 Parker Hannifin
Corporation Quarterly Earnings Release
1
st
Quarter FY2012
October 18, 2011
Exhibit 99.2 |
| Parker Hannifin
Corporation Quarterly Earnings Release
1
st
Quarter FY2012
October 18, 2011
Exhibit 99.2 |
| 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, including its
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 performance.
Among 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, changes in contract cost and
revenue estimates for new development programs and changes in product mix;
uncertainties surrounding timing, successful completion or integration
of
acquisitions;
ability
to
realize
anticipated
cost
savings
from
business
realignment
activities;
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 2
|
| Slide 3
Non-GAAP Financial Measures
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
and
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 FY12 Highlights
Record
1
st
Quarter
Revenue:
Q1
Revenues
Increased
14.3%
Year-
over-Year to $3.2B
All
Time
Q1
Record
Operating
Margin:
Sequential
Quarter
Improvement to 16.1%, from 14.8% in Q4 FY11 and 15.5% in Q1
FY11
NA Industrial Achieved record ROS level of 18.5%
All Time Quarterly Net Income Record of $297M
Continued
Cost
Control:
Incremental
Marginal
Return
on
Sales
of
20% for Q1 FY12
Continued
Strong
Cash
Flow:
Q1
FY12
Operating
Cash
Flow/Revenue of 9.6%
Share
Repurchases:
Repurchased
4.4M
Shares
for
a
Total
of
$292M
Strong
Balance
Sheet:
Cash
Balance
Greater
than
$400M
and
Debt/Total Capitalization Metric of 25.8%
Strong
End
Market
Demand:
Order
Improvement
of
9%
Year-
over-Year. |
 Slide 6
Financial Highlights
Diluted Earnings per Share
1
st
Quarter
$1.91
$1.79
$1.51
$.00
$.30
$.60
$.90
$1.20
$1.50
$1.80
$2.10
$2.40
Q1 FY12
Q4 FY11
Q1 FY11 |
 Slide 7
Influences
on
1
st
Quarter
Earnings
Diluted Earnings Per Share Increase Year-over-Year
of $.40 or 26% Primarily Driven By:
Improved Segment Operating Income Moving Margins to
16.1% from 15.5% ($.37 EPS Impact)
Lower Shares Outstanding due to Share Repurchase ($.10
EPS Impact)
Offset by:
Increased Expense Below Segment Operating Income due
to Higher Market-driven Benefit Expense, Offset by
Favorable Currency ($.02 EPS Impact)
Higher Tax Rate due to Fewer Discrete Items in Q1 ‘12
($.04 EPS Impact) |
 Slide 8
Financial Highlights
Sales –
1
st
Quarter
Dollars in millions
FY2012
%
Change
FY2011
Sales
As reported
3,234
$
14.3 %
2,829
$
Acquisitions
22
0.8 %
Currency
86
3.0 %
Adjusted Sales
3,126
$
10.5 %
Operating Margin
As reported
520
$
438
$
% of Sales
16.1 %
15.5 %
1st Quarter |
 Slide 9
Segment Reporting
Industrial North America
Dollars in millions
FY2012
%
Change
FY2011
Sales
As reported
1,205
$
13.1 %
1,064
$
Acquisitions
11
1.1 %
Currency
4
0.4 %
Adjusted Sales
1,190
$
11.6 %
Operating Margin
As reported
223
$
189
$
% of Sales
18.5 %
17.8 %
1st Quarter |
 Slide 10
Segment Reporting
Industrial International
Dollars in millions
FY2012
%
Change
FY2011
Sales
As reported
1,289
$
17.9 %
1,093
$
Acquisitions
10
0.9 %
Currency
77
7.0 %
Adjusted Sales
1,202
$
10.0 %
Operating Margin
As reported
208
$
184
$
% of Sales
16.2 %
16.8 %
1st Quarter |
 Slide 11
Segment Reporting
Aerospace
Dollars in millions
FY2012
%
Change
FY2011
Sales
As reported
498
$
13.9 %
437
$
Acquisitions
0
0.0 %
Currency
1
0.2 %
Adjusted Sales
497
$
13.7 %
Operating Margin
As reported
69
$
44
$
% of Sales
13.8 %
10.0 %
1st Quarter |
 Slide 12
Segment Reporting
Climate & Industrial Controls
Dollars in millions
FY2012
%
Change
FY2011
Sales
As reported
242
$
3.3 %
235
$
Acquisitions
1
0.3 %
Currency
4
1.8 %
Adjusted Sales
237
$
1.2 %
Operating Margin
As reported
20
$
22
$
% of Sales
8.2 %
9.2 %
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 rolling average
SEPT '11
JUN '11
SEPT '10
JUN '10
Total Parker
9 %
+
15 %
+
29 %
+
35 %
+
Industrial North America
16 %
+
11 %
+
31 %
+
46 %
+
Industrial International
4 %
+
18 %
+
34 %
+
46 %
+
Aerospace
14 %
+
27 %
+
16 %
+
3 %
-
Climate & Industrial Controls
4 %
-
1 %
+
23 %
+
35 %
+
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
1
st
Quarter
Cash From Operating Activities
Q1 '12
Q1 '11
As Reported
$ 309M
$123M
As Reported % Sales
9.6%
4.3% |
 Slide 16
Financial Leverage
20.0%
22.0%
24.0%
26.0%
28.0%
30.0%
32.0%
34.0%
36.0%
38.0%
40.0%
42.0%
FY01
FY02
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
YTD
Debt to Debt Equity
25.8%
Debt to Debt Equity
(20.9% net Debt)
25.8% |
 Slide 17
FY 2012 Earnings Outlook Assumptions
Segment Sales & Operating Margins
FY 2012 Sales change versus FY 2011
Industrial North America
6.5 %
--
10.0 %
Industrial International
5.9 %
--
9.4 %
Aerospace
7.1 %
--
10.1 %
Climate & Industrial Controls
1.1 %
--
4.6 %
FY 2012 Operating margin percentages
Industrial North America
17.2 %
--
17.5 %
Industrial International
15.5 %
--
15.9 %
Aerospace
13.2 %
--
13.5 %
Climate & Industrial Controls
8.1 %
--
8.5 % |
 Slide 18
FY 2012 Earnings Outlook Assumptions
below Operating Margin (+/-
2.0%)
Expenses Below Segment Operating Margin*
$406M at Midpoint
Tax Rate = 28%
*Corporate Admin, Interest and Other Expense (Income)
|
 Slide 19
Earnings Outlook –
FY12
Low
Midpoint
High
Diluted Earnings Per Share
7.25
$
7.55
$
7.85
$ |
| Slide 20
Questions & Answers...
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 Appendix
Income Statement
1
st
Quarter FY2012
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 Slide 22
Income Statement –
1
st
Quarter
Quarter
Dollars in millions
% of Sales
% of Sales
Net Sales
3,233.9
$
100.0 %
2,829.3
$
100.0 %
Cost of sales
2,414.5
74.7 %
2,137.9
75.6 %
Gross profit
819.4
25.3 %
691.4
24.4 %
S, G & A
386.5
12.0 %
333.6
11.8 %
Interest expense
23.2
.7 %
24.6
.8 %
Other (income), net
(1.8)
(.1)%
(3.1)
(.1)%
Income before taxes
411.5
12.7 %
336.3
11.9 %
Income taxes
113.4
3.5 %
87.3
3.1 %
Net income
298.1
$
9.2 %
249.0
$
8.8 %
Less: Noncontrolling interests
1.1
$
.0 %
1.8
$
.1 %
Net income attributable to common
shareholders
297.0
$
9.2 %
247.2
$
8.7 %
FY 2012
FY 2011 |