Parker Hannifin
Corporation Quarterly Earnings Release 4th Quarter FY 2007 August 1, 2007 Exhibit 99.2 * * * * * |
Slide 2 Forward-Looking Statements 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 and individual segments
may differ materially from current expectations, depending on economic
conditions within both its 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,
and growth and innovation initiatives. A change in economic conditions in
individual markets may have a particularly volatile effect on segment results. Among the other factors which may affect future performance are: changes in business relationships with and purchases by or from major customers or suppliers, including delays or cancellations in shipments or significant changes in financial condition; uncertainties surrounding timing, successful
completion or integration of acquisitions; threats associated with and efforts to combat terrorism; competitive market conditions and resulting effects on sales and pricing; increases in raw-material costs that cannot be recovered in product pricing; the companys ability to manage costs related to
employee retirement and health care benefits and insurance; and global economic factors, including manufacturing activity, air travel trends, currency exchange rates, difficulties entering new markets and general
economic conditions such as inflation and interest rates. The company makes
these statements as of the date of this disclosure, and undertakes no
obligation to update them. |
Slide 3 Non-GAAP Financial Measure This presentation reconciles sales amounts reported in accordance with U.S. GAAP to sales amounts adjusted to remove the effects of acquisitions made within the prior four quarters as well as the effects of currency exchange rates on sales. The effects of acquisitions and currency exchange rates are removed to allow investors and the company to meaningfully evaluate changes in sales on a comparable basis from period to period. |
Slide 4 Discussion Agenda CEO 4 th quarter highlights Key performance measures & outlook Questions & answers CEO closing comments |
Slide 5 Fourth Quarter and Total Year Highlights Record Sales, Earnings, Cash Flow and Segment Operating Margins Earnings per share from continuing operations up 19% for the quarter and 33% for the year Inventory down to 11.8% of Sales 5% organic growth for the year Globally balanced in Sales and margins as evidenced by an all-time record in segment operating margin of 13.8% |
Slide 6 Financial Highlights EPS from Continuing Operations 4 th Quarter and Total Year $1.55 $1.84 $7.01 $5.28 $0.00 $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 $7.00 $8.00 Q4 FY07 Q4 FY06 FY07 FY06 |
Slide 7 Influences on Earnings 4 th Quarter and Total Year Sales increased 10% for the quarter and 14% for the year Gross profit improved 16% for the quarter and 21% for the year Higher Other income Reduction in shares outstanding 3.9 million net reduction for the year Offset by: Higher SG&A expense Higher Interest expense Higher income taxes Lower quarterly and annual rate |
Slide 8 Financial Highlights Sales 4 th Quarter and Total Year Dollars in millions FY2007 % Change FY2006 FY2007 % Change FY2006 Sales As reported 2,874 $ 9.8 % 2,617 $ 10,718 $ 14.2 % 9,386 $ Acquisitions 120 4.6 % 585 6.2 % Currency 59 2.2 % 241 2.6 % Adjusted Sales 2,695 $ 3.0 % 9,892 $ 5.4 % 4th Quarter YTD |
Slide 9 Influences on Sales Continued Industrial end market strength International Asia Pacific Latin America Europe particularly Germany Distribution Aerospace Acquisitions Emerging markets |
Slide 10 Segment Reporting Industrial North America Dollars in millions FY2007 % Change FY2006 FY2007 % Change FY2006 Sales As reported 1,055 $ (1.6)% 1,072 $ 4,064 $ 1.8 % 3,993 $ Acquisitions 21 2.0 % 98 2.5 % Currency 2 0.2 % 4 0.1 % Adjusted Sales 1,032 $ (3.8)% 3,962 $ (0.8)% Operating Margin As reported 165 $ 165 $ 598 $ 597 $ % of Sales 15.6 % 15.4 % 14.7 % 15.0 % YTD 4th Quarter |
Slide 11 Segment Reporting Industrial International Dollars in millions FY2007 % Change FY2006 FY2007 % Change FY2006 Sales As reported 1,083 $ 30.3 % 831 $ 3,901 $ 34.4 % 2,903 $ Acquisitions 90 10.8 % 415 14.3 % Currency 54 6.5 % 222 7.6 % Adjusted Sales 939 $ 13.0 % 3,264 $ 12.5 % Operating Margin As reported 143 $ 106 $ 533 $ 354 $ % of Sales 13.2 % 12.8 % 13.7 % 12.2 % 4th Quarter YTD |
Slide 12 Segment Reporting Aerospace Dollars in millions FY2007 % Change FY2006 FY2007 % Change FY2006 Sales As reported 445 $ 5.9 % 420 $ 1,685 $ 12.0 % 1,505 $ Acquisitions 3 0.6 % 15 1.0 % Currency 3 0.7 % 12 0.8 % Adjusted Sales 439 $ 4.6 % 1,658 $ 10.2 % Operating Margin As reported 67 $ 64 $ 270 $ 221 $ % of Sales 15.1 % 15.3 % 16.0 % 14.7 % 4th Quarter YTD |
Slide 13 Segment Reporting Climate & Industrial Controls Dollars in millions FY2007 % Change FY2006 FY2007 % Change FY2006 Sales As reported 292 $ (0.7)% 294 $ 1,068 $ 8.4 % 985 $ Acquisitions 6 2.1 % 56 5.7 % Currency -- -- % 4 0.3 % Adjusted Sales 286 $ (2.8)% 1,008 $ 2.4 % Operating Margin As reported 25 $ 31 $ 82 $ 83 $ % of Sales 8.7 % 10.5 % 7.7 % 8.5 % 4th Quarter YTD |
Slide 14 Parker Order Rates Excludes Acquisitions & Currency 3-month year-over-year comparisons, except Aerospace Aerospace is calculated using a 12-month moving average FY07 FY06 Total Parker 3 % + 12 % + Industrial North America 3 % - 8 % + Industrial International 14 % + 13 % + Aerospace 8 % + 15 % + Climate & Industrial Controls 6 % - 22 % + Three months ending June |
Slide 15 Balance Sheet Summary Cash Working capital Inventory Accounts receivable Pensions FAS 158 |
Slide 16 Strong Cash Flow Cash From Operations 459 538 529 631 662 854 955 955 558 $0 $100 $200 $300 $400 $500 $600 $700 $800 $900 $1,000 4.0% 6.0% 8.0% 10.0% 12.0% FY 07 - $955 $161 pension contribution; $61 incremental to FY06 Dollars in millions |
Slide 17 Financial Leverage Debt to Debt Equity 21.4% 16.0% 18.0% 20.0% 22.0% 24.0% 26.0% 28.0% 30.0% 32.0% 34.0% 36.0% 38.0% FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 Not to exceed 37% over the cycle |
Slide 18 FY 2008 Earnings Outlook Assumptions Segment Sales & Operating Income FY 2008 Sales change versus FY 2007 Industrial North America .5 % -- 1.5 % Industrial International 8.9 % -- 9.9 % Aerospace 0.0 % -- 1.0 % Climate & Industrial Controls 0.0 % -- 1.0 % FY 2008 Operating margin percentages Industrial North America 14.5 % -- 14.9 % Industrial International 14.0 % -- 14.4 % Aerospace 15.7 % -- 16.1 % Climate & Industrial Controls 7.8 % -- 8.2 % |
Slide 19 FY 2008 Earnings Outlook Assumptions below Operating Margin Corporate Admin - 5% to - 9% vs. FY 2007 Interest Expense - 28% to - 29% vs. FY 2007 Other Exp. (Income) + 45% to + 41% vs. FY 2007 Tax Rate 30 % |
Slide 20 Earnings Outlook FY08 Low High EPS from continuing operations 7.20 $ 7.60 $ |
Slide 21 Questions & Answers... * * |
Appendix Income Statements 4 th Quarter Total Year * * * * *
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Slide 23 Income Statement 4 th Quarter Dollars in millions % of Sales % of Sales Net Sales 2,874.4 $ 100.0 % 2,616.7 $ 100.0 % Cost of sales 2,223.8 77.4 % 2,054.0 78.5 % Gross profit 650.6 22.6 % 562.7 21.5 % S, G & A 333.4 11.6 % 277.1 10.6 % Interest expense 21.5 .7 % 18.7 .7 % Other (income) expense (2.2) (.1)% 1.7 .1 % Income from cont'g operations before taxes 297.9 10.4 % 265.2 10.1 % Income taxes 80.7 2.8 % 77.4 3.0 % Income from cont'g operations 217.2 7.6 % 187.8 7.2 % Discontinued operations 6.0 .2 % Net income 217.2 $ 7.6 % 193.8 $ 7.4 % FY 2007 FY 2006 |
Slide 24 Income Statement Total Year Dollars in millions % of Sales % of Sales Net Sales 10,718.1 $ 100.0 % 9,385.9 $ 100.0 % Cost of sales 8,273.0 77.2 % 7,367.6 78.5 % Gross profit 2,445.1 22.8 % 2,018.3 21.5 % S, G & A 1,226.9 11.4 % 1,036.6 11.0 % Interest expense 83.4 .8 % 75.8 .8 % Other (income) expense (24.4) (.2)% 5.9 .1 % Income from cont'g operations before taxes 1,159.2 10.8 % 900.0 9.6 % Income taxes 329.2 3.1 % 261.7 2.8 % Income from cont'g operations 830.0 7.7 % 638.3 6.8 % Discontinued operations 34.9 .4 % Net income 830.0 $ 7.7 % 673.2 $ 7.2 % FY 2007 FY 2006 |