GlobeNewswire Inc | Aug 6, 2020 07:30AM EDT

August 06, 2020

- Fourth quarter EPS were $2.27 as reported, or $2.55 adjusted- Fourth quarter total segment operating margin was 15.8% as reported, or 17.4% adjusted- Fourth quarter EBITDA margin was 18.7% as reported, or 20.4% adjusted- Full year cash flow from operations was an all-time record at $2.1 billion, or 15.1% of sales- Full year total segment operating margin was 15.6% as reported, or 16.8% adjusted- Full year EBITDA margin was 17.2% as reported, or 19.3% adjusted

CLEVELAND, Aug. 06, 2020 (GLOBE NEWSWIRE) -- Parker Hannifin Corporation (NYSE: PH), the global leader in motion and control technologies, today reported results for the fiscal 2020 fourth quarter and full year ended June30, 2020. Fiscal 2020 fourth quarter sales were $3.16 billion, compared with $3.68 billion in the prior year quarter. Net income was $295.7 million, compared with $413.7 million in the fourth quarter of fiscal 2019. Fiscal 2020 fourth quarter earnings per share were $2.27, compared with $3.17 in the prior year quarter. Adjusted earnings per share were $2.55, compared with adjusted earnings per share of $3.31 in the fourth quarter of fiscal 2019. A reconciliation of non-GAAP measures is included in the financial tables of this press release.

For the full year, fiscal 2020 sales were $13.70 billion, compared with $14.32 billion in fiscal 2019. Net income was $1.21 billion, compared with $1.51 billion in fiscal 2019. Fiscal 2020 earnings per share were $9.29, compared with $11.48 per share in the prior year. Adjusted earnings per share were $10.79, compared with $11.85 per share in fiscal 2019. Cash flow from operations for fiscal 2020 was a record at $2.07 billion or 15.1% of sales, compared with $1.73 billion or 12.1% of sales in the prior year period. Excluding a discretionary pension contribution, cash flow from operations for fiscal 2019 was 13.5% of sales.

In light of the economic crisis resulting from the ongoing COVID-19 pandemic, our global team delivered outstanding performance in the fiscal 2020 fourth quarter, said Chairman and Chief Executive Officer, Tom Williams. The improvement of Parkers portfolio through transformative acquisitions, continued execution of The Win Strategy, and near-term actions to reduce costs and preserve cash, have positioned us to achieve exceptional levels of performance during such a steep decline in demand. Despite an organic sales decline of 21%, adjusted total segment operating margin was 17.4% and our adjusted EBITDA margin was impressive at 20.4% in the quarter. Our full year cash flow from operations was a record, surpassing the $2 billion mark for the first time. We continued to aggressively reduce our debt by making repayments totaling $687 million in the fourth quarter and $1.3 billion year to date, which is approximately 25% of the acquisition related debt issued.

Williams added, Our global team has not only delivered outstanding financial performance but has also taken actions to manage the impact of the pandemic on our operations. Since the early stages of this global crisis, we have maintained manufacturing capacity across the enterprise, demonstrating the essential nature of Parker's technologies in every major country in the world. We continue to make the safety of our team members, their families and our communities our highest priority and have implemented rigorous safety protocols globally. My thanks to all Parker team members who continue to serve our customers, many of whom are on the front-line in the fight against the pandemic, and keep our operations running safely and efficiently.

Segment ResultsDiversified Industrial Segment: North American fourth quarter sales decreased 18% to $1.4 billion, and operating income was $219.8 million, compared with $318.2 million in the same period a year ago. International fourth quarter sales decreased 13% to $1.1 billion, and operating income was $175.4 million, compared with $201.0 million in the same period a year ago.

Aerospace Systems Segment: Fourth quarter sales decreased 8% to $624.0 million, and operating income was $105.4 million, compared with $121.7 million in the same period a year ago.

Parker reported the following orders for the quarter ending June30, 2020, compared with the same quarter a year ago:

-- Orders decreased 22% for total Parker -- Orders decreased 29% in the Diversified Industrial North America businesses -- Orders decreased 21% in the Diversified Industrial International businesses -- Orders decreased 5% in the Aerospace Systems Segment on a rolling 12-month average basis

OutlookAs previously communicated at our March 2020 Investor Meeting, going forward, Parker will include intangible asset amortization expense related to acquisitions as a line item in its adjustments to earnings. The company believes this change will lead to a better representation of its core operating earnings, especially since amortization expense has become much more material because of recent acquisitions.

For the fiscal year ending June 30, 2021, the company has issued guidance for earnings per share in the range of $7.41 to $8.41, or $9.80 to $10.80 on an adjusted basis. Fiscal year 2021 guidance is adjusted on a pre-tax basis for expected business realignment expenses of approximately $65 million, costs to achieve of approximately $19 million and acquisition-related intangible asset amortization of approximately $321 million. Guidance assumes an organic sales decline in the range of 13% to 9%. A reconciliation of forecasted earnings per share to adjusted forecasted earnings per share is included in the financial tables of this press release.

Commenting on the outlook, Williams added, We expect that the global COVID-19 pandemic will continue to have a negative effect on economic activity in fiscal 2021. We will continue to manage our costs and preserve cash for the current environment and position ourselves for economic recovery. The actions we have taken under the Win Strategy to strengthen our portfolio and improve our performance have built a business that is better equipped than ever before to be resilient across macro-economic cycles. Importantly, we remain committed to achieving our long-term targets for sales growth, margins, earnings growth and cash flow that would solidify Parker as a top quartile performer. While significant challenges lie ahead, we are positioned to weather these conditions and emerge stronger than ever before. Guided by our purpose: Enabling Engineering Breakthroughs that lead to a Better Tomorrow, Parker has a very bright future."

NOTICE OF CONFERENCE CALL Parker Hannifin's conference call and slide presentation to discuss its fiscal 2020 fourth quarter and full year results are available to all interested parties via live webcast today at 11:00 a.m. ET, at www.phstock.com. A replay of the webcast will be available on the site approximately one hour after the completion of the call and will remain available for one year. To register for e-mail notification of future events please visit www.phstock.com.

About Parker HannifinParker Hannifin is a Fortune 250 global leader in motion and control technologies. For more than a century the company has been enabling engineering breakthroughs that lead to a better tomorrow. Parker has increased its annual dividend per share paid to shareholders for 64 consecutive fiscal years, among the top five longest-running dividend-increase records in the S&P 500 index. Learn more at www.parker.com or @parkerhannifin.

Note on OrdersOrders provide near-term perspective on the company's outlook, particularly when viewed in the context of prior and future quarterly order rates. However, orders are not in themselves an indication of future performance. All comparisons are at constant currency exchange rates, with the prior year restated to the current-year rates. All exclude acquisitions until they can be reflected in both the numerator and denominator. Aerospace comparisons are rolling 12-month average computations. The total Parker orders number is derived from a weighted average of the year-over-year quarterly % change in orders for Diversified Industrial North America and Diversified Industrial International, and the year-over-year 12-month rolling average of orders for the Aerospace Systems Segment.

Note on Net IncomeNet income referenced in this press release is equal to net income attributable to common shareholders.

Note on Non-GAAP Financial MeasuresThis press release contains references to non-GAAP financial information including (a) adjusted earnings per share; (b) adjusted cash flow from operations; (c) adjusted total segment operating margin; EBITDA margin; and adjusted EBITDA margin. The adjusted earnings per share, cash flow from operations and total segment operating margin measures are presented to allow investors and the company to meaningfully evaluate changes in earnings per share, cash flows from operations and total segment operating margin on a comparable basis from period to period. This press release also contains references to EBITDA, EBITDA margin and adjusted EBITDA margin. EBITDA is defined as earnings before interest, taxes, depreciation and amortization. Although EBITDA, EBITDA margin and adjusted EBITDA margin are not measures of performance calculated in accordance with GAAP, we believe that they are useful to an investor in evaluating the results of this quarter versus the prior period. A reconciliation of non-GAAP measures is included in the financial tables of this press release.

Forward-Looking StatementsForward-looking statements contained in this and other written and oral reports are made based on known events and circumstances at the time of release, and as such, are subject in the future to unforeseen uncertainties and risks. These statements may be identified from the use of forward-looking terminology such as anticipates, believes, may, should, could, potential, continues, plans, forecasts, estimates, projects, predicts, would, intends, anticipates, expects, targets, is likely, will, or the negative of these terms and similar expressions, and include all statements regarding future performance, earnings projections, events or developments. Parker cautions readers not to place undue reliance on these statements. It is possible that the future performance and earnings projections of the company, including its individual segments, may differ materially from current expectations, depending on economic conditions within its mobile, industrial and aerospace markets, and the company's ability to maintain and achieve anticipated benefits associated with announced realignment activities, strategic initiatives to improve operating margins, actions taken to combat the effects of the current economic environment, and growth, innovation and global diversification initiatives. Additionally, the actual impact of changes in tax laws in the United States and foreign jurisdictions and any judicial or regulatory interpretation thereof on future performance and earnings projections may impact the companys tax calculations. A change in the economic conditions in individual markets may have a particularly volatile effect on segment performance.

Among other factors which may affect future performance are: the impact of the global outbreak of COVID-19 and governmental and other actions taken in response; changes in business relationships with and purchases by or from major customers, suppliers or distributors, including delays or cancellations in shipments; disputes regarding contract terms or significant changes in financial condition, changes in contract cost and revenue estimates for new development programs and changes in product mix; ability to identify acceptable strategic acquisition targets; uncertainties surrounding timing, successful completion or integration of acquisitions and similar transactions, including the integration of CLARCOR, LORD Corporation or Exotic Metals; the ability to successfully divest businesses planned for divestiture and realize the anticipated benefits of such divestitures; the determination to undertake business realignment activities and the expected costs thereof and, if undertaken, the ability to complete such activities and realize the anticipated cost savings from such activities; ability to implement successfully capital allocation initiatives, including timing, price and execution of share repurchases; availability, limitations or cost increases of raw materials, component products and/or commodities that cannot be recovered in product pricing; ability to manage costs related to insurance and employee retirement and health care benefits; compliance costs associated with environmental laws and regulations; potential labor disruptions; threats associated with and efforts to combat terrorism and cyber-security risks; uncertainties surrounding the ultimate resolution of outstanding legal proceedings, including the outcome of any appeals; global competitive market conditions, including global reactions to U.S. trade policies, and resulting effects on sales and pricing; and global economic factors, including manufacturing activity, air travel trends, currency exchange rates, difficulties entering new markets and general economic conditions such as inflation, deflation, interest rates and credit availability, as well as uncertainties associated with the timing and conditions surrounding the return to service of the Boeing 737 MAX. The company makes these statements as of the date of this disclosure and undertakes no obligation to update them unless otherwise required by law.

PARKER HANNIFIN CORPORATION - JUNE 30, 2020CONSOLIDATED STATEMENT OF INCOME(Unaudited) Three Months Ended June 30, Twelve Months Ended June 30,(Dollars inthousands, except 2020 2019 2020 2019 per share amounts)Net sales $ 3,160,603 $ 3,681,467 $ 13,695,520 $ 14,320,324 Cost of sales 2,357,319 2,739,578 10,286,518 10,703,484 Selling, generaland administrative 352,793 391,493 1,656,553 1,543,939 expensesInterest expense 74,549 50,072 308,161 190,138 Other expense 5,374 (13,024 ) (68,339 ) (50,662 )(income), netIncome before 370,568 513,348 1,512,627 1,933,425 income taxesIncome taxes 74,873 99,610 305,924 420,494 Net income 295,695 413,738 1,206,703 1,512,931 Less:Noncontrolling (21 ) 70 362 567 interestsNet incomeattributable to $ 295,716 $ 413,668 $ 1,206,341 $ 1,512,364 common shareholders Earnings per shareattributable to commonshareholders:Basic earnings per $ 2.30 $ 3.22 $ 9.39 $ 11.63 shareDiluted earnings $ 2.27 $ 3.17 $ 9.29 $ 11.48 per share Average sharesoutstanding during 128,523,334 128,561,494 128,418,495 129,997,640 period - BasicAverage sharesoutstanding during 129,993,001 130,460,247 129,805,034 131,781,617 period - Diluted CASH DIVIDENDS PER COMMON SHARE(Unaudited) Three Months Ended June 30, Twelve Months Ended June 30,(Amounts in 2020 2019 2020 2019 dollars)Cash dividends per $ 0.88 $ 0.88 $ 3.52 $ 3.16 common share RECONCILIATION OF EARNINGS PER DILUTED SHARE TO ADJUSTED EARNINGS PER DILUTEDSHARE(Unaudited) Three Months Ended June 30, Twelve Months Ended June 30,(Amounts in 2020 2019 2020 2019 dollars)Earnings per $ 2.27 $ 3.17 $ 9.29 $ 11.48 diluted shareAdjustments: Business 0.37 0.05 0.59 0.12 realignment chargesClarcor costs to ? 0.01 ? 0.10 achieveLord costs to 0.02 0.01 0.16 0.01 achieveExotic costs to ? ? 0.01 ? achieveAcquisition-related 0.03 0.12 1.45 0.12 expensesTax effect of (0.09 ) (0.05 ) (0.52 ) (0.09 )adjustments^1Favorable tax (0.05 ) ? (0.19 ) ? settlementTax expense related ? ? ? 0.11 to U.S. Tax ReformAdjusted earnings $ 2.55 $ 3.31 $ 10.79 $ 11.85 per diluted share ^1This line item reflects the aggregate tax effect of all non-tax adjustmentsreflected in the preceding line items of the table. We estimate the tax effectof each adjustment item by applying our overall effective tax rate forcontinuing operations to the pre-tax amount, unless the nature of the item and/or the tax jurisdiction in which the item has been recorded requiresapplication of a specific tax rate or tax treatment, in which case the taxeffect of such item is estimated by applying such specific tax rate or taxtreatment.

PARKER HANNIFIN CORPORATION - JUNE 30, 2020RECONCILIATION OF EBITDA TO ADJUSTED EBITDA(Unaudited) Three Months Ended June 30, Twelve Months Ended June 30,(Dollars in thousands) 2020 2019 2020 2019 Net sales $ 3,160,603 $ 3,681,467 $ 13,695,520 $ 14,320,324 Net income 295,695 413,738 1,206,703 1,512,931 Income taxes 74,873 99,610 305,924 420,494 Depreciation and 146,582 105,388 537,531 436,189 amortizationInterest expense 74,549 50,072 308,161 190,138 EBITDA 591,699 668,808 2,358,319 2,559,752 Adjustments: Business realignment 47,601 6,393 75,614 15,677 chargesClarcor costs to ? 928 ? 12,458 achieveLord costs to achieve 2,166 912 20,669 912 Exotic costs to achieve 338 ? 1,908 ? Acquisition-related 4,437 16,234 188,518 16,234 expensesAdjusted EBITDA $ 646,241 $ 693,275 $ 2,645,028 $ 2,605,033 EBITDA margin 18.7 % 18.2 % 17.2 % 17.9 %Adjusted EBITDA margin 20.4 % 18.8 % 19.3 % 18.2 %

PARKER HANNIFIN CORPORATION - JUNE 30, 2020BUSINESS SEGMENT INFORMATION(Unaudited) Three Months Ended June 30, Twelve Months Ended June 30,(Dollars in 2020 2019 2020 2019 thousands)Net sales Diversified Industrial:North America $ 1,440,263 $ 1,745,291 $ 6,456,298 $ 6,808,948 International 1,096,380 1,258,288 4,504,587 5,000,599 Aerospace 623,960 677,888 2,734,635 2,510,777 SystemsTotal net $ 3,160,603 $ 3,681,467 $ 13,695,520 $ 14,320,324 salesSegmentoperating incomeDiversified Industrial:North America $ 219,785 $ 318,175 $ 985,944 $ 1,138,586 International 175,420 201,004 674,763 804,890 Aerospace 105,441 121,650 476,900 487,757 SystemsTotal segmentoperating 500,646 640,829 2,137,607 2,431,233 incomeCorporategeneral and 37,999 47,977 170,903 194,994 administrativeexpensesIncome beforeinterest 462,647 592,852 1,966,704 2,236,239 expense andother expenseInterest 74,549 50,072 308,161 190,138 expenseOther expense 17,530 29,432 145,916 112,676 Income before $ 370,568 $ 513,348 $ 1,512,627 $ 1,933,425 income taxes

PARKER HANNIFIN CORPORATION - JUNE 30, 2020RECONCILIATION OF TOTAL SEGMENT OPERATING MARGIN TO ADJUSTED TOTAL SEGMENTOPERATING MARGIN (Unaudited) Three Months Ended Three Months Ended(Dollars in thousands) June 30, 2020 June 30, 2019 Operating Operating Operating Operating income margin income marginTotal segment operating $ 500,646 15.8 % $ 640,829 17.4 %incomeAdjustments: Business realignment 46,619 6,219 chargesClarcor costs to achieve ? 1,072 Lord costs to achieve 2,166 912 Exotic costs to achieve 338 ? Adjusted total segment $ 549,769 17.4 % $ 649,032 17.6 %operating income Twelve Months Ended Twelve Months Ended June 30, 2020 June 30, 2019 Operating Operating Operating Operating income margin income marginTotal segment operating $ 2,137,607 15.6 % $ 2,431,233 17.0 %incomeAdjustments: Business realignment 74,389 15,503 chargesClarcor costs to achieve ? 12,327 Lord costs to achieve 20,669 912 Exotic costs to achieve 1,908 ? Acquisition-related 69,304 ? expensesAdjusted total segment $ 2,303,877 16.8 % $ 2,459,975 17.2 %operating income

PARKER HANNIFIN CORPORATION - JUNE 30, 2020CONSOLIDATED BALANCE SHEET(Unaudited) June 30 June 30(Dollars in thousands) 2020 2019Assets Current assets: Cash and cash equivalents $ 685,514 $ 3,219,767Marketable securities and other investments 70,805 150,931Trade accounts receivable, net 1,854,398 2,131,054Non-trade and notes receivable 244,870 310,708Inventories 1,814,631 1,678,132Prepaid expenses and other 214,986 182,494Total current assets 4,885,204 7,673,086Plant and equipment, net 2,292,735 1,768,287Deferred income taxes 126,839 150,462Investments and other assets 764,563 747,773Intangible assets, net 3,798,913 1,783,277Goodwill 7,869,935 5,453,805Total assets $ 19,738,189 $ 17,576,690 Liabilities and equity Current liabilities: Notes payable and long-term debt payable within $ 809,529 $ 587,014one yearAccounts payable, trade 1,111,759 1,413,155Accrued payrolls and other compensation 424,231 426,285Accrued domestic and foreign taxes 195,314 167,312Other accrued liabilities 607,540 558,007Total current liabilities 3,148,373 3,151,773Long-term debt 7,652,256 6,520,831Pensions and other postretirement benefits 1,887,414 1,304,379Deferred income taxes 382,528 193,066Other liabilities 539,089 438,489Shareholders' equity 6,113,983 5,961,969Noncontrolling interests 14,546 6,183Total liabilities and equity $ 19,738,189 $ 17,576,690

PARKER HANNIFIN CORPORATION - JUNE 30, 2020CONSOLIDATED STATEMENT OF CASH FLOWS(Unaudited) Twelve Months Ended June 30,(Dollars in thousands) 2020 2019 Cash flows from operating activities: Net income $ 1,206,703 $ 1,512,931 Depreciation and amortization 537,531 436,189 Stock incentive plan compensation 111,375 104,078 Loss on sale of businesses ? 5,854 (Gain) loss on plant and equipment and intangible (1,850 ) 5,091 assets(Gain) loss on marketable securities (587 ) 7,563 Gain on investments (2,084 ) (16,749 )Net change in receivables, inventories and trade 409,252 (61,762 )payablesNet change in other assets and liabilities (211,049 ) (301,480 )Other, net 21,658 38,425 Net cash provided by operating activities 2,070,949 1,730,140 Cash flows from investing activities: Acquisitions (less acquired cash of $82,192 in 2020 (5,076,064 ) (2,042 )and $690 in 2019)Capital expenditures (232,591 ) (195,089 )Proceeds from sale of plant and equipment 26,345 46,592 Proceeds from sale of businesses ? 19,678 Purchases of marketable securities and other (194,742 ) (181,780 )investmentsMaturities and sales of marketable securities and 275,483 74,908 other investmentsOther 177,576 19,223 Net cash used in investing activities (5,023,993 ) (218,510 )Cash flows from financing activities: Net payments for common stock activity (213,426 ) (857,577 )Acquisition of noncontrolling interests (1,200 ) ? Net proceeds from debt 1,117,774 2,172,351 Dividends paid (453,838 ) (412,468 )Net cash provided by financing activities 449,310 902,306 Effect of exchange rate changes on cash (30,519 ) (16,306 )Net (decrease) increase in cash and cash (2,534,253 ) 2,397,630 equivalentsCash and cash equivalents at beginning of period 3,219,767 822,137 Cash and cash equivalents at end of period $ 685,514 $ 3,219,767

RECONCILIATION OF CASH FLOW FROM OPERATIONS TO ADJUSTED CASH FLOW FROMOPERATIONS(Unaudited) Twelve Months Ended Twelve Months Ended(Dollars in thousands) June 30, 2020 Percent of June 30, 2019 Percent of sales salesAs reported cash flow $ 2,070,949 15.1 % $ 1,730,140 12.1 %from operationsDiscretionary pension ? 200,000 contributionAdjusted cash flow $ 2,070,949 15.1 % $ 1,930,140 13.5 %from operations

PARKER HANNIFIN CORPORATION - JUNE 30, 2020

RECONCILIATION OF FORECASTED EARNINGS PER DILUTED SHARE TO ADJUSTED FORECASTEDEARNINGS PER DILUTED SHARE (Unaudited) (Amounts in dollars) Fiscal Year 2021Forecasted earnings per diluted share $7.41 to $8.41Adjustments: Business realignment charges 0.50Costs to achieve 0.14Acquisition-related intangible asset amortization expense 2.46Tax effect of adjustments^1 (0.71)Adjusted forecasted earnings per diluted share $9.80 to $10.80 ^1This line item reflects the aggregate tax effect of all non-tax adjustmentsreflected in the preceding line items of the table. We estimate the tax effectof each adjustment item by applying our overall effective tax rate forcontinuing operations to the pre-tax amount, unless the nature of the item and/or the tax jurisdiction in which the item has been recorded requiresapplication of a specific tax rate or tax treatment, in which case the taxeffect of such item is estimated by applying such specific tax rate or taxtreatment.

Contact: Media - Aidan Gormley - Director, Global Communications and 216-896-3258 Branding aidan.gormley@parker.com Financial Analysts - Robin J. Davenport, Vice President, Corporate Finance 216-896-2265 rjdavenport@parker.com