GlobeNewswire Inc | Feb 4, 2021 07:30AM EST

February 04, 2021

- Second quarter record net income of $447.3 million, EPS at $3.41 as reported, or $3.44 adjusted- Second quarter record total segment operating margin of 17.4% as reported, or 20.4% adjusted- Second quarter EBITDA margin was 23.1% as reported, or 20.8% adjusted- Cash flow from operations was a Q2 YTD record at $1.35 billion, or 20.4% of sales- Cumulative debt reduction reaches approximately $2.8 billion in the last 14 months- Company increases fiscal 2021 EPS guidance midpoint to $12.15 as reported, or $13.90 adjusted

CLEVELAND, Feb. 04, 2021 (GLOBE NEWSWIRE) -- Parker Hannifin Corporation (NYSE: PH), the global leader in motion and control technologies, today reported results for the fiscal 2021 second quarter ended December31, 2020. Fiscal 2021 second quarter sales were $3.41 billion, compared with $3.50 billion in the prior year quarter. Net income was a record $447.3 million, which includes a gain of approximately $76.4 million from the sale of land, compared with $204.5 million in the second quarter of fiscal 2020. Fiscal 2021 second quarter earnings per share were $3.41, compared with $1.57 in the prior year quarter. Adjusted earnings per share increased 15% to $3.44, compared with adjusted earnings per share of $2.98 in the second quarter of fiscal 2020. Fiscal year-to-date cash flow from operations was a second quarter record at $1.35 billion and reached 20.4% of sales, compared with $826.0 million or 12.1% of sales in the prior year period. A reconciliation of non-GAAP measures is included in the financial tables of this press release.

Parker team members continue to deliver outstanding results including many records in a challenging environment, said Chairman and Chief Executive Officer, Tom Williams. Our current results reflect the combined effect of significant operating performance improvement via The Win Strategy and strategic acquisitions that have strengthened our portfolio. We achieved second quarter records in total segment operating margin, earnings and year-to-date operating cash flow. We also delivered better than expected organic sales reflecting a more resilient business portfolio and strong performance in our Diversified Industrial segment. This was also the first quarter since September 2018 that industrial order rates were positive. Second quarter adjusted segment operating margin increased 250 basis points year over year and adjusted EBITDA margin increased 230 basis points compared with the prior year quarter.

During the quarter, the company made debt repayments of $767 million, further accelerating the cumulative debt reduction to approximately $2.8 billion over the last 14 months. The company has also reinitiated its 10b5-1 share repurchase program, which had been temporarily suspended in March 2020, and intends to resume quarterly share repurchases under the program of $50 million in the fiscal 2021 third quarter, effective February 5, 2021.

Segment ResultsDiversified Industrial Segment: North American second quarter sales decreased 3% to $1.6 billion, and operating income was $281.6 million, compared with $211.3 million in the same period a year ago. International second quarter sales increased 10% to $1.3 billion, and operating income was $220.2 million, compared with $153.8 million in the same period a year ago.

Aerospace Systems Segment: Second quarter sales decreased 20% to $585.4 million, and operating income was $90.7 million, compared with $121.0 million in the same period a year ago.

Parker reported the following orders for the quarter ending December31, 2020, compared with the same quarter a year ago:

-- Orders were flat for total Parker -- Orders increased 1% in the Diversified Industrial North America businesses -- Orders increased 10% in the Diversified Industrial International businesses -- Orders decreased 18% in the Aerospace Systems Segment on a rolling 12-month average basis

OutlookFor the fiscal year ending June 30, 2021, the company has increased guidance for earnings per share to the range of $11.90 to $12.40, or $13.65 to $14.15 on an adjusted basis. Guidance assumes an organic sales decline in the range of (4.5%) to (2.5%). Fiscal year 2021 guidance is adjusted on a pre-tax basis for expected business realignment expenses of approximately $60 million, costs to achieve of approximately $15 million, acquisition-related intangible asset amortization of approximately $322 million and a gain on the sale of land of approximately $101 million. A reconciliation of forecasted earnings per share to adjusted forecasted earnings per share is included in the financial tables of this press release.

Williams added, Our performance in the first half of this year has exceeded our expectations, and as a result, we are increasing our full year guidance for fiscal 2021. While the outlook for key end markets continues to be uncertain in the current environment, we remain committed to driving improvements through the execution of the Win Strategy and making continued progress toward our long-term financial goals."

NOTICE OF CONFERENCE CALL Parker Hannifin's conference call and slide presentation to discuss its fiscal 2021 second quarter 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 total segment operating margin; (c) EBITDA margin; and (d) adjusted EBITDA margin. The adjusted earnings per share and total segment operating margin measures are presented to allow investors and the company to meaningfully evaluate changes in earnings per share 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, 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 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 - DECEMBER 31, 2020CONSOLIDATED STATEMENT OF INCOME(Unaudited) Three Months Ended December 31, Six Months Ended December 31,(Dollars inthousands, except 2020 2019 2020 2019 per share amounts)Net sales $ 3,411,905 $ 3,497,974 $ 6,642,445 $ 6,832,485 Cost of sales 2,519,545 2,682,765 4,903,873 5,162,506 Selling, generaland administrative 356,572 491,121 726,423 890,300 expensesInterest expense 62,990 82,891 128,948 152,847 Other (income), net (103,714 ) (13,549 ) (108,606 ) (61,070 )Income before 576,512 254,746 991,807 687,902 income taxesIncome taxes 129,015 50,148 222,593 144,263 Net income 447,497 204,598 769,214 543,639 Less:Noncontrolling 191 124 499 267 interestsNet incomeattributable to $ 447,306 $ 204,474 $ 768,715 $ 543,372 common shareholders Earnings per shareattributable to commonshareholders:Basic earnings per $ 3.47 $ 1.59 $ 5.97 $ 4.23 shareDiluted earnings $ 3.41 $ 1.57 $ 5.89 $ 4.17 per share Average sharesoutstanding during 129,013,781 128,396,933 128,860,763 128,430,463 period - BasicAverage sharesoutstanding during 131,075,655 130,495,381 130,482,564 130,154,079 period - Diluted CASH DIVIDENDS PER COMMON SHARE(Unaudited) Three Months Ended December 31, Six Months Ended December 31,(Amounts in 2020 2019 2020 2019 dollars)Cash dividends per $ 0.88 $ 0.88 $ 1.76 $ 1.76 common share RECONCILIATION OF EARNINGS PER DILUTED SHARE TO ADJUSTED EARNINGS PER DILUTEDSHARE(Unaudited) Three Months Ended December 31, Six Months Ended December 31,(Amounts in 2020 2019 2020 2019 dollars)Earnings per $ 3.41 $ 1.57 $ 5.89 $ 4.17 diluted shareAdjustments: Acquired intangibleasset amortization 0.62 0.57 1.25 0.95 expenseBusiness 0.14 0.08 0.26 0.12 realignment chargesLord costs to 0.02 0.05 0.05 0.08 achieveExotic costs to ? ? ? 0.01 achieveAcquisition-related ? 1.14 ? 1.28 expensesGain on sale of (0.77 ) ? (0.77 ) ? landTax effect of 0.02 (0.43 ) (0.16 ) (0.58 )adjustments^1Adjusted earnings $ 3.44 $ 2.98 $ 6.52 $ 6.03 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 - DECEMBER 31, 2020RECONCILIATION OF EBITDA TO ADJUSTED EBITDA(Unaudited) Three Months Ended December Six Months Ended December 31, 31,(Dollars in 2020 2019 2020 2019 thousands)Net sales $ 3,411,905 $ 3,497,974 $ 6,642,445 $ 6,832,485 Net income $ 447,497 $ 204,598 $ 769,214 $ 543,639 Income taxes 129,015 50,148 222,593 144,263 Depreciation and 149,818 144,229 298,260 253,300 amortizationInterest expense 62,990 82,891 128,948 152,847 EBITDA 789,320 481,866 1,419,015 1,094,049 Adjustments: Business realignment 18,767 9,836 34,468 14,559 chargesLord costs to achieve 3,249 6,725 6,864 10,139 Exotic costs to 343 489 675 1,084 achieveAcquisition-related ? 148,467 ? 165,916 expensesGain on sale of land (100,893 ) ? (100,893 ) ? Adjusted EBITDA $ 710,786 $ 647,383 $ 1,360,129 $ 1,285,747 EBITDA margin 23.1 % 13.8 % 21.4 % 16.0 %Adjusted EBITDA 20.8 % 18.5 % 20.5 % 18.8 %margin

PARKER HANNIFIN CORPORATION - DECEMBER 31, 2020BUSINESS SEGMENT INFORMATION(Unaudited) Three Months Ended December 31, Six Months Ended December 31,(Dollars in 2020 2019 2020 2019 thousands)Net sales Diversified Industrial:North America $ 1,566,877 $ 1,615,852 $ 3,094,988 $ 3,240,457 International 1,259,625 1,147,084 2,388,876 2,225,934 Aerospace 585,403 735,038 1,158,581 1,366,094 SystemsTotal net $ 3,411,905 $ 3,497,974 $ 6,642,445 $ 6,832,485 salesSegmentoperating incomeDiversified Industrial:North America $ 281,619 $ 211,339 $ 550,452 $ 486,531 International 220,213 153,816 407,114 322,389 Aerospace 90,729 121,039 177,495 244,019 SystemsTotal segmentoperating 592,561 486,194 1,135,061 1,052,939 incomeCorporategeneral and 38,720 35,660 75,455 84,562 administrativeexpensesIncome beforeinterest 553,841 450,534 1,059,606 968,377 expense andother expenseInterest 62,990 82,891 128,948 152,847 expenseOther (income) (85,661 ) 112,897 (61,149 ) 127,628 expenseIncome before $ 576,512 $ 254,746 $ 991,807 $ 687,902 income taxes

PARKER HANNIFIN CORPORATION - DECEMBER 31, 2020RECONCILIATION OF TOTAL SEGMENT OPERATING MARGIN TO ADJUSTED TOTAL SEGMENTOPERATING MARGIN (Unaudited) Three Months Ended Three Months Ended(Dollars in December 31, 2020 December 31, 2019thousands) Operating Operating Operating Operating income margin income marginTotal segment $ 592,561 17.4 % $ 486,194 13.9 %operating incomeAdjustments: Acquired intangibleasset amortization 81,237 73,956 expenseBusiness realignment 17,922 9,719 chargesLord costs to achieve 3,249 6,725 Exotic costs to 343 489 achieveAcquisition-related ? 48,725 expensesAdjusted totalsegment operating $ 695,312 20.4 % $ 625,808 17.9 %income Six Months Ended Six Months Ended December 31, 2020 December 31, 2019 Operating Operating Operating Operating income margin income marginTotal segment $ 1,135,061 17.1 % $ 1,052,939 15.4 %operating incomeAdjustments: Acquired intangibleasset amortization 162,940 123,389 expenseBusiness realignment 32,445 14,437 chargesLord costs to achieve 6,864 10,139 Exotic costs to 675 1,084 achieveAcquisition-related ? 51,244 expensesAdjusted totalsegment operating $ 1,337,985 20.1 % $ 1,253,232 18.3 %income

PARKER HANNIFIN CORPORATION - DECEMBER 31, 2020CONSOLIDATED BALANCE SHEET(Unaudited) December 31, June 30, December 31, (Dollars in thousands) 2020 2020 2019 Assets Current assets: Cash and cash $ 564,734 $ 685,514 $ 948,355 equivalentsMarketable securities 43,314 70,805 145,120 and other investmentsTrade accounts 1,816,731 1,854,398 1,973,187 receivable, netNon-trade and notes 312,590 244,870 319,126 receivableInventories 1,870,948 1,814,631 2,014,260 Prepaid expenses and 191,362 214,986 261,103 otherTotal current assets 4,799,679 4,885,204 5,661,151 Property, plant and 2,302,142 2,292,735 2,335,940 equipment, netDeferred income taxes 134,325 126,839 114,032 Investments and other 795,073 764,563 941,588 assetsIntangible assets, net 3,695,194 3,798,913 4,036,108 Goodwill 8,101,016 7,869,935 7,955,170 Total assets $ 19,827,429 $ 19,738,189 $ 21,043,989 Liabilities and equity Current liabilities: Notes payable andlong-term debt payable $ 610,909 $ 809,529 $ 1,604,318 within one yearAccounts payable, 1,343,011 1,111,759 1,311,733 tradeAccrued payrolls and 345,973 424,231 372,549 other compensationAccrued domestic and 218,624 195,314 165,265 foreign taxesOther accrued 688,566 607,540 637,257 liabilitiesTotal current 3,207,083 3,148,373 4,091,122 liabilitiesLong-term debt 6,602,309 7,652,256 8,141,220 Pensions and otherpostretirement 1,843,209 1,887,414 1,366,814 benefitsDeferred income taxes 420,699 382,528 569,582 Other liabilities 631,825 539,089 532,750 Shareholders' equity 7,105,982 6,113,983 6,330,175 Noncontrolling 16,322 14,546 12,326 interestsTotal liabilities and $ 19,827,429 $ 19,738,189 $ 21,043,989 equity

PARKER HANNIFIN CORPORATION - DECEMBER 31, 2020CONSOLIDATED STATEMENT OF CASH FLOWS(Unaudited) Six Months Ended December 31,(Dollars in thousands) 2020 2019 Cash flows from operating activities: Net income $ 769,214 $ 543,639 Depreciation and amortization 298,260 253,300 Share incentive plan compensation 79,833 73,069 Gain on property, plant and equipment (102,565 ) (4,478 )Gain on marketable securities (6,959 ) (1,969 )Gain on investments (4,783 ) (1,849 )Net change in receivables, inventories and trade 269,322 227,247 payablesNet change in other assets and liabilities 47,707 (278,168 )Other, net 3,959 15,177 Net cash provided by operating activities 1,353,988 825,968 Cash flows from investing activities: Acquisitions (net of cash of $82,192 in 2019) ? (5,075,605 )Capital expenditures (92,907 ) (118,593 )Proceeds from sale of property, plant and equipment 124,428 20,993 Purchases of marketable securities and other (16,029 ) (190,129 )investmentsMaturities and sales of marketable securities and 52,019 198,872 other investmentsOther 11,183 9,374 Net cash provided by (used in) investing activities 78,694 (5,155,088 )Cash flows from financing activities: Net payments for common stock activity (57,688 ) (134,892 )Net (payments for) proceeds from debt (1,324,348 ) 2,416,222 Dividends paid (227,228 ) (227,025 )Net cash (used in) provided by financing activities (1,609,264 ) 2,054,305 Effect of exchange rate changes on cash 55,802 3,403 Net decrease in cash and cash equivalents (120,780 ) (2,271,412 )Cash and cash equivalents at beginning of year 685,514 3,219,767 Cash and cash equivalents at end of period $ 564,734 $ 948,355

PARKER HANNIFIN CORPORATION - DECEMBER 31, 2020RECONCILIATION OF FORECASTED EARNINGS PER DILUTED SHARE TO ADJUSTED FORECASTEDEARNINGS PER DILUTED SHARE (Unaudited) (Amounts in dollars) Fiscal Year 2021Forecasted earnings per diluted share $11.90 to $12.40Adjustments: Business realignment charges 0.46Costs to achieve 0.11Acquisition-related intangible asset amortization expense 2.47Gain on sale of land (0.77)Tax effect of adjustments^1 (0.52)Adjusted forecasted earnings per diluted share $13.65 to $14.15 ^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