PH - Earnings call transcript Q4 2018 | Parker-Hannifin Corporation

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, ladies and gentlemen, and welcome to the Q4 2018 Parker Hannifin Corp. Earnings Conference Call. At this time, all participants are in a listen-only mode.

Following management's prepared remains, we will host a question-and-answer session and instructions will be given at that time.

As a reminder, this conference call may be recorded. pleasure the my Ms. over now is to conference hand to It Suever, Financial Cathy Officer. Chief begin. may you Ma'am

Catherine A. Suever

Thank you, Release morning and Brian. Good Full Fourth Parker Year Quarter Hannifin's XXXX Earnings Teleconference. and welcome to

well slide phstock.com, and forward-looking today's on Joining me President X, Chief Harbor Information the number webcast together company's Officer, Parker's Operating replay for year. as and Executive Chief financial call. Reconciliations at will slides at Tom Banks. appears presentation the Statement agenda Williams, website, Investor and release are Disclosure Today's number the earnings Chief included statements are for Lee to with find Williams, provide today for any following highlights company's and and Officer, non-GAAP will On as phstock.com. quarter one Chairman financial year full are audio To you'll and Today's be fourth measures website, non-GAAP accessible Chairman press Safe slide begin, measures. addressing our this on Executive presentation on fiscal morning's X. Tom and posted in Officer, the slides reference also

together number Tom's as will continue and guidance a outlook us overview get then X. slide few Tom provide comments, X of performance review the company's review quarter brief and started highlights slide XXXX to year we'll then full comments Following year summary for and the quarter of now for for XXXX. year a question-and-answer XXXX the refer the fiscal Please of fiscal on session. with call fiscal a fourth our and with Tom year a for full a fiscal the will I'll with provide the open year

Thomas L. Williams

your well. my good Cathy, you, you interest your Parker. in for and morning, and Thank welcome time Extend as everybody. Thank

that for the in and around and the a team report of around dedication was thanks their acquisition members by completed best just growth work, Parker's XXXX. delivered a This QX Win world. So really the their FY performance Parker everybody the year that we experiencing to some driven world, ever organic record and great happy hard My CLARCOR results. we're the really nice the to combination Strategy, we're

highlights, Engage which And ownership to with safety safety more so as-reported. going all we're we just Cathy's are delivery, Win numbers quality starting start going And to People start concept because in as really going On an the beyond the These numbers within this and we the first on do. as of to and me going really for concept to we give all-time history goal improvements is expand High-Performance our which fourth just today. were list quarterly safety, down quarter we're the let I'm High-Performance is and see we go reported all and stands use going normally about And records. I'm So with you specifics, that's driven costs performance. speak by nice I'm to as team, XX% give a goal, through expansion that we to have to you categories. ownership what back. Strategy. the going team records the creating really culture injuries that

company. So, the records these of in history are all-time the quarterly

restructuring amortization all-time in and an delivered achieve CLARCOR, first operating we that is all-time the sales an So, which for was for the the including incremental significant of to amount all. cost Segment and quarter. record, are margin record depreciation still

pretty things see we highlight segment Strong number so on margins the an up basis growth, some tough up of order there And were very had to global were company. margins adjusted I points The quarter were double basis think points it quarter ROS, if XX than to came the Systems; net net that against an performance that. an more for the EBITDA just very the international. some year-over-year. I We underlying up A in And we at excellent pleased in comparables, income, fourth year-over-year. records: happened EPS. quarter. really basis margins. income quarter outstanding industrial for X%, year-over-year. production. a XXX ROS basis nice growth margins of saw speaks XXX America some Aerospace rate is XX.X% other had in nice We and North continued points industrial that improvement And organic in entry which growth would

depreciation, the record. significance reported came flow the you that XXXX. margins. you moving incremental full also points previous EPS, operating record, at the all an basis: would to was a restructuring operating cost to back show And Now you CLARCOR we reported. at Again, segment year. was a previous FY it just cash that XX.X% take the margins of all-time records to in Segment that sales, faced. XX.X% look headwind amortization, on XX achieve, all-time high of Operating that all-time all number than all-time being higher record the with basis I

the to growth really and in X% continuing came operating to Strategy to want Win segment and from demonstrate both transformational sales nice global these growth, EBITDA We margins. again, is for organic cash outpacing other generation. cash I cash results had improvement all XX.X% And Some deployment. full highlights flow in We produce far year. industrial flow terrific on results. capital move operations. the production

great cash of side goal say great generators deployers XXX% XXXX to heard We had You've generation cash ended at the we a our free that very flow. strong year. And be is on cash. FY me and

and side keep in XX% and a that very of increases paid. We dividends deployment record that we're makes record of a intend keep. intend with streak proud annual year increased we consecutive This consecutive to dividends the we XXnd is On alive. it's to this the year starting dividends,

progress debt-to-EBITDA multiple, we fiscal at at close, X.X debt year we gross we had at completed take XXbX-X share CLARCOR just were period $XXX we I of discretionary times on time. in remarkable plan. million and on deal a of were And basis FY our relatively back a and in XXXX times, we the opportunistic progress. then the then at QX. you when If at in on million the share X.X On reduction, $XXX finished side, significant looked so short you And purchasing closed deal the in repurchase to repurchase

with performance to Moving for $XXX $XXX integration. synergies the synergies track. to just year given great period. margin million integration amortization. the are I at CLARCOR It's of pleased of I people EBITDA the CLARCOR cost think very on EBITDA a because targets revenue to really well, evaluate on to incremental going the million this margin three we're our achieve and plan end targets Again The way is to the remain is of synergy remind our and and to want it. move depreciation performance

a EBITDA So to five-year we over margins XXX-basis XXX Parker EBITDA for to really to hit of at point report on the three period a increase early. track almost that margin deal time total basis time. of communicated goal announcement, pleased we're that the CLARCOR points years I'm And expansion

going that to XX.X% at EBITDA was So announcement, adjusted the point. back deal

came 'XX, we for in For FY the in year of QX, XX.X%. came at and at full XX.X% we

total points basis a XXX again, team started. really effort. this So, where from And is almost we

to divisions kind again, new indicator it's Win performance at that working that where period a If margin. And, in this and the over contributed. the you really is Strategy drive of EBITDA groups everybody's strong look of performed time

year the to issuing Moving for operating record FY We're for XXXX outlook. and record guidance margins a sales, of record EPS.

headwinds. approximately X% partially of currency offset by growth growth organic to X.X% Solid

CLARCOR is to range EPS restructuring and $XX.XX. adjusted Our some going have $XX.XX be And costs. integration we'll continued business to

However, in than be lower FY it the costs we significantly will had XXXX.

our forward, XXXX. there's And you looking are you tell through year. I'm can to list positive enthusiasm for next just highlight the FY to for going the lots I room FY going momentum. to So we forward a of of positive XXXX items all around run really

growth the Very growth be market growth macro It's around profitable are positive. Strategy a And synergies initiatives ahead of is conditions. in combination XXXX very new good improvements positive environment this is the and still especially CLARCOR a fact in is the our good in about market. initiatives, organic of to the very to it's We're fast driving are going The us. FY a really going Win period. opportunities a the early all lots way. with solid impact Win of the that Strategy and driving thing First days

North remind had build and us I from is to in to perform tremendous a if international that improve Now, of to for the we forecasted, standpoint And margin the good America. positive a in America, what that some off continue margin intend I'll very The coming be high things is for for to was saw move we which the very And strong at those the significantly. as XXXX tailwind first we the the into we our what balance And stronger quarter. productivity are expect reduced throughout just really for gradual are. some second improvement North The of costs we improvements going level. is portfolio the cycle segments, FY Year XXXX. and gives FY in a future priorities. going to you much half upon segment FY restructuring Aerospace nice New XXXX year. in expansion business against have going long deployment look to a And some and half a Aerospace sheet the utilize

it Relations generate if organic is FY and how five-year productivity of one look really make shareholders. and as of moving towards the we team guide, value growth a discussed recent acquisitions as to And XXXX decisions you at for year on our share is FY and second marks those gives nice targets. then shareholders and behalf FY performance XXXX our start to leadership Investor always, we at to that And us optimal XXXX's take First repurchase. base horizon as dividends, we're goal, our long-term next really we a day. FY our look XXXX our most the the

XXX greater reminder, than operating as of free the of cash So margin of a We over XX%, than XX%, points share XXXX basis segment production that sales growth. targets XX%-plus. want are per conversion following: greater CAGR and industrial EBITDA time at at an XXX% global growth period by flow our earnings margins FY

going a of for back detailed with to the that summary, to Cathy hand it I'm more So quarter. review

Catherine A. Suever

per earnings begin addressing to slide share Thank you, Tom. for now quarter. I'll and the X number by refer

$X.XX income year of sale $X.XX, FY expenses. find Fourth for for business the year. charge $X.XX adjusted income loss and per QX quarter reform. reported, expenses on increase fourth per business $X.XX $X.XX a related On growth, components attributable same were income and segment X were and expense On $XX.XX and components as of of tax slide lower share Adjusted a of a you'll CLARCOR incentive full for increase this expenses related fiscal higher result and to with of costs $X.XX XXXX fiscal performance year XXXX by share of outstanding. $X.XX, shares count fourth adjustments of and Increases operating share compensation, the achieve of from earnings The earnings $X.XX. CLARCOR for $X.XX U.S. XXXX quarter year-over-year. net most Strategy the to $X.XX acquisition-related XXXX. $X.XX the year Win acquisition quarter G&A and expense a adjusted been of other $X.XX, for an of initiatives. significant year acquisitions resulted primarily to of find expense expense The expense issuance, to $X.XX to associated full a segment from tax operating and adjusted adjusted the have walk the the $X.XX meaningful contributed $X.XX, prior-year for quarter other $X.XX. included while increased XX% of to the As per in higher earnings to benefit significant Lower share compares debt increased include $X.XX margins of share equating to expense realignment the corporate were earnings adjusted $X.XX. decreases per higher significant lower income respectively. to related exclude $X.XX $X.XX per realignment you'll share in from earnings the a share of earnings XXXX from from G&A $X.XX ago, X, XXXX of of were and interest XXXX for business increased the of adjusted earnings on of higher per of earnings walk to $X.XX, reduced a increase organic to savings of $X.XX the tax $X.XX, synergy came income corporate The slide the fewer the of higher

improved fourth Parker a X.X% margin filtration and the same total to sales Strategy overall divestiture a positive Total year. XX.X% quarter for and improvement margin X, fourth benefits organic find sales Win an was to sales the year-over-year segment and higher total Moving quarter X.X%. acquisition XX.X% operating you'll our on from This with increased There last to X.X% headwind segment the slide reflects by quarter, operating full versus impacts combined number adjusted basis of contribution and currency. margin from year. In synergies. company initiatives the during the volume a from

full For organic and operating XX year, basis increased the increased to XX.X%. total margins sales points X.X% segment

Moving to Diversified discuss Industrial the America. slide I'll with number business starting XX, North segments,

was involved year, the X.X% quarter margin fourth XX.X% the America complete consolidations customer organic North footprint experience for reflects and increased by work of XX.X% to filtration fourth on while last also year quarter, higher-than-anticipated from versus divestiture. additional prior X.X% the quarter during period sales current of compared basis last the growth. an sales the Operating with maintaining For as adjusted drag year. a excellent Compared to to a in

During we steady continued. the consolidations improvement improve, quarter, plant we saw metrics toward productivity and but completing costs duplicate some made these

of planned completion of confident plant operating Industrial first a strong Strategy, Win continuous the improvements with for year productivity XXXX of the and XXXX half second the year the during remain America experience fiscal With we closures we'll North margins. fiscal that half

fourth by filtration XX.X%, Organic segment currency of Industrial XX.X% fourth XX.X%. created margins Diversified the Industrial basis segment For prior on the in while year. increased with I'll on number the X.X%. quarter slide Operating XX.X%. segment organic full positively the margin versus XX. continue the in by quarter for sales X.X% for International adjusted XX% quarter International The year, operating the sales a while drag, increased impacted the divestiture an was sales were

Strategy progress simplification in as realignment to Industrial and result and of continue a Win see in efforts. We International margins the

in to the move For by impact and aftermarket. driven the military prior XX.X% increased fourth increased strength development XXX growth organic revenues now costs points favorable of X.X% more sales Operating was Organic than full versus operating commercial to the margins margin the XX.X% XX the XX.X% mix, effective Systems Aerospace number basis slide quarter, the execution year, a of Win quarter military aftermarket by the to was the for OEM year, and review years. and of prior and successful fourth segment I'll in for sales reflecting XX.X%. segment. Strategy

year, XXX for the increased growth X.X%. For full was organic margins year. Operating the by XX.X% basis points to

of to show Moving details rates by we slide number segment. the XX, order

to represent Parker average X% a year-over-year growing orders are continue of report Diversified from the The XX-month orders, Systems average. X% up a North based year-over-year while Total from strong, Industrial of absolute on are reminder, a acquisitions, As on be end. Industrial excluding to X% quarter three-month trailing This rolling average is as and America rolling made XX.X% a orders growth and dollars XX, billion, Parker's the segments a of year Diversified last currency. increase adjusted XX flow percentage of reported for divestitures of On pension Aerospace as last a On free rate. report operating $XXX Systems cash activities from million we $XXX Diversified period flow International slide sales year XX% sales of orders. increased XX.X% show Aerospace conversion and discretionary operating we cash or or same for cash XX.X% a year history slide contribution. when activities. from flow Full compared to million from $X.X Industrial

a capital at flow able proud XXX%, allocations during their this a earnings adjusted XX. sales The million slide full-year in provided $XXX of consecutive on The for compared common capital and to for finishing for XXX%. range was sales of outlined be repurchases is growth. to currency of rates million For pay fiscal shares, capital The is to great XXXX working the will plan to dividends, impressive estimate held expected our of XXXX are its for million year. calculated million generated currency fully an divestiture XXXX of between We're ended basis. or that resulting X.X% higher management prior repurchases XXbX-X cash corresponding of expected of is for a of growth We've as down sustain $XXX our Total million on have have $XXX to negative to conversion be than number of of year year organic the significant through flow those prior fiscal quarter, debt, and fourth quarter sales loss cash of year expected being to XXth X.X%. negative and to period is from and Parker the X.X% we've fiscal the guidance $XXX free as-reported on XXXX. fiscal the X.X% have Guidance discretionary of million of June the the as greater and X.X% on for very the X.X% year, year both as of year-over-year expenditures. XXXX steady team year sales in $XXX the $XXX fiscal $XXX of to in for the we XXXX retired The maturity, million increase and rates XX, X.X% payment impact impact share for XXXX. impact spot the which shareholder been: impact

adjusted margins be operating XX.X% total between For between be tax XX%. XX.X%. segment is forecasted to rate operating margins and XX.X% to forecasted Parker, full-year adjusted XX.X%, to are segment as-reported projected and be are while The

$XX.XX to basis from per On $XX.XX earnings range $XX.XX midpoint. range the $XX.XX the projected share $XX on or is adjusted an initiatives business year to year, the the expenses earnings business guidance $XX.XX Savings an are realignment on at million realignment per basis to be $XX.XX fiscal full the For approximately million. full an of $XX is guidance This for excludes as-reported share or guidance at basis, adjusted XXXX. midpoint. the

addition, of CLARCOR to $XX $XX ramp $XXX to achieve the synergy fiscal expenses. guidance adjusted In costs savings year CLARCOR million year end of excludes to XXXX. a on end basis an estimated million run rising rate to fiscal at after by million XXXX are the of of

We and guidance rate fully the million XXXX. the as-reported by adjusted to year synergy are the achieve business remain $XXX savings both realize all pace to run realignment in continue on Savings forecasted CLARCOR reflected ranges. costs from fiscal and to

full-year XXXX sales assumptions additional operating second midpoint adjusted adjusted is half, half, for XX%, Some half at first XX% second XX% half, half, segment XX% income divided is key XX% XX%. guidance are are: half/second the EPS divided divided first first

back fiscal $XX.XX. higher and corporate This Increases Please other is include count. $X.XX during from a adjusted prior of summary the from reconciliation for using you'll increases prepared XX, to my First comparison. and Offsetting higher quarter consistent costs lower the per and guidance to projected midpoint for of fiscal G&A CLARCOR a from realignment forecast projected to year of of projected expenses expense comments. representing $X.XX your projected share the divestitures share ask of compared earnings We $X.XX the that tax fiscal comments. any higher segment per a call to is concludes per midpoint this remember of Tom, turn of you expense decrease On purposes continue adjusted find share year your of projected estimates that operating publish close a acquisitions income, the earnings per $X.XX share $X.XX the XXXX. $X.XX be XXXX major remainder you lower excludes of at more and XXXX $X.XX year-over-year interest $X.XX guidance achieve. or from slide from to adjusted the might that at these excludes projected components share expense. I'll business and $XX.XX

Thomas L. Williams

Thank you, Cathy.

we year FY to to of we and our we changes XXXX. is years another One, Strategy we performer a a working cash. Win the So record three are peers wanted Win two versus be were What generator Strategy wanted when it Industrial anticipating Diversified in top-quartile great overarching about to well. The and ago deployer themes. be the framed revised

versus unique the to with the themes us motion our have that and we advantage two competitive control enables number-one that those couple differentiate what competitors that's in the be us company You world.

these that our as that is to Diversified some get one, customers. the intellectual best the know So record that provides the in future best and best we divisional Strategy, second going ship about technologies of property network of the balanced is have our that, and decentralized and we everything third breadth has we're we continue better. the the is we to control unique Parker the but almost a XXXX, our of we position advantages structure, the support motion global portfolio fact has space, Industrial it. service system among tied really value Win We're thing FY which element distribution that globally following: and a We're are our to to And do forecasting companies differentiating in the have world. lots to opportunities capabilities a

let hard by to thank thank saying to want Parker their for and So you world progress all the the just shareholders. to I say the around team And you close work. me the members

shareholders that confidence Parker, we much. Our very in have had that continued appreciate

to So it with to back the going I'm over you to start that, Q&A. Brian, hand

Operator

Dobre line And Robert come the Thank W. with question first you, Baird. will sir. of our from Mig

open. now is line Your

Joseph M. Grabowski

this everyone. for Mig Good on is morning, Joe Grabowski morning. This

Catherine A. Suever

morning, Good Joe.

Joseph M. Grabowski

Good America start the inefficiencies of through puts and have quarter, in the progressed takes North How morning. in CLARCOR Maybe there. incremental talk margin there. kind fourth quarter? about what were Maybe the the

Thomas L. Williams

Yeah, Joe. Tom. It's

of with the We America. in metrics very in pleased and XXXX. continued through saw line, FY we track the encouraged our were we what by productivity So plant it saw. progress really line by we improvement with that saw closures plant were We completed We quarter. with plant we North XX% the

carryover experienced. that's we FY volume to XXXX We to XX% due higher going the to have that

a problem is have. volume, that higher this high-class we So this

organic X% by America. for we approximately help guide at North mean the growth, frame in and higher we that what to I volume, came organic X% QX almost was gave for growth Just America North

we're at and carryover these see what to first comfortable closures very had from higher in to second a pace the North do out to and that costs than that when and anticipated. the plants going the productivity going a got to we're close able half we're a strong very able the But we that is be improving you that XX% to plants So half you're going rate at take be America. growth we've the

America an So sequentially. just significant your I was you very maybe got of So stage and there, you I on then performance And results encouraged I've strong with here, improvement. if you annual a other could prior think total And it's emphasize if North saw while segments, the look Aerospace year – America. at basis I just indicator and North the the margin versus EBITDA and underlying quarterly performance look at if a basis really really International good operating the progress on

So and we what forward to on done we've good feel very XXXX. about we the FY margin side look

Joseph M. Grabowski

be would as And Great. the does same that quarter? the up dynamics how follow FY maybe were material keep And look with through What able Have the lines. up price my the inflation raw through pricing? been then color. Thanks XXXX? along in you progress for you cost to

Lee C. Banks

Joe, this Thanks question. the Lee. for is

our a input measure start before through at increases measure past, the we we've in our Index our process pretty level through costs disciplined division company the and and our inside sales SPI Index. talked we've got where As PPI the

it. everything a been I inflation and has been company. the say very definitely the So in channel for minimum, neutralizing done we've we margin would stay we've in really of neutral, There's top And at it. active on

Joseph M. Grabowski

my taking for Thanks Great. question.

Catherine A. Suever

Thanks, Joe.

Operator

from you. Thank question our Cook And will of the line with come next Credit Jamie Suisse.

Credit Jamie morning. Cook Hi. Securities LLC - now Good is line Your open. (USA) L. Suisse

for First, weaker little color in than International expected. some the were just what on I have They a would Industrial. orders

with could start you have if So follow-up then just I question. that. And a

Thomas L. Williams

Tom. it's Jamie, Yes,

So first comps there. got tougher you for international

Cook contributor and Jamie it. (USA) and So us. that's Credit saw moderated EMEA Okay. at stayed level for a numbers Suisse good America but bit still Latin the - to had We little quarter, a Asia high through Securities L. pretty big LLC probably a

sorry. And

a first investors half expecting a Just on think the in for could question last or better Is think any right half. were I second question half. on there give follow-up first the than the half, Thanks. way about incrementals it? quantify you second way that color? the more Is XXs just in low-XXs XXXX still to little

Thomas L. Williams

on a Yeah, difficult range and pinpoint you basis. I'll to because a is MROS a predict give metric

So America XX% going XX% XXXX going to with XX% to total mentioned, before. that MROS half tailwind whole half, to the Jamie is Credit the company putting be to seems MROS. strong the our more Cook XX% for the it in low be for to in is in mid-XXs the North and the I first be second Securities back-end Full together. And L. for year just LLC will - versus company Suisse (USA) loaded as

If give you could just a little that. color on

Thomas L. Williams

Jamie improvements are when XXXX And going we last plants were quarter, line with and us to at. XXXX. by with what the the Thanks. shape that in improvements were that is color. close those team queue. LLC factories get out half. in - the (USA) the for line take L. The and members FY half making making didn't second to I'll appreciate very productivity the be to anticipate pace. going our for that enable us we're Okay. Securities Credit that's in we're that the the we to I about and Cook talked first but to that's pleased of very back I Suisse Obviously we talk work about about we were position think we No, we I'm costs anticipating. good But where need the more

Catherine A. Suever

Thanks, Jamie.

Operator

will from Sachs. Goldman come question next line our of Ritchie And the you. with Thank Joe

now is line open. Your

Joe Ritchie

everyone. morning, Good you. Thank

Catherine A. Suever

Joe. morning, Good

Joe Ritchie

growth But been on have I to know order guys, So, so you at guide when the trend. better. for much I look trend the year, will on organic rates guide upcoming typically the tend far your

about And that range how I lower that remain trends very order you've given? low end good. anticipated, think seems should we The so than still obviously the but

Thomas L. Williams

is This Joe. Tom. Yeah,

I'll then guide, we through Let your of question. process maybe go the have me people with developed first how and the context, so answer start and some

patterns, distributors, help input industrial the We and first groups from forecasts own by future. our So you economic we on we to our of customers from respective at just look at growth. like regression models predict the look models We get we obviously our divisions. our that get production have described. our built order we then all And

going we on predict what my focus organic is because So, comments on to growth currency. I'm can't

the So primarily our in X% approximately second rates X.X% the like second and of half. to really the growth down because comparisons. X.X% half first of half looks for approximately But the for range X% the of coming

you our But the recent put it's to going environment of far end I'm going market's just negative. asterisk my run comparison as comments end growth that in my we've positive, XXXX comparison memory as not whole do of the But by describe best had these And forecast forecast necessarily a going this to number harder perform you I through look to the do. markets, organic neutral, how to this for the going in buckets: at end of than that little a going Parker's our the is markets. predictor of I'm with markets. I'm significant how to to one XXXX, three If would XXXX XXXX. positive to as ones from much

list refrigeration air long truck, lawn with heavy ag, industrial, rail, gas, I'm the because list very distribution, and long side, But sciences, oil is. construction, all about telecom. to read semicon, forestry, On and it's turfs, this conditioning aerospace, and a going it duty life starts positive I'm and and general mining, how them excited

is as about in automotive that's gen. do Neutral you predict, power positive bucket. everything we So is And and marine. negative, the is might

every time we recognize So that going better to I better view data, of best we're the think our But visibility is for for we're you and growth environment for characterize And would I as world. going quarter to update that have about future. just the at terrific when the a us forecast our this go. as XXXX

Joseph M. Grabowski

the for about guess helpful, again, strong. incremental visibility, roughly a of margin/EBIT XXXX the all at think EBIT. that the outlook taken about year. associated about this is savings pretty from and maybe very sounds $XXX was And just the for That just much volume wait Tom. leverage obviously your the it. thinking see year versus, But how for are cost about like the coming thinking later And actions Got the XXXX, to update you're of your that and implies how guess with it take versus I midpoint how million rest in we you've you're look remains of bridge year? the I given it supposed guidance, benefits thinking when how I the we'll the

Catherine A. Suever

Yeah, Joe.

this take little for bit It be will one a me combination. a here. Let

from complete plant we savings first half of see as the efficiencies we XXXX. in the So closures will

seen and that, We And as we've in we inefficient in terms keep better this pretty will growth continue productivity continue and as and in efficiency to continue such and improvement work with up period forward. through that. as high come to improvement to that Win it's our overall at just on times some Strategy been we've initiatives. seen we'll of see gotten the and maintaining go deliveries margins of we to premium in growth customer see freight We've at level

of a things. So it'll be combination

Thomas L. Williams

The is Tom. our guide. forecast company the Joe, low the numbers, in MROS to year's for (XX:XX) next bottom mid-XXs total it's for

Joseph M. Grabowski

Got it. Appreciate it. guys. Thanks,

Operator

the will BMO. of come And from Thank question our Tiss you. next Joel with line

Your line now is open.

Joel G. Tiss

it going? Hi. How's

Catherine A. Suever

Joel. Hi,

Joel G. Tiss

and success wondered And particular. Can of about I I Aerospace used start XX% about bigger XX%-ish. I little incremental more that. how you great the how think I overall and wondered, in? just early fits be there too Aerospace in acquisitions bit having a talk just know all now that to just and than It and And to making it's mix it's acquisitions you're and wondered, again you

Thomas L. Williams

Tom. This Joel. is Yeah,

Investor mentioned is one, acquisition motion the the consolidator be strategy at within briefly to of choice control I and Day, So first this our space.

So we space. one but about are number XX% only we share billion $XXX of a have

to want want not be at we space. at make bat So looking we'll that everything, swing to the but be in bat for things us motion that – at we control at sense

to being we to aerospace, in are little resilience that invest margins in equal, business Groups. cycle. Instrumentation things want and more all a over groups our materials have infiltration engineering Second is, tend a higher and Those

a standpoint. about we better in are than Aerospace XXXX capital from that I sense, in FY list. into maybe we we And XXXX a position if were could deployment clearly broader capital deployment on just So as much is in go talk a

robust balance gross position at in X.X EBITDA is debt to a Our sheet multiples.

go net is growing, to balance. about decisions plants strategic same. do I happen we in But our to segment market-facing it's productivity and and the share So going these invest technologies and Aerospace, into remind other of all we're customer then we're Aerospace when like targeting and is growth look Semicon shareholders. things. the that the make income But net XX/XX technologies the to these – of technologies go on to so people, can organic profile best our to dividends going into We there. XX% at acquisitions repurchase keep productivity going productivity. our control And out a within because your technologies, robotics in – into additive which markets. same at we're and the there. a call the and look income and as so those are a And all we other that you motion We're point, big for of I mentioned of to at Aerospace that Day, end type drive would going to that investments just growth we Investor go

that for benefits and years great in going done, the us. It's forward R&D work it over that like good yield we done XX and team's in of work So the Win work we've to a a from the going we've lot Strategy, Aerospace the there. the done position nice it's last

Joel G. Tiss

a for then Lee. weird question And just

like a efficiency the cost on improvement. – anywhere this you're just and little reaching of around things you you're Or to do? efficiency overall cost your what go all the maybe you are, factories, reduction inning different of As and running to goals you where savings finding out where are sense

Lee C. Banks

to on very one I'll can of proud the tell thing? you you, running team. not No, of am do. I out things me Joel, believe

productivity make to continue We improvements.

and We continue analogy to you. stages because on eliminate focused are waste We're change with what early we're that. working on all doing in our in the in our the to factories. constantly And journey this there's businesses teams opportunities the I've of many of used

Joel G. Tiss

you. Thank right. All

Catherine A. Suever

Joel. Thanks,

Operator

will next Evercore Thank question come of line from the David with our ISI. you. And Raso

is now line Your open.

David Raso

Hi. Good morning.

Catherine A. Suever

Hi, David.

David Raso

the the comment about Just incrementals. curious being America and about half, North mid-teens on the first

if back basic Just trying we're running XX% talking incrementals I has company $XX year of whole and feel. it kind comp, are of But for the a half, of here, incrementals. million know second first for the of it where doing about the XX% XX% first I XX%, your the company it's and took the easy it's you'd to then get to I'm whole XXX%. math the it's a number. sort in mean, really the it it to sense half million out $XX a half number like the you added so seems funny half the looks of a be like

in the just Or to in there a of So number a going loaded the that maybe of size trying half. the half? plant with some the I'm back on it's of gauge cushion comfort, half. understand. that the second trying the That's closures into get to sizable is understanding kind that number ability the to I'm first

somehow me little can you if bit better. maybe So understand that a help

Catherine A. Suever

to from David, in we let achieve out me what Yeah, efforts. think savings going we're spell our

half. to So half, first million million in weighted expect Then throughout year, working spending continuing a heavily savings of cost split first margins have weighted half our half. improvements addition, in we split million $XX of areas Out second year evenly other fairly second be synergy be and we'll in on half, and that'll through half. with Parker the realignment. for the we'll first cost with to That'll of achieve of $XX the $XX second $XX the pretty efforts, million fiscal evenly our heavily savings about increase XXXX, CLARCOR be that,

David Raso

on guess math You're I Yeah, suggests. bit away, than loaded back-half function go little less a just right back Is slower there half growth expecting? of the loaded easier it's price obviously just maybe now. know to the that mode calendar bit we year the understand, for some it also incremental little that the serve? little better also pieces. scramble the be increases is maybe was to But trying a to is a on some in about Or comfort inefficiencies it get margin to maybe the a you're going all

Thomas L. Williams

what half start Tom. has that get top even throughout right. to XXXX. Clearly We good the will of metrics half. on activity half second do been see the Lee And demand, we as and robust more very David, they we've on productivity been back about costs and go feel of it's feel about we the you're Pricing into we've the very the as as second in very we good racing freight the to described, down FY going worked, peel-off year. actions up

I a job on done we've great that. think

that We well have been we year. on next and top clearly of us it as as help will go into

David Raso

Okay. I'll you queue. get in very much. back Thank

Thomas L. Williams

David. Thanks, Okay.

Operator

the Nathan with our Stifel. of will And line you. come question Jones next Thank from

Your line is open. now

Nathan Hardie Jones

everyone. morning, Good

Catherine A. Suever

Good Nathan. morning,

Nathan Hardie Jones

of you going million expect duplicate the get of you basis America, see you'd I've still your North guidance have only low the of we improvements the said year expect I costs improved North the some drag bit of synergy you what those for points on in some I North talk Yet through from is midpoint XX progresses. additional XXXX. guidance? $XX that's there shouldn't is about out up margins why XX% basis would XXX guys CLARCOR from figured Can margin think you. more some and America just expansion in than got margins as a American what's to points. savings. productivity split Cathy, If some I'd that synergy math more savings in CLARCOR just

Thomas L. Williams

Tom. Well, is Nathan, this

ins good all that second are total, I you're particulars in a MROSs still going and that come these you full reflects for with outs, think the range. these look in XX% pretty because XX% are the half up it's it And year good about to America, really what still saying. you're North at If some talking that numbers to

of to the half plans all has half is which running. you're we're and time, that got that over still numbers XX%, redundant first seeing. The cetera, reflect the going to second be And will the doing with to XX% et activities that you're there going

think And in half. first to activity given it's very weighed we'll in good primarily first year performance. half range because XX% XX% closure is of a a number, complete plant the so down But I full the a the

Nathan Hardie Jones

you segment And Can growth into you've and versus what revenue are for there? you of have happens of guys, assumptions the that by half XX/XX growth I first use if limited the fiscal visibility what split. is year revenue maybe organic regression your revenue half the what you organic half second kind model second know of about those talk in have

Catherine A. Suever

Sure, Nathan.

breaks just had X.X% So organic X.X% just midpoint America, North mentioned over Aerospace. that That overall the and around growth growth X%. the and organic half, little Tom expecting over to for of X% for Aerospace. International in for just and under for down America, close is X% to X% second the X.X% North expected bit under breaks first be to X.X% In of close down we're International half, as that a

Nathan Hardie Jones

any the And in in half. that assume these was much the to would And numbers current potentially maintain business the trends upside half? second you there there those economy guys second to pretty be into grow improvement if continue

Thomas L. Williams

the describe feel would of benefit – way would to I the everybody first the listening, for the that to it second So, think that. would our customers not we've based I our right that's not built one just get half. distributors. giving have that's our encouraged it. we to of that describe with Nathan, economic environment, and we're I'm I XXXX it's Obviously, companies over-read Tom. Yes, being I activity this levels models environment, by very on But the describe visibility the best we and the

has obviously, half to So I improve. think, the opportunities got second

Nathan Hardie Jones

much Thanks for very Very time. helpful. your

Catherine A. Suever

Nathan. Thanks,

Operator

Thank Ann you. of JPMorgan. with line question our come the next will Duignan from And

Your now open. is line

Ann P. Duignan

to my region, Perhaps please. give on on little us just QX. you're perhaps wanted commentary of or in go that the EAME by Good lot course back I (XX:XX) little comments of a bit you country your morning. could or seeing either But more answered. market Hi. have questions A by a moderating that that to Yeah. any been color through end

Thomas L. Williams

region it for Ann, it's country country, by a good continues Tom. but not to us. be And by go going I'm to

if holiday for most think In of Europe our into and go and other regions, rate. I how growth summer a they the seasonal as were lower typical at Europe the what trends heavy it you versus time at Europeans. to tread look to we saw was general, tends period

X.X% And go not rate, towards of really to range So highest lower that at and towards the next Latin North more was a we unexpected. we that the X%, range. for forecasted that into of that described end as that's America year. I growth At high what end America and Europe the it's top level, the Europe Asia being

Lee C. Banks

And, out of would this Lee. larger add encouraged is Ann, I our going just a lot very to They forward. very, reached personally customers. on are I've

of So I just is Tom it some think as seasonal, said.

Ann P. Duignan

from Okay. can that's fourth margin profit what strong helpful QX. margin color. lot that for versus And operating in the things, different quarter in full drove but XX.X% the of XXXX? on a year Aerospace That for the the come outlook. guide then

Catherine A. Suever

of some the and we had mix military best repeat nice that be well aftermarket but in third through mostly highest typically our as nice – helped margin. came Ann, We in a mix see necessarily quarter us. for to quarter the it aftermarket, very aftermarket both terms fourth for tends it quarter won't and mix the Yeah,

Win were we more on Development with which costs expecting. costs. initiatives. realign We then productivity the operations Strategy with was improvement and team for came just also the is in gotten it development as X.X% were effective overall work than that continues at to year the our more in And effort. efficient lower We've

see because won't the development improvements improvement productivity we through So and margins it of to of cost activities. mix, but a the efficiency in continue bit in continued hope continued

Ann P. Duignan

what sustainable? guide? Is And just costs is in for development clarification, previously? the what's And the margin were that X.X%

Catherine A. Suever

Yeah.

we're a planes normal X.XX% next the in level hard new will average expecting to that get higher closer we've are running been fly the been been for We're years last Aerospace. working That high into ready X.XX% couple have of year now development at to more for have We of and of to service. prior or platforms X.XX% to down operating years. The as costs. because and taper sales getting somewhere between

Ann P. Duignan

That's I you. appreciate Okay. Thank helpful. it.

Catherine A. Suever

Ann. Thanks, Okay.

Operator

question Vertical. Thank line come of will Sprague Jeffrey next And with from you. the our

line Your open. now is

Jeffrey Todd Sprague

you. Thank Good day, everyone.

Catherine A. Suever

Hi, Jeff.

Jeffrey Todd Sprague

was work the in we Obviously Tom, Hey. maybe and arithmetic. effects we picture. carryover in could XXXX, bigger with. calculators comparing to a your dealing you're partial year transition somewhat trying back out here a have I we're of XXXX just protractors our year transition to wondering through step But all with heavy if

with the has other Just thing? you settles side profile of going changed? materially to reasonable from on to as would margin the us company underlying incremental get incremental the this, And a dust guide sort what once the of the

Thomas L. Williams

Yeah, Jeff. It's Tom.

beyond say, XXXX? about, talking you're So, FY

Jeffrey Todd Sprague

Yeah.

Thomas L. Williams

we companies a a or margins significantly by took industrial to our an to it's is what I go minus to Day environment And being now, thought to gave for XX% is and a we've bit. stop. of not around engagement to to years. get period been we had X% ownership, various years customers, And all we've XX over. our was march we market on best experience EBITDA number, tackle we're standard environment to going a that go much it we're last But couple doing, here. that we're were for early now to we're about first changes actual to and haven't So, want just Investor financial because number the in than to jobs, initiatives a growth greater simplification Strategy going in after. all and we little initiatives, the back go plus you we when buckets the put – the X% segment the Relations whether new both And then revenue X% to than the so we and encouraged that of growth, ourselves. We're And in we're and this talked growth Win XXXX new clearly activities. X.X% on ends for on the chain margins that's organic customer things yet, and hosted living next for premier probably to done performance and which some you But I we've that we pricing just ago. and we that continue have got we our and always on think demonstrating I'm experience, call world. XX/XX the And up Lee going the unless our operating in are still better set XX% the And an starting are complexity good but the days a the has than supply we we as bridge outdone we of do Lean visibility plan in on more XX% Investor a Day do

encouraged. tried of that had lot work I'm doing happening that and is So fact I we're record underneath, could as give to what's us margins. difficult We to to we which see EBITDA the that very I sometimes of color a why reported hit things is much side the

the FY reported is context, in year and was in round numbers XX.X% it million. this XXXX put XX.X%. to margin almost $XXX that Just Well

the the basis incremental from the record you points million costs XX headwind up of If achieve higher than put company. all add and incremental and D&A CLARCOR of $XXX the the all-time still to we restructuring

clear not once be once And I going unusual FY a you think, less at, strong that XXXX, you of activities have underlying which the which the is we're we point static very there move that happy to we're kind getting to we with group and of will is you're is start those performance. performance. from

improvement shareholders. continuous about EPS driving to all higher and it's So levels for our

Jeffrey Todd Sprague

the numbers? higher adding Then for speak thing together around we us other with too I the you think I'm trying a this all happening that puts think as just those getting is I and underlying that. And Thank Yeah. that. of takes, get is at on and one noise phone XX%-ish there's are that would to to lot

Catherine A. Suever

because think at think Yes, the Because to talked we the about changes be Day, we're higher of closer our made give in not or – I but just it to band too IR a the comment we talked have when something little mid-XXs tighter more FY hope to beyond that right. in the take, in lift I precise, about we that make up we'd CapEx, productivity going and XXXX. XX%, going to traditional you're investment

Jeffrey Todd Sprague

you. Great. Thank

Catherine A. Suever

Jeff. Thanks,

Operator

Thank Cowen. come Joe you. with question from will And our next Giordano

Your open. is line now

Joseph Giordano

Hey, guys. Thanks for taking my question.

Catherine A. Suever

morning. Good Joe. Sure,

Joseph Giordano

next assumptions that? range underlying points just guide, to cost are we your the IP? inherent XXX year? there? what's in in your assume Should that a up that below in price Or building basis And Just on how for what's it's for you view

Thomas L. Williams

price and take I'll let this Joe. is the And the Lee cost. IP question I'll discuss Tom,

you forecast is don't based typically we Parker So, we because industrial fiscal it. have to do build global forecast That year. on to build X.X%. a the get this our approximately But best

So at of than X.X% at our we performing range clearly would that. greater X%, to be

Joseph Giordano

So, Parker X.X% the timeframe is your forecast global IP? baseline for

Thomas L. Williams

Right.

Joseph Giordano

Okay.

Thomas L. Williams

I'll let Lee talk about...

Lee C. Banks

Lee. it's Joe,

what earlier. Just mentioned reiterating I maybe

processes and a here forward. we've that price. minimum, be neutral So some internally costs really got input very margin we'll And good sales going at track

sure, been we're inflation, in we've cycles of making had worst top good us if on at case, we're it, where pretty at are on We top at look you of margin have it. neutral. And past

Joseph Giordano

cost year, question, what Can of you Okay. me me. in this I you the years? next was And couple on X.XX%. said for then mentioned think X.XX%, think for Ann's last the remind last Aero but I Cathy, it of development you

Catherine A. Suever

It's percent the been range. in more X-plus

finished some back was as first think started high FY It these platforms. little year – before about as XX% XXXX a X.X%. on of The at when we I we new X.X%.

service. stable at now entering a we're as platforms level more So the normal, are

Joseph Giordano

you. Great. Thank

Catherine A. Suever

Okay.

Operator

you. question And from with next Thank come Deblase Deutsche line Bank. of our the will Nicole

is now line open. Your

Nicole Deblase

taking Hi. question. Thanks my for

Catherine A. Suever

Sure.

Nicole Deblase

tariffs. first question around just my is So,

year into your could talk of business guys this kind for tariffs on done impact the if what you talked we've any little about like So, you've a extensively in and from on about XXXX. bit XXXX. work But price/cost expected you looks

Thomas L. Williams

It's Yeah, Tom. Nicole.

a we're So, shape. the you in give in short good the answer and one here on second, longer tariffs, is I'll

in Our supply make, we buy the region for service region. chain the model, and

if naturally minute. Section XXX just I a that So XXX go and for us. through helps here But

that. that placed reduction in number actually of to which steel only is countries take $XX even list down you of about XXX. and which billion list of about, President the number XXX, for talked million aluminum, only, of were exposed, because and $XXX And it even if bumping Section XXX, Section and list number all this XX% tariff, of exemptions So, has impact number million being is two up the is are fact and milled about $X.X the the us, to products all it's the that's one the in number latest three, number the the even that that that at

million approximately So in round at numbers, XXX add for XXX, $X.X you you're us. if $XX at for $XX and million the million looking

process against and we're immediately. our direct total we're So that cost I think pretty going spend. one We're to understand of it's And to immaterial not material eat to going pass that our is, our that going cover And on. customers dime that.

this cover And for we're going us is so small to and it.

Nicole Deblase

revenue year. pretty say year-on-year I'd like Okay. pretty that Thanks, Tom. on next margin margins. And are of forecasting then impressive Seems just kind one guys on the you Industrial modest growth International is expansion

just the could bit that you If what's driving helpful. the elaborate in little be would on there, a MROS confidence

Catherine A. Suever

to we've the the getting now Yeah, Nicole. to Sure, where working enjoying we our base. they've savings point margins. them cost realign operations to that more international effective a been And from in hard the and been are higher

tools do. better more that our at have realignment becoming Strategy through operations. the Win that in to There's we better we also in So and to more more productive more gotten improvements. and we the use have continue normal work They on

continue of fiscal of volume to we're significantly. not so we the expect that too benefits and into increasing the seeing And XXXX despite all that

Nicole Deblase

you. Understood. Thank

Catherine A. Suever

time one more Okay. Thanks, have for please. Nicole. we question, Brian,

Operator

Yes, ma'am.

Coe with the from from then Research. will question Nigel last Our line come Wolfe

line Your open. is now

Nigel Coe

better right, since the one, Thanks. this last I it's question. a guess I good make

Catherine A. Suever

Nigel. The on, pressure's

Nigel Coe

Seriously. know. I

have most been answered. questions So my of

can we your for And talk given healthy, are positive as you, higher. discount rates Discount So also June pension? significantly rates market returns year-end, XX are well.

So expense how the fiscal pension in XXXX. XXXX versus wondering is fiscal just tracking

Catherine A. Suever

benefit will Yeah, Nigel, slightly, the discount raised expense. pension have forecasting which rate – our we're we

assets got the at offset the is lower to decide we from we of using, change. looked the rate slightly, we to which discount we that that going return did benefit as on However, were rate

expect to expense. FY fiscal we comparable year XXXX So pretty our to be XXXX pension

Nigel Coe

OEM in through pricing through whether that or and impact curious of of as both power then to channel? pricing, channel OEM would tariffs, being in back but, the And the is that? coming So Okay. there's you pricing the offset channel, OEMs strength enough is I'm describe and squishy strong as it power you're that just the in pricing a to case confidence and the say, inflationary talking about passing

Lee C. Banks

And a there's Lee. inflation Nigel, throughout distribution in channel, OEM we've little channels. elastic it. it's is been effective Definitely than the more channel both the but

are So have, these to we to. wants get where to nobody conversations understands but have everybody

successful been we've in So both.

Nigel Coe

Lee. Great. Thanks,

Catherine A. Suever

day. for today. concludes be Have Nigel. Okay. for will you right. great This take calls you your the throughout available Thank to and call our should Ryan have us. Thank and Thanks, everybody. Q&A All Robert a questions. the earnings joining day you, further any

Operator

you This have and may conclude Ladies a the day. conference. all for wonderful thank your we disconnect. program Everybody gentlemen, participation does today's on and

Catherine A. Suever	Parker-Hannifin Corp.
Thomas L. Williams	Parker-Hannifin Corp.
Lee C. Banks	Parker-Hannifin Corp.
Joseph M. Grabowski	Robert W. Baird & Co., Inc.
Jamie L. Cook	Credit Suisse Securities (NYSE:USA) LLC
Joe Ritchie	Goldman Sachs & Co. LLC
Joel G. Tiss	BMO Capital Markets (United States)
David Raso	Evercore ISI Group
Nathan Hardie Jones	Stifel, Nicolaus & Co., Inc.
Ann P. Duignan	JPMorgan Securities LLC
Jeffrey Todd Sprague	Vertical Research Partners LLC
Joseph Giordano	Cowen & Co. LLC
Nicole Deblase	Deutsche Bank Securities, Inc.
Nigel Coe	Wolfe Research LLC

Parker-Hannifin (PH) 2 Aug 182018 Q4 Earnings call transcript