• Earnings per diluted share $1.37 as reported, or $1.51 adjusted for realignment expenses
  • Impressive decremental margins of 17.0% as reported, 11.8% adjusted, reflect business restructuring and Simplification actions
  • Segment operating margins 13.8% as reported, or 14.7% adjusted
  • Company increases full year fiscal 2016 guidance

CLEVELAND, April 26, 2016 (GLOBE NEWSWIRE) -- Parker Hannifin Corporation (NYSE:PH), the global leader in motion and control technologies, today announced results for the fiscal 2016 third quarter ended March 31, 2016.  Fiscal 2016 third quarter sales decreased 11% to $2.83 billion compared with $3.16 billion in the same quarter a year ago.  Fiscal 2016 third quarter net income was $187.1 million compared with $285.5 million in the third quarter of fiscal 2015.  Fiscal 2016 third quarter earnings per share were $1.37 compared with $2.02 per share in the prior year quarter.  Adjusted earnings per share were $1.51 in the fiscal 2016 third quarter compared with $2.06 per share in the prior year quarter.  A reconciliation of as reported to adjusted earnings per diluted share and segment operating margins is included with the financial tables accompanying this news release.

Cash flow from operations for the first nine months of fiscal 2016 was $681.5 million, or 8.1% of sales, compared with $791.1 million, or 8.3% of sales, in the prior year period. Excluding a discretionary contribution to the company's pension plan of $200 million, fiscal 2016 year-to-date cash flow from operations was 10.5% of sales.

"Implementation of the new Win Strategy™ has helped us achieve strong adjusted segment operating margins and impressive decremental marginal return on sales, especially given difficult macroeconomic conditions," said Tom Williams, Chairman and Chief Executive Officer.  "We are on track to achieve our previously stated sales target while improving operating margins for the full fiscal year."

Segment Results  Diversified Industrial Segment: North American third quarter sales decreased 13% to $1.25 billion and operating income was $202.2 million, compared with $235.5 million in the same period a year ago.  International third quarter sales decreased 11% to $1.02 billion and operating income was $105.2 million, compared with $139.5 million in the same period a year ago. 

Aerospace Systems Segment:  Third quarter sales decreased 2% to $561.0 million and operating income was $84.2 million, compared with $73.3 million in the same period a year ago.

Orders Parker reported a decrease of 6% in orders for the quarter ending March 31, 2016, compared with the same quarter a year ago.  The company reported the following orders by business: 
  • Orders decreased 9% in the Diversified Industrial North America businesses;
  • Orders decreased 6% in the Diversified Industrial International businesses; and
  • Orders increased 1% in the Aerospace Systems segment on a rolling 12-month average basis.

Share Repurchases During the quarter, the company repurchased approximately $50 million of Parker shares bringing the total repurchases for fiscal 2016 year-to-date to approximately $450 million. 

Outlook  For the fiscal year ending June 30, 2016, the company has increased guidance for earnings from continuing operations to the range of $5.57 to $5.77 per share, or $6.20 to $6.40 per share, adjusted.  Earnings guidance is adjusted for business realignment expenses of approximately $0.63 per share, including $0.40 per share related to Simplification initiatives.

Williams added, "We remain focused on increasing employee engagement, delivering premier customer experience, and in driving overall growth and profitability which are core tenets of the new Win Strategy that we announced six months ago. I am pleased at how far we have come in such a short period of time and continue to be excited about the opportunities that we have for the future."

NOTICE OF CONFERENCE CALL : Parker Hannifin's conference call and slide presentation to discuss its fiscal 2016 third 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 conference call 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 60 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 and earnings per share without the effect of business realignment expenses; (b) the effect of business realignment expenses on forecasted earnings from continuing operations per share; and (c) cash flows from operations without the effect of a discretionary pension contribution. The effects of business realignment expenses and the discretionary pension contribution are removed to allow investors and the company to meaningfully evaluate changes in segment operating margin, earnings per share and cash flows from operations 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 - MARCH 31, 2016                
CONSOLIDATED STATEMENT OF INCOME                
                       
(Unaudited)        Three Months Ended March 31,    Nine Months Ended March 31,
(Dollars in thousands except per share amounts)     2016       2015       2016       2015  
                       
Net sales       $   2,828,665     $   3,162,311     $   8,403,603     $   9,567,236  
Cost of sales         2,209,401         2,373,016         6,550,929         7,234,465  
Gross profit           619,264         789,295         1,852,674         2,332,771  
Selling, general and administrative expenses       335,908         372,306         1,020,788         1,152,950  
Interest expense         33,745         35,003         103,802         83,609  
Other (income), net         (23,382 )       (6,380 )       (50,438 )       (32,055 )
Income before income taxes         272,993         388,366         778,522         1,128,267  
Income taxes         85,851         102,904         213,217         295,299  
Net income            187,142         285,462         565,305         832,968  
Less:  Noncontrolling interests         58         117         261         282  
Net income attributable to common shareholders $   187,084     $   285,345     $   565,044     $   832,686  
                       
Earnings per share attributable to common shareholders:              
Basic earnings per share     $    1.39     $   2.06     $   4.16     $   5.77  
Diluted earnings per share     $   1.37     $   2.02     $   4.12     $   5.68  
                       
Average shares outstanding during period - Basic       134,809,610         138,794,789         135,675,823         144,342,288  
Average shares outstanding during period - Diluted       136,552,769       141,189,803         137,311,848       146,627,273  
                       
Cash dividends per common share      $ .63      $ .63     $   1.89     $   1.74  
                       
RECONCILIATION OF NET INCOME AND EARNINGS PER DILUTED SHARE TO ADJUSTED NET INCOME AND EARNINGS PER DILUTED SHARE
                       
Net income       $   187,142     $   285,462     $   565,305     $   832,968  
Adjustments:                  
Business realignment charges         19,226          6,352         60,241         18,496  
Adjusted net income     $   206,368     $   291,814     $   625,546     $   851,464  
                       
Earnings per diluted share     $   1.37     $   2.02     $   4.12     $   5.68  
Adjustments:                  
Business realignment charges         0.14         0.04         0.44         0.13  
Adjusted earnings per diluted share   $   1.51     $   2.06     $   4.56     $   5.81  

 

BUSINESS SEGMENT INFORMATION                
(Unaudited)        Three Months Ended March 31,    Nine Months Ended March 31,
(Dollars in thousands)       2016       2015       2016       2015  
Net sales                    
Diversified Industrial:                  
North America     $    1,247,904     $   1,441,625     $   3,695,008     $   4,302,644  
International           1,019,776         1,148,248         3,050,687         3,599,145  
Aerospace Systems         560,985          572,438         1,657,908         1,665,447  
Total       $   2,828,665     $   3,162,311     $   8,403,603     $   9,567,236  
                   
Segment operating income                      
Diversified Industrial:                  
North America     $   202,180     $   235,516     $   568,509     $   726,640  
International           105,161         139,473         329,823         465,803  
Aerospace Systems         84,238         73,334         240,005         205,500  
Total segment operating income       391,579         448,323         1,138,337         1,397,943  
Corporate general and administrative expenses       42,322         45,515         126,583         152,319  
Income before interest and other             349,257         402,808         1,011,754         1,245,624  
Interest expense         33,745         35,003         103,802         83,609  
Other expense (income)         42,519         (20,561 )       129,430         33,748  
Income before income taxes     $   272,993     $   388,366     $   778,522     $   1,128,267  
                       
RECONCILIATION OF SEGMENT OPERATING MARGIN TO ADJUSTED SEGMENT OPERATING MARGIN        
(Unaudited)                    
           Three Months Ended    Nine Months Ended
          March 31, 2016   March 31, 2016
           Operating income     Margin      Operating income   Margin  
As reported segment operating income   $   391,579       13.8 %   $   1,138,337       13.5 %
Adjustments:                  
Business realignment charges         25,030             81,618      
Adjusted segment operating income   $   416,609       14.7 %   $   1,219,955       14.5 %

CONSOLIDATED BALANCE SHEET              
(Unuaudited)        March 31,    June 30,    March 31,
(Dollars in thousands)           2016       2015       2015  
Assets                
Current assets:              
Cash and cash equivalents     $   1,034,971     $   1,180,584     $   1,017,013  
Marketable securities and other investments       1,069,658         733,490         1,013,692  
Trade accounts receivable, net         1,587,785         1,620,194         1,701,017  
Non-trade and notes receivable         245,248         364,534         324,140  
Inventories           1,248,213         1,300,459         1,387,681  
Prepaid expenses         124,025         241,684         188,855  
Deferred income taxes         146,939         142,147         152,599  
Total current assets         5,456,839         5,583,092         5,784,997  
Plant and equipment, net         1,598,758         1,664,022         1,643,538  
Goodwill           2,948,284         2,942,679         2,892,705  
Intangible assets, net         961,206         1,013,439         1,022,425  
Other assets         1,104,314         1,091,805         993,550  
Total assets     $   12,069,401     $   12,295,037     $   12,337,215  
                   
Liabilities and equity              
Current liabilities:              
Notes payable     $   576,621     $   223,142     $   665,123  
Accounts payable         999,159         1,092,138         1,138,163  
Accrued liabilities         801,716         894,555          822,385  
Accrued domestic and foreign taxes         123,123         140,295         141,653  
Total current liabilities         2,500,619         2,350,130         2,767,324  
Long-term debt          2,675,000         2,723,960         2,724,943  
Pensions and other postretirement benefits       1,483,641         1,699,197         1,288,166  
Deferred income taxes         80,452         77,967         78,276  
Other liabilities         302,706         336,214         323,567  
Shareholders' equity         5,023,612         5,104,287         5,151,715  
Noncontrolling interests          3,371         3,282         3,224  
Total liabilities and equity     $   12,069,401     $   12,295,037     $   12,337,215  

 

 

CONSOLIDATED STATEMENT OF CASH FLOWS        
(Unaudited)        Nine Months Ended March 31,
(Dollars in thousands)       2016       2015  
               
Cash flows from operating activities:        
Net income       $   565,305     $   832,968  
Depreciation and amortization         231,777         237,232  
Stock incentive plan compensation         53,735         74,830  
Gain on sale of businesses         (10,668 )       (4,732 )
Loss on disposal of assets         76         10,248  
Gain on sale of marketable securities       (535 )       -  
Net change in receivables, inventories, and trade payables     (19,661 )       (132,515 )
Net change in other assets and liabilities       (138,268 )       (118,047 )
Other, net           (262 )       (108,934 )
Net cash provided by operating activities        681,499         791,050  
Cash flows from investing activities:        
Acquisitions (net of cash of $3,814 in 2016 and $3,979 in 2015)     (67,552 )       (18,640 )
Capital expenditures         (110,804 )        (157,418 )
Proceeds from sale of plant and equipment       14,112         15,525  
Proceeds from sale of businesses         24,325         35,577  
Purchases of marketable securities and other investments     (1,188,594 )       (1,456,410 )
Maturities and sales of marketable securities and other investments     974,417         828,653  
Other, net           (40,364 )       (44,726 )
Net cash (used in) investing activities       (394,460 )       (797,439 )
Cash flows from financing activities:        
Net payments for common stock activity       (441,300 )       (1,326,521 )
Net proceeds from debt         305,555         1,117,343  
Dividends           (256,890 )       (252,745 )
Net cash (used in) financing activities       (392,635 )       (461,923 )
Effect of exchange rate changes on cash       (40,017 )       (128,230 )
Net (decrease) in cash and cash equivalents       (145,613 )       (596,542 )
Cash and cash equivalents at beginning of period       1,180,584         1,613,555  
Cash and cash equivalents at end of period   $   1,034,971     $   1,017,013  

 

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    $5.57 to $5.77
Adjustments:      
Business realignment charges     .63
Adjusted forecasted earnings per diluted share    $6.20 to $6.40

 
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

Primary Logo