 Parker Hannifin
Corporation Quarterly Earnings Release 2nd Quarter FY 2010 January 19, 2010 Exhibit 99.2 |
| Parker Hannifin
Corporation Quarterly Earnings Release 2nd Quarter FY 2010 January 19, 2010 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.
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| 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 2 Quarter Highlights Key Performance Measures & Outlook Questions & Answers CEO Closing Comments nd |
 Slide 5 Second Quarter FY10 Highlights Indicative Signs of Industrial Markets Improvement: Industrial Orders Improved Sequentially From Q1 FY10 Continued Strong Cash Flow: Operating Cash Flow/Sales of 14.7% Continued Inventory Reduction: $33M in Q2 FY10; $287M Y-o-Y Continued Debt Reduction: $203M in Q2 FY10; $1B Y-o-Y Continued Reduction in Leverage: Debt to Total Capital Ratio Reduced to 29.9% (gross) or 27.3% (net of cash) Operating Margin Improvement: Sequential Quarter Improvement to 10.4% from 9.0% in Q1 FY10 Continued Cost Control: Impressive Decremental Marginal Return on Sales of 10.6% (includes the effects of Acquisitions, Realignment and Inventory Reductions) |
 Slide 6 Financial Highlights Diluted Earnings per Share 2 Quarter $.64 $.96 $1.10 $2.47 $.00 $.50 $1.00 $1.50 $2.00 $2.50 $3.00 Q2 FY10 Q2 FY09 YTD10 YTD09 nd |
 Slide 7 Influences on 2 Quarter Earnings Diluted Earnings Per Share Decreased Y-o-Y as a Result of: Decreased Revenues (12.4%) Due To Global Recession and Decline In Nearly All Markets Increased Other Expense: $8M Due to Asset Write- Downs Offset by: Reduced SG&A Expenses of $27M Due To Tight Budgetary Control and Lower Incentive Compensation Lower Interest Expense: $5M Due to Less Debt Outstanding Lower Taxes Due to Decreased Operating Income; Higher Tax Rate Due to Normalized R&D Tax Credits nd |
 Slide 8 Financial Highlights Sales – 2 nd Quarter Dollars in millions FY2010 % Change FY2009 Sales As reported 2,355 $ (12.4)% 2,689 $ Acquisitions 7 0.3 % Currency 102 3.8 % Adjusted Sales 2,246 $ (16.5)% 2nd Quarter |
 Slide 9 Segment Reporting Industrial North America Dollars in millions FY2010 % Change FY2009 Sales As reported 847 $ (14.7)% 993 $ Acquisitions 4 0.4 % Currency 7 0.7 % Adjusted Sales 836 $ (15.8)% Operating Margin As reported 114 $ 108 $ % of Sales 13.5 % 10.8 % 2nd Quarter |
 Slide 10 Segment Reporting Industrial International Dollars in millions FY2010 % Change FY2009 Sales As reported 932 $ (10.6)% 1,043 $ Acquisitions 3 0.3 % Currency 87 8.3 % Adjusted Sales 842 $ (19.2)% Operating Margin As reported 83 $ 115 $ % of Sales 8.9 % 11.0 % 2nd Quarter |
 Slide 11 Segment Reporting Aerospace Dollars in millions FY2010 % Change FY2009 Sales As reported 401 $ (15.4)% 474 $ Acquisitions Currency 3 0.6 % Adjusted Sales 398 $ (16.0)% Operating Margin As reported 41 $ 70 $ % of Sales 10.2 % 14.7 % 2nd Quarter |
 Slide 12 Segment Reporting Climate & Industrial Controls Dollars in millions FY2010 % Change FY2009 Sales As reported 175 $ (2.4)% 179 $ Acquisitions Currency 5 2.6 % Adjusted Sales 170 $ (5.0)% Operating Margin As reported 6 $ (13) $ % of Sales 3.5 % (7.2)% 2nd 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 DEC '09 SEPT '09 DEC '08 SEPT '0 Total Parker 7 % - 25 % - 20 % - 1 % + Industrial North America 3 % - 27 % - 18 % - 2 % + Industrial International 0.0% 25 % - 28 % - 4 % - Aerospace 27 % - 23 % - 2 % + 9 % + Climate & Industrial Controls 6 % + 17 % - 28 % - 5 % + Three Month Rolling at Period End |
 Slide 14 Balance Sheet Summary Cash Working capital - Inventory - Accounts receivable - Accounts payable |
 Slide 15 Strong Cash Flow Cash from Operating Activities 1 Half FY10 $606 $445 $0 $100 $200 $300 $400 $500 $600 $700 $800 YTD FY10 YTD FY09 st |
 Slide 16 Financial Leverage 29.9% Debt to Debt Equity (27.3% net Debt) |
 Slide 17 FY 2010 Earnings Outlook Assumptions Segment Sales & Operating Margins FY 2010 Sales change versus FY 2009 Industrial North America (6.3)% -- (10.3)% Industrial International (1.4)% -- (6.4)% Aerospace (7.9)% -- (8.7)% Climate & Industrial Controls (4.3)% -- (6.7)% FY 2010 Operating margin percentages Industrial North America 12.6 % -- 12.4 % Industrial International 8.8 % -- 8.4 % Aerospace 11.4 % -- 11.1 % Climate & Industrial Controls 6.2 % -- 5.6 % |
 Slide 18 FY 2010 Earnings Outlook Assumptions below Operating Margin (+/- 3.0%) Corporate Admin $142M Interest Expense $101M Other Expense (Inc.) $150M Total $393M Tax Rate 29 % |
 Slide 19 Earnings Outlook – FY10 Low High Diluted earnings per share $ 2.40 $ 2.80 |
 Slide 20 Questions & Answers... |
 Appendix Income Statement 2 Quarter FY2010 1 Half FY2010 nd st |
 Slide 22 Income Statement – 2 Quarter Quarter Dollars in millions % of Sales % of Sales Net Sales 2,354.7 $ 100.0 % 2,688.6 $ 100.0 % Cost of sales 1,869.5 79.4 % 2,121.4 78.9 % Gross profit 485.2 20.6 % 567.2 21.1 % S, G & A 309.8 13.2 % 337.2 12.5 % Interest expense 25.0 1.1 % 30.3 1.1 % Other expense, net 8.1 .3 % .5 .0 % Income before taxes 142.3 6.0 % 199.2 7.5 % Income taxes 37.3 1.6 % 42.5 1.6 % Net income 105.0 $ 4.4 % 156.7 $ 5.9 % Less: Noncontrolling interests .4 $ 1.3 $ .1 % Net income attributable to common shareholders 104.6 $ 4.4 % 155.4 $ 5.8 % FY 2010 FY 2009 nd |
 Slide 23 Income Statement – 1st Half Total Year Dollars in millions % of Sales % of Sales Net Sales 4,591.9 $ 100.0 % 5,753.3 $ 100.0 % Cost of sales 3,670.4 79.9 % 4,458.6 77.5 % Gross profit 921.5 20.1 % 1,294.7 22.5 % S, G & A 611.7 13.3 % 669.9 11.6 % Interest expense 50.8 1.1 % 58.4 1.0 % Other expense, net 2.7 .1 % 8.8 .2 % Income before taxes 256.3 5.6 % 557.6 9.7 % Income taxes 77.3 1.7 % 149.0 2.6 % Net income 179.0 $ 3.9 % 408.6 $ 7.1 % Less: Noncontrolling interests .9 $ 3.0 $ .1 % Net income attribituable to common shares 178.1 $ 3.9 % 405.6 $ 7.0 % FY 2010 FY 2009 |