exhibit991image1a04a20.gif
Exhibit 99.1    
For Release:    Immediately                    

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 2018 Third Quarter Results

Record third quarter sales increased 20% to $3.75 billion
Organic sales increased 8%, order rates increased 11%
Segment operating margins were 15.8% as reported, or 16.3% adjusted
EBITDA margins increased 280 basis points to 17.1% as reported, or 17.6% adjusted
EPS were a record at $2.70 as reported, or $2.80 adjusted
Fiscal 2018 full year earnings guidance increased

CLEVELAND, April 26, 2018 -- Parker Hannifin Corporation (NYSE: PH), the global leader in motion and control technologies, today reported results for the fiscal 2018 third quarter ended March 31, 2018. Fiscal 2018 third quarter sales increased 20% to a record $3.75 billion compared with $3.12 billion in the prior year quarter. Net income increased to a record $366.1 million compared with $238.8 million in the third quarter of fiscal 2017. Fiscal 2018 third quarter earnings per share were also a record at $2.70, compared with $1.75 in the prior year quarter. Adjusted for business realignment expenses and CLARCOR costs to achieve, earnings per share were $2.80, an increase of 33% compared with $2.11 in the prior year quarter. Cash flow from operations for the first nine months of fiscal 2018 was $904.8 million or 8.6% of sales, compared with $789.3 million or 9.2% of sales in the prior year period, or 11.8% excluding a discretionary pension contribution in fiscal 2017. A reconciliation of earnings per share to adjusted earnings per share and cash flows from operations to cash flows from operations excluding a discretionary pension contribution is included in the financial tables of this press release.

“We achieved record performance this quarter, supported by broad-based demand improvement across our key end markets and regions,” said Chairman and Chief Executive Officer, Tom Williams. “Organic sales increased 8% growing faster than the overall market and positive order trends continued as orders





grew 11%. Segment operating margin performance was strong and adjusted EDITDA margins increased 120 basis points to 17.6%. Industrial North America incremental margins were impacted by higher sales volume, which required us to run consolidating plants for longer than expected. Our productivity metrics for these plants improved as the quarter progressed and we expect steady improvement in Industrial North America incremental margins as plant closures continue during the rest of calendar year 2018. Overall, we are very pleased with the progress we are making.”

Segment Results
Diversified Industrial Segment: North American third quarter sales increased 25% to $1.8 billion, and operating income increased 23% to $280.7 million compared with $227.4 million in the same period a year ago. International third quarter sales increased 23% to $1.4 billion, and operating income increased 34% to $205.3 million compared with $153.0 million in the same period a year ago.

Aerospace Systems Segment: Third quarter sales increased 4% to $598.4 million, and operating income increased 33% to $106.7 million compared with $80.0 million in the same period a year ago.

Parker reported the following orders for the quarter ending March 31, 2018, compared with the same quarter a year ago:
Orders increased 11% for total Parker
Orders increased 11% in the Diversified Industrial North America businesses
Orders increased 8% in the Diversified Industrial International businesses
Orders increased 17% in the Aerospace Systems Segment on a rolling 12-month average basis

Outlook
For the fiscal year ending June 30, 2018, the company has increased guidance for earnings from continuing operations to the range of $7.76 to $7.96 per share, or $9.95 to $10.15 per share on an adjusted basis.

Fiscal 2018 earnings are adjusted for expected business realignment expenses of approximately $50 million and CLARCOR costs to achieve of approximately $45 million, while savings remain as previously forecasted. 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, “We expect record performance in fiscal year 2018 that will serve as a solid foundation for us to achieve new five year targets that include 19% total segment operating margins and a greater than 10% compound annual growth rate in adjusted earnings per share by fiscal year 2023.”
   





NOTICE OF CONFERENCE CALL: Parker Hannifin's conference call and slide presentation to discuss its fiscal 2018 third quarter results are available to all interested parties via live webcast today at 11:00 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. A replay of the webcast will be accessible on Parker's investor relations website, www.phstock.com, 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 and information available from Parker please visit www.phstock.com.

Parker Hannifin is a Fortune 250 global leader in motion and control technologies. For 100 years the company has engineered the success of its customers in a wide range of diversified industrial and aerospace markets. Parker has increased its annual dividend per share paid to shareholders for 62 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.

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 Non-GAAP Numbers
This press release contains references to (a) earnings per share and segment operating margins without the effect of business realignment charges, CLARCOR costs to achieve, U.S. Tax Reform adjustments, the gain on sale and writedown of assets, net, and acquisition-related expenses; (b) the effect of business realignment charges, CLARCOR costs to achieve, U.S. Tax Reform adjustments, the gain on sale and writedown of assets, net, and acquisition-related expenses on forecasted earnings from continuing operations per share; (c) and cash flows from operations without the effect of a discretionary pension contribution. The effects of business realignment charges, CLARCOR costs to achieve, U.S. Tax Reform adjustments, the gain on sale and writedown of assets, net, acquisition-related expenses and discretionary pension contribution are removed to allow investors and the company to meaningfully evaluate changes in earnings per share, segment operating margins and cash flows from operations on a comparable basis from period to period. This press release also contains references to EBITDA and adjusted EBITDA. EBITDA is defined as earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA before business realignment charges, CLARCOR costs to achieve, U.S. Tax Reform adjustments, the gain on sale and writedown of assets, net, gain on sale of a product line and acquisition-related expenses. Although EBITDA and Adjusted EBITDA are not measures of performance calculated in accordance with GAAP, we believe that it is useful to an investor in evaluating the results of this quarter versus one year ago.

Forward-Looking Statements
Forward-looking statements contained in this and other written and oral reports are made based on known events and circumstances at the time of release, and as such, are subject in the future to unforeseen uncertainties and risks. These statements may be identified from the use of forward-looking terminology such as “anticipates,” “believes,” “may,” “should,” “could,” “potential,” “continues,” “plans,” “forecasts,” “estimates,” “projects,” “predicts,” “would,” “intends,” “anticipates,” “expects,” “targets,” “is likely,” “will,” or the negative of these terms and similar expressions, and include all statements regarding future performance, earnings projections, events or developments. It is possible that the future performance and earnings projections of the company, including its individual segments, may differ materially from current expectations, depending on economic conditions within its mobile, industrial and aerospace markets, and the company's ability to maintain and achieve anticipated benefits





associated with announced realignment activities, strategic initiatives to improve operating margins, actions taken to combat the effects of the current economic environment, and growth, innovation and global diversification initiatives. 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. Additionally, the actual impact of the U.S. Tax Cuts and Jobs Act may affect future performance and earnings projections as the amounts reflected in this period are preliminary estimates and exact amounts will not be determined until a later date, and there may be other judicial or regulatory interpretations of the U.S. Tax Cuts and Jobs Act that may also affect these estimates and the actual impact on the company. 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.



###






PARKER HANNIFIN CORPORATION - MARCH 31, 2018
 
 
 
 
 
Exhibit 99.1

CONSOLIDATED STATEMENT OF INCOME
 
 
 
 
 
 
 
(Unaudited)
 
Three Months Ended March 31,
 
Nine Months Ended March 31,
(Dollars in thousands except per share amounts)
2018

 
2017

 
2018

 
2017

 
 
 
 
 
 
 
 
 
Net sales
 
$
3,749,591

 
$
3,119,139

 
$
10,484,915

 
$
8,533,074

Cost of sales
 
2,825,008

 
2,383,790

 
7,926,956

 
6,534,280

Selling, general and administrative expenses
420,595

 
392,036

 
1,234,729

 
1,051,583

Interest expense
 
54,145

 
42,057

 
160,833

 
109,649

Other (income), net
 
(19,984
)
 
(13,807
)
 
(41,953
)
 
(90,468
)
Income before income taxes
 
469,827

 
315,063

 
1,204,350

 
928,030

Income taxes
 
103,697

 
76,216

 
496,363

 
237,545

Net income
 
366,130

 
238,847

 
707,987

 
690,485

Less: Noncontrolling interests
 
141

 
174

 
442

 
378

Net income attributable to common shareholders
$
365,989

 
$
238,673

 
$
707,545

 
$
690,107

 
 
 
 
 
 
 
 
 
Earnings per share attributable to common shareholders:
 
 
 
 
 
 
 
   Basic earnings per share
 
$
2.75

 
$
1.79

 
$
5.32

 
$
5.17

   Diluted earnings per share
 
$
2.70

 
$
1.75

 
$
5.22

 
$
5.09

 
 
 
 
 
 
 
 
 
Average shares outstanding during period - Basic
133,032,431

 
133,232,378

 
133,107,321

 
133,410,622

Average shares outstanding during period - Diluted
135,768,280

 
136,102,974

 
135,661,385

 
135,527,195

 
 
 
 
 
 
 
 
 
Cash dividends per common share
$
0.66

 
$
0.66

 
$
1.98

 
$
1.92

 
 
 
 
 
 
 
 
 
RECONCILIATION OF EARNINGS PER DILUTED SHARE TO ADJUSTED EARNINGS PER DILUTED SHARE

(Unaudited)
 
Three Months Ended March 31,
 
Nine Months Ended March 31,
(Amounts in dollars)
 
2018

 
2017

 
2018

 
2017

Earnings per diluted share
$
2.70

 
$
1.75

 
$
5.22

 
$
5.09

Adjustments:
 
 
 
 
 
 
 
  Business realignment charges
0.04

 
0.09

 
0.16

 
0.19

  Clarcor costs to achieve
0.06

 

 
0.16

 

  Gain on sale and writedown of assets, net

 

 
0.02

 

  U.S. Tax Reform one-time impact, net

 

 
1.65

 

  Acquisition-related expenses

 
0.27

 
 
 
0.36

Adjusted earnings per diluted share
$
2.80

 
$
2.11

 
$
7.21

 
$
5.64

 
 
 
 
 
 
 
 
 
RECONCILIATION OF EBITDA TO ADJUSTED EBITDA
 
 
 
 
(Unaudited)
 
 
 
 
 
 
 
 
(Dollars in thousands)
 
Three Months Ended March 31,
 
 
 
 
 
 
2018

 
2017

 
 
 
 
Net sales
 
$
3,749,591

 
$
3,119,139

 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings before income taxes
 
$
469,827

 
$
315,063

 
 
 
 
Depreciation and amortization
 
117,100

 
87,458

 
 
 
 
Interest expense
 
54,145

 
42,057

 
 
 
 
EBITDA
 
641,072

 
444,578

 
 
 
 
Adjustments:
 
 
 
 
 
 
 
 
  Business realignment charges
6,822

 
16,318

 
 
 
 
  Clarcor costs to achieve
10,636

 

 
 
 
 
  Acquisition-related expenses

 
50,880

 
 
 
 
Adjusted EBITDA
 
$
658,530

 
$
511,776

 
 
 
 
 
 
 
 
 
 
 
 
 
EBITDA margin
 
17.1
%
 
14.3
%
 
 
 
 
Adjusted EBITDA margin
 
17.6
%
 
16.4
%
 
 
 
 






PARKER HANNIFIN CORPORATION - MARCH 31, 2018
 
 
 
 
 
Exhibit 99.1

BUSINESS SEGMENT INFORMATION
 
 
 
 
 
 
 
(Unaudited)
 
Three Months Ended March 31,
 
Nine Months Ended March 31,
(Dollars in thousands)
 
2018

 
2017

 
2018

 
2017

Net sales
 
 
 
 
 
 
 
 
    Diversified Industrial:
 
 
 
 
 
 
 
 
       North America
 
$
1,761,845

 
$
1,413,302

 
$
4,921,952

 
$
3,701,326

       International
 
1,389,332

 
1,128,886

 
3,883,675

 
3,149,777

    Aerospace Systems
 
598,414

 
576,951

 
1,679,288

 
1,681,971

Total net sales
 
$
3,749,591

 
$
3,119,139

 
$
10,484,915

 
$
8,533,074

Segment operating income
 
 
 
 
 
 
 
 
    Diversified Industrial:
 
 
 
 
 
 
 
 
       North America
 
$
280,694

 
$
227,419

 
$
762,528

 
$
612,043

       International
 
205,251

 
152,995

 
561,848

 
417,708

    Aerospace Systems
 
106,653

 
79,967

 
271,235

 
225,764

Total segment operating income
592,598

 
460,381

 
1,595,611

 
1,255,515

Corporate general and administrative expenses
54,138

 
45,747

 
142,430

 
120,707

Income before interest expense and other expense
538,460

 
414,634

 
1,453,181

 
1,134,808

Interest expense
 
54,145

 
42,057

 
160,833

 
109,649

Other expense
 
14,488

 
57,514

 
87,998

 
97,129

Income before income taxes
 
$
469,827

 
$
315,063

 
$
1,204,350

 
$
928,030

 
 
 
 
 
 
 
 
 
RECONCILIATION OF TOTAL SEGMENT OPERATING MARGIN TO ADJUSTED TOTAL SEGMENT OPERATING MARGIN
(Unaudited)
 
 
 
 
 
 
 
 
(Dollars in thousands)
 
Three Months Ended
 
Three Months Ended
 
 
March 31, 2018
 
March 31, 2017
 
 
Operating income

 
Operating margin

 
Operating income

 
Operating margin

Total segment operating income
$
592,598

 
15.8
%
 
$
460,381

 
14.8
%
Adjustments:
 
 
 
 
 
 
 
 
  Business realignment charges
 
6,822

 
 
 
16,318

 
 
  Clarcor costs to achieve
 
10,636

 
 
 
26,226

 
 
Adjusted total segment operating income
$
610,056

 
16.3
%
 
$
502,925

 
16.1
%
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended
 
Nine Months Ended
 
 
March 31, 2018
 
March 31, 2017
 
 
Operating income

 
Operating margin

 
Operating income

 
Operating margin

Total segment operating income
$
1,595,611

 
15.2
%
 
$
1,255,515

 
14.7
%
Adjustments:
 
 
 
 
 
 
 
 
  Business realignment charges
 
28,476

 
 
 
34,960

 
 
  Clarcor costs to achieve
 
28,384

 
 
 
26,226

 
 
Adjusted total segment operating income
$
1,652,471

 
15.8
%
 
$
1,316,701

 
15.4
%






 
 
 
 
 
 
Exhibit 99.1

PARKER HANNIFIN CORPORATION - MARCH 31, 2018
 
 
 
 
 
CONSOLIDATED BALANCE SHEET
 
 
 
 
 
 
(Unaudited)
 
March 31,

 
June 30,

 
March 31,

(Dollars in thousands)
 
2018

 
2017

 
2017

Assets
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
Cash and cash equivalents
 
$
1,089,529

 
$
884,886

 
$
819,563

Marketable securities and other investments
 
101,206

 
39,318

 
36,758

Trade accounts receivable, net
 
2,146,408

 
1,930,751

 
1,869,303

Non-trade and notes receivable
 
328,111

 
254,987

 
235,924

Inventories
 
1,732,759

 
1,549,494

 
1,538,644

Prepaid expenses
 
165,083

 
120,282

 
118,962

Total current assets
 
5,563,096

 
4,779,718

 
4,619,154

Plant and equipment, net
 
1,941,799

 
1,937,292

 
1,945,739

Deferred income taxes
 
36,935

 
36,057

 
65,152

Goodwill
 
5,746,358

 
5,586,878

 
5,508,712

Intangible assets, net
 
2,134,659

 
2,307,484

 
2,338,364

Other assets
 
814,637

 
842,475

 
848,212

Total assets
 
$
16,237,484

 
$
15,489,904

 
$
15,325,333

 
 
 
 
 
 
 
Liabilities and equity
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
Notes payable
 
$
1,055,527

 
$
1,008,465

 
$
776,159

Accounts payable
 
1,376,457

 
1,300,496

 
1,209,351

Accrued liabilities
 
896,604

 
933,762

 
904,297

Accrued domestic and foreign taxes
 
179,929

 
153,137

 
158,634

Total current liabilities
 
3,508,517

 
3,395,860

 
3,048,441

Long-term debt
 
4,818,570

 
4,861,895

 
5,255,156

Pensions and other postretirement benefits
 
1,351,106

 
1,406,082

 
1,787,311

Deferred income taxes
 
113,799

 
221,790

 
159,666

Other liabilities
 
569,209

 
336,931

 
327,033

Shareholders' equity
 
5,870,353

 
5,261,649

 
4,742,139

Noncontrolling interests
 
5,930

 
5,697

 
5,587

Total liabilities and equity
 
$
16,237,484

 
$
15,489,904

 
$
15,325,333






 
 
 
 
Exhibit 99.1

PARKER HANNIFIN CORPORATION - MARCH 31, 2018
 
 
 
 
CONSOLIDATED STATEMENT OF CASH FLOWS
 
 
 
 
(Unaudited)
 
Nine Months Ended March 31,
(Dollars in thousands)
 
2018

 
2017

 
 
 
 
 
Cash flows from operating activities:
 
 
 
 
Net income
 
$
707,987

 
$
690,485

Depreciation and amortization
 
351,316

 
236,543

Stock incentive plan compensation
 
89,571

 
60,916

(Gain) on sale of business
 

 
(42,994
)
(Gain) loss on disposal of assets
 
(26,767
)
 
513

(Gain) on sale of marketable securities
 
(1
)
 
(1,032
)
Loss on sale and impairment of investments
 
33,759

 

Net change in receivables, inventories, and trade payables
 
(329,428
)
 
(35,469
)
Net change in other assets and liabilities
 
150,876

 
(169,403
)
Other, net
 
(72,488
)
 
49,734

Net cash provided by operating activities
 
904,825

 
789,293

Cash flows from investing activities:
 
 
 
 
Acquisitions (net of cash of $157,426 in 2017)
 

 
(4,067,755
)
Capital expenditures
 
(194,307
)
 
(145,236
)
Proceeds from sale of plant and equipment
 
64,203

 
8,452

Proceeds from sale of business
 

 
85,610

Purchases of marketable securities and other investments
 
(78,488
)
 
(451,561
)
Maturities and sales of marketable securities and other investments
 
20,260

 
1,264,721

Other, net
 
5,350

 
(2,590
)
Net cash (used in) investing activities
 
(182,982
)
 
(3,308,359
)
Cash flows from financing activities:
 
 
 
 
Net payments for common stock activity
 
(199,361
)
 
(262,248
)
Net (payments for) proceeds from debt
 
(71,835
)
 
2,687,761

Dividends
 
(264,332
)
 
(257,161
)
Net cash (used in) provided by financing activities
 
(535,528
)
 
2,168,352

Effect of exchange rate changes on cash
 
18,328

 
(51,376
)
Net increase (decrease) in cash and cash equivalents
 
204,643

 
(402,090
)
Cash and cash equivalents at beginning of period
 
884,886

 
1,221,653

Cash and cash equivalents at end of period
 
$
1,089,529

 
$
819,563


 
 
 
 
Exhibit 99.1

PARKER HANNIFIN CORPORATION - MARCH 31, 2018
 
 
 
 
 
 
 
 
 
RECONCILIATION OF CASH FLOW FROM OPERATIONS TO ADJUSTED CASH FLOW FROM OPERATIONS
(Unaudited)
 
Nine Months Ended
 
 
(Dollars in thousands)
 
March 31, 2018
 
Percent of Sales

As reported cash flow from operations
 
$
904,825

 
8.6
%
  Discretionary pension contribution
 

 
 
Adjusted cash flow from operations
 
$
904,825

 
8.6
%
 
 
 
 
 
 
 
Nine Months Ended
 
 
 
 
March 31, 2017
 
Percent of Sales

As reported cash flow from operations
 
$
789,293

 
9.2
%
  Discretionary pension contribution
 
220,000

 
 
Adjusted cash flow from operations
 
$
1,009,293

 
11.8
%
 
 
 
 
 





 
 
 
 
Exhibit 99.1
PARKER HANNIFIN CORPORATION - MARCH 31, 2018
 
 
RECONCILIATION OF FORECASTED EARNINGS PER DILUTED SHARE TO ADJUSTED FORECASTED EARNINGS PER DILUTED SHARE
(Unaudited)
 
 
 
 
(Amounts in dollars)
 
 
 
 
 
 
Fiscal Year 2018
 
 
Forecasted earnings per diluted share
$7.76 to $7.96
 
 
Adjustments:
 
 
 
  Business realignment charges
0.27
 
 
  Clarcor costs to achieve
0.25
 
 
  Gain on sale and writedown of assets, net
0.02
 
 
  U.S. Tax Reform one-time impact, net
1.65
 
 
Adjusted forecasted earnings per diluted share
$9.95 to $10.15