![]() Parker Hannifin Corporation Quarterly Earnings Release 3rd Quarter FY 2010 April 20, 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; 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 3 rd Quarter Highlights Key Performance Measures & Outlook Questions & Answers CEO Closing Comments |
![]() Slide 5 Third Quarter FY10 Highlights Industrial Markets Improve: Industrial Orders Improved Sequentially From Q2 FY10 Continued Strong Cash Flow: Operating Cash Flow/Sales of 11.7% YTD Continued Inventory Reduction: $36M in Q3 FY10; $58M YTD FY10 Continued Debt Reduction: $41M in Q3 FY10; $418M YTD FY10 Continued Reduction in Leverage: Debt to Total Capital Ratio Reduced to 29.2% (gross) or 24.8% (net of cash) Operating Margin Improvement: Sequential Quarter Improvement to 11.8% from 10.4% in Q2 FY10 Continued Cost Control: Impressive Incremental Marginal Return on Sales of 51.6% for Q3 FY10 |
![]() Slide 6 Financial Highlights Diluted Earnings per Share 3 rd Quarter $.94 $.33 $2.04 $2.81 $.00 $.50 $1.00 $1.50 $2.00 $2.50 $3.00 Q3 FY10 Q3 FY09 YTD FY10 YTD FY09 |
![]() Slide 7 Influences on 3 rd Quarter Earnings Diluted Earnings Per Share Increased Y-o-Y as a Result of: Increased Revenues of 11.5% as a Result of End Market Recoveries Reduced SG&A due to Tight Budgetary Control ($2M) Reduced Interest Expense due to Less Debt Outstanding ($2M) Reduced Other Expense primarily due to Legal and Insurance Settlements in Prior Year ($23M) Offset by: Higher Taxes Due to Increased Operating Income; Higher Tax Rate Due to Prior Year Discrete Item Higher Shares Outstanding due to Increased Dilutive Effect of Equity Awards |
![]() ![]() Slide 8 Financial Highlights Sales – 3 rd Quarter Dollars in millions FY2010 % Change FY2009 Sales As reported 2,615 $ 11.5 % 2,345 $ Acquisitions - -- % Currency 85 3.6 % Adjusted Sales 2,530 $ 7.9 % 3rd Quarter |
![]() Slide 9 Segment Reporting Industrial North America Dollars in millions FY2010 % Change FY2009 Sales As reported 959 $ 11.9 % 857 $ Acquisitions - -- % Currency 12 1.4 % Adjusted Sales 947 $ 10.5 % Operating Margin As reported 134 $ 73 $ % of Sales 13.9 % 8.5 % 3rd Quarter |
![]() Slide 10 Segment Reporting Industrial International Dollars in millions FY2010 % Change FY2009 Sales As reported 995 $ 18.9 % 837 $ Acquisitions - -- % Currency 65 7.8 % Adjusted Sales 930 $ 11.1 % Operating Margin As reported 109 $ 38 $ % of Sales 11.0 % 4.6 % 3rd Quarter |
![]() Slide 11 Segment Reporting Aerospace Dollars in millions FY2010 % Change FY2009 Sales As reported 449 $ (6.4)% 480 $ Acquisitions - -- % Currency 2 0.4 % Adjusted Sales 447 $ (6.8)% Operating Margin As reported 50 $ 66 $ % of Sales 11.1 % 13.7 % 3rd Quarter |
![]() Slide 12 Segment Reporting Climate & Industrial Controls Dollars in millions FY2010 % Change FY2009 Sales As reported 212 $ 23.9 % 171 $ Acquisitions - -- % Currency 6 3.6 % Adjusted Sales 206 $ 20.3 % Operating Margin As reported 16 $ (7) $ % of Sales 7.7 % (4.3)% 3rd 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 MAR '10 DEC '09 MAR '09 DEC '08 Total Parker 23 % + 7 % - 34 % - 20 % - Industrial North America 30 % + 3 % - 35 % - 18 % - Industrial International 42 % + 0% 41 % - 28 % - Aerospace 22 % - 27 % - 12 % - 2 % + Climate & Industrial Controls 38 % + 6 % + 36 % - 28 % - 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 3 rd Quarter Year To Date |
![]() Slide 16 Financial Leverage 29.2% Debt to Debt Equity (24.8% net Debt) |
![]() Slide 17 FY 2010 Earnings Outlook Assumptions Segment Sales & Operating Margins FY 2010 Sales change versus FY 2009 Industrial North America (3.6)% -- (5.6)% Industrial International (1.8)% -- (4.8)% Aerospace (7.6)% -- (8.0)% Climate & Industrial Controls .9 % -- (.1)% FY 2010 Operating margin percentages Industrial North America 13.1 % -- 12.9 % Industrial International 9.9 % -- 9.7 % Aerospace 11.7 % -- 11.5 % Climate & Industrial Controls 6.5 % -- 6.3 % |
![]() Slide 18 FY 2010 Earnings Outlook Assumptions below Operating Margin (+/- 1.0%) Corporate Admin $140M Interest Expense $104M Other Expense (Inc.) $147M Total $391M Tax Rate 28 % |
![]() Slide 19 Earnings Outlook – FY10 Low High Diluted earnings per share 2.95 $ 3.15 $ |
![]() Slide 20 Questions & Answers... |
![]() Appendix Income Statement 3 rd Quarter FY2010 3 rd Quarter YTD FY2010 |
![]() Slide 22 Income Statement – 3 rd Quarter Quarter Dollars in millions % of Sales % of Sales Net Sales 2,614.8 $ 100.0 % 2,344.7 $ 100.0 % Cost of sales 2,062.4 78.9 % 1,908.6 81.4 % Gross profit 552.4 21.1 % 436.1 18.6 % S, G & A 316.0 12.1 % 318.0 13.6 % Interest expense 26.0 1.0 % 28.4 1.2 % Other expense, net 4.0 .1 % 27.4 1.1 % Income before taxes 206.4 7.9 % 62.3 2.7 % Income taxes 52.0 2.0 % 9.1 .4 % Net income 154.4 $ 5.9 % 53.2 $ 2.3 % Less: Noncontrolling interests .5 $ .0 % (.2) $ (.0)% Net income attributable to common shareholders 153.9 $ 5.9 % 53.4 $ 2.3 % FY 2010 FY 2009 |
![]() Slide 23 Income Statement – 3 rd Quarter YTD Total Year Dollars in millions % of Sales % of Sales Net Sales 7,206.7 $ 100.0 % 8,098.1 $ 100.0 % Cost of sales 5,732.9 79.5 % 6,367.3 78.6 % Gross profit 1,473.8 20.5 % 1,730.8 21.4 % S, G & A 927.8 12.9 % 987.9 12.2 % Interest expense 76.7 1.1 % 86.8 1.1 % Other expense, net 6.7 .1 % 36.2 .4 % Income before taxes 462.6 6.4 % 619.9 7.7 % Income taxes 129.3 1.8 % 158.1 2.0 % Net income 333.3 $ 4.6 % 461.8 $ 5.7 % Less: Noncontrolling interests 1.4 $ .0 % 2.8 $ .0 % Net income attribituable to common shares 331.9 $ 4.6 % 459.0 $ 5.7 % FY 2010 FY 2009 |