Document

CLEVELAND, February 2, 2023 -- Parker Hannifin Corporation (NYSE: PH), the global leader in motion and control technologies, today reported results for the fiscal 2023 second quarter ended December 31, 2022. Fiscal 2023 second quarter sales were a record at $4.67 billion, an increase of 22%, compared with $3.82 billion in the second quarter of fiscal 2022. Net income was $395.2 million compared with $387.6 million in the prior year quarter. Adjusted net income was $618.9 million, an increase of 6% compared with $582.2 million in the second quarter of fiscal 2022. Earnings per share were $3.04 compared with $2.97 in the second quarter of fiscal 2022. Adjusted earnings per share increased 7% to a record of $4.76 compared with $4.46 in the prior year quarter. Fiscal 2023 year-to-date cash flow from operations was $1.08 billion, or 12.1% of sales, compared with $1.01 billion, or 13.3% of sales, in the prior year. A reconciliation of non-GAAP measures is included in the financial tables of this press release and includes various expenses associated with the completion of the acquisition of Meggitt plc and the related divestiture of the Aircraft Wheel and Brake Division during fiscal 2023.

Diversified Industrial Segment: North American second quarter sales increased 18% to $2.14 billion and operating income was $419.9 million compared with $337.4 million in the same period a year ago. On an adjusted basis, North American operating income was $466.9 million, or 21.8% of sales, a 50 basis point increase compared with the prior year quarter. International second quarter sales were flat at $1.40 billion and operating income was $285.5 million compared with $291.6 million in the same period a year ago. On an adjusted basis, International operating income was $305.8 million, or 21.9% of sales.

Effective July 1, 2022, the company began classifying certain expenses, previously classified as cost of sales, as selling, general and administrative expenses (“SG&A”) or within other (income) expense, net. During the integration of recently acquired businesses, the company has seen diversity in practice of the classifications of certain expenses, and the reclassification was made to better align the presentation of expenses on the Consolidated Statement of Income with management’s internal reporting. The expenses reclassified from cost of sales to SG&A relate to certain administrative activities conducted in production facilities and research and development. Foreign currency transaction expense was also reclassified from cost of sales to other (income) expense, net on the Consolidated Statement of Income. These reclassifications had no impact on net income, earnings per share, cash flows, segment reporting or the financial position of the Company and were retrospectively applied to all periods presented in the financial tables of this press release.

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, and divestitures. 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.

This press release contains references to non-GAAP financial information including (a) adjusted net income; (b) adjusted earnings per share; (c) adjusted segment operating margins; (d) adjusted segment operating income; (e) EBITDA margin; (f) adjusted EBITDA margin and (g) organic sales growth. The adjusted net income, earnings per share, segment operating margin, adjusted segment operating income and organic sales measures are presented to allow investors and the company to meaningfully evaluate changes in net income, earnings per share and segment operating margins 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. Comparable descriptions of record adjusted results in this release refer only to the period from the first quarter of FY2011 to the periods presented in this release. This period coincides with recast historical financial results provided in association with our FY2014 change in segment reporting. A reconciliation of non-GAAP measures is included in the financial tables of this press release.

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.

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 Meggitt PLC; 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 international conflicts 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


PARKER HANNIFIN CORPORATION - DECEMBER 31, 2022							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)	2022		2021*		2022		2021*
Net sales	$	4,674,811	$	3,824,580	$	8,907,586	$	7,587,389
Cost of sales	3,236,812		2,567,595		6,032,268		5,071,977
Selling, general and administrative expenses	814,966		585,858		1,650,770		1,212,607
Interest expense	146,931		61,360		264,725		120,710
Other (income) expense, net	(40,641)		119,443		(60,265)		120,026
Income before income taxes	516,743		490,324		1,020,088		1,062,069
Income taxes	121,282		102,595		236,590		222,877
Net income	395,461		387,729		783,498		839,192
Less: Noncontrolling interests	224		129		407		435
Net income attributable to common shareholders	$	395,237	$	387,600	$	783,091	$	838,757

*Prior period amounts have been reclassified to reflect the income statement reclassification, as described in the attached press release.

Earnings per share attributable to common shareholders:
Basic earnings per share	$	3.08	$	3.02	$	6.10	$	6.52
Diluted earnings per share	$	3.04	$	2.97	$	6.03	$	6.42

Average shares outstanding during period - Basic	128,313,322		128,493,725		128,369,162		128,610,223
Average shares outstanding during period - Diluted	130,045,013		130,581,665		129,961,696		130,585,212


CASH DIVIDENDS PER COMMON SHARE
(Unaudited)	Three Months Ended December 31,				Six Months Ended December 31,
(Amounts in dollars)	2022		2021		2022		2021
Cash dividends per common share	$	1.33	$	1.03	$	2.66	$	2.06


PARKER HANNIFIN CORPORATION - DECEMBER 31, 2022							Exhibit 99.1
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)	2022		2021		2022		2021
Net income attributable to common shareholders	$	395,237	$	387,600	$	783,091	$	838,757
Adjustments:
Acquired intangible asset amortization expense	142,256		78,741		229,270		158,512
Business realignment charges	5,378		3,645		9,239		6,659
Integration costs to achieve	33,418		807		45,409		2,009
Acquisition-related expenses	1,983		19,142		162,241		71,341
Loss on deal-contingent forward contracts	—		149,382		389,992		149,382
Gain on Aircraft Wheel and Brake divestiture	—		—		(372,930)		—
Amortization of inventory step-up to fair value	111,973		—		130,331		—

Tax effect of adjustments1	(71,391)		(57,139)		(142,246)		(87,780)
Adjusted net income attributable to common shareholders	$	618,854	$	582,178	$	1,234,397	$	1,138,880



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)	2022		2021		2022		2021
Earnings per diluted share	$	3.04	$	2.97	$	6.03	$	6.42
Adjustments:
Acquired intangible asset amortization expense	1.09		0.60		1.76		1.21
Business realignment charges	0.04		0.03		0.07		0.05
Integration costs to achieve	0.26		0.01		0.35		0.02
Acquisition-related expenses	0.02		0.15		1.26		0.55
Loss on deal-contingent forward contracts	—		1.14		3.00		1.14
Gain on Aircraft Wheel and Brake divestiture	—		—		(2.87)		—
Amortization of inventory step-up to fair value	0.86		—		1.00		—

Tax effect of adjustments1	(0.55)		(0.44)		(1.09)		(0.67)
Adjusted earnings per diluted share	$	4.76	$	4.46	$	9.51	$	8.72

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, 2022										Exhibit 99.1
RECONCILIATION OF EBITDA TO ADJUSTED EBITDA
(Unaudited)	Three Months Ended December 31,						Six Months Ended December 31,
(Dollars in thousands)	2022			2021			2022			2021
Net sales	$	4,674,811		$	3,824,580		$	8,907,586		$	7,587,389

Net income	$	395,461		$	387,729		$	783,498		$	839,192
Income taxes	121,282			102,595			236,590			222,877
Depreciation	87,488			65,362			154,455			131,113
Amortization	142,256			78,741			229,270			158,512
Interest expense	146,931			61,360			264,725			120,710
EBITDA	893,418			695,787			1,668,538			1,472,404
Adjustments:
Business realignment charges	5,378			3,645			9,239			6,659
Integration costs to achieve	33,418			807			45,409			2,009
Acquisition-related expenses	1,983			19,142			162,241			71,341
Loss on deal-contingent forward contracts	—			149,382			389,992			149,382
Gain on Aircraft Wheel and Brake divestiture	—			—			(372,930)			—
Amortization of inventory step-up to fair value	111,973			—			130,331			—

Adjusted EBITDA	$	1,046,170		$	868,763		$	2,032,820		$	1,701,795

EBITDA margin	19.1		%	18.2		%	18.7		%	19.4		%
Adjusted EBITDA margin	22.4		%	22.7		%	22.8		%	22.4		%



BUSINESS SEGMENT INFORMATION
(Unaudited)	Three Months Ended December 31,				Six Months Ended December 31,
(Dollars in thousands)	2022		2021		2022		2021
Net sales
Diversified Industrial:
North America	$	2,140,685	$	1,807,024	$	4,272,445	$	3,600,739
International	1,397,699		1,399,179		2,752,712		2,775,615
Aerospace Systems	1,136,427		618,377		1,882,429		1,211,035
Total net sales	$	4,674,811	$	3,824,580	$	8,907,586	$	7,587,389
Segment operating income
Diversified Industrial:
North America	$	419,921	$	337,417	$	872,907	$	671,119
International	285,520		291,555		579,460		582,731
Aerospace Systems	8,793		114,796		100,944		233,047
Total segment operating income	714,234		743,768		1,553,311		1,486,897
Corporate general and administrative expenses	48,901		42,587		100,561		91,659
Income before interest expense and other expense	665,333		701,181		1,452,750		1,395,238
Interest expense	146,931		61,360		264,725		120,710
Other expense	1,659		149,497		167,937		212,459
Income before income taxes	$	516,743	$	490,324	$	1,020,088	$	1,062,069


PARKER HANNIFIN CORPORATION - DECEMBER 31, 2022										Exhibit 99.1
RECONCILIATION OF SEGMENT OPERATING MARGINS TO ADJUSTED SEGMENT OPERATING MARGINS
(Unaudited)	Three Months Ended December 31,						Six Months Ended December 31,
(Dollars in thousands)	2022			2021			2022			2021
Diversified Industrial North America sales	$	2,140,685		$	1,807,024		$	4,272,445		$	3,600,739

Diversified Industrial North America operating income	$	419,921		$	337,417		$	872,907		$	671,119
Adjustments:
Acquired intangible asset amortization	44,358			47,024			90,632			94,287
Business realignment charges	1,338			660			1,471			1,613
Integration costs to achieve	1,270			329			1,317			660
Adjusted Diversified Industrial North America operating income	$	466,887		$	385,430		$	966,327		$	767,679

Diversified Industrial North America operating margin	19.6		%	18.7		%	20.4		%	18.6		%
Adjusted Diversified Industrial North America operating margin	21.8		%	21.3		%	22.6		%	21.3		%



(Unaudited)	Three Months Ended December 31,						Six Months Ended December 31,
(Dollars in thousands)	2022			2021			2022			2021
Diversified Industrial International sales	$	1,397,699		$	1,399,179		$	2,752,712		$	2,775,615

Diversified Industrial International operating income	$	285,520		$	291,555		$	579,460		$	582,731
Adjustments:
Acquired intangible asset amortization	16,819			18,958			33,624			38,700
Business realignment charges	3,039			2,387			4,918			4,451
Integration costs to achieve	425			478			564			1,349

Adjusted Diversified Industrial International operating income	$	305,803		$	313,378		$	618,566		$	627,231

Diversified Industrial International operating margin	20.4		%	20.8		%	21.1		%	21.0		%
Adjusted Diversified Industrial International operating margin	21.9		%	22.4		%	22.5		%	22.6		%


(Unaudited)	Three Months Ended December 31,						Six Months Ended December 31,
(Dollars in thousands)	2022			2021			2022			2021
Aerospace Systems sales	$	1,136,427		$	618,377		$	1,882,429		$	1,211,035

Aerospace Systems operating income	$	8,793		$	114,796		$	100,944		$	233,047
Adjustments:
Acquired intangible asset amortization	81,079			12,759			105,014			25,525
Business realignment charges	1,001			598			2,850			595

Integration costs to achieve	31,723			—			43,528			—
Amortization of inventory step-up to fair value	111,973			—			130,331			—

Adjusted Aerospace Systems operating income	$	234,569		$	128,153		$	382,667		$	259,167

Aerospace Systems operating margin	0.8		%	18.6		%	5.4		%	19.2		%
Adjusted Aerospace Systems operating margin	20.6		%	20.7		%	20.3		%	21.4		%



PARKER HANNIFIN CORPORATION - DECEMBER 31, 2022										Exhibit 99.1
RECONCILIATION OF SEGMENT OPERATING MARGINS TO ADJUSTED SEGMENT OPERATING MARGINS
(Unaudited)	Three Months Ended December 31,						Six Months Ended December 31,
(Dollars in thousands)	2022			2021			2022			2021
Total segment sales	$	4,674,811		$	3,824,580		$	8,907,586		$	7,587,389

Total segment operating income	$	714,234		$	743,768		$	1,553,311		$	1,486,897
Adjustments:
Acquired intangible asset amortization	142,256			78,741			229,270			158,512
Business realignment charges	5,378			3,645			9,239			6,659
Integration costs to achieve	33,418			807			45,409			2,009
Amortization of inventory step-up to fair value	111,973			—			130,331			—

Adjusted total segment operating income	$	1,007,259		$	826,961		$	1,967,560		$	1,654,077

Total segment operating margin	15.3		%	19.4		%	17.4		%	19.6		%
Adjusted total segment operating margin	21.5		%	21.6		%	22.1		%	21.8		%


PARKER HANNIFIN CORPORATION - DECEMBER 31, 2022					Exhibit 99.1
CONSOLIDATED BALANCE SHEET
(Unaudited)	December 31,		June 30,		December 31,
(Dollars in thousands)	2022		2022		2021
Assets
Current assets:
Cash and cash equivalents	$	756,055	$	535,799	$	449,481
Marketable securities and other investments	21,611		27,862		40,511
Trade accounts receivable, net	2,578,045		2,341,504		2,041,953
Non-trade and notes receivable	371,474		543,757		314,897
Inventories	3,095,722		2,214,553		2,307,306
Prepaid expenses and other	462,093		6,383,169		2,753,501
Total current assets	7,285,000		12,046,644		7,907,649
Property, plant and equipment, net	2,839,524		2,122,758		2,202,932
Deferred income taxes	133,348		110,585		146,567
Investments and other assets	1,206,194		788,057		794,814
Intangible assets, net	8,387,917		3,135,817		3,343,612
Goodwill	10,668,904		7,740,082		7,999,901
Total assets	$	30,520,887	$	25,943,943	$	22,395,475

Liabilities and equity
Current liabilities:
Notes payable and long-term debt payable within one year	$	1,994,333	$	1,724,310	$	2,201,653
Accounts payable, trade	1,966,757		1,731,925		1,597,025
Accrued payrolls and other compensation	453,037		470,132		335,417
Accrued domestic and foreign taxes	236,227		250,292		294,255
Other accrued liabilities	1,053,049		1,682,659		829,141
Total current liabilities	5,703,403		5,859,318		5,257,491
Long-term debt	12,025,860		9,755,825		6,250,525
Pensions and other postretirement benefits	807,124		639,939		959,741
Deferred income taxes	1,751,321		307,044		558,986
Other liabilities	898,703		521,897		600,452
Shareholders' equity	9,322,380		8,848,011		8,755,082
Noncontrolling interests	12,096		11,909		13,198
Total liabilities and equity	$	30,520,887	$	25,943,943	$	22,395,475


PARKER HANNIFIN CORPORATION - DECEMBER 31, 2022			Exhibit 99.1
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)	Six Months Ended December 31,
(Dollars in thousands)	2022		2021
Cash flows from operating activities:
Net income	$	783,498	$	839,192
Depreciation and amortization	383,725		289,625
Share incentive plan compensation	89,709		79,385
Gain on sale of businesses	(377,251)		(1,520)
Gain on disposal of property, plant and equipment	(2,551)		(7,880)
Gain on marketable securities	(1,354)		(4,948)
Gain on investments	(2,929)		(1,487)
Net change in receivables, inventories and trade payables	112,216		(147,481)
Net change in other assets and liabilities	(112,066)		(16,498)
Other, net	203,137		(22,919)
Net cash provided by operating activities	1,076,134		1,005,469
Cash flows from investing activities:
Acquisitions (net of cash of $89,704 in 2022)	(7,146,110)		—
Capital expenditures	(185,704)		(105,606)
Proceeds from sale of property, plant and equipment	11,632		22,392
Proceeds from sale of businesses	447,300		2,466
Purchases of marketable securities and other investments	(25,198)		(10,150)
Maturities and sales of marketable securities and other investments	30,594		13,742
Payments of deal-contingent forward contracts	(1,405,418)		—
Other	251,174		2,789
Net cash used in investing activities	(8,021,730)		(74,367)
Cash flows from financing activities:
Net payments for common stock activity	(119,944)		(317,512)

Net proceeds from debt	1,536,211		1,900,844
Financing fees paid	(8,911)		(52,108)
Dividends paid	(342,360)		(265,556)
Net cash provided by financing activities	1,064,996		1,265,668
Effect of exchange rate changes on cash	(11,221)		6,978
Net (decrease) increase in cash, cash equivalents and restricted cash	(5,891,821)		2,203,748
Cash, cash equivalents and restricted cash at beginning of year	6,647,876		733,117
Cash, cash equivalents and restricted cash at end of period	$	756,055	$	2,936,865



PARKER HANNIFIN CORPORATION - DECEMBER 31, 2022						Exhibit 99.1
RECONCILIATION OF FORECASTED EARNINGS PER DILUTED SHARE TO ADJUSTED FORECASTED EARNINGS PER DILUTED SHARE

(Unaudited)
(Amounts in dollars)						Fiscal Year 2023
Forecasted earnings per diluted share						$13.50 to $14.00
Adjustments:
Business realignment charges						0.23
Costs to achieve						0.54
Acquisition-related intangible asset amortization expense						4.00
Acquisition-related expenses						2.55
Loss on deal-contingent forward contracts						3.00
Gain on Aircraft Wheel & Brake divestiture						(2.87)
Tax effect of adjustments1						(1.75)
Adjusted forecasted earnings per diluted share						$19.20 to $19.70

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.


For Release:	Immediately	Exhibit 99.1

Contact:	Media -
	Aidan Gormley - Director, Global Communications and Branding	216-896-3258
	aidan.gormley@parker.com

	Financial Analysts -
	Jeff Miller - Vice President, Investor Relations	216-896-2708
	jeffrey.miller@parker.com

Stock Symbol:	PH - NYSE


RECONCILIATION OF ORGANIC GROWTH
(Unaudited)	Three Months Ended December 31,				Six Months Ended December 31,
	2022		2021		2022		2021
Sales growth - as reported	22.2	%	12.1	%	17.4	%	14.2	%
Adjustments:
Acquisitions	16.5	%	—	%	10.2	%	—	%
Divestitures	(0.5)	%	—	%	(0.3)	%	—	%
Currency	(4.1)	%	(1.1)	%	(4.7)	%	(0.2)	%
Organic sales growth	10.3	%	13.2	%	12.2	%	14.4	%