![]() Parker Hannifin Corporation Quarterly Earnings Release 2 nd Quarter FY2012 January 20, 2012 Exhibit 99.2 |
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, 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 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; ability to realize antici pated 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 2 |
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 and 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 2 nd Quarter Highlights Key Performance Measures & Outlook Questions & Answers CEO Closing Comments |
![]() Slide 5 Second Quarter FY12 Highlights Record 2 nd Quarter Sales: Q2 Sales Increased 8.4% Year-over-Year to $3.1B End Market Demand: Order Improvement of 3% Year-over-Year Against Tougher Comparables ; International Industrial Orders Moderating Operating Margin: 14.2% as compared to 14.0% in Q2 FY11 NA Industrial Increased to 16.5% from 15.2% in Q2 FY11 Record 2 nd Quarter Net Income: $242 million Continued Strong Cash Flow: Q2 FY12 Operating Cash Flow/Sales of 8.2%; YTD FY12 of 8.9% Earnings Per Share: Q2 Record of $1.56 vs. $1.39 in Q2 FY11 Strong Balance Sheet: Cash Balance Greater than $487M and Debt/Total Capitalization Metric of 25.2% |
![]() Slide 6 Financial Highlights Diluted Earnings per Share 2 nd Quarter and Year-to-Date $1.56 $1.39 $3.47 $2.90 $.00 $.50 $1.00 $1.50 $2.00 $2.50 $3.00 $3.50 $4.00 $4.50 $5.00 Q2 FY12 Q2 FY11 FY12 FY11 |
![]() Slide 7 Influences on 2 nd Quarter Earnings Diluted Earnings Per Share Increase Year-over-Year of $.17 or 12% Primarily Driven By: Improved NA Segment Operating Margins to 16.5% from 15.2% ($.17 EPS Impact) Improved Aerospace Segment Operating Margins to 14.2% from 13.8% ($.03 EPS Impact) Lower Shares Outstanding due to Share Repurchase ($.11 EPS Impact) Offset by: Increased Expense Below Segment Operating Income due to Higher Market-driven Benefit Expense ($.04 EPS Impact) Higher Tax Rate due to Multi-period R&D Tax Credit booked in Q2 FY11 ($.09 EPS Impact) |
![]() Slide 8 Financial Highlights Sales – 2 nd Quarter Dollars in millions FY2012 % Change FY2011 FY2012 % Change FY2011 Sales As reported 3,107 $ 8.4 % 2,867 $ 6,340 $ 11.3 % 5,696 $ Acquisitions 10 0.3 % 32 0.6 % Currency 0 0.0 % 86 1.5 % Adjusted Sales 3,097 $ 8.1 % 6,222 $ 9.2 % Operating Margin As reported 442 $ 400 $ 962 $ 839 $ % of Sales 14.2 % 14.0 % 15.2 % 14.7 % 2nd Quarter Year to Date |
![]() Slide 9 Segment Reporting Industrial North America Dollars in millions FY2012 % Change FY2011 FY2012 % Change FY2011 Sales As reported 1,183 $ 13.2 % 1,046 $ 2,388 $ 13.2 % 2,110 $ Acquisitions 4 0.4 % 15 0.7 % Currency (3) (0.3)% 1 0.1 % Adjusted Sales 1,182 $ 13.1 % 2,372 $ 12.4 % Operating Margin As reported 196 $ 159 $ 419 $ 349 $ % of Sales 16.5 % 15.2 % 17.5 % 16.5 % 2nd Quarter Year to Date |
![]() Slide 10 Segment Reporting Industrial International Dollars in millions FY2012 % Change FY2011 FY2012 % Change FY2011 Sales As reported 1,219 $ 6.2 % 1,147 $ 2,508 $ 12.0 % 2,240 $ Acquisitions 6 0.5 % 16 0.7 % Currency 4 0.4 % 81 3.6 % Adjusted Sales 1,209 $ 5.3 % $ 7.7 % Operating Margin As reported 166 $ 168 $ 374 $ 352 $ % of Sales 13.6 % 14.6 % 14.9 % 15.7 % 2nd Quarter Year to Date |
![]() Slide 11 Segment Reporting Aerospace Dollars in millions FY2012 % Change FY2011 FY2012 % Change FY2011 Sales As reported 497 $ 8.0 % 460 $ 994 $ 10.9 % 897 $ Acquisitions 0 0.0 % 0 0.0 % Currency 0 0.0 % 1 0.1 % Adjusted Sales 497 $ 8.0 % 993 $ 10.8 % Operating Margin As reported 70 $ 64 $ 139 $ 107 $ % of Sales 14.2 % 13.8 % 14.0 % 12.0 % 2nd Quarter Year to Date |
![]() Slide 12 Segment Reporting Climate & Industrial Controls Dollars in millions FY2012 % Change FY2011 FY2012 % Change FY2011 Sales As reported 208 $ (2.9)% 214 $ 450 $ 0.4 % 449 $ Acquisitions 0 0.0 % 1 0.2 % Currency (1) (0.5)% 3 0.7 % Adjusted Sales 209 $ (2.4)% 446 $ (0.5)% Operating Margin As reported 10 $ 10 $ 30 $ 31 $ % of Sales 4.7 % 4.4 % 6.6 % 6.9 % 2nd Quarter Year to Date |
![]() 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 rolling average DEC '11 SEPT '11 DEC '10 SEPT '10 Total Parker 3 % + 9 % + 29 % + 29 % + Industrial North America 8 % + 16 % + 26 % + 31 % + Industrial International 1 % + 4 % + 29 % + 34 % + Aerospace 0 % + 14 % + 37 % + 16 % + Climate & Industrial Controls 5 % - 4 % - 26 % + 23 % + 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 2 nd Quarter and Year-To- Date Cash From Operating Activities Q2 '12 Q2 '11 As Reported $ 254M $285M As Reported % Sales 8.2% 10.0% Year-to-Date Cash from Operating Activities: YTD '12 YTD '11 As Reported $563M $408M As Reported % Sales 8.9% 7.2% |
![]() Slide 16 Financial Leverage 20.0% 22.0% 24.0% 26.0% 28.0% 30.0% 32.0% 34.0% 36.0% 38.0% 40.0% 42.0% FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 YTD Debt to Debt Equity 25.2% Debt to Debt Equity (19.5% net Debt) 25.2% |
![]() Slide 17 FY 2012 Earnings Outlook Assumptions Segment Sales & Operating Margins FY 2012 Sales change versus FY 2011 Industrial North America 8.4 % -- 10.4 % Industrial International 1.9 % -- 3.9 % Aerospace 7.1 % -- 9.1 % Climate & Industrial Controls (2.7) % -- .3 % FY 2012 Operating margin percentages Industrial North America 17.0 % -- 17.4 % Industrial International 14.7 % -- 15.1 % Aerospace 13.3 % -- 13.7 % Climate & Industrial Controls 7.7 % -- 8.0 % |
![]() Slide 18 FY 2012 Earnings Outlook Assumptions below Operating Margin (+/-.50%) Expenses Below Segment Operating Margin* $412M at Midpoint Tax Rate = 29% *Corporate Admin, Interest and Other Expense (Income) |
![]() Low Midpoint High Diluted Earnings Per Share 6.90 $ $ 7.10 $ 7.30 Slide 19 Earnings Outlook – FY12 |
Slide 20 Questions & Answers... ************************************************ ************************************************ ************************************************ ************************************************ ************************************************ |
![]() Appendix Income Statement 2 nd Quarter FY2012 1 st Half FY2012 * * * * ********************************* ******************** *********************** *********************** |
![]() Slide 22 Income Statement – 2 nd Quarter Quarter Dollars in millions % of Sales % of Sales Net Sales 3,106.8 $ 100.0 % 2,866.6 $ 100.0 % Cost of sales 2,381.3 76.6 % 2,195.7 76.6 % Gross profit 725.5 23.4 % 670.9 23.4 % S, G & A 368.7 11.9 % 345.7 12.1 % Interest expense 23.8 .8 % 25.6 .9 % Other (income), net (5.9) (.2)% (6.6) (.3)% Income before taxes 338.9 10.9 % 306.2 10.7 % Income taxes 96.6 3.1 % 74.4 2.6 % Net income 242.3 $ 7.8 % 231.8 $ 8.1 % Less: Noncontrolling interests 1.5 $ .1 % 1.6 $ .1 % Net income attributable to common shareholders 240.8 $ 7.7 % 230.2 $ 8.0 % FY 2012 FY 2011 |
![]() Slide 23 Income Statement – 1 st Half Dollars in millions % of Sales % of Sales Net Sales 6,340.7 $ 100.0 % 5,695.9 $ 100.0 % Cost of sales 4,795.8 75.6 % 4,333.6 76.1 % Gross profit 1,544.9 24.4 % 1,362.3 23.9 % S, G & A 755.1 11.9 % 679.2 11.9 % Interest expense 47.0 .8 % 50.3 .9 % Other (income), net (7.7) (.1)% (9.8) (.2)% Income before taxes 750.5 11.8 % 642.6 11.3 % Income taxes 210.0 3.3 % 161.8 2.8 % Net income 540.5 $ 8.5 % 480.8 $ 8.5 % Less: Noncontrolling interests 2.7 $ .0 % 3.5 $ .1 % Net income attributable to common shareholders 537.8 $ 8.5 % 477.3 $ 8.4 % FY 2012 FY 2011 |