![]() 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 |