GlobeNewswire Inc | Apr 29, 2021 07:30AM EDT

April 29, 2021

- All-time quarterly records for net income, EPS and segment operating margins- Net income was $471.6 million; EPS were $3.59 as reported, or $4.11 adjusted- EBITDA margin was 21.6% as reported, or 21.8% adjusted- Total segment operating margin reached 19.0% as reported, or 21.4% adjusted- Cash flow from operations was a Q3 YTD record at $1.88 billion, or 18.1% of sales- Total order rates turned positive, led by strong demand in Diversified Industrial Segment

CLEVELAND, April 29, 2021 (GLOBE NEWSWIRE) -- Parker Hannifin Corporation (NYSE: PH), the global leader in motion and control technologies, today reported results for the fiscal 2021 third quarter ended March31, 2021. Fiscal 2021 third quarter sales were $3.75 billion, compared with $3.70 billion in the third quarter of fiscal 2020. Net income was an all-time quarterly record at $471.6 million, an increase of 28% compared with $367.3 million in the prior year quarter. Fiscal 2021 third quarter earnings per share were also an all-time quarterly record at $3.59, an increase of 27% compared with $2.83 in the third quarter of fiscal 2020. Adjusted earnings per share increased 21% to $4.11, compared with adjusted earnings per share of $3.39 in the prior year quarter. Fiscal year-to-date cash flow from operations was a third quarter record at $1.88 billion, reaching 18.1% of sales, compared with $1.29 billion, or 12.3% of sales in the prior year period. A reconciliation of non-GAAP measures is included in the financial tables of this press release.

In the third quarter, we delivered all-time quarterly records for net income, EPS and segment operating margins, said Chairman and Chief Executive Officer, Tom Williams. We also generated record year-to-date cash from operations and continued to accelerate the pay down of available debt, putting us in a very strong financial position. Our results reflect sustainable performance improvements across our business. These include strengthening our portfolio through the effective integration and accelerated synergies from our acquisitions. Broad-based execution of The Win Strategy continues to drive improved profitability and cash flow. Order rates increased by 6% in the third quarter, reinforcing our view that demand is at a positive inflection point.

In the fiscal 2021 third quarter, the company made debt repayments of $426 million, bringing the cumulative debt reduction to approximately $3.2 billion over the last 17 months. Also during the quarter, the company made share repurchases of $50 million under its 10b5-1 share repurchase program. As announced last week, Parker's Board of Directors declared an increase of 17% to the quarterly cash dividend, which extends its long-standing record of annual dividends per share paid to 65 consecutive fiscal years.

Segment ResultsDiversified Industrial Segment: North American third quarter sales decreased 1% to $1.76 billion, and operating income was $336.6 million, compared with $279.6 million in the same period a year ago. International third quarter sales increased 17% to $1.39 billion, and operating income was $274.4 million, compared with $177.0 million in the same period a year ago.

Aerospace Systems Segment: Third quarter sales decreased 20% to $598.9 million, and operating income was $102.3 million, compared with $127.4 million in the same period a year ago.

Parker reported the following orders for the quarter ending March31, 2021, compared with the same quarter a year ago:

-- Orders increased 6% for total Parker -- Orders increased 11% in the Diversified Industrial North America businesses -- Orders increased 14% in the Diversified Industrial International businesses -- Orders decreased 19% 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 $12.96 to $13.26, or $14.65 to $14.95 on an adjusted basis. Guidance assumes organic sales are flat compared with the prior year. Fiscal year 2021 guidance is adjusted on a pre-tax basis for expected business realignment expenses of approximately $50 million, costs to achieve of approximately $13 million, acquisition-related intangible asset amortization of approximately $324 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 increased guidance reflects strong year-to-date performance and a positive outlook for macroeconomic conditions as we enter the fourth quarter of this fiscal year. My thanks to our global team as they continue to execute the Win Strategy and progress towards achieving our long-term financial targets, positioning us among the top-quartile of our peer group of diversified industrial companies.

NOTICE OF CONFERENCE CALL Parker Hannifin's conference call and slide presentation to discuss its fiscal 2021 third 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 65 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. 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 - MARCH 31, 2021 CONSOLIDATED STATEMENT OF INCOME(Unaudited) Three Months Ended March 31, Nine Months Ended March 31,(Dollars in thousands,except per share 2021 2020 2021 2020 amounts)Net sales $ 3,746,326 $ 3,702,432 $ 10,388,771 $ 10,534,917 Cost of sales 2,714,773 2,766,693 7,618,646 7,929,199 Selling, general and 386,831 413,460 1,113,254 1,303,760 administrative expensesInterest expense 60,830 80,765 189,778 233,612 Other (income), net (13,460 ) (12,643 ) (122,066 ) (73,713 )Income before income 597,352 454,157 1,589,159 1,142,059 taxesIncome taxes 125,619 86,788 348,212 231,051 Net income 471,733 367,369 1,240,947 911,008 Less: Noncontrolling 86 116 585 383 interestsNet income attributable $ 471,647 $ 367,253 $ 1,240,362 $ 910,625 to common shareholders Earnings per shareattributable to common shareholders:Basic earnings per $ 3.65 $ 2.86 $ 9.62 $ 7.09 shareDiluted earnings per $ 3.59 $ 2.83 $ 9.50 $ 7.01 share Average sharesoutstanding during 129,085,563 128,289,720 128,935,696 128,383,549 period - BasicAverage sharesoutstanding during 131,377,933 129,746,547 130,626,600 129,862,815 period - Diluted CASH DIVIDENDS PER COMMON SHARE(Unaudited) Three Months Ended March 31, Nine Months Ended March 31,(Amounts in dollars) 2021 2020 2021 2020 Cash dividends per $ 0.88 $ 0.88 $ 2.64 $ 2.64 common share

RECONCILIATION OF EARNINGS PER DILUTED SHARE TO ADJUSTED EARNINGS PER DILUTEDSHARE (Unaudited) Three Months Ended March 31, Nine Months Ended March 31,(Amounts in dollars) 2021 2020 2021 2020 Earnings per diluted $ 3.59 $ 2.83 $ 9.50 $ 7.01 shareAdjustments: Acquired intangibleasset amortization 0.62 0.62 1.87 1.57 expenseBusiness realignment 0.04 0.10 0.30 0.22 chargesLord costs to achieve 0.02 0.06 0.07 0.14 Exotic costs to achieve ? ? ? 0.01 Acquisition-related ? 0.14 ? 1.42 expensesGain on sale of land ? ? (0.77 ) ? Tax effect of (0.16 ) (0.22 ) (0.32 ) (0.80 )adjustments^1Favorable tax ? (0.14 ) ? (0.14 )settlementAdjusted earnings per $ 4.11 $ 3.39 $ 10.65 $ 9.43 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 - MARCH 31, 2021RECONCILIATION OF EBITDA TO ADJUSTED EBITDA (Unaudited) Three Months Ended March 31, Nine Months Ended March 31,(Dollars in thousands) 2021 2020 2021 2020 Net sales $ 3,746,326 $ 3,702,432 $ 10,388,771 $ 10,534,917 Net income $ 471,733 $ 367,369 $ 1,240,947 $ 911,008 Income taxes 125,619 86,788 348,212 231,051 Depreciation and 150,548 137,649 448,808 390,949 amortizationInterest expense 60,830 80,765 189,778 233,612 EBITDA 808,730 672,571 2,227,745 1,766,620 Adjustments: Business realignment 5,602 13,454 40,070 28,013 chargesLord costs to achieve 2,631 8,364 9,495 18,503 Exotic costs to achieve 24 486 699 1,570 Acquisition-related ? 18,165 ? 184,081 expensesGain on sale of land ? ? (100,893 ) ? Adjusted EBITDA $ 816,987 $ 713,040 $ 2,177,116 $ 1,998,787 EBITDA margin 21.6 % 18.2 % 21.4 % 16.8 %Adjusted EBITDA margin 21.8 % 19.3 % 21.0 % 19.0 %

PARKER HANNIFIN CORPORATION - MARCH 31, 2021BUSINESS SEGMENT INFORMATION(Unaudited) Three Months Ended March 31, Nine Months Ended March 31,(Dollars in 2021 2020 2021 2020 thousands)Net sales Diversified Industrial:North America $ 1,758,383 $ 1,775,578 $ 4,853,371 $ 5,016,035 International 1,388,999 1,182,273 3,777,875 3,408,207 Aerospace 598,944 744,581 1,757,525 2,110,675 SystemsTotal net $ 3,746,326 $ 3,702,432 $ 10,388,771 $ 10,534,917 salesSegmentoperating incomeDiversified Industrial:North America $ 336,589 $ 279,628 $ 887,041 $ 766,159 International 274,427 176,954 681,541 499,343 Aerospace 102,303 127,440 279,798 371,459 SystemsTotal segment 713,319 584,022 1,848,380 1,636,961 operating incomeCorporategeneral and 48,089 48,342 123,544 132,904 administrativeexpensesIncome beforeinterest expense 665,230 535,680 1,724,836 1,504,057 and otherexpenseInterest 60,830 80,765 189,778 233,612 expenseOther expense 7,048 758 (54,101 ) 128,386 (income)Income before $ 597,352 $ 454,157 $ 1,589,159 $ 1,142,059 income taxes

PARKER HANNIFIN CORPORATION - MARCH 31, 2021RECONCILIATION OF TOTAL SEGMENT OPERATING MARGIN TO ADJUSTED TOTAL SEGMENTOPERATING MARGIN (Unaudited) Three Months Ended Three Months Ended(Dollars in thousands) March 31, 2021 March 31, 2020 Operating Operating Operating Operating income margin income marginTotal segment operating $ 713,319 19.0 % $ 584,022 15.8 %incomeAdjustments: Acquired intangible asset 81,253 80,506 amortization expenseBusiness realignment 5,445 13,333 chargesLord costs to achieve 2,631 8,364 Exotic costs to achieve 24 486 Acquisition-related ? 18,060 expensesAdjusted total segment $ 802,672 21.4 % $ 704,771 19.0 %operating income Nine Months Ended Nine Months Ended March 31, 2021 March 31, 2020 Operating Operating Operating Operating income margin income marginTotal segment operating $ 1,848,380 17.8 % $ 1,636,961 15.5 %incomeAdjustments: Acquired intangible asset 244,193 203,895 amortization expenseBusiness realignment 37,890 27,770 chargesLord costs to achieve 9,495 18,503 Exotic costs to achieve 699 1,570 Acquisition-related ? 69,304 expensesAdjusted total segment $ 2,140,657 20.6 % $ 1,958,003 18.6 %operating income

PARKER HANNIFIN CORPORATION - MARCH 31, 2021CONSOLIDATED BALANCE SHEET(Unaudited) March 31, June 30, March 31, (Dollars in 2021 2020 2020 thousands)Assets Current assets: Cash and cash $ 489,600 $ 685,514 $ 697,617 equivalentsMarketablesecurities and 40,270 70,805 92,536 other investmentsTrade accounts 2,118,437 1,854,398 2,174,425 receivable, netNon-trade and notes 309,568 244,870 322,187 receivableInventories 1,898,159 1,814,631 2,011,367 Prepaid expenses 193,019 214,986 183,294 and otherTotal current 5,049,053 4,885,204 5,481,426 assetsProperty, plant and 2,249,122 2,292,735 2,296,990 equipment, netDeferred income 125,382 126,839 124,515 taxesInvestments and 791,221 764,563 750,743 other assetsIntangible assets, 3,595,182 3,798,913 3,881,827 netGoodwill 8,031,586 7,869,935 7,829,779 Total assets $ 19,841,546 $ 19,738,189 $ 20,365,280 Liabilities and equityCurrent liabilities:Notes payable andlong-term debt $ 186,388 $ 809,529 $ 1,035,191 payable within oneyearAccounts payable, 1,551,460 1,111,759 1,422,011 tradeAccrued payrollsand other 430,008 424,231 415,213 compensationAccrued domestic 204,241 195,314 151,029 and foreign taxesOther accrued 664,550 607,540 650,165 liabilitiesTotal current 3,036,647 3,148,373 3,673,609 liabilitiesLong-term debt 6,571,908 7,652,256 8,097,922 Pensions and otherpostretirement 1,777,137 1,887,414 1,320,167 benefitsDeferred income 416,223 382,528 497,920 taxesOther liabilities 631,702 539,089 468,235 Shareholders' 7,392,202 6,113,983 6,295,990 equityNoncontrolling 15,727 14,546 11,437 interestsTotal liabilities $ 19,841,546 $ 19,738,189 $ 20,365,280 and equity

PARKER HANNIFIN CORPORATION - MARCH 31, 2021 CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) Nine Months Ended March 31,(Dollars in thousands) 2021 2020 Cash flows from operating activities: Net income $ 1,240,947 $ 911,008 Depreciation and amortization 448,808 390,949 Share incentive plan compensation 101,907 91,857 Gain on property, plant and equipment (108,449 ) (5,194 )(Gain) loss on marketable securities (8,489 ) 434 Gain on investments (6,008 ) (1,849 )Net change in receivables, inventories and trade 127,164 111,416 payablesNet change in other assets and liabilities 94,742 (218,979 )Other, net (9,217 ) 11,217 Net cash provided by operating activities 1,881,405 1,290,859 Cash flows from investing activities: Acquisitions (net of cash of $82,192 in 2020) ? (5,076,064 )Capital expenditures (136,064 ) (182,502 )Proceeds from sale of property, plant and 132,740 25,398 equipmentPurchases of marketable securities and other (30,608 ) (191,277 )investmentsMaturities and sales of marketable securities and 71,225 249,306 other investmentsOther 14,120 129,938 Net cash provided by (used in) investing 51,413 (5,045,201 )activitiesCash flows from financing activities: Net payments for common stock activity (125,519 ) (192,174 )Net (payments for) proceeds from debt (1,748,818 ) 1,805,210 Dividends paid (341,333 ) (340,291 )Net cash (used in) provided by financing (2,215,670 ) 1,272,745 activitiesEffect of exchange rate changes on cash 86,938 (40,553 )Net decrease in cash and cash equivalents (195,914 ) (2,522,150 )Cash and cash equivalents at beginning of year 685,514 3,219,767 Cash and cash equivalents at end of period $ 489,600 $ 697,617

PARKER HANNIFIN CORPORATION - MARCH 31, 2021 RECONCILIATION OF FORECASTED EARNINGS PER DILUTED SHARE TO ADJUSTED FORECASTEDEARNINGS PER DILUTED SHARE (Unaudited) (Amounts in dollars) Fiscal Year 2021Forecasted earnings per diluted share $12.96 to $13.26Adjustments: Business realignment charges 0.38Costs to achieve 0.10Acquisition-related intangible asset amortization expense 2.47Gain on sale of land (0.77)Tax effect of adjustments^1 (0.49)Adjusted forecasted earnings per diluted share $14.65 to $14.95 ^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