s key 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 of the Company are, as applicable: changes in business relationships with and purchases by or from
major customers, suppliers or distributors, including delays or cancellations in shipments; disputes regarding contract terms or significant changes in financial condition, changes in
contract cost and revenue estimates for new development programs and changes in product mix; ability to identify acceptable strategic acquisition targets; uncertainties surrounding
timing, successful completion or integration of acquisitions and similar transactions, including the integration of CLARCOR; the ability to successfully divest businesses planned for
divestiture and realize the anticipated benefits of such divestitures; the determination to undertake business realignment activities and the expected costs thereof and, if undertaken, the
ability to complete such activities and realize the anticipated cost savings from such activities; ability to implement successfully capital allocation initiatives, including timing, price and
execution of share repurchases; availability, limitations or cost increases of raw materials, component products and/or commodities that cannot be recovered in product pricing; ability to
manage costs related to insurance and employee retirement and health care benefits; compliance costs associated with environmental laws and regulations; potential labor disruptions;
threats associated with and efforts to combat terrorism and cyber-security risks; uncertainties surrounding the ultimate resolution of outstanding legal proceedings, including the
outcome of any appeals; competitive market conditions and resulting effects on sales and pricing; and global economic factors, including manufacturing activity, air travel trends,
currency exchange rates, difficulties entering new markets and general economic conditions such as inflation, deflation, interest rates and credit availability. The company makes these
statements as of the date of this disclosure, and undertakes no obligation to update them unless otherwise required by law.
This presentation reconciles (a) sales amounts reported in accordance with U.S. GAAP to sales amounts adjusted to remove the effects of acquisitions and the effects of currency
exchange rates, (b) cash flow from operating activities and cash flow from operating activities as a percent of sales in accordance with U.S. GAAP to cash flow from operating activities
and cash flow from operating activities as a percent of sales without the effect of discretionary pension plan contributions, (c) segment operating income and operating margins reported
in accordance with U.S. GAAP to segment operating income and operating margins without the effect of business realignment charges and CLARCOR acquisition expenses (d) below
the Line Items reported in accordance with U.S. GAAP to Below the Line Items without the effect of CLARCOR acquisition expenses and, (e) actual and forecast earnings per diluted
share reported in accordance with U.S. GAAP to actual and forecast earnings per diluted share without the effect of business realignment charges and CLARCOR acquisition
expenses. The effects of acquisitions, currency exchange rates, discretionary pension plan contributions, business realignment charges, CLARCOR acquisition expenses are removed
to allow investors and the company to meaningfully evaluate changes in sales, and cash flow from operating activities as a percent of sales, segment operating income, operating
margins, below the line items and earnings per diluted share on a comparable basis from period to period. Full year adjusted guidance removes business realignment charges and
CLARCOR acquisition expenses.
Please visit www.PHstock.com for more information
2
Agenda
3
• Chairman & CEO Comments
• Results & Outlook
• Questions & Answers
Chairman and CEO Comments
3rd Quarter FY2017 Results
Recordable Accident Reduction of 28% in the Third Quarter
Third Quarter Sales Increased 10% to $3.12B, Organic Sales +6%, Orders +8%
Earnings per Share Increased 28% to $1.75; or +40% to $2.11 Adjusted
Segment Operating Margins of 14.8%; 16.1% Adjusted, up 140 bps
Cash Flow and Capital Allocation 3rd Quarter FY2017
Year-to-date Adjusted Cash Flow from Operations 11.8% of Sales
CLARCOR and Helac Transactions Completed
Extended Record of Increasing Annual Dividends Paid to 61 Consecutive years
$50M Share Repurchase
Full Year FY2017 Guidance Increased
Sales Guidance Increased to $12.0B
FY17 EPS Guidance Midpoint of $7.05 As Reported; $7.85 Adjusted
Realignment $0.25 per share, Acquisition-related Costs $0.55 per share
4
Diluted Earnings Per Share
3rd Quarter FY2017
5
*Adjusted for Business Realignment Charges, CLARCOR Acquisition Expenses
**Adjusted for Business Realignment Charges
6
*Adjusted for Business Realignment Charges
**Adjusted for Business Realignment Charges, CLARCOR Acquisition Expenses
Influences on Adjusted Earnings Per Share
3rd Quarter FY2017 vs. 3rd Quarter FY2016
Sales & Segment Operating Margin
Total Parker
7
*Acquisitions include: Jäger (closed 7/1/16), Helac (closed 2/1/17), CLARCOR (closed 2/28/17)
$ in millions 3rd Quarter
FY2017
%
Change FY2016
Sales
As Reported 3,119$ 10.3 % 2,829$
Acquisitions* 159 5.6 %
Currency (29) (1.0)%
Organic Sales 2,989$ 5.7 %
FY2017
% of
Sales FY2016
% of
Sales
Segment Operating Margin
As Reported 460$ 14.8 % 392$ 13.8 %
Business Realignment &
CLARCOR Acquisition
Expense
43 25
Adjusted 503$ 16.1 % 417$ 14.7 %
Sales & Segment Operating Margin
Diversified Industrial North America
8
*Acquisitions include: Jäger (closed 7/1/16), Helac (closed 2/1/17), CLARCOR (closed 2/28/17)
$ in millions 3rd Quarter
FY2017
%
Change FY2016
Sales
As Reported 1,413$ 13.3 % 1,248$
Acquisitions* 121 9.7 %
Currency (3) (0.2)%
Organic Sales 1,295$ 3.8 %
FY2017
% of
Sales FY2016
% of
Sales
Segment Operating Margin
As Reported 228$ 16.1 % 202$ 16.2 %
Business Realignment &
CLARCOR Acquisition
Expense
30 9
Adjusted 258$ 18.2 % 211$ 16.9 %
Sales & Segment Operating Margin
Diversified Industrial International
9
*Acquisitions include: Jäger (closed 7/1/16), Helac (closed 2/1/17), CLARCOR (closed 2/28/17)
$ in millions 3rd Quarter
FY2017
%
Change FY2016
Sales
As Reported 1,129$ 10.7 % 1,020$
Acquisitions* 38 3.7 %
Currency (25) (2.5)%
Organic Sales 1,116$ 9.5 %
FY2017
% of
Sales FY2016
% of
Sales
Segment Operating Margin
As Reported 153$ 13.6 % 105$ 10.3 %
Business Realignment &
CLARCOR Acquisition
Expense
11 16
Adjusted 164$ 14.5 % 121$ 11.9 %
Sales & Segment Operating Margin
Aerospace Systems
10
$ in millions 3rd Quarter
FY2017
%
Change FY2016
Sales
As Reported 577$ 2.8 % 561$
Acquisitions - - %
Currency (1) (0.1)%
Organic Sales 578$ 2.9 %
FY2017
% of
Sales FY2016
% of
Sales
Segment Operating Margin
As Reported 80$ 13.9 % 84$ 15.0 %
Business Realignment 2 1
Adjusted 82$ 14.2 % 85$ 15.1 %
Order Rates
11
Excludes Acquisitions, Divestitures & Currency
3-month year-over-year comparisons of total dollars, except Aerospace Systems
Aerospace Systems is calculated using a 12-month rolling average
Mar 2017 Dec 2016 Mar 2016 Dec 2015
Total Parker 8 %+ 5 %+ 6 %- 12 %-
Diversified Industrial North America 9 %+ 0% 9 %- 15 %-
Diversified Industrial International 13 %+ 10 %+ 6 %- 10 %-
Aerospace Systems 0% 9 %+ 1 %+ 11 %-
Cash Flow from Operating Activities¹
FY2017 YTD
12
*Adjusted for Discretionary Pension Plan Contribution
¹Dollars in millions
FY 2017 % of Sales FY 2016 % of Sales
As Reported Cash Flow From Operating Activities 789$ 9.2% 705$ 8.4%
Discreti nary Pension Plan Contribution 220 2 0
Adjusted Cash Flow From Operating Activities 1,009$ 11.8% 905$ 10.8%
FY2017 Guidance – Total Parker (incl Clarcor)
EPS Midpoint: $7.05 As Reported, $7.85 Adjusted
13
Expected FY17 Adjusted Segment Operating Margins, Adjusted Below the Line Items and Adjusted Earnings Per Share
exclude CLARCOR Acquisition Expenses of $103M and Business Realignment Charges of $48M
Sales Growth vs. Prior Year
Diversified Industrial North America
Diversified Industrial International
Aerospace Systems
Total Parker
Segment Operating Margins As Reported Adjusted
Diversified Industrial North America 16.1% - 16.3% 17.5% - 17.7%
Diversified Industrial International 13.2% - 13.4% 13.9% - 14.1%
Aerospace Systems 14.4% - 14.6% 14.5% - 14.7%
Total Parker 14.7% - 14.9% 15.6% - 15.8%
Below the Line Items
Corporate General & Administrative Expense, Interest and Other $470 M $425 M
Tax Rate
Full Year
Shares
Diluted Shares Outstanding
Earnings Per Share As Reported Adjusted
Range $6.90 - $7.20 $7.70 - $8.00
136.0M
27.0%
7.1% - 9.1%
5.0% - 7.0%
0.1% - 2.1%
4.9% - 6.9%
CLARCOR Impact on Financial Results
14
*Includes:
• Amortization estimated at $130M/year (to be finalized in FY18 guidance)
• Depreciation estimated at $13M/year (to be finalized in FY18 guidance)
• Incremental Interest costs of $73M/year
CLARCOR Impact – FY2017
Q2 Actual Q3 Actual Q4 Guide FY17 Guide
Sales ($M) $0 $136 $369 $505
Acquisition-Related
Expenses ($M)
$16 $51 $36 $103
EPS* - As Reported ($’s) ($.09) ($.24) ($.14) ($.47)
EPS* - Adjusted for Acquisition-
Related Expenses ($’s)
$.00 $.04 $.04 $.08
15
FY2017 Guidance
Reconciliation to Prior Guidance
*Adjusted for Business Realignment Charges and CLARCOR Acquisition Expenses
16
Appendix
• Consolidated Statement of Income
• Reconciliation of EPS
• Business Segment Information
• Reconciliation of Total Segment Operating Margin to Adjusted Total
Segment Operating Margin
• Consolidated Balance Sheet
• Consolidated Statement of Cash Flows
• Reconciliation of Cash Flow from Operations to Adjusted Cash
Flow from Operations
• Reconciliation of EPS
• Supplemental Sales Information – Global Technology Platforms
Consolidated Statement of Income
18
(Unaudited) Three Months Ended March 31, Nine Months Ended March 31,
(Dollars in thousands except per share amounts) 2017 2016 2017 2016
Net sales 3,119,139$ 2,828,665$ 8,533,074$ 8,403,603$
Cost of sales 2,383,790 2,209,401 6,534,280 6,550,929
Gross profit 735,349 619,264 1,998,794 1,852,674
Selling, general and administrative expenses 392,036 335,908 1,051,583 1,020,788
Interest expense 42,057 33,745 109,649 103,802
Other (income), net (13,807) (23,382) (90,468) (50,438)
Income before income taxes 315,063 272,993 928,030 778,522
Income taxes 76,216 85,851 237,545 213,217
Net income 238,847 187,142 690,485 565,305
Less: Noncontrolling interests 174 58 378 261
Net income attributable to common shareholders 238,673$ 187,084$ 690,107$ 565,044$
Earnings per share attributable to common shareholders:
Basic earnings per share 1.79$ 1.39$ 5.17$ 4.16$
Diluted earnings per share 1.75$ 1.37$ 5.09$ 4.12$
Average shares outstanding during period - Basic 133,232,378 134,809,610 133,410,622 135,675,823
Average shares outstanding during period - Diluted 136,102,974 136,552,769 135,527,195 137,311,848
Cash dividends per common share .66$ .63$ 1.92$ 1.89$
Reconciliation of EPS
19
(Unaudited) Three Months Ended March 31, Nine Months Ended March 31,
(Amounts in Dollars)
2017 2016 2017 2016
Earnings per diluted share 1.75$ 1.37$ 5.09$ 4.12$
Adjustments:
Business realignment charges 0.09 0.14 0.19 0.44
Acquisition-related expenses 0.27 - 0.36 -
Adjusted earnings per diluted share 2.11$ 1.51$ 5.64$ 4.56$
Business Segment Information
20
(Unaudited) Three Months Ended March 31, Nine Months Ended March 31,
(Dollars in thousands) 2017 2016 2017 2016
Net sales
Diversif ied Industrial:
North America 1,413,302$ 1,247,904$ 3,701,326$ 3,695,008$
International 1,128,886 1,019,776 3,149,777 3,050,687
Aerospace Systems 576,951 560,985 1,681,971 1,657,908
Total 3,119,139$ 2,828,665$ 8,533,074$ 8,403,603$
Segment operating income
Diversif ied Industrial:
North America 227,419$ 202,180$ 612,043$ 568,509$
International 152,995 105,161 417,708 329,823
Aerospace Systems 79,967 84,238 225,764 240,005
Total segment operating income 460,381 391,579 1,255,515 1,138,337
Corporate general and administrative expenses 45,747 42,322 120,707 126,583
Income before interest and other expense 414,634 349,257 1,134,808 1,011,754
Interest expense 42,057 33,745 109,649 103,802
Other expense 57,514 42,519 97,129 129,430
Income before income taxes 315,063$ 272,993$ 928,030$ 778,522$
Reconciliation of Total Segment Operating
Margin to Adjusted Total Segment
Operating Margin
21
(Unaudited)
(Dollars in thousands)
Three Months
Ended March 31,
2017
Three Months
Ended March 31,
2016
Operating margin Operating margin
Total segment operating income 460,381$ 14.8% 391,579$ 13.8%
Adjustments:
Business realignment charges 16,318 25,030
Acquisition-related expenses 26,226 -
Adjusted total segment operating income 502,925$ 16.1% 416,609$ 14.7%
Consolidated Balance Sheet
22
(Unaudited) March 31, June 30, March 31,
(Dollars in thousands) 2017 2016 2016
Assets
Current assets:
Cash and cash equivalents 819,563$ 1,221,653$ 1,034,971$
Marketable securities and other investments 36,758 882,342 1,069,658
Trade accounts receivable, net 1,869,303 1,593,920 1,587,785
Non-trade and notes receivable 235,924 232,183 245,248
Inventories 1,538,644 1,173,329 1,248,213
Prepaid expenses 118,962 104,360 124,025
Total current assets 4,619,154 5,207,787 5,309,900
Plant and equipment, net 1,945,739 1,568,100 1,598,758
Deferred income taxes 65,152 605,155 379,541
Goodw ill 5,508,712 2,903,037 2,948,284
Intangible assets, net 2,338,364 922,571 961,206
Other assets 848,212 827,492 831,880
Total assets 15,325,333$ 12,034,142$ 12,029,569$
Liabilities and equity
Current liabilities:
Notes payable 776,159$ 361,787$ 576,548$
Accounts payable 1,209,351 1,034,589 999,159
Accrued liabilities 904,297 841,915 801,716
Accrued domestic and foreign taxes 158,634 127,597 118,802
Total current liabilities 3,048,441 2,365,888 2,496,225
Long-term debt 5,255,156 2,652,457 2,651,906
Pensions nd other postretirement benefits 1,787,311 2,076,143 1,483,641
Deferred income taxes 159,666 54,395 68,108
Other liabilities 327,033 306,581 302,706
Shareholders' equity 4,742,139 4,575,255 5,023,612
Noncontrolling interests 5,587 3,423 3,371
Total liabilities and equity 15,325,333$ 12,034,142$ 12,029,569$
Consolidated Statement of Cash Flows
23
(Unaudited) Nine Months Ended March 31,
(Dollars in thousands) 2017 2016
Cash flows from operating activities:
Net income 690,485$ 565,305$
Depreciation and amortization 236,543 231,777
Stock incentive plan compensation 60,916 53,735
(Gain) on sale of business (42,994) (10,668)
Loss on disposal of assets 513 76
(Gain) on sale of marketable securities (1,032) (535)
Net change in receivables, inventories, and trade payables (35,469) (19,661)
Net change in other assets and liabilities (169,403) (115,201)
Other, net 49,734 (262)
Net cash provided by operating activities 789,293 704,566
Cash flows from investing activities:
Acquisitions (net of cash of $157,426 in 2017 and $3,814 in 2016) (4,067,755) (67,552)
Capital expenditures (145,236) (110,804)
Proceeds from sale of plant and equipment 8,452 14,112
Proceeds from sale of business 85,610 24,325
Purchases of marketable securities and other investments (451,561) (1,188,594)
Maturities and sales of marketable securities and other investments 1,264,721 974,417
Other, net (2,590) (40,364)
Net cash (used in) investing activities (3,308,359) (394,460)
Cash flows from financing activities:
Net payments for common stock activity (262,248) (464,367)
Net proceeds from debt 2,687,761 305,555
Dividen s (257,161) (256,890)
Net cash provided by (used in) financing activities 2,168,352 (415,702)
Effect of exchange rate changes on cash (51,376) (40,017)
Net (decrease) in cash and cash equivalents (402,090) (145,613)
Cash and cash equivalents at beginning of period 1,221,653 1,180,584
Cash and cash equivalents at end of period 819,563$ 1,034,971$
Reconciliation of Cash Flow from
Operations to Adjusted Cash Flow from
Operations
24
(Unaudited)
(Dollars in thousands)
Nine Months
Ended March 31,
2017
Nine Months
Ended March
31, 2016
Percent of sales Percent of sales
As reported cash flow from operations 789,293$ 9.2% 704,566$ 8.4%
Discretionary pension contribution 220,000 200,000
Adjusted cash flow from operations 1,009,293$ 11.8% 904,566$ 10.8%
Reconciliation of EPS
25
(Unaudited)
(Amounts in dollars)
Fiscal Year
2017
Forecasted earnings per diluted share $6.90 to $7.20
Adjustments:
Business realignment charges .25
Acquisition expenses .55
Adjusted forecasted earnings per diluted share $7.70 to $8.00
Supplemental Sales Information
Global Technology Platforms
26
(Unaudited)
(Dollars in thousands)
September 30,
2016
December 31,
2016
March 31,
2017
September 30,
2016
December 31,
2016
March 31,
2017
Net sales
Diversif ied Industrial:
Motion Systems 741,650$ 754,772$ 856,388$ 741,650$ $ 1,496,422 $ 2,352,810
Flow and Process Control 824,314 783,864 905,667 824,314 1,608,178 2,513,845
Filtration and Engineered Materials 615,930 588,385 780,133 615,930 1,204,315 1,984,448
Aerospace Systems 561,237 543,783 576,951 561,237 1,105,020 1,681,971
Total 2,743,131$ 2,670,804$ 3,119,139$ 2,743,131$ 5,413,935$ 8,533,074$
Three Months Ending Fiscal Year-to-Date