 Parker Hannifin
Corporation Quarterly Earnings Release
4th Quarter & Total Year FY2010
August 3, 2010
Exhibit 99.2 |
| Parker Hannifin
Corporation Quarterly Earnings Release
4th Quarter & Total Year FY2010
August 3, 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
economic
environment,
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,
and
changes
in
contract
cost
and
revenue
estimates
for
new
development
programs;
uncertainties
surrounding
timing,
successful
completion
or
integration
of
acquisitions;
ability
to
realize
anticipated
cost
savings
from
business
realignment
actions;
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
insurance
and
employee
retirement
and
health
care
benefits;
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
unless
otherwise
required
by
law. |
| 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 & Total Year
FY10 Highlights
End
Market
Improvement:
Orders
Improved
Year-over-Year
and
Sequentially
From
Q3
FY10
Revenues
Rebounding:
Q4
Revenues
Increased
26%
Year-over-
Year
Operating
Margin
Improvement:
Sequential
Quarter
Improvement
to
13.9%
from
11.8%
in
Q3
FY10;
Full
Year
Improvement
to
11.4%
from
9.7%
in
FY10
Continued
Cost
Control:
Impressive
Incremental
Marginal
Return
on
Sales
of
48.7%
for
Q4
FY10
Continued
Inventory
Reduction:
$25M
in
Q4
FY10;
$83M
Total
Year
FY10
Continued
Debt
Reduction:
$126M
in
Q4
FY10;
$544M
Total
Year
FY10
Continued
Reduction
in
Leverage:
Debt
to
Total
Capital
Ratio
Reduced
to
28.9%
(gross)
or
21.6%
(net
of
cash)
Continued
Strong
Cash
Flow:
FY10
Operating
Cash
Flow/Revenue
of
12.2%
including
$100M
Discretionary
Pension
Contribution |
 Slide 6
Financial Highlights
Diluted Earnings per Share
4
th
Quarter and Total Year
$1.35
$.31
$3.40
$3.13
$.00
$.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
$4.00
Q4 FY10
Q4 FY09
FY10
FY09 |
 Slide 7
Influences on 4
th
Quarter Earnings
Diluted Earnings Per Share Increase of $1.04 Year-
over-Year Primarily Driven By:
Increased Revenues of 26%
Significantly Improved Operating Margins to 13.9% from
4.9% Year-over-Year ($1.30 EPS Impact)
Offset by:
Increased Corporate G&A Primarily Due To Market-driven
Benefits ($.12 EPS Impact)
Increased Other Expense due to Pension, Inventory
Adjustments and Asset Writedown
($.11 EPS Impact) |
 Slide 8
Financial Highlights
Sales –
4
th
Quarter and Total Year
Dollars in millions
FY2010
%
Change
FY2009
FY2010
%
Change
FY2009
Sales
As reported
2,786
$
26.0 %
2,211
$
9,993
$
(3.1)%
10,309
$
Acquisitions
1
(0.0)%
85
0.8 %
Currency
(14)
(0.6)%
125
1.2 %
Adjusted Sales
2,799
$
26.6 %
9,783
$
(5.1)%
4th Quarter
Total Year |
 Slide 9
Segment Reporting
Industrial North America
Dollars in millions
FY2010
%
Change
FY2009
FY2010
%
Change
FY2009
Sales
As reported
1,034
$
33.1 %
778
$
3,624
$
(3.0)%
3,735
$
Acquisitions
-
--
%
24
0.6 %
Currency
7
0.9 %
19
0.5 %
Adjusted Sales
1,027
$
32.2 %
3,581
$
(4.1)%
Operating Margin
As reported
163
$
54
$
487
$
395
$
% of Sales
15.7 %
6.9 %
13.4 %
10.6 %
4th Quarter
Total Year |
 Slide 10
Segment Reporting
Industrial International
Dollars in millions
FY2010
%
Change
FY2009
FY2010
%
Change
FY2009
Sales
As reported
1,034
$
30.4 %
793
$
3,811
$
(2.2)%
3,896
$
Acquisitions
-
-- %
59
1.5 %
Currency
(20)
(2.5)%
100
2.6 %
Adjusted Sales
1,054
$
32.9 %
3,652
$
(6.3)%
Operating Margin
As reported
140
$
(6)
$
394
$
351
$
% of Sales
13.6 %
(0.7)%
10.3 %
9.0 %
4th Quarter
Total Year |
 Slide 11
Segment Reporting
Aerospace
Dollars in millions
FY2010
%
Change
FY2009
FY2010
%
Change
FY2009
Sales
As reported
478
$
5.9 %
451
$
1,744
$
(7.4)%
1,883
$
Acquisitions
1
0.3 %
2
0.1 %
Currency
(1)
(0.3)%
1
0.1 %
Adjusted Sales
478
$
5.9 %
1,741
$
(7.6)%
Operating Margin
As reported
64
$
58
$
208
$
262
$
% of Sales
13.4 %
13.0 %
11.9 %
13.9 %
4th Quarter
Total Year |
 Slide 12
Segment Reporting
Climate & Industrial Controls
Dollars in millions
FY2010
%
Change
FY2009
FY2010
%
Change
FY2009
Sales
As reported
240
$
27.0 %
189
$
814
$
2.4 %
795
$
Acquisitions
-
--
%
Currency
-
--
%
5
0.7 %
Adjusted Sales
240
$
27.0 %
809
$
1.7 %
Operating Margin
As reported
21
$
1
$
53
$
(4)
$
% of Sales
8.5 %
0.5 %
6.6 %
(0.5)%
4th Quarter
Total Year
--
%
- |
 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
JUN '10
MAR '10
JUN '09
MAR '09
Total Parker
35 %
+
23 %
+
38 %
-
34 %
-
Industrial North America
46 %
+
30 %
+
40 %
-
35 %
-
Industrial International
46 %
+
42 %
+
43 %
-
41 %
-
Aerospace
3 %
-
22 %
-
22 %
-
12 %
-
Climate & Industrial Controls
35 %
+
38 %
+
31 %
-
36 %
-
Three Month Rolling at Period End |
 Slide 14
Balance Sheet Summary
Cash
Working capital
-
Accounts receivable
-
Inventory
-
Accounts payable |
 Slide 15
Strong Cash Flow
Cash from Operating Activities
Total Year |
 Slide 16
Financial Leverage
28.9%
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
Debt to Debt Equity
28.9%
Debt to Debt Equity
(21.6% net Debt) |
 Slide 17
FY 2011 Earnings Outlook Assumptions
Segment Sales & Operating Margins
FY 2011 Sales change versus FY 2010
Industrial North America
5.7 %
--
9.7 %
Industrial International
1.6 %
--
4.6 %
Aerospace
2.5 %
--
5.5 %
Climate & Industrial Controls
3.7 %
--
7.7 %
FY 2011 Operating margin percentages
Industrial North America
14.3 %
--
14.9 %
Industrial International
11.4 %
--
13.4 %
Aerospace
11.9 %
--
13.4 %
Climate & Industrial Controls
8.0 %
--
8.6 % |
 Slide 18
FY 2011 Earnings Outlook Assumptions
below Operating Margin (+/-
1.0%)
Corporate Admin
$160M
Interest Expense
$100M
Other Expense (Inc.)
$160M
Total
$420M
Tax Rate
30 % |
 Slide 19
Earnings Outlook –
FY11
Low
High
Diluted earnings per share
3.60
$
4.40
$ |
| Slide 20
Questions & Answers...
*
*
*
* |
 Appendix
Income Statement
4
th
Quarter FY2010
Total Year FY2010
*
*
*
*
*
*
*
* |
 Slide 22
Income Statement –
4
th
Quarter
Quarter
Dollars in millions
% of Sales
% of Sales
Net Sales
2,786.5
$
100.0 %
2,211.0
$
100.0 %
Cost of sales
2,114.2
75.9 %
1,814.1
82.0 %
Gross profit
672.3
24.1 %
396.9
18.0 %
S, G & A
349.3
12.5 %
302.5
13.7 %
Interest expense
26.9
1.0 %
25.3
1.1 %
Other expense, net
3.9
.1 %
5.9
.3 %
Income before taxes
292.2
10.5 %
63.2
2.9 %
Income taxes
69.1
2.5 %
14.8
.7 %
Net income
223.1
$
8.0 %
48.4
$
2.2 %
Less: Noncontrolling interests
.9
$
.0 %
(1.1)
$
.0 %
Net income attributable to common
shareholders
222.2
$
8.0 %
49.5
$
2.2 %
FY 2010
FY 2009 |
 Slide 23
Income Statement –
Total Year
Total Year
Dollars in millions
% of Sales
% of Sales
Net Sales
9,993.2
$
100.0 %
10,309.0
100.0 %
Cost of sales
7,847.1
78.5 %
8,181.3
79.4 %
Gross profit
2,146.1
21.5 %
2,127.7
20.6 %
S, G & A
1,277.1
12.8 %
1,290.4
12.5 %
Interest expense
103.6
1.0 %
112.1
1.1 %
Other expense, net
10.6
.1 %
42.2
.4 %
Income before taxes
754.8
7.6 %
683.0
6.6 %
Income taxes
198.4
2.0 %
172.9
1.7 %
Net income
556.4
$
5.6 %
510.1
$
4.9 %
Less: Noncontrolling interests
2.3
$
.1 %
1.6
$
.0 %
Net income attribituable to common
shares
554.1
$
5.5 %
508.5
$
4.9 %
FY 2010
FY 2009 |