PH - Earnings call transcript Q2 2020 | Parker-Hannifin Corporation

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

Operator

Ladies and gentlemen, thank you for standing by and welcome to the Parker-Hannifin Fiscal 2020 Second Quarter Earnings Conference call and Webcast. At this time, all participant lines are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference may be recorded. [Operator Instructions]

hand over to today, your like Ms. now the to conference speaker I'd Financial Suever, Officer. Cathy Chief ahead, go Please, ma'am.

Cathy Suever

release Liz. to quarter earnings Parker you, Hannifin's Thank Good second fiscal morning year and welcome teleconference. XXXX

phstock.com and today's on Chief me President Chief information the webcast together company's Officer, Operating replay, are call. slides, at Joining Banks. presentation the Executive investor and Today's today for Lee with Tom following Williams; Officer, will one and year Chairman audio be website accessible

find the forward-looking morning's you'll measures Safe Harbor as On financial on addressing two, slide in for materials financial company's disclosure statement, also posted to Parker's statements non-GAAP this number are are included non-GAAP well website as and any at measures. Reconciliations reference phstock.com.

three. Chief Chairman with highlights number We'll Williams, providing Today's begin Executive the Tom agenda and second quarter. from on our Officer, appears slide

a a company's the guidance comments, of for provide then fiscal Tom's quarter Following session. year we'll and a revised full review provide the question-and-answer together for the open performance, few comments I'll call summary will with Tom the second XXXX.

Tom to and number four us get Please refer now started. slide will

Tom Williams

Thank everybody, Good welcome Parker. to you, call thanks for interest in Cathy. and and your the morning,

strategic some with start me Let highlights.

report all, all-time our that First pleased margins previous relative challenging very we downturns. our of to cash macroeconomic conditions, are highs, despite are to and flow

prior apples-to-apples to I think compare at look is the it best the side base do and best way without to to the compare this way business lowering -- downturns.

remarkable a point job. doing organic the and a to and performance world around this comparing was XXXX, XXX of a operating that for without at really recession previous recessions had This that sales previous performance. margins XX.X%. these you operating performance, best our look second thanks my in Both in came XX.X%. everybody declines Really, and When about acquisitions, to compares that XXXX FY our adjusted basis similar FY which margin at our QX best were such quarter improvement to adjusted represents recession great

In record. the accelerated margin cash flow resilient are improvement, year-to-date activities the earnings QX performance from for This that is more as addition growth we operating turns. all-time market poised that a to demonstrates business was an building

XXXX FY margins. Strategy are a so our the the portfolio strengthening improvements really The of reflection flow cash by far and generation driven margin to and that accretive companies by Strong into growth performance Win of are buying

are are and we we're about where So in go future. about we going we're where the excited excited to

dedication their thanks reduction great recordable to everybody to safety. Really for a XX% again QX. in Shifting We effort incidents and here this in on and had my making progress their safety. to

Our rate incident number project members that and familiar a peers. linkage. there's people recordable we the of is quartile to is incidents is versus with have aren't per safety what strong And that, very top that our XXX that now that

talk You've and about safety heard is between business me performance.

metrics you were financial in our in see If to apply you'll a our positive metrics and moving safety direction. tandem them

organic offset advance sales of were sales issues Organic So business our were as engineers we slowed second guide. international pause. improvement Max with sales XXX QX some record revenue expected declined organic versus and airframe impacted comments on acquisition as sales. QX, in summary the quarter in as soft our The production our aerospace

quarter really adjusted EPS expectations. adjusted in than EBITDA the they We EBITDA strong the were QX in adjusted came Earnings recession. were margins at of higher performance. and margin excellent Strong significantly were during again last XX.X% exceeded

have portfolio to our continued the impacting certainly in rates organic that growth And growth. help going we are quarter made over time. additions Order organic be negative to the

than in that. positioned Parker. and legacy half more for beyond organic We've with acquired businesses performance well excellent XXXX of that higher are second rates resilient the FY We're growth

now want move to cash year-to-date I flow. to

We that's want shareholders. conditions really great of current We've cash us. this how about from commendable. first to generation excellent You've for of any talk cash deployers heard best-ever me to in flow given priority the drive half our market And such be achieved for history. is operations strategic returns a our

Free XXth consecutive our activities was of cash from for at cash XX% expecting sales is conversion year-to-date operating and The about to in a to excess we're flow sales cash XXXX. year FY achieve of flow of excellent XX% as percent XXX%. free

performance sales the EPS by XXX being offset to increasing on versus the our flat reflects slightly outlook, XXXX prior strong second we're in roughly year. organic weaker to now and the guidance half Max guide. QX FY for which This prior sales the Moving is

no balance additional XXXX. assumes the guidance sales XXX of FY for Max Our

feel very excited cash with are conditions excellent flow We as growth for macro we're about the and We positioned the improve. well future. margins

that of Strategy. performance of the The Some company is to this X.X to be we've The driving of first Strategy will momentum the previous are the Win further feeling the confidence Win going made a factors the launching, that building step-change updates drive which in from on really

portfolio strategic that the done through Q&A. acquisitions be would we Exotic are that how happy that strengthening integrations and We're progressing comment the LORD in can the board. on come about and Second have with we've very more

their recently the we a great lot teams integration a talked of there. plans. for both headquarters leadership had teamwork businesses at about -- incorporating the Win Strategy session; It The And here good X.X was

for lead recognize statement of being then to third pride performing engineering a the And the that purpose company And takes to a tomorrow. top-quartile of is we the source breakthroughs that which be purpose. a better enabling up our statement to organization. live is it real launch would This higher

beyond of of doing drive business by evidenced growth earnings XXXX. Parker part cycle very lots the of we're FY opportunities is that with performance transforming to level a in difficult as higher the

a why should reminder about highlight our This the come not in us as just -- And going Parker. is shareholders before, of to special. characterized these listing you'll would so what this formula competitive to and I one about say this to see makes next is specific. have customers talked Switching I've slide, you we winning each what investing differentiators. is think our this aggregate us tell is in why I'm

would differentiators, create out that performance X.X the in on that's I If what a to forward. time. will these discussions enhancements going more the particular Strategy over -- to point I And had we as and momentum we're happen reference Win competitive lot one and

So and to in more to my the thanks for that members all dedicated a back And company. effort team creating guidance. with it the continued their on Cathy and details quarter the global top-quartile I'll hand for

Cathy Suever

before-tax realignment costs adjusted adjustments $X.XX, were of the of like share $X.XX second compared quarter tax earnings second offset fiscal totaled non-GAAP to by Adjusted acquisition which charges Prior Adjustments $X.XX These for are the in earnings from measures. $X.XX, refer for quarter. This had X. included business slide the second slide of Okay. financial of amounts including achieve reported per year to results $X.XX and the these of share to $X.XX. were as quarter for the the of a Thanks details of acquisition XXXX Tom. as I'd reported effect adjusted expenses per the to quarter you for now and same number been year by year $X.XX, reconciliation presents $X.XX. share ago. transaction per earnings tables

the quarter number earnings $X.XX $X.XX the this second share X, walk operating segment fiscal fiscal second slide from to for per quarter the with $X.XX year. significant of the of income. of adjusted of XXXX you'll in -- On Starting components to decrease net find of second quarter the the for of

costs XX% of For sales a controlling Legacy Parker quarter. Legacy in $XXX The volume good sustaining partially operating did job this a reduction the Parker, decline for in a $X.XX of million acquisitions by a lower on $X.XX offsetting margin teams to contributed contributed The decremental reduction. income. this

the on tied on to deferred debt in Incremental to contributed to corporate due investments interest the this Lower year last for market-adjusted year, borrowed $X.XX a acquisitions $X.XX current earnings G&A expense share. decline compared year-over-year per the compensation. resulted gains in losses

other benefited and benefited on prior interest primarily lower rate, discrete We LORD $X.XX from from benefits closing due to the the to current Lower the a tax of gained tax a $X.XX. the $X.XX lower count bond share acquisition. proceeds income quarter favorable of expense earned

Slide X.X%. were negative had sales of impact shows for segment the Organic operating year-over-year declines sales second by from decreased and more X of positive than offset number a X.X% margin by quarter. currency acquisitions. and the total impact These Parker the X.X%

point operating adjusted segment compared before acquisitions. margins the basis Total the amortization from were decline incremental XX.X% expense XX year. last to This XX.X%

businesses XX% help the margins Parker With of lower the Strategy the managed tools, Legacy decremental to good volume. sales on their Win achieve of

operating the this LORD Sales quarter income on an acquisition the showing from LORD and which on during fiscal Exotic October period. closed $XX year a impact and contribution X, a quarter slide partial results These the closed had on full during and Exotic, the since of were basis acquisitions reflect million adjusted $XXX from the we're XXXX. second of September XX; million XX. quarter On on stub was quarter

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

was For in the Incremental for on were more points the second sales adjusted change quarter American contributed accounted the of margin sales amortization organic to than basis second in of the in down XX% XX margins. while Operating year. X.X%, North quarter versus XX.X% segment. quarter acquisitions the an the X.X% for basis prior

Strategy with North reflecting our decremental cost of the initiatives. diligent America's of together containment legacy XX%, and improvements a work of good hard the businesses Win generated margin productivity impact

organic XX, International for Diversified Moving second International Industrial sales the decreased quarter on number the X.X%. slide segment to Industrial by in the segment

of prior Operating offset and basis an businesses was Acquisitions very impact of XX.X% Incremental a the negative XX% a legacy currency margin X.X%. The quarter year. sales the which generated contributed the amortization decremental the margin quarter. the X.X% of was acquisitions. good to XX.X% was in contributions versus in adjusted by XX had partially on points basis from second segment for

to Aerospace from commercial by and increased in XX% X.X% and lower Aerospace or Growth move to military and commercial XX military organic OEM sales. acquisitions Systems sales number were now offset I'll $XXX largely segment. review Systems sales aftermarket sales. aftermarket the million from OEM slide sales

quarter sales points was change helped quarter. Good margin strong in by Operating in to of from on last XX.X% and the the the Incremental versus productivity more margins. accounted the amortization than hard performance Exotic XX.X% teams of year. contribute margin performance for for the improvements, work expense XXX basis second

sales. for This report XX year last was we pension That's net XX.X% a after operating number increase flow or cash XX%. compares activities. of the to million adjusted for XX.X% is $XXX sales million number cash of to the from operating year's flow contribution. period flow sales rate same from XX.X% was of activities last Free Year-to-date income a for and XXX%. $XXX slide On discretionary cash was conversion the quarter current year-over-year of

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

rolling X-month reminder while currency. The rolling average, a these a As Industrial a acquisitions, on orders are report and divestitures segments XX-month exclude average. results Aerospace Systems Diversified on based

Continued Industrial Aerospace decline orders in increase American is made Diversified the a International up industrial Systems X% year-over-year from decline Industrial positive from a from a resulted by This North declines orders orders Diversified decline and in markets total dropping orders. offset X% XX% X%. of

The outlined. for year number revised full to reported on to LORD an provided earnings has guidance includes slide XX. impact is an and basis. both to macro and guidance Guidance adjusted been and XXXX This as year conditions the Moving Exotic current acquisitions. being is fiscal the of align

negative expected to for sales full And prior midpoint compared to decline now are to the is year impact from X.X% a add a of expected help acquisitions flat the is the change year. will organic year be acquisitions have at the to on Total sales. X.X%. current Anticipated year. X.X% Currency with

Considering as have we December resulting and year-over-year XXXX for estimate fiscal XXX the held the the of balance impact fiscal we all XXX ended of impact the year those the the MAX have of year have quarters to clearance currency of the spot sales the now regulatory XXXX. We of remaining MAX, we quarter XXXX. as steady for XX, uncertainty calculated excluded rates the rates of

are XX.X%, as XX.X% adjusted Parker, be segment to forecasted XX.X%. margins operating between operating segment and XX.X% between margins For while total and to be reported are forecasted

approximately of two the in $XXX acquisitions. XXXX not result have of we fiscal will adjusted incur as a the million, incremental expense We amortization year

The rate full projected to tax year be effective is XX.X%.

balance quarter The year. discrete impacted rate was we tax second the items favorably by the for forecast which of don't

of We continue XX.X% anticipate rate remainder continuing of year. from the a tax operations for the to

fiscal approximately or $XX be business year. to savings XXXX earnings the $XX.XX guidance earnings for midpoint. at full with forecast now reported the per or of projected basis, adjustments $X.XX on the the this at as now reported On million to per basis is million the made is the The range the For as year the to expenses midpoint. to year, $XX.XX $X.XX adjusted for guidance $X.XX an share realignment an in share $XX $XX.XX full this range guidance include associated

million Synergy savings end of still of $XX the from incremental XXXX, a rate to achieve million savings. CLARCOR $XXX represents run estimated year by of are which an fiscal year-end

to addition, $XXX guidance integration adjusted excludes costs an LORD acquisition-related million of achieve on one-time and In for million of and basis Exotic expenses. $XX

fiscal and synergy details are achieve and Exotic in this $XX to found reconciliation million year. adjustments these LORD further expected of savings to can of morning's slides. this A the appendix be

Savings from and of as that operating fully purposes reported your year-over-year publish are adjusted all the you adjusted margin to continue for acquisition representing the ranges. to guidance guidance business more a comparison. costs We estimates in realignment achieve consistent and both reflected ask using

divided second XXXX for midpoint XX% is second half. second split is XX%, XX% half guidance full XX% Adjusted half are second XX%. segment half, are XX%, XX% half, first Adjusted half XX% sales assumptions half. EPS key operating is second Some half additional first first income -- at sorry -- year divided

Third is integration $XX excludes this costs projected realignment one-time million be to business of quarter XXXX midpoint expenses, per expenses. share million per share $XX the fiscal achieve $X at $X.XX of and and related of acquisition to million earnings projected adjusted

you'll major per adjusted year EPS fiscal the share. the of compared slide find components guidance $XX.XX revised On reconciliation prior per of XXXX guidance of $XX.XX share midpoint, of the at to XX, a

a the operating higher quarter, beat. net income segment to together market adjusted the meaningfully gains from Strong than margins During in $X.XX sales operating generated second investments tied industrial stronger guided $X.XX, and with compensation the beat $X.XX lower $X.XX to during of than expense totaling a quarter. EPS guided benefit deferred interest contribute a tax the in discrete helped favorable contributed benefits and to segment quarter

from earnings in offset the second decline. negative Updates $X.XX a elimination income MAX result net line Updates guided of $X.XX in fiscal half increase by the guide resulted share impact the full in half. a This at a to shipments per in in items $X.XX the XXXX below a operating to to income net the to second midpoint. the results XXX increase operating year the $X.XX

XX.X% and will impact acquisitions or have On year show the XX.X% an incremental basis adjusted Legacy total for the an we lower slide FY from by to the for basis full the for both margin XX, full the points amortization Parker Parker On adjusted reported XX basis on year. acquisitions million as of XXXX operating impacted $XXX expense.

of EBITDA adjusted the to moving Parker for acquisitions total the Parker. for For margins, provide XX from XX.X% points improvement, basis Legacy XX.X%

go now to summary comments. for turn slide you'll Tom If XX, I'll to it back

Tom Williams

pleased continued Thanks the progress. Cathy. with We're

We to floor and demonstrated a cash on on ability are We're performance performing as margins. performance flow financial downturn the top-quartile our way this for our our by to delivering raise well well company. as

XXX we're where growth far points at basis we're focused drive as sales targets I and just laser than as those people our want free to remind those trying EPS growth, flow on FY XXXX to than margins plus. XX% are EBITDA to in XXX%. at culminate would CAGR greater production operating XX%, conversion industrial margins at driving XX%, And of cash an segment all global greater

So thanks world global hard the all everybody again to work. for around the team your

And with of that, the call. over Liz hand it to Q&A to the I'll start portion

Operator

Operator Dobre the Instructions] Mig from line comes of with Baird. Our first question

now Your line open. is

Mig Dobre

everyone. morning, Good Yes.

Lee Banks

Yes. Good Mig. morning,

Mig Dobre

is organic embedded especially some just your clarification growth, industrial business? in quickly what's segment on Maybe very level for

Tom Williams

Tom. it's Mig,

compares XX, assumed second for at So minus X.X half aerospace guide bit the weakness prior of difference for gets international America to North America to big what guide North there difference the half X.X. give minus being six. we that the mix. seven, going shift was but minus you little at at new the just second minus the was was in a in with the Big at to a a And – I'm minus

Mig Dobre

Then international, Understood. you for on I the half? I negative second may XX if said think

Tom Williams

Yes. Yes.

Mig Dobre

is the half first that comparing So bit little I'm are in a some would. you've you done And bad different – less looking if there? being that in obviously regard deceleration your there in if with orders what

of help it what's how can us on you're going there? seeing and you kind understand So

Tom Williams

Yes.

So our it's on – thinking Mig. Tom. again

the Our right. you're first for thinking international, of and sales on the orders all,

but So some we did And driven influenced QX New that from improve orders came in tell, of in mainly pull-ins at can in minus by that Asia. a lot They what six. was by advance Chinese of was Year.

conditions. we not So these rates a overstated order may feel bit of underlying little market be maybe reflective entirely or

And Chinese our and on guide. fact just given within half we actually going has Coronavirus the their the obviously XX the is what's extended there then New last in latest And reflected hours Chinese, given thought. the the on forecast fluid team had which is this what uncertainties they Year of one now second Asia the by very redo thinking government week, new

the from had minus we And were the reflected is in our and on was same intelligence-based were it came the that a pull-ins ironically over-enhanced bit thinking as minus in are orders But this little going guide. we what combination of current our about before. We is what's XX XX.X that million. on before,

Mig Dobre

I Not about we but sort think specifically to thinking back XX the for too about how the negative Asia, a Thank we're you. in the appreciate that of that. fine put the do of half terms as in of QX, in China, point year?

Tom Williams

Yes.

minus international not it going necessarily to I'm So for by region QX but split out at about we XX. have

Year, of might reasons the of obvious worse. got in There's QX it why extension hitting some So you the QX, Chinese, New worst the that. impacted be

Mig Dobre

Thank Great. Tom. you,

Cathy Suever

Mig. Thanks,

Operator

from question next Nathan with Jones Stifel. comes Our

open. now is line Your

Nathan Jones

morning, Good everyone.

Cathy Suever

Good Nathan. morning,

Nathan Jones

of know you of out the it of coming negative I kind Maybe any guys getting with or mean Are being able seeing pressure can you comps year? rest that the question the aggressive were irrational in maintain are you pricing. the maintain targeting start cycle. you there? competitors down at a price/cost for I on Are neutral? from you I'll customers? part from still this peak the moment? guys do to just in behavior the always of you think Any to And the of market kind

Lee Banks

To Lee. answer your yes. it's Nathan, is Yes. question

As expecting I forecast that are you in have? costs goal purchase margin-neutral. our selling resilient price follow through different index locations. doing price/cost-neutral, our what and the input index we're price our we the at our all And to track so and the that processes know, be be have we're we in But price/cost-neutral, to We always think we that is why margin-neutral. is

Nathan Jones

Okay.

have guys mean, margin the you've the expectation is going think fairly on down, to You've I You also straightforward, right? I taken not so MAX, -- which in volume got leverage less say the aerospace you're that. from

the did margin productivity? Can guidance? North the what You about what's on an America else you full year Or take both led it's expectations of than margins expectation into going international for up. baked previously had there, whether better internal and you talk in has to

Tom Williams

Tom. its Nathan,

we're a think of we experiencing, everything help doing and America of activities from lower from first North pulling we're I we what half; Win as The that plants. We said, synergies take seen from an there. I'd what in a benefits some had lot of our lot what the in example. all originally and Kaizen at saw We've expected, you Strategy had

second through Win very that we international, Kaizen we that gave I had for benefit the the other But international, is thing think And -- the The it organic that guide. continue of that slightly in we worse positives strong we with looked think had was our us felt for had there. a we we than didn't same and prior higher different, volume confidence when burst Strategy, QX, the The growth enough improve we enough second of slightly our offset activities, to half the driven margins. is somewhat us playing to just could guide. it to prior On But at half. restructuring that

Nathan Jones

Okay. my it I'll questions. Thanks taking very much on. pass for

Cathy Suever

Nathan. Thanks,

Operator

with next Goldman Sachs. from Ritchie Our comes question Joe

is now open. line Your

Joe Ritchie

everyone. Good Thanks. morning,

Cathy Suever

Joe. morning, Good

Nathan Jones

the want clarify I comment just to Tom, made. that you MAX

XQ. impacted I that it think you said

of think if going hand it it secondly, then fair to zero MAX like, have airframers zero impact to year, XH? what is And did And is so, that's as just for in the of you the that the about it kind assume XQ? second why have the half did, on inventory on and

Tom Williams

Yes.

did wanted So color let to give on why what the Tom. -- this is did because me a we of Glad asked, I you MAX. just as bit little Joe, to we

Boeing's occurring what's Even exactly of public the middle ungrounding in hey, doesn't First, about sometime given know there. felt fully the that, the lot a year, there's going uncertainty for back by out. comments will we of to once wanted the of derisk that really taking fiscal MAX the the year turn we rest to that, happen on. with guidance suppliers And the Boeing

in by and completely wasn't it that our and out -- it it's thought be of could also to we're could what fair I to a shareholders be without have was better MAX. I and taking kind that it much that that demonstrate it shareholders going stronger what guessing to to it we to and would be. have felt our perceived then the even disservice guidance the ramps be it here, on that we showing going

did pause so the started what officially So is XX. we -- January production

$X for half, and the was what It impact million $XX million and total QX the side. $XXX the of Obviously, us approximately for However, there associated orders, of is and with the look full that. lower in both the second year, for million was on amount earnings. when slowing QX, lack The in the QX. you some minor hit us of and engine airframe volume at absorption MAX including

we there and meantime, be schedules backlog customers reallocating be our But have our us. that. as really to the customers there sooner production them happens obviously much to programs the it other accelerating to whenever to we'll support And team potentially to help and our for return as returns. them. all are of we're guidance of Boeing If going possible well permit with members We're in what important this in to as as

and strategy MAX. So thinking behind the that's the really the

Joe Ritchie

kind industry the And maybe on just, if second how parsing weakness distributor you're more talk little in what versus to play heavy detail, side a perspective and a what about just out then America the you in Tom. North helpful seeing can expect bit half? fiscal you that like you're your of, out from super That's seeing

Tom Williams

Okay.

I'll on it's the XXX through whole North So is prior typically because But company lower America, question just Joe on do markets, what we're a people America, through than but guide. go the bps I'll run I'll our thinking North guiding maybe what want.

it So was six. minus

I'm Now second minus about because, obviously, that's half talking the left. it's what's seven. just

Orders were down from -- XXX basis points from QX to QX.

So distribution that's linkage We probably direct the most there. had weaker.

We do have a plus, thinking we we And the look factors XX.X. all at December every those there. obviously, bottoms-up. ISM our do really this at time was We what

but I distribution I make about I to wanted through went about North a America. comment think international, when

distribution the XXX down QX. for the end-market whole than quarter the standpoint. this mid-single worse and an declined basis pretty digits So much points company whole was sequentially about through broad-based and And was from really

what is with this plant distributors saw decline as extended customers opportunity went And regions North inventory. International drove equally approximately end we QX. the market Day. to America their based all but And and to there There's resize shutdowns New of broad Wednesdays shutdowns. a QX Year's timing took the think particular, going two In about worse for involved really extended Christmas and holiday our result America, in distribution down in the we the was that North hurt.

the in more on maybe the list again tied I'll marine. is total a of aerospace, about. And I'm was an color estimate was destocking. negatives go and of little Half this total Maybe to was lawn us. it I markets. just and all going if mid-single I was back about an QX best turf just think of positive distribution, So markets. on But the it intelligence to channel which talking positives just mining, you side end markets, about end but for to was the specific Parker, the market that and and digits on important our It's -- not half distribution, if minus down was semiconductor, and a give quarter then

list heavy-duty and Mills and power sciences, tools, this machine telecom, long gas, generation, refrigeration, truck, and ag, rail a foundries, oil negative the and tire too side. automotive, life forestry construction, is rubber, on

some let to me lift up give -- but segments. you major was kind the to, So it if color of, I

about talked distribution. I So

end So markets. characterize now I'd industrial just

-- For those move. was move basically don't that improved. things maybe familiar, equipment without doesn't things wheels not markets our all are of that industrial that That

minus So, from nine total to industrial markets again company. X.X, minus went

of low single-digit in The come semiconductor. Semiconductor starting positive improvements mining side there was back. is and to

On the mills, Mid-single give power I'm refrigeration, greater you going single declines digits and and negative gas. single And general side, than industrial. just and life machine telecom rubber low digits gen digits. things science. and to buckets. was oil tire, was Low XX% were tools,

in equipment saw go Then X.X on minus us to with the minus mobile side, again from QX wheels XX.

lawn and And the the mid-single-digit of in was turf. that So America. positives North there was big shift. A improvements lot that was in driven

truck, on buckets were automotive decline in But XX% almost high And to material range: ag, two then here, the end markets to nearest decline of had all forestry. of, the X. handling. plus XX; kind in half. OE that Netted commercial mobile We kind the and XX% to Cathy military negatives, rounding commercial rail I'm heavy then about single-digit with X.X. X; then minus alluded Up X.X. plus military OE comments out And X; aerospace. and her MRO MRO in to down plus construction,

markets, you the follow-up end the I kind that. have hope Joe, So through that's spend to a of

Joe Ritchie

No.

good. all I'm Tom. Thanks, think I Thanks.

Cathy Suever

Thank you, Joe.

Operator

comes with Our Nicole DeBlase Bank. Deutsche next question from

Your line open. now is

Nicole DeBlase

Thanks. morning, Yes. guys. Good

Cathy Suever

Nicole. morning, Good

Nicole DeBlase

to thinking talked and we North maybe a way has how characterize has bit focusing what view on about already happened activity maybe But order little a what's about guess, America I orders, So, January your as on trended in international. the bottomed whether that? not or

Tom Williams

Nicole, its Tom.

it was industrial, to North So if go X. to I do kind kind QX X.X, of if America say you at did, basically about won't look into North America. detail that minus went I same QX But minus what to I for of

is So basically same end is from total just the And the there. what that XX. for to went company, markets most. same quarter-over-quarter. what I X minus we saw It described The minus all mobile declined the the

X distribution, to it And North then or about about was in I so -- minus that mean, America on flat in minus QX. X from went to --

bps So XXX down. that went North that was we America in alone

kind look at of North how that was So we America.

I think we're is we're think, our for in see general, really this point. QX really of -- when about at in we our kind reflecting guidance, year, growth we bottom from the what organic

Nicole DeBlase

Thanks, helpful. then on one Okay. just quick deals. a Got the it. That's Tom. And

in second I for in the Can said synergies, from expecting guidance. bit quarter? remaining $XX you you And think you're little what's a guys million half? the prior of your synergies you've just what realized that second up say

Cathy Suever

Yes. of for pull We so quarter. saw moves sooner than got the little second synergies anticipated. The we them us, a LORD the timing for ahead into we bit

we're so, year the rest well. as that factoring through And the of then

So, $XX small million effect. in QX year for full a the amount with

Nicole DeBlase

Got it. it on. I'll Thanks. hop

Cathy Suever

Nicole. Thanks,

Operator

next of Duignan comes Our the line question JPMorgan. Ann from with

Your line is now open.

Ann Duignan

Hi. everybody. Good morning,

Cathy Suever

morning. Good

Ann Duignan

comment down you as broadly, aerospace production? your MAX? from Tom, notion and would business just morning. have you've they of downturn industrial the the the supply the into Good because the over more on spill base to supply that, on in just chain taken while that XXX also Couldn't shut

Tom Williams

into that's amount who have Tom. that filtration of realize don't its did and and work we'd that goes We goes aerospace-related a engineered Ann, people Because materials that that Yes. fair in. factor that.

And it did the about of is bulk the what the factor of the suppliers. things amount And the the XX% part the million XX% in have we type you the other that. then That's we our the we I into factories segment. of that as onboard But numbers includes think you're might for guide industrial; did. the is work and referring be of the $XXX So in in that to business. might rest of Aerospace is piece round in factored industrial imagine, data in the of -- just

Ann Duignan

Okay. appreciate on just Exotic How breakdown, Parker? much -- how same the That's And I And then is that. Metals? of can circling give us topic, a you Legacy million? $XXX back that is the much

Tom Williams

of $XX million $XX the is Exotic So million.

Cathy Suever

$XXX million.

Tom Williams

million sorry. the Yeah, Of million. the million, $XXX of $XX $XXX

Ann Duignan

of million? million the $XX $XXX

Tom Williams

Yes.

Ann Duignan

the to as And well that direct engine? on both content shipments Okay. as includes the aircraft shipments

Tom Williams

Yes.

Ann Duignan

given you’d color, wanted just us everything most back of Okay. and to think I get I’m appreciate I assuming. I that.

So, appreciate I it.

Tom Williams

Okay. Thank you.

Cathy Suever

Thanks, Ann.

Operator

comes Our next Suisse. from Credit with Cook question Jamie

now is open. line Your

Jamie Cook

guess good two A I quarter. morning. questions Tom. Hi, nice

on we Industrial terms when to reignite when acquisitions done there be you've on guess? we any organic versus thinking I'm wondering Aerospace if we with things And see there's about -- in exit is better should Just XXXX, about difference comps differently? incrementals think to potentially and Based get as growth I how of again. what a the start

be Eaton you. change hydraulics a potential just to with selling see divestitures? then relates guess you is Thank One, the the some my just of in your recently. Or second in in given could there do terms portfolio And -- change their just any positive business? of view of any your And your landscape? competitive for of I view your portfolio that announcements question you

Tom Williams

Tom. Jamie, Okay. it's

Eaton think has. on Danfoss it. So the the portfolio I'm would some going of inclination to work is say weren't that I might what I the announcement. as what surprised, with backwards -- think questions. to And they our start I to you're do Eaton given with I I'll think referring we first

view, for our and of Eaton. both in make better you And We business. a Danfoss competitors strong have a lot respect

challenge. of space. So company the forward. the we We believe is with our going and any our we that welcome growth confident to And in control to technologies, Win effectively with the us our motion breadth we're compete technology the going allow and have the that Strategy We chances. like

recognize the transitions, gain. we there's that type happens. there's opportunity Obviously having system when done at to that look lot these, stress of And share of you a have potential ourselves, a in kind these of, acquisitions maybe when

doing we tension the good that and system. of be that competitive so advantage everything optimize in will, And can to and we obviously, take

because to adding to comes be you're as you and cost that. help doing about that get of, other if move some incremental to comments if in your you're maybe I the going two plus up. years. But from past, a be of it over out kind to XX, have MROSs, think downturn very going you forward. incremental see XX a back you're talked multiple still in do only variable north good clearly efficiently And number coming looking general is that a it So volume would we I expect doing as as plus of

I say first quarters So of would over couple stronger what I think a you'd coming out, than be tends the to cycle. see whole

two these about but talent pleased maybe products extremely could organization and And they just the come then thing in whole best with technology these I that's acquired of into We've will acquisitions the general comment them. that the businesses. and the great progress. done goal I'm the but is from we've

meaning to LORD, what look we if both growth that single-digit had It hoped and together. had minus I display ahead the we about people on And when compares have Parker. is LORD for from we total full low X.X% leadership businesses and XX at for, was a of

wanted. more we doing it's So what resilient. It's

The million seeing of what the year. synergies aerospace from quite doing we pulled we're part management. nicely. $XXX were really the confident of into very thermal on We and in this is adhesives synergies the LORD structural And cost

out hands. Now everybody was team redeployed And redeployed we on there is we've is to got to help But job. FXXX. and facilitate But CapEx that That's FXXX. some great The we that effectively with the a is everybody's to of them have MAX doing XXX can't on them Exotic, MAX minor the control. we do the something that. team

Exotic of those support well-established engines and as of to fact depot didn't in. does. do efforts repair customer the can that starting revenue the try to help look on the up operation big we're and to FXXX. synergies got that that spares to have is we go the Exotic legacy of have we products of that the then which repairs on commercial one pull Parker disclose aerospace And also we're And going going with them to really for all we've legacy aftermarket organization our the this part We type for capture and side

And And everything will for Exotic it's XXXX really I so in much positioned come not going described that MAX FY FY just the back. is help but XXXX. really in to

punch we potentially And back. Exotic people goes a so one-two There's with got there. have additional think MAX the trained. benefit I And also then we've

allowing the of FXXX on depend customer accelerate some our us Now schedule. the will to

might have FXXX. they a to they they if think But the us an supply them signaled would. accelerate that's But down. slow obviously, some other becomes I opportunity for constraint that

of answer kind on acquisitions. long-winded that's a So

faster in that than But them. the whole in if the legacy coming acquired reason we them going was grow you they're why Parker. aggregate think And about they're to

incremental You what see Cathy that the one had. slides the EBITDA, it's doing in for us of

still path for is pretty The we're So a future MAX very short-term blip strong a to them. on positive. the

Jamie Cook

appreciate the I you. color. Thank

Cathy Suever

Jamie. Thanks,

Operator

Jeff Research. Our Vertical with Sprague next from question comes

now Your open. line is

Jeff Sprague

day, everyone. Yes. Thank Good you.

for Just me. of things a couple

thick First We've of Can just kind of automotive LORD, you the out of through this and kind earnings lot DuPonts here a pointed to kind the to how the heard back had address to Tom. comments of negative markets? it's of outgrow performing and thin. in ability season. you And automotive the XMs

Just wondering the slice how things of are that business? really progressing for

Tom Williams

Yes.

without would into have that for take three thermal pretty and of automotive would more to numbers, really us. the – are positive. we getting would and if there technologies industrial growth type negative strong So And just be the a management. happening then buckets. slightly the technologies electrification be specific what's there neutral be which Aerospace major is And I slightly piece is

adhesives they and internal the combustion structural we the that engine. might are coatings more the And offsetting traditional adhesives have. be weaknesses into supplied And

to I'm in single that's digits. at factoring what coming So even doing, some in low Coronavirus. in really And weakness happy with the they're Asia tied

still and out of to obviously, what they're determined. that's, the I'm unknown But element -- -- a that's as and happy be gate. doing those yet really So new with an

Jeff Sprague

the was I curious situation. MAX back And to

related do operationally a are the are you at actually provided you you little to How signal? make rate get have low Or go detail the the redirect sure But line warm? you you if to You to the continuing FXXX cetera. on that keep shut some down MAX ready production? et to manage

Tom Williams

obviously, Well, act. a that's balancing

So we the people. redeployed

set we we've the some most haven't There's them. unfortunately, but not skill we So retain of for could most lost part. that retained

the So any maintained. sure have Obviously we make set needs the that be we'll maintain we skill people equipment of to wise.

we're to So ready go.

sure need and chain, with And to when ready they're making to our to. able supply supply we that us we're

ready for inventory our will guessing need ready we to is I be thought carry if up. a not start prudent going was when the back and to chase to trying and to our extra suppliers MAX us we'll So But little And that. be shareholders to too. do it be for

give us will. will But us a didn't there recognize signal. But, obviously, they in we're we internally supply built the can And, Boeing be some they to we time sure gives we guidance. lead respond. chain respond going build and to obviously, it So Boeing when that to a that make needs

Jeff Sprague

you. Thank Right.

Cathy Suever

Jeff. Thanks,

Operator

with BMO Capital next Tiss Our Joel from question comes Markets.

now line Your is open.

Joel Tiss

it’s how going? guys, Hey

Cathy Suever

Joel. morning, Good

Joel Tiss

We've gotten a lot of good information here.

is of just you Like more Are for couple any giving whatever you clarification debt-to-EBITDA? guess. I that expect like updates So the when? to your on a be where do guys by Analyst Or Day?

Cathy Suever

that about for I Joel. can talk you

currently a we As times. full from acquisitions a is net we as don't we're considering finished X.X the debt-to-EBITDA quarter And EBITDA debt our times. gross in of there, have is that at four XX months the

we'll that's the have the that of period We not in by for debt has net Again sub the end debt a EBITDA only to down year there. the the acquisitions expect X.X. X.X -- gross down to of and

once get So -- a look it's of look actually XX months -- quickly little next year we will EBITDA. better

Joel Tiss

you'd target at or to it And closer there need look you to before a again? be X.X? Do is is more acquisitions two,

Tom Williams

Joel, it's Tom.

what get we'd think closer obviously, I interest we obviously start -- to is keen. to to. as that But, as like to get – more going is to X.X we're our glide

The pipeline. key learned continually lesson not and over we've years work what you it's new development thing on have business is a that to the

relationships, it those we strategic fits are understanding We the building company. as to our speak, today now working

the to continue action that. we're yes ready to we do And though not in to so we'll to get to But a before we'll closer back Even pipeline. get work game. that thing, continue we need two

Joel Tiss

quick one. last one just And Okay.

missed guys -- Or you I asked of just any, bigger of, accelerate Jamie is the that the expected -- improvement? you really and part keep kind there You seeing are didn't are question. about and restructuring. you that the incremental that PLS as chunks we could you everything pretty much wondered just

Tom Williams

PLS? with Joel me help

Joel Tiss

for better Product them? looking finding off or them lines having owner a line at and product simplification, so individual

Tom Williams

Okay. Good.

that So our Simple a added will lot by forward. but big cliff still we've notes about going to But at be the Design. it of a that's part talk yes, big strategy we was IR a day. is to And that really going

what through has call look But cruise. that change, of divisions played it's but the part looking So most a we to still I'll for at or continue organization that. and structural number at

debt the best-in-class But that the we versus competitive staffing the within at just we analysis part right of other examples. looking staffing we'll do at look have elements, is what divisions that call

So we that's would what still item one. Item days. were – you three is And I call XX-XX. that's what early think using

opportunities we're and of a how things, part complexity to of services We trying that's structure and processes that the that. revenue simplify big have lots and

Simple is by Design, in XX% which element of we place. approximately things is the that how third the design tied product And the gets first in up at cost

your customers your fantastic lean service speed in speed product. but So and all these lot the your you your system and most concrete design cost simplification within you a doing other just can things the in is have stuck Kaizen talked based how factories about, I of on and of

detail. think existing detail as obviously, And first longer lot and things There we're term margin you got for design really Day. differently one we want do the go of a in people in bit up and and IR things backwards more new little nicely combination thinking designs. more But So expansion be – do a some that's in through the will we set of that can with going it'll we'll that to to that are at how speed process think we do things. that we'll future. on that's you've that software And because us I a elaborate

Joel Tiss

you much. Thank very great. Okay,

Cathy Suever

Joel Thanks,

Operator

from question with Barclays. Mitchell next Julian Our comes

now Your line open. is

Julian Mitchell

Hi, good morning.

on point said had you drag the Tom X.X destocking second think quarter. that about in a sales fiscal I was

please? just I wondered for So second aspect what destock guidance implies in half your that the

Tom Williams

now really given We're bps. down doesn't about and goes not minus minus about in honest quarter QX. we're QX. It's destocking have we how to numbers before to XXX predict is exactly That expected it does have round To stepped XXX be one trending I around destocking the what in would go. in hard were XXX

we our to hope that market-related has our in would And end be bottom, into And our when distribution bottom the equilibrium. I hit destocking eventually as QX. everything – That based on go find is channel else QX from then being would to the QX. probably

Julian Mitchell

Thank you. That's And industrial second segment. then helpful. question just international my the on

the You I good rate ask implies QX, terms a step-down of top on full wanted because margin there. year it in just be sequentially pieces in second first guide looks half your gave international to the if lot even half revenues the versus just for the up. dollar though a margins should the in going half color the or in line on margins moving second in of around as – terms

sequentially dragged So I higher with earlier just you something that margin that wondered Asian if the there's were mix talking with about revenue? production down the impact around that or something even

Tom Williams

Yes.

head. nail the hit on You the

down when you by you're in influenced goes extend second that and happening is up, the little you and be of the Year at uncertainties really decremental, low the then looked organic inefficient. percentage-wise around, Chinese XXs kind Asia, nothing's little going minus New from a weaker back more -- how is assumption the we think seeing half we've the particular, unknowns risks our what Asia, to much what Coronavirus I for So low in as a there. got to half it's associated particular, decremental the Recognizing there. in just the shutdown, a And the international. there, XX in in XXs to XX.X go for first But start

the Chinese New than in Year. coming belief previous the off of times Our on start-up

difference, Julian. So that's really the

Julian Mitchell

you. That’s great. Thank

Cathy Suever

Thanks, Julian.

Operator

next Securities. Casey Fargo question Andy with comes Wells from Our

Your is line now open.

Andy Casey

a Thanks lot.

anything First Are than -- It we're are that? follow trending some question ground would on doesn't different expected, any like stuff. seem improving but that's you Europe. seeing you seeing that macro on seeing you the

Tom Williams

minus slight improvement Hey, total XX QX. at EMEA I as industrial Europe. look minus Andy, If it's saw to a region, in some from Tom. went in XX We

getting basically XX.X. end bit kind same, little kind improvement XX, no what was Mobile nearest was a got sand. to I'm up There it whole was breadth That of just a minus better. but better. that a of soft, of still the half. lifted the rounding So minus bit was market particular really drove little slight it,

would say, minor I some So fairly consistent with improvement.

Andy Casey

sorry, how and distribution Thanks, QX North lag change little kind phase you phase us like Could and a trended last one American you out phase of Okay. American that three, three, XX% exclude being sounds may bit if and three four -- how I four North the phase It of a then, down. with had And respectively. quarter you phase piece? help called XX% in Tom. phase think, distribution

Tom Williams

really four Yes. as distribution phases. so influences -- distribution that these it Andy, goes,

what's can and we've between I we these phase seen and move jock what forth things what And at quarter. on you on. in of last that's kind and going three four, back think now this depending saw looking phases, phase

Distribution went aerospace, phase prior our -- three. of quarter And from quite phase four bit. distribution, the to it being points XX excluding in like influences it a

phase So, I'm -- if current one XX% I was was just that's talking of accelerating phase plus growth, two, sales. our contrast for plus or you X. Decelerating about the quarter. growth XX%

decline. was moved decel and being balance XX% in why was moved because three four. phase our higher, distribution X% in automotive phase in The decline was sales in into main moved and and that phase there reason there. was Accelerating four of Automotive that

automotive to the four and predominantly three. from So shift distribution moving big was

Andy Casey

because in irrespective on like be at of goals track should big significant It longer Investor potentially expect EBIT slug detail. an the end exceed it? margins, more expect one what, of the which that to But be But be this it, a -- a of last like providing seems attempt, Okay. previously to And challenge. of amortization now, look and Given that you're are should any then, outlined significant Thank Day. in anyway carrying looks I'll going outside should of term margin isn't at the we changes lineup longer-term the you. changes EBITDA maybe you But your we lot the you're looks great. a might just, -- of it trajectory? one

Tom Williams

This is Tom.

gave amortization Cathy by perceptive. very segment. the Obviously You're numbers headwinds

steady we about excited -- it's going think I than to you. headwind before with ever be to to amortization with numbers, XXX about an round see before a -- now But on we've that at Parker-Hannifin. have that shared look you would and a very that that bps you're I looked lineup we because and no, your didn't And to we everybody, If I of given those set have be to with current with seeing will state you team to excited an think answer what's goals. at think short more talk big shareholders look And a question information of Strategy we're hopefully then be to people any happened. not to future see obviously, Win the lot EBITDA And we to shareholders But, should looking exciting want to to going going that. own want X.X we're chance our about the are compelling get things at changes. forward needs is, I

Andy Casey

you much. very Thank Great.

Cathy Suever

time have we question. think more I Liz, Andy. for one Thanks

Operator

Our last Jefferies. the Stephen question with comes from line Volkmann of

Your line is now open.

Stephen Volkmann

Well, just you. in. Thank slid it

Cathy Suever

Good morning.

Stephen Volkmann

other potential process to From that part you might back instituted to have I lot were talked was was talking And size you Can that over asking I earlier might revenues have off about time XX/XX. be underperforming this, simplification. have a a big companies might of perform or thought. to chunky the you ask when just the about of having something not just fairly you of Joel Tom go a line about who product think

made You've of and lots lots acquisitions.

a for higher a of returns I more the just Can of, divesting some it going is major? there there. guess tweaking to, get portfolio I was So clarity a you prepare kind and want of chunk Or be through trying little revenue and where Parker to you forward? ship higher might nothing process going growth the picture significant but

Tom Williams

Yes. Steve, it's Tom.

I And and a completely what that's at didn't that's was good answer him. Joel question. So actually probably getting

think answer is, any chunks not to major short the you're no, I come see going off.

how big XX/XX. minor see tweaks. say deploying some might difference we're between The You

to it our cetera. We're the ITW you've way that people before seen The portfolio. like in deploying is difference et same it that

portfolio other four more of the is with is of interconnectivity lot customers built or revenue our tail much a complementary coming of buy there. from with XX% our Our to that our revenue from company. very revenue And in linked the throughout technologies,

might the a item hey thoughtful end saying because A it the tail We So for that's an lop can't little it a off requires division of different more one just for be approach. those tails division.

standpoint. So a for we're very doing thoughtful that

to really We We will revenue don't will speed -- on We're of revenue. still any, it on the be see a changes kind to get you're going see the not that. revenue side. kind just headwind neutral improvements. same It margin as and of,

a to care alternative experience You going efficient their to might through things our is we ways things just want but to We it. we just Different demand. ways minor it. We're of going to be that see create pricing do of most customers to things can satisfy different part some on customers that, on are find it still do numbers helping different do them. for to take deliver more and great

Stephen Volkmann

I color. it. Thanks. appreciate Good Great.

Cathy Suever

Stephen. Thanks, Okay.

you you the will the your should question-and-answer session day. Thank Robin earnings questions. Okay. your available for Enjoy Thank calls Jeff us everyone This call. of be you. have to today. throughout day take further concludes the our and and joining rest

Operator

gentlemen, you this conference today's for and Thank Ladies participating. call. concludes

You may disconnect. now

Parker-Hannifin (PH) 30 Jan 202020 Q2 Earnings call transcript