• Second quarter EPS $1.33 as reported, or $1.52 adjusted for business realignment
  • Sales decreased 14% with 4% due to currency, 10% organic
  • Simplification and restructuring efforts generated impressive decremental marginal return on sales of 23.2% as reported, 17.2% adjusted
  • Company maintains fiscal 2016 full-year adjusted earnings guidance

CLEVELAND, Jan. 26, 2016 (GLOBE NEWSWIRE) -- Parker Hannifin Corporation (NYSE:PH), the global leader in motion and control technologies, today reported results for the fiscal 2016 second quarter ended December 31, 2015.  Fiscal 2016 second quarter sales were $2.71 billion, compared with $3.13 billion in the prior year quarter. Net income was $183.1 million, compared with $267.3 million in the second quarter of fiscal 2015.  Fiscal 2016 second quarter earnings per share were $1.33, compared with $1.80 in the prior year quarter.  Adjusted earnings per share were $1.52, compared with $1.84 in the prior year quarter.  A reconciliation of reported to adjusted earnings per share is included with the financial tables in this news release.

"We have taken purposeful action in managing our cost structure to reflect challenging global market conditions," said Chairman and Chief Executive Officer Tom Williams.  "Continued weakness, stemming from natural resource related end markets such as oil and gas, construction, mining and agriculture, continues to impact sales and order rates.  Our global teams have adapted quickly to these changes allowing us to deliver solid margin performance with decremental marginal returns of 17.2% on an adjusted basis.  We are executing our previously announced restructuring actions and have made significant progress with Simplification initiatives to reduce complexity, increase speed, reduce costs and better serve our customers.  We remain well positioned to weather the current downturn."

During the quarter, the company repurchased $90 million of Parker shares, and $400 million have been repurchased year-to-date. Approximately $1.7 billion in shares have been purchased under a previously announced authorization to repurchase between $2 billion and $3 billion in shares over two years, beginning in October 2014.

Segment Results

Diversified Industrial Segment: North American second quarter sales decreased 16% to $1.2 billion and operating income was $153.6 million compared with $226.9 million in the same period a year ago.  International second quarter sales decreased 16% to $1.0 billion, the majority of the decline in sales was the result of changes in foreign currency rates. International operating income was $95.4 million compared with $136.5 million in the same period a year ago.

Aerospace Systems Segment: Second quarter sales decreased 1% to $552.4 million, and operating income increased 22% to $81.8 million, compared with $66.8 million in the same period a year ago.

Orders

Parker reported a decrease in orders of 12% for the quarter ending December 31, 2015, compared with the same quarter a year ago.  The company reported the following orders by business: 
  • Orders decreased 15% in the Diversified Industrial North America businesses compared with the same quarter a year ago.
  • Orders decreased 10% in the Diversified Industrial International businesses compared with the same quarter a year ago.
  • Orders decreased 11% in the Aerospace Systems segment on a rolling 12-month average basis.

Outlook

For the fiscal year ending June 30, 2016, the company has maintained the midpoint and narrowed the range of guidance for earnings from continuing operations to $5.40 to $5.80 per share, or $5.90 to $6.30 per share on an adjusted basis.  Fiscal year 2016 guidance is adjusted for expected business realignment expenses of approximately $0.50 per share, of which $0.30 per share relates to the company's Simplification initiatives. Guidance also reflects an expected full year tax rate of approximately 28%.

Williams added, "We expect that market conditions will continue to be challenging through the end of fiscal 2016. Efforts to align costs accordingly and position Parker to deliver strong financial performance will continue and are reflected in our outlook.  Parker team members are also working hard to further many new growth initiatives established by our new Win Strategy TM.  Expanding our distribution network, commercializing new products and systems, improving the customer experience, developing services, e-Business and Internet of Things are all opportunities that we are pursuing to spur future growth and solidify our position as the leader in the motion and control industry."

NOTICE OF CONFERENCE CALL : Parker Hannifin's conference call and slide presentation to discuss its fiscal 2016 second quarter results are available to all interested parties via live webcast today at 11:00 a.m. ET, on the company's investor information web site at www.phstock.com. To access the call, click on the "Live Webcast" link. From this link, users also may complete a pre-call system test and register for e-mail notification of future events and information available from Parker.  A replay of the webcast will also be available at www.phstock.com for one year after the call.

With annual sales of approximately $13 billion in fiscal year 2015, Parker Hannifin is the world's leading diversified manufacturer of motion and control technologies and systems, providing precision-engineered solutions for a wide variety of mobile, industrial and aerospace markets.  The company has operations in 50 countries around the world.  Parker has increased its annual dividends paid to shareholders for 59 consecutive fiscal years, among the top five longest-running dividend-increase records in the S&P 500 index.  For more information, visit the company's website at www.parker.com, or its investor information website at www.phstock.com.

Note on Orders

Orders provide near-term perspective on the company's outlook, particularly when viewed in the context of prior and future quarterly order rates. However, orders are not in themselves an indication of future performance. All comparisons are at constant currency exchange rates, with the prior year restated to the current-year rates. All exclude acquisitions until they can be reflected in both the numerator and denominator. Aerospace comparisons are rolling 12-month average computations. The total Parker orders number is derived from a weighted average of the year-over-year quarterly % change in orders for Diversified Industrial North America and Diversified Industrial International, and the year-over-year 12-month rolling average of orders for the Aerospace Systems segment.

Note on Non-GAAP Numbers

This press release contains references to (a) segment operating margins, earnings per share and net income without the effect of business realignment expenses; and (b) the effect of business realignment expenses on forecasted earnings from continuing operations per share. The effects of business realignment expenses are removed to allow investors and the company to meaningfully evaluate changes in segment operating margin, earnings per share and net income on a comparable basis from period to period.

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 the 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; ability to identify acceptable strategic acquisition targets; uncertainties surrounding timing, successful completion or integration of acquisitions and similar transactions; the ability to successfully divest businesses planned for divestiture and realize the anticipated benefits of such divestitures; the determination to undertake business realignment activities and the expected costs thereof and, if undertaken, the ability to complete such activities and realize the anticipated cost savings from such activities; ability to implement successfully the Company's capital allocation initiatives, including timing, price and execution of share repurchases; 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;  threats associated with and efforts to combat terrorism and cyber-security risks; 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; 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.
PARKER HANNIFIN CORPORATION - DECEMBER 31, 2015          
CONSOLIDATED STATEMENT OF INCOME          
           
(Unaudited) Three Months Ended December 31,  Six Months Ended December 31,   
(Dollars in thousands except per share amounts)   2015     2014     2015     2014    
           
Net sales $     2,705,590   $   3,134,993   $     5,574,938   $   6,404,925    
Cost of sales     2,140,624       2,401,584       4,341,528       4,861,449    
Gross profit     564,966       733,409       1,233,410       1,543,476    
Selling, general and administrative expenses     314,666       379,804       684,880       780,644    
Interest expense     34,297       27,645       70,057       48,606    
Other (income), net     (13,877 )     (17,306 )     (27,056 )     (25,675 )  
Income before income taxes     229,880       343,266       505,529       739,901    
Income taxes     46,743       75,931       127,366       192,395    
Net income     183,137       267,335       378,163       547,506    
Less:  Noncontrolling interests     155       83       203       165    
Net income attributable to common shareholders $     182,982   $   267,252   $     377,960   $   547,341    
           
Earnings per share attributable to common shareholders:          
  Basic earnings per share  $     1.35   $   1.84   $     2.78   $   3.72    
  Diluted earnings per share $     1.33   $   1.80   $     2.74   $   3.66    
           
Average shares outstanding during period - Basic   135,373,356     145,493,247     136,108,930     147,116,038    
Average shares outstanding during period - Diluted   137,065,447     148,182,777     137,788,219     149,463,280    
           
Cash dividends per common share   $ .63    $ .63   $     1.26   $   1.11    
           
RECONCILIATION OF NET INCOME AND EARNINGS PER DILUTED SHARE TO ADJUSTED NET INCOME AND EARNINGS PER DILUTED SHARE  
           
Net income   $     183,137   $   267,335   $     378,163   $   547,506    
Adjustments:          
  Business realignment charges     25,463       6,450       41,015       11,962    
Adjusted net income $     208,600   $   273,785   $     419,178   $   559,468    
           
Earnings per diluted share $     1.33   $   1.80   $     2.74   $   3.66    
Adjustments:          
  Business realignment charges     0.19       0.04       0.30       0.08    
Adjusted earnings per diluted share $     1.52   $   1.84   $     3.04   $   3.74    
           
           
BUSINESS SEGMENT INFORMATION          
(Unaudited) Three Months Ended December 31,  Six Months Ended December 31,   
(Dollars in thousands)   2015     2014     2015     2014    
Net sales          
  Diversified Industrial:          
  North America $     1,160,774   $   1,389,207   $     2,447,104   $   2,861,019    
  International     992,464       1,187,400       2,030,911       2,450,897    
  Aerospace Systems     552,352       558,386       1,096,923       1,093,009    
Total $     2,705,590   $   3,134,993   $     5,574,938   $   6,404,925    
Segment operating income          
  Diversified Industrial:          
  North America $     153,581   $   226,888   $     366,329   $   491,124    
  International     95,367       136,525       224,662       326,330    
  Aerospace Systems     81,764       66,817       155,767       132,166    
Total segment operating income     330,712       430,230       746,758       949,620    
Corporate general and administrative expenses     31,210       51,360       84,261       106,804    
Income before interest and other       299,502       378,870       662,497       842,816    
Interest expense     34,297       27,645       70,057       48,606    
Other expense     35,325       7,959       86,911       54,309    
Income before income taxes $     229,880   $   343,266   $     505,529   $   739,901    
           
RECONCILIATION OF SEGMENT OPERATING MARGIN TO ADJUSTED SEGMENT OPERATING MARGIN  
(Unaudited)          
   Three Months Ended   Six Months Ended   
  December 31, 2015 December 31, 2015  
   Operating income   Margin   Operating income   Margin   
As reported segment operating income   $     330,712     12.2 % $     746,758     13.4 %  
Adjustments:          
  Business realignment charges     34,800         56,588      
Adjusted segment operating income $     365,512     13.5 % $     803,346     14.4 %  
           
           
           
CONSOLIDATED BALANCE SHEET          
(Unuaudited)   December 31,    June 30,   December 31,     
(Dollars in thousands)   2015     2015     2014      
Assets          
Current assets:          
Cash and cash equivalents $     1,047,494   $   1,180,584   $   1,075,307      
Marketable securities and other investments     820,682       733,490       886,879      
Trade accounts receivable, net     1,419,934       1,620,194       1,572,864      
Non-trade and notes receivable     293,913       364,534       428,090      
Inventories     1,279,760       1,300,459       1,453,996      
Prepaid expenses     141,030       241,684       160,335      
Deferred income taxes     148,198       142,147       150,301      
Total current assets     5,151,011       5,583,092       5,727,772      
Plant and equipment, net     1,598,185       1,664,022       1,716,489      
Goodwill     2,913,065       2,942,679       3,011,894      
Intangible assets, net     975,515       1,013,439       1,090,972      
Other assets     1,116,315       1,091,805       1,021,272      
Total assets $     11,754,091   $   12,295,037   $   12,568,399      
           
Liabilities and equity          
Current liabilities:          
Notes payable $     574,302   $   223,142   $   242,043      
Accounts payable     948,157       1,092,138       1,145,202      
Accrued liabilities     736,145       894,555       817,152      
Accrued domestic and foreign taxes     109,495       140,295       134,754      
Total current liabilities     2,368,099       2,350,130       2,339,151      
Long-term debt     2,724,860       2,723,960       2,725,510      
Pensions and other postretirement benefits     1,475,351       1,699,197       1,309,477      
Deferred income taxes     76,405       77,967       86,606      
Other liabilities     306,655       336,214       347,514      
Shareholders' equity     4,799,406       5,104,287       5,756,749      
Noncontrolling interests     3,315       3,282       3,392      
Total liabilities and equity $     11,754,091   $   12,295,037   $   12,568,399      
           
           
CONSOLIDATED STATEMENT OF CASH FLOWS          
(Unaudited) Six Months Ended December 31,       
(Dollars in thousands)   2015     2014        
Cash flows from operating activities:          
Net income $     378,163   $   547,506        
Depreciation and amortization     156,093       160,625        
Stock incentive plan compensation     39,026       52,217        
Gain on sale of businesses     -       (5,791 )      
(Gain) loss on disposal of assets     (336 )     8,092        
Gain on sale of marketable securities     (158 )     -        
Net change in receivables, inventories, and trade payables     41,866       2,205        
Net change in other assets and liabilities     (255,296 )     (167,918 )      
Other, net     (12,730 )     (58,439 )      
Net cash provided by operating activities     346,628       538,497        
Cash flows from investing activities:          
Acquisitions (net of cash of $3,814 in 2015 and $3,979 in 2014)     (67,552 )     (18,640 )      
Capital expenditures     (75,419 )     (109,781 )      
Proceeds from sale of plant and equipment     8,506       3,902        
Proceeds from sale of businesses     -       22,779        
Purchases of marketable securities and other investments     (575,183 )     (971,606 )      
Maturities and sales of marketable securities and other investments     527,819       475,851        
Other, net     (41,450 )     (43,239 )      
Net cash (used in) investing activities     (223,279 )     (640,734 )      
Cash flows from financing activities:          
Net payments for common stock activity     (394,030 )     (852,524 )      
Net proceeds from debt     356,591       669,975        
Dividends     (171,707 )     (164,758 )      
Net cash (used in) financing activities     (209,146 )     (347,307 )      
Effect of exchange rate changes on cash     (47,293 )     (88,704 )      
Net (decrease) in cash and cash equivalents     (133,090 )     (538,248 )      
Cash and cash equivalents at beginning of period     1,180,584       1,613,555        
Cash and cash equivalents at end of period $     1,047,494   $   1,075,307        
           
           
RECONCILIATION OF FORECASTED EARNINGS PER DILUTED SHARE TO ADJUSTED FORECASTED EARNINGS PER DILUTED SHARE         
(Unaudited)          
(Amounts in dollars)          
  Fiscal Year        
    2016          
Forecasted earnings per diluted share   $5.40 to $5.80          
Adjustments:          
  Business realignment charges .50        
Adjusted forecasted earnings per diluted share   $5.90 to $6.30          
           

Contact:Media -Aidan Gormley, Director, Global Communications and Branding216/896-3258aidan.gormley@parker.comFinancial Analysts -Robin J. Davenport, Vice President, Corporate Finance216/896-2265rjdavenport@parker.com

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