 Parker Hannifin
Corporation Quarterly Earnings Release 1st Quarter FY 2010 October 20, 2009 Exhibit 99.2 |
| Parker Hannifin
Corporation Quarterly Earnings Release 1st Quarter FY 2010 October 20, 2009 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 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 recession, 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, suppliers or distributors, including delays or cancellations in shipments, disputes
regarding contract terms 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
legal proceedings, including the outcome of any appeals; 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, 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. |
| 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 FY10 Highlights Indicative Signs That Markets Have Bottomed: Orders Improved Sequentially From Q4 FY09 Continued Strong Cash Flow: Operating Cash Flow/Sales of 11.6% Continued Inventory Reduction: $253M in Past 9 Months Continued Debt Reduction: $162M in Q1 FY10; $745M in Past 9 Months Continued Reduction in Leverage: Debt to Total Capital Ratio Reduced to 32.5% (gross) or 30.5% (net) Operating Margin Improvement: Sequential Quarter Improvement to 9.0% from 4.9% (Q4 FY09) Continued Cost Control: Impressive Decremental Marginal Return on Sales of 29.7% (Unadjusted GAAP Number) |
 Slide 6 Financial Highlights Diluted Earnings per Share 1 Quarter $.00 $.20 $.40 $.60 $.80 $1.00 $1.20 $1.40 $1.60 Q1 FY10 Q1 FY09 $.45 $1.50 st |
 Slide 7 Influences on 1 Quarter Earnings Diluted Earnings Per Share Decreased Y-O-Y as a Result of: Decreased Revenues (27%) Due To Global Recession and Decline In Nearly All Markets Realignment Expenses of $19M Offset by: Reduced SG&A Expenses of $31M Due To Tight Budgetary Control and Lower Incentive Compensation Lower Interest Expense: $2M Due to Less Debt Outstanding Lower Other Income: $14M Primarily Due to “One-off” Expenses in FY09 Lower Taxes Due to Decreased Operating Income st |
 Slide 8 Financial Highlights Sales - 1 st Quarter Dollars in millions FY2010 % Change FY2009 Sales As reported 2,237 $ (27.0)% 3,065 $ Acquisitions 76 2.5 % Currency (46) (1.5)% Adjusted Sales 2,207 $ (28.0)% 1st Quarter |
 Slide 9 Segment Reporting Industrial North America Dollars in millions FY2010 % Change FY2009 Sales As reported 783 $ (29.3)% 1,107 $ Acquisitions 20 1.8 % Currency (7) (0.7)% Adjusted Sales 770 $ (30.4)% Operating Margin As reported 76 $ 160 $ % of Sales 9.7 % 14.5 % 1st Quarter |
 Slide 10 Segment Reporting Industrial International Dollars in millions FY2010 % Change FY2009 Sales As reported 850 $ (30.5)% 1,223 $ Acquisitions 56 4.6 % Currency (31) (2.6)% Adjusted Sales 825 $ (32.5)% Operating Margin As reported 62 $ 203 $ % of Sales 7.3 % 16.6 % 1st Quarter |
 Slide 11 Segment Reporting Aerospace Dollars in millions FY2010 % Change FY2009 Sales As reported 417 $ (12.9)% 478 $ Acquisitions Currency (2) (0.4)% Adjusted Sales 419 $ (12.5)% Operating Margin As reported 53 $ 68 $ % of Sales 12.7 % 14.2 % 1st Quarter |
 Slide 12 Segment Reporting Climate & Industrial Controls Dollars in millions FY2010 % Change FY2009 Sales As reported 187 $ (27.0)% 256 $ Acquisitions Currency (6) (2.2)% Adjusted Sales 193 $ (24.8)% Operating Margin As reported 10 $ 15 $ % of Sales 5.6 % 6.1 % 1st Quarter |
 Slide 13 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 SEPT ’09 JUN ’09 SEPT ’08 JUN ’08 Total Parker 25 % - 38 % - 1 % + 8 % + Industrial North America 27 % - 40 % - 2 % + 4 % + Industrial International 25 % - 43 % - 4 % - 8 % + Aerospace 23 % - 22 % - 9 % + 23 % + Climate & Industrial Controls 17 % - 31 % - 5 % + 7 % - Three Month Rolling at Period End |
 Slide 14 Balance Sheet Summary Cash Working capital - Inventory - Accounts receivable - Accounts payable Reclassification of Noncontrolling Interests |
 Slide 15 Strong Cash Flow Cash from Operating Activities 1st Quarter $307 $260 $0 $50 $100 $150 $200 $250 $300 $350 $400 Q1 FY10 Q1 FY09 |
 Slide 16 Financial Leverage Debt to Debt Equity 32.5% 16.0% 18.0% 20.0% 22.0% 24.0% 26.0% 28.0% 30.0% 32.0% 34.0% 36.0% 38.0% 40.0% 42.0% FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 YTD 32.5% Debt to Debt Equity (30.5% net Debt) |
 Slide 17 FY 2010 Earnings Outlook Assumptions Segment Sales & Operating Margins FY 2010 Sales change versus FY 2009 Industrial North America (7.8)% -- (11.8)% Industrial International (8.1)% -- (13.1)% Aerospace (7.8)% -- (8.6)% Climate & Industrial Controls (10.5)% -- (12.9)% FY 2010 Operating margin percentages Industrial North America 9.9 % -- 9.6 % Industrial International 6.7 % -- 6.2 % Aerospace 11.4 % -- 11.0 % Climate & Industrial Controls 4.0 % -- 3.2 % |
 Slide 18 FY 2010 Earnings Outlook Assumptions below Operating Margin (+/- 7.0%) Corporate Admin $ 147 M Interest Expense $ 108 M Other Expense (Inc.) $ 100 M Total $ 355 M Tax Rate 30 % |
 Slide 19 Earnings Outlook – FY10 Low High Diluted earnings per share $1.55 $2.05 |
 Slide 20 Questions & Answers... |
 Appendix
Income Statement 1 st Quarter FY2010 |
 Slide 22 Income Statement – 1 st Quarter Dollars in millions % of Sales % of Sales Net Sales 2,237.2 $ 100.0 % 3,064.7 $ 100.0 % Cost of sales 1,801.0 80.5 % 2,337.2 76.3 % Gross profit 436.2 19.5 % 727.5 23.7 % S, G & A 301.8 13.4 % 332.7 10.9 % Interest expense 25.7 1.2 % 28.1 .9 % Other expense (income), net (5.3) (.2)% 8.3 .2 % Income before taxes 114.0 5.1 % 358.4 11.7 % Income taxes 40.0 1.8 % 106.6 3.5 % Net income 74.0 $ 3.3 % 251.8 $ 8.2 % Less: Noncontrolling interests .5 $ 1.6 $ Net income attributable to common shareholders 73.5 $ 3.3 % 250.2 $ 8.2 % FY 2010 FY 2009 |