 Parker Hannifin
Corporation Quarterly Earnings Release 4th Quarter FY 2008 July 31, 2008 Exhibit 99.2 |
| Parker Hannifin
Corporation Quarterly Earnings Release 4th Quarter FY 2008 July 31, 2008 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; uncertainties surrounding the ultimate resolution of outstanding litigation;
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. This presentation contains references to earnings per share amounts excluding a contingency reserve. The removal of the contingency reserve allows investors and the company to meaningfully evaluate performance on a comparable basis with the prior period, which was not impacted by the contingency reserve. |
 Slide 4 Discussion Agenda 4 th quarter highlights Key performance measures & outlook Questions & answers Closing comments |
 Slide 5 Fourth Quarter and Total Year Highlights Another record year Record Quarterly Sales, Earnings, and Cash Flow International strength offsetting challenging North American environment Q4 Sales growth 16.4% - 6.4% organic Excluding the establishment of a contingency reserve, Earnings per diluted share up 26% in Q4, 20%-Total Year Total Parker Orders up 8% in Q4 |
 Slide 6 Financial Highlights Diluted Earnings per Share 4 th Quarter and Total Year % % FY2008 FY2007 Increase FY2008 FY2007 Increase Earnings per share 1.47 $ 1.23 $ 20% 5.53 $ 4.68 $ 18% Contingency reserve .08 .08 Adjusted Earnings per share 1.55 $ 1.23 $ 26% 5.61 $ 4.68 $ 20% 4th Quarter Total Year |
 Slide 7 Influences on 4 th Quarter Earnings Diluted Earnings per Share increased as a result of: Increased Sales of 16.4% - 6.4% organic - Up from 4.3% organic growth last quarter Gross margin improvement of 40 bps S,G&A as percent of Sales decrease of 50 bps Fewer shares outstanding - 5.4 million fewer diluted shares in FY2008 Offset by: Lower Industrial North America and CIC Operating Income Higher Interest expense Establishment of Contingency Reserve classified in “Other expense” |
 Slide 8 Financial Highlights Sales – 4 th Quarter and Total Year Dollars in millions FY2008 % Change FY2007 FY2008 % Change FY2007 Sales As reported 3,347 $ 16.4 % 2,874 $ 12,146 $ 13.3 % 10,718 $ Acquisitions 127 4.4 % 373 3.5 % Currency 161 5.6 % 544 5.0 % Adjusted Sales 3,059 $ 6.4 % 11,229 $ 4.8 % 4th Quarter Total Year |
 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 FY2008 % Change FY2007 Sales As reported 1,166 $ 10.5 % 1,055 $ 4,250 $ 4.6 % 4,064 $ Acquisitions 70 6.7 % 121 3.0 % Currency 8 0.7 % 26 0.6 % Adjusted Sales 1,088 $ 3.1 % 4,103 $ 1.0 % Operating Margin As reported 163 $ 165 $ 608 $ 598 $ % of Sales 14.0 % 15.6 % 14.3 % 14.7 % Total Year 4th Quarter |
 Slide 11 Segment Reporting Industrial International Dollars in millions FY2008 % Change FY2007 FY2008 % Change FY2007 Sales As reported 1,382 $ 27.6 % 1,083 $ 5,006 $ 28.3 % 3,901 $ Acquisitions 39 3.6 % 214 5.4 % Currency 143 13.2 % 476 12.2 % Adjusted Sales 1,200 $ 10.8 % 4,316 $ 10.7 % Operating Margin As reported 213 $ 143 $ 789 $ 533 $ % of Sales 15.4 % 13.2 % 15.8 % 13.7 % 4th Quarter Total Year |
 Slide 12 Segment Reporting Aerospace Dollars in millions FY2008 % Change FY2007 FY2008 % Change FY2007 Sales As reported 510 $ 14.7 % 445 $ 1,838 $ 9.0 % 1,685 $ Acquisitions 17 3.8 % 39 2.3 % Currency 3 0.7 % 10 0.5 % Adjusted Sales 490 $ 10.2 % 1,789 $ 6.2 % Operating Margin As reported 73 $ 67 $ 251 $ 270 $ % of Sales 14.3 % 15.1 % 13.6 % 16.0 % 4th Quarter Total Year |
 Slide 13 Segment Reporting Climate & Industrial Controls Dollars in millions FY2008 % Change FY2007 FY2008 % Change FY2007 Sales As reported 289 $ (0.8)% 292 $ 1,051 $ (1.6)% 1,068 $ Acquisitions Currency 8 2.9 % 31 2.9 % Adjusted Sales 281 $ (3.7)% 1,020 $ (4.5)% Operating Margin As reported 20 $ 25 $ 59 $ 82 $ % of Sales 7.0 % 8.7 % 5.7 % 7.7 % 4th Quarter Total Year |
 Slide 14 Parker Order Rates Excludes Acquisitions & Currency 3-month year-over-year comparisons of total dollars, except Aerospace Aerospace is calculated using a 12-month moving average FY08 FY07 Total Parker 8 % + 3 % + Industrial North America 4 % + 3 % - Industrial International 8 % + 14 % + Aerospace 23 % + 8 % + Climate & Industrial Controls 7 % - 6 % - 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 Operating Activities Total Year $957 $1,317 $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 FY08 FY07 |
 Slide 17 Financial Leverage Debt to Debt Equity 28.3% 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 Goal - Not to exceed 37% over the cycle |
 Slide 18 FY 2009 Earnings Outlook Assumptions Segment Sales & Operating Income FY 2009 Sales change versus FY 2008 Industrial North America 5.1 % -- 5.5 % Industrial International 6.5 % -- 6.9 % Aerospace 3.7 % -- 4.1 % Climate & Industrial Controls (2.5)% -- (2.1)% FY 2009 Operating margin percentages Industrial North America 14.0 % -- 14.6 % Industrial International 15.5 % -- 16.1 % Aerospace 12.7 % -- 13.3 % Climate & Industrial Controls 5.7 % -- 6.3 % |
 Slide 19 FY 2009 Earnings Outlook Assumptions below Operating Margin Corporate Admin - 1% to - 3% vs. FY 2008 Interest Expense + 7% to + 1% vs. FY 2008 Other Expense (Inc.) - 24% to - 28% vs. FY 2008 Tax Rate 30 % |
 Slide 20 Earnings Outlook – FY09 Low High Diluted earnings per share 5.65 $ 6.05 $ |
| Slide 21 Questions & Answers... |
 Slide
22 Appendix Income Statements 4 th Quarter Total Year |
 Slide 23 Income Statement – 4 th Quarter Dollars in millions % of Sales % of Sales Net Sales 3,346.8 $ 100.0 % 2,874.4 $ 100.0 % Cost of sales 2,575.4 77.0 % 2,223.8 77.4 % Gross profit 771.4 23.0 % 650.6 22.6 % S, G & A 373.1 11.1 % 333.4 11.6 % Interest expense 25.0 .7 % 21.5 .7 % Other expense (income), net 18.4 .6 % (2.2) (.1)% Income before taxes 354.9 10.6 % 297.9 10.4 % Income taxes 102.3 3.1 % 80.7 2.8 % Net income 252.6 $ 7.5 % 217.2 $ 7.6 % FY 2008 FY 2007 |
 Slide 24 Income Statement – Total Year Dollars in millions % of Sales % of Sales Net Sales 12,145.6 $ 100.0 % 10,718.1 $ 100.0 % Cost of sales 9,339.1 76.9 % 8,273.0 77.2 % Gross profit 2,806.5 23.1 % 2,445.1 22.8 % S, G & A 1,364.1 11.2 % 1,226.9 11.4 % Interest expense 99.0 .8 % 83.4 .8 % Other expense (income), net 16.9 .2 % (24.4) (.2)% Income before taxes 1,326.5 10.9 % 1,159.2 10.8 % Income taxes 377.0 3.1 % 329.2 3.1 % Net income 949.5 $ 7.8 % 830.0 $ 7.7 % FY 2008 FY 2007 |