PH - Earnings call transcript Q4 2021 | Parker-Hannifin Corporation

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Operator

Good day, and thank you for standing by. Welcome to the Parker-Hannifin Fiscal 2021 Fourth Quarter and Full Year Earnings Conference Call and Webcast. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. now today, hand Todd Parker's would to conference Leombruno. I speaker your Chief Instructions] like the to over [Operator Financial Officer,

Todd Leombruno

our Thank Thanks release good And FY joining webcast. you, earnings 'XX morning, QX Dawn. for everyone.

Dawn President Officer I'm Financial Officer. and our and Chief here Leombruno, and Officer; Williams, speaking. Chief Tom Operating said, Executive this with Lee As Todd Chairman Chief is today Banks, our

this non-GAAP is addressing If measures. the accessible safe our at you slide will available section could non-GAAP statement and focus presentation parker.com Investors harbor in Those remain any forward-looking for for two, statements included today's financial on Reconciliations disclosure are are year. reconciliations X the and company's measures under materials. and

highlights As well usual, for year, record some and as we'll transformation. as fiscal our start quarter today some on providing the Parker's color with Tom

the just of code. reminder, ask And I'll hand to the Tom. the by to Meggitt UK financial I'll for for respect Lee morning. provide 'XX announcement the will lines that Q&A. we brief Following acquisition, just our move one open we and to slide With down it Tom's still to that, Monday, three, and made takeover details are a hand we FY this in summary then comments, I'll the Tom, on to comments. then And back guidance and released concerning I provide some closing you I'll requirement it Tom off

Tom Williams

just for for tomorrow, to We marks to a difficult and but purpose our in a you, results everybody lived for goes the a end Thank where and better Parker thanks it outstanding everybody. morning, 'XX great professionally year, year was quarter. for a COVID, personally today. Todd. delivered my to Good great team team us, out due shined. global and enabling it the year really the and up us Thanks of FY joining This was

safety XX was the company almost growth performance, Top quarter. portion quarter Organic incidents. the industrial It XX% XX% reduction the was the start reportable quartile the almost The sales and dynamite. at in in approximately. quarter. in let's with grew of So XX% was

We as Parker, and that EBITDA improvement records, as strong adjusted, America quarterly versus at income, points international. for well margins as all-time have reported EPS, sales, or total North were margins basis The segment was six very net prior. XX.X% XXX XX.X%

operating prior. improvement or On on XX.X% point an you basis, to basis a the margin, adjusted if versus go that last XXX segment row,

around world. quarter year. Just a up but can we'll the put see XXX read a really record. move won't these I so four, a all-time years great to slide And Go records, team you the the to and year everybody by full effort great was to fiscal and of - that's all year in to of you, records. that's the eight company, history of just a It

record, FY and rates. to Sales growth for Organic speaks well the organic year, next it second almost of fiscal year, March orders our offer that on a here Plc, we of at that that we're years forward to look minutes. half 'XX. out in at flat, and conversion to able few a briefly we'll discussion hit in was Free cash flow announcing to was team the two $X.X full was We be billion, order FY which performed to we'll last and five pleased rate 'XX our from margin going going but Day, flow of in early, momentum a once how was and the see be XX% X% very targets enhances you Meggitt year-over-year. greatly on growth building I'll in So clear XXX%. came as go And to Investor we have new portfolio, announce out aerospace targets, were touch acquire year we Operating the a cash be so sales. them almost new this time. target, to year.

go few little if to making talk being the going these health talk the what's highlight next I'm I'm company, in to technologies to you specifically speaks purpose want slides. for living deployers the a transformation to lead helping and progress up to it people. going It color five, the slide and that they're helping climate action, next work, our of give breakthroughs about you and When is the six several calling bit resonates about quartile And our results. how each of engineering a to and higher performer. it driving a to they're This three something of of I cash; tomorrow. world more and So clean drivers, the enabling as on and touch our that those slides, purpose, behind acts technology really to everybody. we're a top In over and purpose, care it represents our to the great how a North being better our and comes on Star. with your generators create one slide

for So COVID-XX production, on to going vaccine talk slide very eight, in production. particular, we're that's pertinent something today, obviously about

that footprints to requirements, long products. cycles The the a They between large these extensive times manufacturers manufacturing On and batch the storage, today. is huge the very footprints speaks lead with is changeovers. large inventories, very drug produce difficult the have to processes cleaning left processes for with process batch hand take typically side This challenges complicated. space

And relate that in most kind a soda been restaurant a pick the with soft to you of of simple have choice. pick of a some behind can fountain, your choice. idea a carbonated where you your drink of get water beverage to. of the and So is us can concentrated that the technology syrup and here those All course, concept is

similar type ingredients process? of slide that a idea of nine deliver with So here sterile instead the drinks, is we could soft And vaccine process.

the proprietary combining a for dilution ingredients. our system. purified that's So vaccine inline point-of-use process It's

to that look you deploy. if you modular, wheels, can So around, to see of on equipment, it's at easy move so it's easy piece

way sensing enterprise and communications time. intellectual consumables. it two to so talk very use IoT-enabled, it can has mixing the It property-protected the in single system just combined, uses, As it enable importantly, manufacturer's scheduling to via

these So huge batch flow software amount automation massive is also control reducing to for and of drug instead cleaning Then tied manufacturers speed helps changeover. the the contamination events improvement of our the and the the various ingredients. of processes, productivity just for changeovers, giant these change, the but this on a

this we COVID-XX other to to other apply obviously that developed can are as well. for drugs applies use this vaccines being and and So that

purpose action. just a for it's of our announced But Move and recently last opportunity society slide is business purpose. XX, great attractive the month targets. climate new of more in customers help sustainability this to So to really example a technology importantly, us. a our move to and We great the portion is clean

report, see we can emissions a the XXXX. electronically, hand You announced side XX% of where new reduction on which right our in you this is reach sustainability page by

to neutral. So X things that and go would pointing carbon And XXXX, be indirect. Scope emissions, by and X same be direct

is and we forestry more electric exciting in top society portfolio for help part this And future plants, sustainability our addition, clean is of basically portfolio, the with So our approximately our more the almost this XX, what our technologies of much how applications. equipment actually, on this our The But see, everything with airplanes, technologies very customers. page journey? mining, two impact and do of and importantly, we of to customers. that on with bill every motion automobiles, slide eight material part an across enabling of can chain. so on supply if equipment, thirds this a piece you is operations, the more the construction how feeling engines, we can for in help go enabling you a expanding control sustainable Like

there's opportunities So as the opportunities, in infrastructure also there's world infrastructure to build that growth. to has but support onboard

slide can quartile really help using see people, years transformative to at we of The to back move I those a the adjusted adjusted can which this, made EBITDA metrics portfolio and And and seven we're this left, of three portion the and that's is margin then drivers. the It's two illustrates on you performance. want And technologies deployment Our infrastructure that look made, been the this, XX, you last the And EPS decisions strategic over just our Strategy that right. with Win capital step to we move. performance changes illustrate this top improvement. the when remarkable on

closed last is in do. the companies, which the and members is makes customers. aerospace a course, our more you flow. hard as And together, to that's segment do. of deal so transformation The growth an well has technologies, and piece EBITDA parishioners, my Parker be to And the that's a excited the 'XX to hard the sole announced that deploy size recurring improvement a deployment margins, and of this to little excellent source, propelling team This quality their recovery, to nearly on is with I companies that a synergies, for and Meggitt can as clearly left less our pensioners complementary than And revenue, over $XX fantastic Aerospace EPS XXX all we high Monday, and organic sense cash two progress, shareholders basis the Parker is FY our of combination very highly our opening sales $X of with and EPS. we're really the as cash and On Systems accretive assure commercial on of put then been This aerospace how XX.X%, of margin, And than Meggitt. companies. and will both both year. in of combination generation We to effective touched but buying drivers generation comments, point cash a from the potential doubles in our XX% part clearly, we the strong deployment. XX.X% last of doubling there. growth stakeholders, capital

to for Monday, the UK, announcement why we the reinforcing we've Meggitt. home are in ourselves the on Following stakeholders the key introduced best

strategic reception commitments track UK UK, a steward clear invest, a is great with shared premium Meggitt our number how that of we continue forward. deal the to to legally to this we've forward going it Our And pleased long we you back hand transactions, Meggitt so the with discussions operate shareholders, are planned offered Meggitt. the I'll in committed for binding with are the unfolds we the in and details that, approximate XX being interest record we to quarter. to a responsible as process that on the completion including go for months. of Todd about the rationale And type innovate of more going to the we the look in government. a keep why people key UK are but And we'll And the to and we're far. to offer updated of constructive with government These to agreed

Todd Leombruno

Yeah. XX. would Thanks, 'XX direct Tom. like I QX just, I'll guess FY And real through attention to to the slide quickly, everyone's walk results. I

XX% As over to and prior Tom mentioned share here. billion. outstanding in some at increased have QX Sales $X.X versus we results earlier, finished year

Organic demand that up the As proud industrial the for Exotic, & strong all-time in XX% of is we our still that's to this due really broad-based And aerospace It businesses. particularly our are CLARCOR, portfolio an record all we've LORD really of across driven we're the and spoken company. challenged. that said, additions about, strength quarter. the of by markets fact demonstrates really are the sales

majority is impact been positive with the was company time all X.X% XX% sales years. to total over of in have organic So two favorable the a change basically, sales. also first for This that organic. the Currency is

XX.X% basis an That from a said, Tom like also Moving margins. points year, to improved from is adjusted QX. points prior XX XXX sequentially improvement, it's basis segment and

And world increased Just margin a challenges, our the excuse for performance, approximately or really levels of depth the 'XX through managed also included And last demand $XXX year-over-year, pandemic. very considering commendable our the minus impressive that as with at teams XX%. you another and of fantastic million decrementals strong around XX% team are of proud quarter savings number margin remember, our performance. that QX. if were in at plus of last year me, year of temporary - to pivoted that really FY Incrementals the

million, XXX incrementals. from income quarter also XX.X%. basis at So with ROS margins expanded of $XXX at an XX% prior of that's the points that's and you we're look that if finishing increase And year, really happy the an prior number, nearly from XX% net year. EBITDA XX.X%,

prior per $X.XX. All of translated to of those adjusted year of an XX% $X.XX. an the $X.XX compared increase results EPS on number great share slide to of or That's this

net I numbers I'm really the only. to point year income the want to and numbers, speaking one Just to and reference EPS prior

change evaluation time to that inventory planning made that in prior We standardize that to have purposes. the years, LIFO 'XX this applied section. our used years QX, those in across use company of to that for impact remaining to US prior FY been release FIFO and some change We and convert inventory and move voluntary table we've to we've retrospectively to the attached valuation for press locations the

the So previously reported minimal. the $X.XX only last It was impact last year quarter year. to was

back on would this in have to [ph] $X.XX the FY that looking prior been So year, if page, you're 'XX. $X.XX

XXX% that valued just now has the always impact to is other make, to the we've note no method. of margins corporate the I at operating incrementals LIFO, want FIFO one I using segment to inventory this mentioned level. So booked and our This company's the or

So of It's just solid our year. to Tom a forth the such Really just the globally. a finish just team one to tremendous last team proud a put record quarter. really, effort comment as said, put quarter on up

So $X.XX just that put that I that and largest to of love move performance increase EPS is just mentioned, the on to together. a slide signals the XX, what here page, can if bar strong this teams bridge the we the operating is I adjusted

really Our for other everywhere really $X.XX, operating offset to year strong $XXX an increased company. the or it's lower segment $X.XX QX. but income see slightly of That the and lower so the on there. we put it, you items adjusted you just execution in of All across net increase $X.XX up impact tax that were unfavorable. slide, on Corporate expense it's basis quarter XX% the the other million G&A, prior EPS if shares interest the from partially unfavorable, income accounts and

to back most quarter our of this the to again, fantastic due So is COVID-impacted of prior comparing really year.

improved company, the at tough improved bit drive an Margins prior XX.X% the can the really points performance. America control Operating XX, helped in the are Diversified and some and Really, is were outstanding impressive on billion numbers. this versus continue XX% quarter. here up And year portfolio also color Obviously, healthy our in increase referencing changes have the If cost these XXX the last sales in year, segment the keep record, again our We've is about these were it incrementals at for the operating volume really you margins. just past you a a delivered industrial here see North and $X.X margin board. a in sales on to margins go of message businesses slide were had quarter. across all-time again, finished to results segment versus in are the to XX%. up which Organic year. basis sequentially us prior back disciplined and spoken I record. just the impact this segment little And very comparison. sizable to there, but really very performance comparables

look at points plus story the another at growth order margins And and from here, really sales story prior are plus board. rates, finished in at to a This segment. billion versus XXX in [ph] If little is we sequentially last International bit And expanded of and here, rates segment, quarter just again, I same up $X.X reached International, that operating segment organic just XX.X% robust segment. International XX.X% really the higher you the Diversified move XX%. year adjusted reported basis XX% across strong where If order

the performance productivity than coupled in cost here, well. again organic America and generated containment rates strong really plus segment XX% record in higher quarter. this a Order that again, versus bit as this in that XX% tremendous, really, initiatives little volume, with growth up margin Just at North last positive

with body Sales X% margins QX Aerospace in the less are million jet growth QX X%. a OEMs, just sequential to turned entire fiscal And really just really also business improved segment, very strong XX.X% $XXX had this strength happy the in performance on that narrow that minus I'm XX% quarter. of also performance industrial commercial we last from I'll Very from year. area. start in increases they in really sequentially Operating organic sales businesses. have in were happy improved seeing again this our military seeing basis recovery are quarter to and negative current Systems, the We platforms. and level aftermarkets a this So the got the finished in of report year and rate great particularly market. out in positive minus further to the touch XX sound rolling Aerospace slightly. we're signs for highest and and at quarter saw up orders they've strong, and on proof versus here

So there. very proud of team our aerospace

just we're whole, It's to finish a these a the as year. solid So looking at the with really results. fiscal company pleased

comment, incrementals proud were And in 'XX like-for-like on really really that. industrial about FY a those at our pre-pandemic just volume businesses, include in if to sales a 'XX FY look industrial the levels. I'm back has go total LORD I our and if just surpassed basis, pre-COVID if I numbers, businesses, XX%. I Our

really and but we about did can XX%. plus see as we years FY are in you two that. only proud total did that margin Tom And surpassed Orders, 'XX achieve So we mentioned, we're our them, not targets, earlier.

outstanding to was full obviously Tom flow an quartile top that's slide next very XX.X% all-time for proud operations the earlier, cash XX, mentioned just slide, I record from the We're of billion, flow. of if year $X.X this. go cash So sales, this performance. company.

And compared at $X.X billion generated XX% cash more CFOA That's is I $XXX said, look we that cash. year. over record. Working around prior million here. at we they to solid to a year, on capital, to did prior want And focus than everywhere more this really like you and really soundly. this. that on asked We our the teams world just delivered I them performance pandemic focusing for the If thank through

for conversion on cash So I year, that. prior focus the the your up flow, fantastic, want all basis year, also versus XXX%. XXX to you flow thank That's free and points cash XX.X%. for Free

running. than So been that has now than marks greater year operations cash with XX flow XX%, the years been conversion XXth from greater this free XXX% and that, flow cash have

about All for of We've months. these couple allowed us been vocal debt. last of the to down that serviceable pay our significantly

If we've last $X.X and at the the at debt net you our look of XX year debt down finished X.X%. months, paid gross billion X.X%, debt-to-EBITDA is

So again, quartile the of story we just top than sooner an and impressive really year considering a achieved execution one levels have forecast, backdrop global pandemic. the the these cash similar leverage position. originally and here, we It's full it's outstanding

guidance. XX, will So and 'XX flipping XX, I to focus to ask our you on just FY

we that this morning. saw released You

considered to so of And spot always 'XX. currency are acquisition going of the that We're XX anniversary XX% points really and note, of basis, and XX.X% usual, do, study no rates mid-point, FY just start One on the just about a the guidance margin is XX, half. But margin This like at As to than points XX% basis. 'XX. basis X% X.X% FY segment operating the sales for we're sales And sales Meggitt rates mid-point, breakdown On Exotic second guide side range of I'll sales. range record that. the not minimal for drag top. LORD growth I'll on have guide no operating currency the side at Both is in adjusted talk of calculated Therefore, the at adjusted this the in to We essentially the to just those year as-reported sales. segment basis The there's half, XX I'll is and X% forecasting organic. provide of the either close forecast [ph], higher adjusted impact for those to And impact June app. the is And sales points FY guidance an at X%, at is all forecasting of we just expect mid-point. of first the do basis increase transaction as we same we an XX.X% we and end really margin. acquisitions. 'XX Sales. have is year held split from is operating importantly, longer that. on either a more as-reported item range what the next of on we've full finished segment we thing at basis, an full XX the our are

business charges are on intangible acquisition some for a pretax are million forecasted cost amortization be and only Just achieve $X FY $XXX $XX million adjustments. expected year level, for the At realignment 'XX. color LORD is to to million. related

split, operating adjusted segment XX% a second Just XX%, note the half. margins, first on half,

bit little a of we continued forecasting similar $X.XX Slide per adjusted XX%. for execution across QX, driver is share enterprise. at $X.XX And then that. in, change. XX%. of $X.XX split: increasing a just on a is just per earnings the an And EPS our on EPS Adjusted If But share, interest And That an G&A, we is side color adjusted per strong guidance is at QX. as-reported of corporate the is $XXX tax to mid-point, range to side second to be the margin first or full again, in $XX.XX as-reported is million be at XX%, increase our XX% an $X.XX $XX.XX Segment higher at forecasting that. are all midpoint. a outstanding you slightly the the and guidance bridge. half to of the are And of either and $X.XX XX%. half mid-point. either adjusted very year forecast. on adjusted other, that Main average look accounting is little corporate XX the rate, basis, G&A EPS finally, same and increase our $X.XX are There's on share shares EPS our is is same by is this drag. operating a And Tax on the earnings basis. earnings range again,

will deployment. I about talk capital Lastly, just

are our capital For FY committed 'XX, to we deployment strategies.

consistently a dividends of consecutively We're the We of strong have record increasing with that continue going XX-year annual to paid. record.

Our XX% growth five going to of to not XX% net of changed. And year to of productivity continue has target It organic across and our average fund we're global payout the income. remains course, locations.

capital expect be year. to We expenditures the X% for

Our XXbX-X this that we program, share repurchase year. reinstated

We we are I committed are talking And when FY have I flow, our continuing about a to in that cash all as of was position. extinguished 'XX. now building we mentioned, in serviceable cash debt, and

of focus will our 'XX transaction. generation FY record for cash of be accumulation and to preparation So for our the continue the Meggitt strong flow in closing

I'll audience ask that, to I'll turn back XX. it with So focus on you, slide and to Tom, the

Tom Williams

Thank you, Todd.

closing Just there.

EPS, the we now strategic upon Meggitt. for deployment for CLARCOR, the you margin chain is people, results, class more on the great production our performance up just, very And And purpose, Exotic, vaccine engine we're to two higher going that. XXX six are know, years, EBITDA of [indiscernible] Living basis points getting margin in levels last you performance than to company’s of and of the team, what capital ownership the our targets obviously, and a laid that of So change out driving as drive keep years this improving the doubling the early. top puller, LORD, improvement portfolio, in engage the you’ve culture, these seen. quartile results

with X.X that, to continue for to bright spells And to X.X, we'll really Strategy Win and Dawn over it future, and a it accelerate put together and open with that now turn this You Q&A. I'll up to The performance.

Operator

with [Operator you. line Thank the And your of first Davis Research. comes Instructions] Scott question Melius from

Scott Davis

a And year. morning, Hi. great guys. on Good congrats

Tom Williams

you, Thank Scott.

Scott Davis

a I I at say you've announcement? been deal mean the for Meggitt feedback and the had least. marinate few response don't days to this but that, it. Guys, the always to What's customer

Tom Williams

complementary great great the the early Scott, the more value, stronger out of engineering companies Both positive. create this really like very customers. that material companies. to and days a highly track have is We're on it's great led companies. record General a fact bill of view is reaching reputation, to opportunity technologies They both innovators, Tom.

very the So is far so response positive.

Scott Davis

how nitty-gritty all not much that. chain to incrementals, it disruptions, the I on the are relates couldn't there have get of guys. been clearly, how really too some here, you too of managed you perhaps didn't through understand about help But Good that well? for And supply cost of you've to you mean thinking it you to months the talk XX about And over big us hear. challenges guidance logistics, as but with that? could as side, a XX% deal out next

Lee Banks

at It's Lee. Scott. I'll answering a shot this. take Hey,

the side I to I a think supply which recognize structured, how the first for thing company. is chain on just of is kind step benefit we're back, huge the

source know, in as you region the So sell and for make, the we region.

not in immune lot manageable not us But of said internally it characterize the we're the going but on allows any without to I as it So work. a international from would what's shipments. Having to be close that, to customers being and regions. away of hard get

customers. biggest Now dealing challenges with would we're our say the I just is

have don't home, OEM that very kind So et where hasn't a have on some large I mean, think I down, sent I But lands been disruption happening. had what's of been probably public have automotive cetera. is people

work we're that. choppy So of just, our just through would production. and of say, the working with lot a it's customers to chatter a in is best It's creating I channel lot

Scott Davis

Yeah. Makes sense.

Lee. Thanks, Okay.

Lee Banks

Yeah.

bet. You

Operator

I am sorry.

Your Credit with line next Jamie of question comes Suisse. from Cook the

Jamie Cook

know, understanding you're some for understand And versus I seemed with us of variant, top what first guess you line. me of versus think top then could growth like aerospace, the Can there, I of Hi, there the good volume? like sort half sort nice we morning. guide And but half? - about the we a Delta assuming help couple organic And the assuming of level price going have questions. second in just guess you quarter. you're the conservatism the to the line as on, what's be what

if So aerospace me your Thank assumptions are understand on the help you. just what can guide? you

Tom Williams

I'll I'll take go the aspect. let I'm on Tom. guide, the describe few touch the minutes that. going through piece. a it's aerospace and Jamie, I'll cost price Lee take to to

do So that on the everybody's behind guidance how it. the context this question some is is mind, everybody probably up with and come the of and we

all, order think number clearly, years. a on for side, happened of of the that I'll there of of a first number So headwinds. the environment, there's a CapEx trends, macro is under-spend I But highlight tailwinds, the and tailwind the some

shutdown So The which on, I'll I climate clean CapEx rebound and technology being attractive from some in here aerospace in with positive a prone Clearly, companies. to us Jamie. commercial interest question the our great very course, a put a think for rates touch coming that's manufacturing the demand the investment, minute, to of is future. recovery, portfolio more in back for then activity. there's answer stimuluses, rebound which your governments and of Low

had the I’ll what factored we forecasting. it more with over in XX to perfect, little But And not the this we've might behind It's forecast and wages. supply months. comes The came on is away at it. the best and our last and side inputs COVID time Lee nothing the side demand in in creating sophisticated and the built On variant up best both detail on model material the and chain hasn't impact world. But a it's when tool a disruptions Delta all customers particular, that company, is we've uncertainties to my and is is. which pretty inflation, than the the headwind give gone date, how AI throughout touched patterns,

industrial so single XX% the in the and the that over is that’s And several single pre-reports right and the organically, that didn't out, up to digits overall. a little now. you first half. up industrial at think share X% second of looking mid to piece, look why approximately in and North half America half The have we're aerospace When I'm get mid if the about the second X% up going you the with you came up you that part, both important digit, first half, same, and insight

give what's where recovery, underneath you is we get it that's as the X% in So up is. a up half, X% have is and that at gradual context X% second the aerospace some half, in help number the to mid-point. what with you first that the why will But

were grow OEM Military reason is have customers military an help supplier They accelerated and mid deliveries as down to military going protect is single And On thankfully, as customers example. the the of mid this What exposure, the suppliers to nice chain as to so up digits. they low we well commercial side, that, last growing lot exposure, single a and our is down accelerated MRO, health everybody. OEM, there. thought protect for our recovery year, XX% and because digits. that's military teens, both commercial to the it's supply MRO as exposure did

that year of in a now, is this through So the reset chain. that supply we're inventory 'XX

back course, And FY normal down. be will go of we'll 'XX. then we So to in levels more

in take prior that would would 'XX the you FY plus acceleration out period, a If our be about three. military OEM

So then when would would you growth that aerospace factor in, be when like you add more X%. -

inventory. that OEM segment, weighted So by is down that reset the X% of military being

why is. with everybody helps it that the hopefully, what aerospace number So is

a that. that X% GIPI, our to basis comparing be And want Industrial growth touch that's within forecast. X% us about about points we grow that a maybe to would you've Just I've kind of to comment faster that's Index, X.X% Production and guidance, do so number Global on margin, I XXX our price operating year heard 'XX, got fiscal talk that, Lee want to to while externally, cost. I'll let going rate of than for talking Then just second

mid-point. at the operating XX.X% So our margin at is guide

for or less the So it's approximately full XX% more year.

that mentioned from speaks to everybody being an that hard If it the underlying I team in just was think the XX% why a hidden did the year-over-year The MROS underlying it so is did this is actual a underlying excellence discretionaries operational MROS is over you we to can indicator do good XX%. comparisons because out is XX% in QX, QX, results. from an to the what it's I And really that appreciate that. where made we positive was, and being awkward of because period, reason in the take the apples-to-apples, were prior

Lee, the you comment on if price. to So want

Lee Banks

just price, I'll maybe finish here cost. Jamie, on, Yeah. up add with

sea processes price see also of selling then quarter index. sea very it's talked trends. the said margin commodities a able the measuring year-over-year I red. trends index of still at by track here call, having you would But said well how came to neutrality question I we're quarterly later, red. maintaining In earnings the coming what on our tell words, about internally, price up, purchase by So a other a of back because that, all up. was and And And last was this we it have I call then, we and and the everything we our

always commodity So margin neutral. in we're on no as lot there of price a And inflation a now, working side about the right actively direct and of is with doubt distribution. - be to both is is But We're it. it goal, it. customers top said, we've our

Jamie Cook

I Okay. Thank appreciate you. the color.

Tom Williams

Jamie. Thanks,

Operator

from Your Dobre the next line Baird. question comes with of Mig

Tom Williams

morning, Mig. Good

Mig Dobre

with also North the I'm everyone. with looking must or was either organic regards from the maybe. a there And these what know like are start I intake any little your I'm Because revenues challenges point? maybe ours, actual context understand this looking on order were strength, for versus growth. stronger. Thank backlog obviously, your I were don't side backlog you taking your order And for let's expectations customers? to but than what morning, for to at America potentially look converting to that, higher Good orders this vis-à-vis you, So quarter, more Tom, question. both you industrial much your I'll guess tell and International.

Tom Williams

is orders. So Tom. This me Mig, let talk about

thing not in maybe are have the like one is as might teens. like the Jamie's two acquisitions first orders, it might to do to prior say, be I growth. industrial LORD low seems on to stacks, two was that have I think I year we mentioned, our XX% things exclude go apples-to-apples question, 'XX at organic just teens help answering the year to acquisitions, geez, 'XX. industrial just compared When exactly is hey, for on and up in low growth you We you you at And look you're have orders clarify 'XX for current half organic the to back stack. way to our forecast do period, People, the The people. doing period.

- clear that number excited on The in entry. we're too And what between we versus prior the to order inflated are laid we low seeing about. how [ph] probably a has you correlation 'XX, It's get that year. an to uniquely apples-to-apples can't there's that's So got comps. the backlogs addition remember AIMO you again, out periods how increasing. Again,

nicely. been would trouble up our automobile that mentioned, and do really us very well times. we've it's as particularly where shutdowns better my versus with customer are targeted a they're were various 'XX. comparable on orders And FY having QX. in the and of bit that and about everybody the OEMs schedules, has seen taking will XX% more knows, as sales QX had our little to impacted but North customs like delivery on-time holding chips in Todd Our that to is push-outs I'd But push-out QX America industrial up Obviously, see holding up that, on compared impact automotive, say

of when kind type orders growth So to rate. everything between is of around 'XX you that and low teens compare sales coalescing

Mig Dobre

Thank I'm in increases in follow I are it's involved see up there your pretty level at of in plus sort are at I'm your then I get you and OE maybe to a if of differences some to product common of more the various seeing terms you're seeing just guess question can pricing of if X%, wondering business. somewhere When And And all Jamie's partners? a we industrial trying on price on versus these of PPIs distributor looking guys with, if year-over-year. specific PPIs you. similar that Okay. X.X% answer. want categories And

Lee Banks

some it really say. not, clauses OEM it's many them or with a we've out from that to I and and is them. material our averages lot some range, So higher. contracts have got direct lower can't with I what say benefiting a in them of of would But Whether customers, we're

us go allows we as pricing So it forward. to capture that

best typically list On all But the the guide and you're seeing a guess kind our what distribution of price now. it's side, increase. that's is right just in

Mig Dobre

Thank you.

Tom Williams\

Thanks, Mig.

Operator

Bank. with of Your DeBlase line Nicole next from Deutsche question comes the

Tom Williams\

Nicole. morning, Good

Nicole DeBlase

- morning, margin? but Tom, Good maybe, we Thanks. you to guys. to can and organic baked Thanks. just in view one incremental you went that little both bit growth through XQ, half respect know with a dynamics, narrow Can what's I to just the

Tom Williams\

Yeah.

So Tom. Nicole, it's

you from XXs. would Again, mid-teens So point in really comparison, range. upper is low apples-to-apples, going that be MROS first would digits; of Industrials, an still in just did quarter to to I would Aerospace, single kind again, be for up half to, and first XX% low our if the the be

prior outstanding masked being it's had. discretionary the period, really So performance operating the team by cost that by savings the we all

Nicole DeBlase

Got it.

impetus And accounting then Okay. the can to the Thanks, there we Tom. just the is on to now? US. guess, And FIFO do I to change? clarify to FIFO this related change the XXXX benefit guidance what the in was any

Todd Leombruno

acquisitions, it that. for valuation our FIFO the the CLARCOR, take US do some only quite Aerospace really this in in use about talking recent always business. Nicole, and We've been We locations. traditional is not We it really with started Todd. it use and time, This internally used method. I'll those LORD Exotic, companies our

by FIFO to All the had valuation of use rule our international method. locations

in just it me, look said, external our that's convert, what took tirelessly or to we is and felt across and was year an that with at quarter. a maybe opportunity - did. this and So We excuse essentially We We the worked internal our we show go early back auditors And hey, the we prior and it converted is realizes in our the impact reported teams best everybody essentially the I do was. to that. you just quarter it. sure the quarter what to since method. FIFO the impact We did restate time no converted. make to years There want and really to we

very $X.XX anywhere historically, our book always impact. it's at our to just impact this now it had It's If corporate, immaterial a at look no and valuation you $X.XX per entire incrementals, We company. standardizes or margins it inventory or across the that segment really quarter. so

we're to So a the respect FY for to for with converting FIFO. the in happy In results. there's benefit 'XX, guidance nothing

Nicole DeBlase

I’ll it for on. Todd. clarifying Okay. Thanks pass

Todd Leombruno

you. Thank Okay.

Operator

Nathan of line Jones Stifel. the from comes question next from Your

Tom Williams

Nathan. Hi,

Nathan Jones

Good morning, everyone.

Todd Leombruno

Morning.

Nathan Jones

kind - kind normalized. was XX progression of on first real over charges but something guys? to get you'd Can if you talk a And here, comment, normalized wanted Can which and about think think what to normally high I would normalize margin down I be of discrete of year you of than recovery you I talk glide would higher benefits, for is what normally you XX% would probably back that the and MROS which all Tom. a years for more in you the up average then year. incremental first MROS the follow would both the you be the think MROS time? would see MROS in costs

Tom Williams

it's Nathan, right. And Tom. you're Yeah.

XX% I we a would last be think MROs also of so than probably normally months for year, whole this underlying XX higher QX and longer QX it counting will year, of and and expect. be

the - of you're of a those more I think changes to year. we the just with FY and discretionary pandemic not made the Win about The speaks going efficiencies anniversaries from next fixed working. changes changes think, I worry that get But maybe these out to efficient the when in Strategy top to on of have what is way won't especially and the 'XX, cost the you forward, we came on

think XX%. and for I I - just would use people modeling,

be to cycle of think I I good made, we've over you to XX%. changes a a think looked the number. number continues that As at with use benchmark, that's we've in it all a best-in-class And

Nathan Jones

over the I goals? to talk some those long some about bit that initiatives domain very you that - over good the probably guys or of answer. it's put on that. some has the mechanism the for clearly last a to just Can reductions very Thanks question next aggressive decade the years. right. used, a There Parker out to going significant All XX you and targets you to XX day. want ask you're that achieve guys use little made so a ESG other some that report Is is

Tom Williams

Yeah. got the [indiscernible] been [indiscernible] XXXX these XXXX. XX% periods this already we've actually had time since XX% reduction, I’ve we've since report So different and

going various using within we We that some over as with our better smaller this do this Kaizen So energy or will for this things happen utility different as helps kind we’ve credit do be it. we renewables. what reduction. those on companies distances And a it's can get for footprints, lighting, been automatically flow, indirect working of the the All reduce do change we emissions, that of work [ph] from to better, the traveled in well. while. the to things suppliers We're utilize just to less equipment plants, renewables, they all

Motion taking the it, this could groups for have been and EVs the we on list Center know So aren't technology have signed aerospace greenhouse And clean where EVs have in formed exactly doing And on. greenhouse Motion change the to their plant - it this map, group et to about They The all working between have respective who drive the a for portfolio then Systems they having hydrogen, by know every developing envisioned cetera, of every cascaded technology the way needs gets each doing, we they're gas our it. they're group road people at down or group that's prospective emissions up things how was ago, - divisions. we we've we We about level, we and their reductions, best plant. familiar they're and that the it targets for also is thing cell Technology and the with group X are, how down their or more Group. have years in brightest then do. actively that and things good recycling and doing, that fuel their

the of all of flight in actuated a the so are it and into learnings spread. of focusing of the more technology technologies lot to we're surfaces electric. where we excellence have taking on developed industrial F-XX, motion-related like And the and with fighter the of on as you And have OEMs electro-hydraulically Parker, F-XX taken look a really applied LORD a platform engineered in and portion the science help in and lot offering 'XXs we've the they acquisitions developed suite applications materials has as on that controllers and motors company legacy material So center in add that well. electrification. a particular, strong top those on the portfolio having software that motor And of companies, of transformation we from the on we particular, their when that company, changes a the the industrial

targets internally, and to at helping all going X, message we get and help major things doing line twofold, do to XXXX, because we sustainability out that's sight what put be our for XXXX, have to is our So we're and two to, but doing us then that. customers over customers year-over-year our of our we're Scope which looking there; we're good customers, things we'll

Nathan Jones

for questions. Thanks my Great. taking

Tom Williams

Thanks, Nathan.

Operator

comes next the Goldman from of Joe question Ritchie with Your Sachs. line

Joe Ritchie

Thanks. Good morning, everyone.

Tom Williams

Good morning, Joe.

Joe Ritchie

margin here of little cash just the Todd, going a forward, that bit on XX.X% more on going thinking Clearly, like cash guess first nice free at question industrial we drain be the flow. side? a maybe a be job sales. growth going really about inflecting is this there's as forward, year I working free you should to that given think flow capital

Todd Leombruno

little think a Well, yeah, always change There's I tougher been And growth over a everyone a bit Joe. performance. in has environment. our absolutely, It's of flow cash couple seen the that in last step years.

our still opportunity be enterprise. think ready we'll some that. So across I for there's

months. really we've think I acquisitions, [Technical and recent throughout got on and inventory, the some last Difficulty] the on of payables receivables Some XX I upside

think So we've grow here. to got room I still

So a impact. we're expecting not of much

Joe Ritchie

you help announcement bit little to side helpful. how big divesture potential on Okay, be maybe I and with the Tom, follow around deleveraging that thinking great. are you week, am up, thinking large the portfolio my would this flip can holistically, obviously, this about one a things, And know, you're maybe divestitures clearly then acquisition and from Great, side, hear. curious, like more aggressively of

Tom Williams

Executive. we acquisition, it's office standard look of but that the large it we the have time, not all a something we have We at this Tom. Yeah, at Joe, just Chief the when workaround is look

the do that characterize Board. And So I've Lee, annually we people. myself, I used would as visual with as this well Todd for it and

the together. technologies comes our very portfolio customers company as revenue put has a of of that buy eight various the or the think thoughtfully trunk tree of four of more been have. thirds we with it Two from I from Think the branches.

and that predecessors built putting interconnected So everybody together make a of very sense. this thoughtful did my job that company pieces

there's gets doesn't we want use analysis, see we to tree off. wouldn't anything. divest. that little big when lopped at regarding we but It that analogy, it something we'd see you very it So time. do the any I major would be look the a divestitures. portfolio There's mean all wouldn't at trunks from branch. all to But It's we be small the time, that going we announcements if look divest those But that no

Joe Ritchie

for taking my Thanks Okay. questions.

Tom Williams

Appreciate it, Joe.

Operator

of from comes the next with line Tiss Your question Joel BMO.

Joel Tiss

Hey, guys.

Tom Williams

morning, Good Joe.

Joel Tiss

how Or acquisition? guys that help you Meggitt question. that's would a Or Are there angle get ready can the not work? actions take? last really Just internal for different on that any you you to

Tom Williams

characterize the to EBITDA - positioned every everybody in the basis and Well, I I to mean, would it that all deal here. slide this of we day as a points that about earlier able I improvement. think And XXX we're is internal improvement Those size. joined on I continuous Tom. margin do it's happening us been showed what's be actions day since Joel, company works the have every else

size a we of over similar multiples If synergies, you is did and transaction, did LORD. are largest the point purchase are we flow just while very what what what The company, take that might that very our looks what's have to a be reason synergies similar that about so EBITDA how. of less example. and with our margins The is the has dollars and are were than that we The big, so And of going EBITDA that's going to the grown do to did this the has in we're generation grown Exotic, interesting starting things CLARCOR. and percent because for similar we're price past. dramatically, but Xx dramatically about be the couple that CLARCOR very the using an we cash deal that it when can have regarding think leverage we LORD the at to we Meggitt, will or do what as same the

the keep we to everyday and going we our ready And future. so better go [indiscernible] reach as be in do we ready something we When had as will get even into it [ph] to has we're we propel started ’XX Win and X.X just tremendous what company. higher Strategy behind FY then to targets, the be to continue it it today are and when firepower

the for preparing really the positioned future we're think did Meggitt what's And day. we what I acquisition. last do So the is XX us every years to

Joel Tiss

kind then your away take a that the of that have small finished. of company? forward? of examples potential you're could And continue transform series things? you And bigger Is as Does drive of margin some us can couple give Investor Thank to really a really working some things to this I'm on of to get you. it of levers we that kind Day really just

Tom Williams

a there's which would with new things how whole those couple a made positioning, we've PVI more of which several margin side It replacing on but help I'll our are of distribution IR on innovation a as RONA. leadership to growth, things on divisions real how design, top on be and the The taking printing, position as strategic change of going versus talk changes and on we're about themselves ownership Day is those to and simplify propellant try there differently international things I'd All line portfolio step line. is Well, the color growth plan incentive we've in changes help are on competitors. engine, the digital well. also organically, well they margin their give doing change, the the a ACIP product new the top the as that made,

company done, important, carry done think an people becomes number big and of driven have efficient single use continuous one put it ownership. company, part enhancement. that of to that, portfolio you it's has higher propelled I about pick improvement it's the as Kaizen the you get when least just act the enhancement that mix, with to members, a that digital then last single had our been of thing that which the more around starting. which know more hard talk of number is maybe that's use me to has leadership AI. of If owner margin International And like the and probably found ever last scores, engagement a most you distribution the that the things be the margins. Simplify of the as engagement. and but margin as We team And of we've years, over move design, largest will heard So not we we innovative, the continue those some what's to it's and part the our normal that Lean date. success a to their is spirit thinking, engagement what

on They're and they're engagement scores success. parallel activity You hand. in a our path can hand Kaizen driving our working plot locked and

And It's at to a we that compounding earlier of not things. improvement effect one it's margins, of not keep single I the So that's to one thing, going the EPS, going. you We're slide stop. Joel. compound and of number that on showed - year-over-year. doubling guess The compounding going showed

Joel Tiss

That’s great. Thank you.

Todd Leombruno

Thanks, time Joel. Dawn, for more think I have Hey, we one question.

in is more we'll queue, take next one whoever So question.

Operator

Okay.

question We have David with a of from Raso ISI. Evercore the line

David Raso

much. order the very I you apologize. commentary. I didn't follow Thank

you to quarter the the think, it I'm running, comment. said Was understand I whole that current that that XX%. just industrial? first you clarify You that? company? said orders were Can Was trying

Tom Williams

is Tom. this David,

in around apples-for-apples. making because around teens was organic last we of orders for just that And 'XX didn't coming QX company in was comment half versus I around contrasting So two have we the growing piece 'XX. low industrial if And versus growth made were, in we've 'XX entry we first 'XX. order correlation forecast the XX% acquisitions XX%. 'XX. acquisitions, at got And for the you growth got was mentioned right And it versus the teens. And low where I to 'XX, was because orders that has on sales our

teen of that low XX% XX% So they around type coalescing to all of kind level.

David Raso

that. appreciate we're right, I not But not - versus 'XX. comparing we're really it

last XX quarter, to at its be the orders if XX% like is guide Your you degradation. 'XX if more the stack, want you And the it, and were in so of know, maybe versus look single you will orders over industrial 'XX. XX%, or challenging stack comps, double see less

you the Just are correlations leading I versus significantly just commentary actual because industrial am breaking right to how you're just So understand, so the trying just first we guiding. order a now about is we the a are are orders slowdown? Or and understand, ago, year confusing what versus half clear, growth be 'XX? to versus the trends saying sales

Tom Williams

was the was a is percent conditions which was more announced. trying quarter back Because that I was for plus XX Aerospace, the to international for activity X that we've to XX. something great when on against plus you because ago, It normalized normal against year-over-year you over because shutdown happened. is that and what minus Right. give extrapolate can't

take number growth. organic can't it and that extrapolate into you So

with. benchmark I that. come normalized, all back of to came kind activity inputs is and This the to we we that's more up into to that other went data put various got - the that some You was what back so when

of why order so to this growth. a entry XX% organic into just trying a take that went to a science XX% you're So contrast you have there's going number. lot can't and And I'm

David Raso

us the with But orders help are how would currently versus year you trending be ago? able a to

Tom Williams

Well, thing orders continued sequentially America, in to grow it through it and happened and better quarter, every month the North quarter. international. QX went I at mean, XX% XX%, same through to I it the take if was got

don't process, the not that anybody quarter. want through are down, So we to through building David. the Things things built momentum I thought saw quarter. take definitely slowing

David Raso

XX, when the you not of a or comps That's look industrial but fact that up the I'm taking dramatic quarters of current this a thinking to if so. the mean, on if I for in a making is little that's what half make thinking maybe at - tricky a were just should of you've it's XX have Tom, this I a lot exactly correlation just somewhat kind things two sure first the don't XX want But conversion, I to quarter, ship. be it And quarter, still clear, then away walk then comp. north the some have we the usually to got you running past low right, a comps, is quarter, industrial longer doesn't And the next little I'm XX, normal pretty be orders be is know slowdown. sense teens.

a day? the saying slowdown the you're not you're at seeing end So of

Tom Williams

absolutely I'm no be there's slowdown. very going clear, to

draw order curve You it's and growth. entry there a can't say XX% a XX% take rate linear a and organic

David Raso

you. hear I

perceive March Lastly, how when margin us way here journey by last Design. the us, on Simple by of Just to a journey. think you you you about improvement feel can of from frame pretty bit been the five we've the Design, kind still versus to kind early little about frame meeting, we Simple it for given for in the comment the Any years?

Tom Williams

through full And say we're would going going to continue in want better. a can is and future. if the that do - baked of But do I explanation. context that get indicator, to is how draw that into we're just it, past and to if fully an to the I going all you future the strategies the given you

David Raso

that. appreciate I No,

Okay, thank you very much.

Todd Leombruno

future. questions investor further a thank or Take calls great I available care. Parker. has just joining 'XX your our in a the today. to All on to want again, does great hope you and for Appreciate interest you FY of and day And here requirements are obviously made day thank need of foreseeable representative conclude analysts Robin weekend. pending everyone all of QX takeover right. all Jeff Meggitt us code the it, have consistent for the continue participate And UK to David. if for and a and will clarification. further on webcast. any transaction, always the say our I everyone you earnings just This Citibank our comments regarding Monday with And

Parker-Hannifin (PH) 5 Aug 212021 Q4 Earnings call transcript