![]() Parker Hannifin Corporation Quarterly Earnings Release 1 st Quarter FY2011 October 19, 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 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 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 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 as well as the effects of currency exchange rates on sales. This presentation also reconciles cash flow from operating activities as a percent of sales in accordance with U.S. GAAP to cash flow from operating activities as a percent of sales without the effect of a discretionary pension plan contribution. The effects of acquisitions, currency exchange rates and the discretionary pension plan contribution are removed to allow investors and the company to meaningfully evaluate changes in sales and cash flow from operating activities as a percent of 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 FY11 Highlights End Market Improvement: Orders Improved Year-over-Year and Sequentially Revenues Rebounding: Q1 Revenues Increased 26.5% Year-over- Year All Time Record Operating Margin: Sequential Quarter Improvement to 15.5%, from 13.9% in Q4 FY10 and 9.0% in Q1 FY10 NA Industrial and International Industrial achieved record ROS levels Continued Cost Control: Impressive Incremental Marginal Return on Sales of 40% for Q1 FY11 Gross Debt Increase: $360M in Q1 FY11; offset by build in cash of $348M Continued Reduction in Net Leverage: While Debt to Total Capital Ratio Increased to 30.4% (gross); Net Leverage decreased to 19.9% (net of cash) Continued Strong Cash Flow: Q1 FY11 Operating Cash Flow/Revenue of 4.3%; (11.4% excluding $200M Discretionary Pension Contribution) |
![]() Slide 6 Financial Highlights Diluted Earnings per Share 1 Quarter $1.51 $.45 $.00 $.20 $.40 $.60 $.80 $1.00 $1.20 $1.40 $1.60 $1.80 $2.00 Q1 FY11 Q1 FY10 st |
![]() Slide 7 Influences on 1 Quarter Earnings Diluted Earnings Per Share Increase of $1.06 Year- over-Year Primarily Driven By: Increased Revenues of 26.5% Significantly Improved Operating Margins to 15.5% from 9.0% Year-over-Year ($1.07 EPS Impact) Lower Tax Rate due to Favorable FIN 48 Settlements ($.06 EPS Impact) Offset by: Increased Corporate G&A Primarily Due To Incentives ($.03 EPS Impact) Increased Other Expense Primarily Due to Pension and Inventory Adjustments ($.04 EPS Impact) st |
![]() ![]() Slide 8 Financial Highlights Sales – 1 st Quarter Dollars in millions FY2011 % Change FY2010 Sales As reported 2,829 $ 26.5 % 2,237 $ Acquisitions 4 0.2 % Currency (26) (1.1)% Adjusted Sales 2,851 $ 27.4 % 1st Quarter |
![]() Slide 9 Segment Reporting Industrial North America Dollars in millions FY2011 % Change FY2010 Sales As reported 1,064 $ 36.0 % 783 $ Acquisitions - -- % Currency 3 0.4 % Adjusted Sales 1,061 $ 35.6 % Operating Margin As reported 189 $ 76 $ % of Sales 17.8 % 9.7 % 1st Quarter |
![]() Slide 10 Segment Reporting Industrial International Dollars in millions FY2011 % Change FY2010 Sales As reported 1,093 $ 28.5 % 850 $ Acquisitions - -- % Currency (27) (3.2)% Adjusted Sales 1,120 $ 31.7 % Operating Margin As reported 184 $ 62 $ % of Sales 16.8 % 7.3 % 1st Quarter |
![]() Slide 11 Segment Reporting Aerospace Dollars in millions FY2011 % Change FY2010 Sales As reported 437 $ 4.8 % 417 $ Acquisitions 2 0.6 % Currency (1) (0.2)% Adjusted Sales 436 $ 4.4 % Operating Margin As reported 44 $ 53 $ % of Sales 10.0 % 12.7 % 1st Quarter |
![]() Slide 12 Segment Reporting Climate & Industrial Controls Dollars in millions FY2011 % Change FY2010 Sales As reported 235 $ 25.5 % 187 $ Acquisitions 2 0.9 % Currency (1) (0.3)% Adjusted Sales 234 $ 24.9 % Operating Margin As reported 22 $ 10 $ % of Sales 9.2 % 5.6 % 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 moving average SEPT '10 JUN '10 SEPT '09 JUN '09 Total Parker 29 % + 35 % + 25 % - 38 % - Industrial North America 31 % + 46 % + 27 % - 40 % - Industrial International 34 % + 46 % + 25 % - 43 % - Aerospace 16 % + 3 % - 23 % - 22 % - Climate & Industrial Controls 23 % + 35 % + 17 % - 31 % - 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 $123 $260 $0 $100 $200 $300 $400 $500 $600 FY11 FY10 FY11 Cash from Operating Activities As reported $122,880 Pension plan contribution 200,000 Adjusted $322,880 FY11 Cash from Operating Activities As A % of Sales As reported 4.3% Pension plan contribution 7.1% Adjusted 11.4% |
![]() Slide 16 Financial Leverage 30.4% 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 FY11 Debt to Debt Equity 30.4% Debt to Debt Equity (19.9% net Debt) |
![]() Slide 17 FY 2011 Earnings Outlook Assumptions Segment Sales & Operating Margins FY 2011 Sales change versus FY 2010 Industrial North America 13.4 % -- 16.4 % Industrial International 13.3 % -- 16.3 % Aerospace 4.1 % -- 6.7 % Climate & Industrial Controls 12.3 % -- 15.3 % FY 2011 Operating margin percentages Industrial North America 16.4 % -- 17.0 % Industrial International 15.2 % -- 16.1 % Aerospace 12.0 % -- 12.8 % Climate & Industrial Controls 8.8 % -- 9.4 % |
![]() Slide 18 FY 2011 Earnings Outlook Assumptions below Operating Margin (+/- 2.0%) Corporate Admin $161M Interest Expense $ 98M Other Expense (Inc.) $152M Total $411M Tax Rate 29% |
![]() Slide 19 Earnings Outlook – FY11 Low High Diluted earnings per share $5.20 $5.80 |
![]() Slide 20 Questions & Answers... |
![]() Appendix Income Statement 1 st Quarter FY2011 |
![]() Slide 22 Income Statement – 1 Quarter st Quarter Dollars in millions % of Sales % of Sales Net Sales 2,829.3 $ 100.0 % 2,237.2 $ 100.0 % Cost of sales 2,137.9 75.6 % 1,801.0 80.5 % Gross profit 691.4 24.4 % 436.2 19.5 % S, G & A 333.6 11.8 % 301.8 13.4 % Interest expense 24.6 .8 % 25.7 1.2 % Other (income), net (3.2) (.1)% (5.3) (.2)% Income before taxes 336.4 11.9 % 114.0 5.1 % Income taxes 87.3 3.1 % 40.0 1.8 % Net income 249.1 $ 8.8 % 74.0 $ 3.3 % Less: Noncontrolling interests 1.9 $ .1 % .5 $ .0 % Net income attributable to common shareholders 247.2 $ 8.7 % 73.5 $ 3.3 % FY 2011 FY 2010 |