 Parker Hannifin
Corporation Quarterly Earnings Release 1st Quarter FY 2008 October 18, 2007 Exhibit 99.2 |
| Parker Hannifin
Corporation Quarterly Earnings Release 1st Quarter FY 2008 October 18, 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, innovation and global diversification 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 company’s 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,
interest rates and credit availability. 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 1 st quarter highlights Key performance measures & outlook Questions & answers CEO closing comments |
 Slide 5 First Quarter Highlights Record Sales, Earnings, and Cash Flow Earnings per diluted share up 14% 9% Sales growth - 3% organic Globally balanced in Sales and margins Record Industrial International margins Record Total Industrial margins |
 Slide 6 Financial Highlights Diluted Earnings per Share 1 st Quarter $1.33 $1.17 $0.00 $0.20 $0.40 $0.60 $0.80 $1.00 $1.20 $1.40 $1.60 Q1 FY08 Q1 FY07 |
 Slide 7 Influences on Earnings 1 st Quarter Sales increased 9% Gross profit improved 10% Industrial International Operating Income increased 44% Lower income taxes – 28% vs. 30% Reduction in shares outstanding 5.8 million net reduction during the quarter Offset by: Higher SG&A expense Higher Interest expense Lower Other income |
 Slide 8 Financial Highlights Sales – 1 st Quarter Dollars in millions FY2008 % Change FY2007 Sales As reported 2,787 $ 9.2 % 2,552 $ Acquisitions 62 2.4 % Currency 90 3.5 % Adjusted Sales 2,635 $ 3.3 % 1st Quarter |
 Slide 9 Influences on Sales Continued Industrial end market strength International – Asia Pacific – Latin America – Europe Distribution Aerospace Acquisitions Emerging markets |
 Slide 10 Segment Reporting Industrial North America Dollars in millions FY2008 % Change FY2007 Sales As reported 1,006 $ 0.5 % 1,001 $ Acquisitions 27 2.7 % Currency 3 0.3 % Adjusted Sales 976 $ (2.5)% Operating Margin As reported 155 $ 153 $ % of Sales 15.4 % 15.3 % 1st Quarter |
 Slide 11 Segment Reporting Industrial International Dollars in millions FY2008 % Change FY2007 Sales As reported 1,101 $ 25.4 % 878 $ Acquisitions 35 4.0 % Currency 79 9.0 % Adjusted Sales 987 $ 12.4 % Operating Margin As reported 183 $ 128 $ % of Sales 16.7 % 14.5 % 1st Quarter |
 Slide 12 Segment Reporting Aerospace Dollars in millions FY2008 % Change FY2007 Sales As reported 427 $ 6.2 % 402 $ Acquisitions Currency 2 0.5 % Adjusted Sales 425 $ 5.7 % Operating Margin As reported 57 $ 69 $ % of Sales 13.4 % 17.1 % 1st Quarter |
 Slide 13 Segment Reporting Climate & Industrial Controls Dollars in millions FY2008 % Change FY2007 Sales As reported 253 $ (6.5)% 271 $ Acquisitions Currency 6 2.2 % Adjusted Sales 247 $ (8.7)% Operating Margin As reported 16 $ 31 $ % of Sales 6.1 % 11.4 % 1st Quarter |
 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 FY08 FY07 Total Parker 7 % + 9 % + Industrial North America 0 % + 5 % + Industrial International 19 % + 14 % + Aerospace 12 % + 18 % + Climate & Industrial Controls 13 % - 6 % + Three months ending September |
 Slide 15 Balance Sheet Summary Cash Working capital Inventory Accounts receivable Pensions – FAS 158 |
 Slide 16 Strong Cash Flow Cash from Operating Activities 1 Quarter $115 $269 $0 $60 $120 $180 $240 $300 $360 FY08 FY07 st |
 Slide 17 Financial Leverage Debt to Debt Equity 27.2% 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 FY08 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 .8 % -- 1.2 % Industrial International 12.0 % -- 12.4 % Aerospace .7 % -- 1.1 % Climate & Industrial Controls (1.8)% -- (1.4)% FY 2008 Operating margin percentages Industrial North America 14.5 % -- 14.9 % Industrial International 14.7 % -- 15.1 % Aerospace 15.7 % -- 16.1 % Climate & Industrial Controls 6.6 % -- 7.0 % |
 Slide 19 FY 2008 Earnings Outlook Assumptions below Operating Margin Corporate Admin - 4% to - 10% vs. FY 2007 Interest Expense + 3% to - 2% vs. FY 2007 Other Expense (Inc.) + 45% to + 37% vs. FY 2007 Tax Rate 29 % |
 Slide 20 Earnings Outlook – FY08 Low High Diluted earnings per share 5.05 $ 5.35 $ |
| Slide 21 Questions & Answers... * * * * * * * |
 Appendix Income Statements 1 st Quarter * * * * * * ************** * * * |
 Slide 23 Income Statement – 1 st Quarter Dollars in millions % of Sales % of Sales Net Sales 2,787.3 $ 100.0 % 2,551.6 $ 100.0 % Cost of sales 2,122.3 76.1 % 1,947.4 76.3 % Gross profit 665.0 23.9 % 604.2 23.7 % S, G & A 325.0 11.7 % 292.0 11.4 % Interest expense 22.4 .8 % 17.2 .7 % Other (income) expense (.1) (.0)% (6.6) (.3)% Income before taxes 317.7 11.4 % 301.6 11.9 % Income taxes 88.1 3.2 % 91.1 3.6 % Net income 229.6 $ 8.2 % 210.5 $ 8.3 % FY 2008 FY 2007 |