GlobeNewswire Inc | Nov 4, 2021 07:30AM EDT

November 04, 2021

-- First quarter records for sales, segment operating margins, net income and EPS -- Sales increased 17% to $3.76 billion, organic sales increased 16% -- Segment operating margin was 19.7% as reported, or 22.0% adjusted -- Net income was $451.2 million; EPS was $3.45 as reported, or $4.26 adjusted -- EBITDA margin was 20.6% as reported, or 22.1% adjusted -- Company increases fiscal 2022 EPS guidance

CLEVELAND, Nov. 04, 2021 (GLOBE NEWSWIRE) -- Parker Hannifin Corporation (NYSE: PH), the global leader in motion and control technologies, today reported results for the fiscal 2022 first quarter ended September30, 2021. Fiscal 2022 first quarter sales were a first quarter record at $3.76 billion, an increase of 17% compared with $3.23 billion in the first quarter of fiscal 2021. Net income was also a first quarter record at $451.2 million, an increase of 41% compared with $319.8 million in the prior year quarter. Fiscal 2022 first quarter earnings per share were also a first quarter record at $3.45, an increase of 41% compared with $2.45 in the first quarter of fiscal 2021. Adjusted earnings per share increased 40% to $4.26 compared with adjusted earnings per share of $3.05 in the prior year quarter. Fiscal year-to-date cash flow from operations was $424.4 million, or 11.3% of sales, compared with $737.4 million in the prior year period. A reconciliation of non-GAAP measures is included in the financial tables of this press release.

We delivered impressive results in the quarter, said Chairman and Chief Executive Officer, Tom Williams. "Our performance demonstrated operational discipline and agility in a challenging manufacturing environment that coupled increased demand with labor and supply chain constraints. We achieved first quarter records for sales, segment operating margins, net income and earnings per share. Adjusted total segment operating margin and adjusted EBITDA margin both increased 210 basis points as a result of The Win Strategy 3.0, portfolio enhancements and the excellent efforts from our global team.

Segment ResultsDiversified Industrial Segment: North American first quarter sales increased 17% to $1.79 billion and operating income was $333.7 million compared with $268.8 million in the same period a year ago. International first quarter sales increased 22% to $1.38 billion and operating income was $291.2 million compared with $186.9 million in the same period a year ago.

Aerospace Systems Segment: First quarter sales increased 3% to $592.7 million and operating income was $118.3 million compared with $86.8 million in the same period a year ago.

Parker reported the following orders for the quarter ending September30, 2021, compared with the same quarter a year ago:

-- Orders increased 26% for total Parker -- Orders increased 32% in the Diversified Industrial North America businesses -- Orders increased 25% in the Diversified Industrial International businesses -- Orders increased 16% in the Aerospace Systems Segment on a rolling 12-month average basis

Offer to Acquire Meggitt PLCAs previously announced on August 2, 2021, the company has reached an agreement on the terms of a recommended cash acquisition of the entire issued and to be issued ordinary share capital of Meggitt PLC. The acquisition was approved by Meggitt shareholders on September 21, 2021. The transaction remains subject to satisfaction of the conditions set out in the scheme document, including regulatory clearances. Under the UK Companies Act, the Scheme of Arrangement further requires the sanction of the Court, currently expected during the third quarter of calendar year 2022. For copies of all announcements and further information, please visit the dedicated transaction microsite at www.aerospacegrowth.com.

OutlookFor the fiscal year ending June 30, 2022, the company has increased guidance for earnings per share to the range of $14.52 to $15.22, or $16.95 to $17.65 on an adjusted basis. Guidance assumes organic sales growth of approximately 7% to 10% compared with the prior year. Fiscal year 2022 guidance is adjusted on a pre-tax basis for acquisition-related expenses of $52 million and expected business realignment expenses of approximately $35 million, LORD costs to achieve of approximately $7 million and acquisition-related intangible asset amortization of approximately $320 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, Robust demand trends continue across nearly all of our end markets reinforcing our positive outlook for sales and earnings per share for this fiscal year. The transformation of our portfolio and the Win Strategy 3.0 continue to position us to deliver sustainable long-term growth and top quartile performance."

NOTICE OF CONFERENCE CALL Parker Hannifin's conference call and slide presentation to discuss its fiscal 2022 first 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. Often but not always, 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. Neither Parker nor any of its respective associates or directors, officers or advisers, provides any representation, assurance or guarantee that the occurrence of the events expressed or implied in any forward-looking statements in this press release will actually occur. 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 past performance or 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.

The risks and uncertainties in connection with such forward-looking statements related to the proposed acquisition of Meggitt include, but are not limited to, the occurrence of any event, change or other circumstances that could delay the closing of the proposed acquisition; the possibility of non-consummation of the proposed Acquisition; the failure to satisfy any of the conditions to the proposed acquisition (including the satisfaction of the conditions detailed in the Rule 2.7 announcement); the possibility that a governmental entity may prohibit the consummation of the proposed acquisition or may delay or refuse to grant a necessary regulatory approval in connection with the proposed acquisition, or that in order for the parties to obtain any such regulatory approvals, conditions are imposed that adversely affect the anticipated benefits from the proposed acquisition or cause the parties to abandon the proposed acquisition; adverse effects on Parkers common stock because of the failure to complete the proposed acquisition; Parkers business experiencing disruptions due to acquisition-related uncertainty or other factors making it more difficult to maintain relationships with employees, business partners or governmental entities; the possibility that the expected synergies and value creation from the proposed acquisition will not be realized or will not be realized within the expected time period; the parties being unable to successfully implement integration strategies; and significant transaction costs related to the proposed acquisition. Readers should consider these forward-looking statements in light of risk factors discussed in Parkers Annual Report on Form 10-K for the fiscal year ended June 30, 2021 and other periodic filings made with the SEC.

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; legal and regulatory developments and changes; compliance costs associated with environmental laws and regulations; potential supply chain and labor disruptions, including as a result of labor shortages; 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; local and global political and economic conditions; inability to obtain, or meet conditions imposed for, required governmental and regulatory approvals; changes in consumer habits and preferences; foreign exchange rate fluctuations and interest rate fluctuations (including those from any potential credit rating decline); government actions and natural phenomena such as floods, earthquakes, hurricanes and pandemics; and success of business and operating initiatives.

PARKER HANNIFIN CORPORATION - SEPTEMBER 30, 2021CONSOLIDATED STATEMENT OF INCOME(Unaudited) Three Months Ended September 30, (Dollars in thousands, except per share 2021 2020* amounts)Net sales $ 3,762,809 $ 3,230,540 Cost of sales 2,713,897 2,386,449 Selling, general and administrative expenses 407,765 369,851 Interest expense 59,350 65,958 Other expense (income), net 10,052 (4,892 )Income before income taxes 571,745 413,174 Income taxes 120,282 93,063 Net income 451,463 320,111 Less: Noncontrolling interests 306 308 Net income attributable to common $ 451,157 $ 319,803 shareholders Earnings per share attributable to common shareholders:Basic earnings per share $ 3.50 $ 2.48 Diluted earnings per share $ 3.45 $ 2.45 Average shares outstanding during period - 128,726,721 128,707,745 BasicAverage shares outstanding during period - 130,827,971 130,294,223 Diluted CASH DIVIDENDS PER COMMON SHARE(Unaudited) Three Months Ended September 30, (Amounts in dollars) 2021 2020 Cash dividends per common share $ 1.03 $ 0.88 RECONCILIATION OF EARNINGS PER DILUTED SHARE TO ADJUSTED EARNINGS PER DILUTEDSHARE(Unaudited) Three Months Ended September 30, (Amounts in dollars) 2021 2020* Earnings per diluted share $ 3.45 $ 2.45 Adjustments: Acquired intangible asset amortization 0.61 0.63 expenseBusiness realignment charges 0.02 0.12 Integration costs to achieve 0.01 0.03 Acquisition-related expenses 0.40 ? Tax effect of adjustments^1 (0.23 ) (0.18 )Adjusted earnings per diluted share $ 4.26 $ 3.05 *Prior period has been adjusted to reflect the change in inventory accountingmethod, as described in the Company's fiscal 2021 Annual Report on Form 10-K. ^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 - SEPTEMBER 30, 2021RECONCILIATION OF EBITDA TO ADJUSTED EBITDA(Unaudited) Three Months Ended September 30, (Dollars in thousands) 2021 2020* Net sales $ 3,762,809 $ 3,230,540 Net income $ 451,463 $ 320,111 Income taxes 120,282 93,063 Depreciation and amortization 145,522 148,442 Interest expense 59,350 65,958 EBITDA 776,617 627,574 Adjustments: Business realignment charges 3,014 15,701 Integration costs to achieve 1,202 3,947 Acquisition-related expenses 52,199 ? Adjusted EBITDA $ 833,032 $ 647,222 EBITDA margin 20.6 % 19.4 %Adjusted EBITDA margin 22.1 % 20.0 % *Prior period has been adjusted to reflect the change in inventory accountingmethod, as described in the Company's fiscal 2021 Annual Report on Form 10-K.

PARKER HANNIFIN CORPORATION - SEPTEMBER 30, 2021BUSINESS SEGMENT INFORMATION(Unaudited) Three Months Ended September 30, (Dollars in thousands) 2021 2020* Net sales Diversified Industrial: North America $ 1,793,715 $ 1,528,111 International 1,376,436 1,129,251 Aerospace Systems 592,658 573,178 Total net sales $ 3,762,809 $ 3,230,540 Segment operating income Diversified Industrial: North America $ 333,702 $ 268,833 International 291,176 186,901 Aerospace Systems 118,251 86,766 Total segment operating income 743,129 542,500 Corporate general and administrative 49,072 36,735 expensesIncome before interest expense and other 694,057 505,765 expenseInterest expense 59,350 65,958 Other expense 62,962 26,633 Income before income taxes $ 571,745 $ 413,174 *Prior period has been adjusted to reflect the change in inventory accountingmethod, as described in the Company's fiscal 2021 Annual Report on Form 10-K.

RECONCILIATION OF TOTAL SEGMENT OPERATING MARGIN TO ADJUSTED TOTAL SEGMENTOPERATING MARGIN (Unaudited) Three Months Ended Three Months Ended(Dollars in September 30, 2021 September 30, 2020thousands) Operating Operating Operating Operating income margin income marginTotal segmentoperating $ 743,129 19.7 % $ 542,500 16.8 %incomeAdjustments: Acquiredintangibleasset 79,771 81,703 amortizationexpenseBusinessrealignment 3,014 14,523 chargesIntegrationcosts to 1,202 3,947 achieveAdjusted totalsegment $ 827,116 22.0 % $ 642,673 19.9 %operatingincome

PARKER HANNIFIN CORPORATION - SEPTEMBER 30, 2021CONSOLIDATED BALANCE SHEET(Unaudited) September June 30, September 30, 30,(Dollars in thousands) 2021 2021 2020* Assets Current assets: Cash and cash $ 478,582 $ 733,117 $ 742,394 equivalentsMarketable securities 40,160 39,116 33,463 and other investmentsTrade accounts 2,109,648 2,183,594 1,860,324 receivable, netNon-trade and notes 315,571 326,315 273,991 receivableInventories 2,264,725 2,090,642 1,943,222 Prepaid expenses and 422,588 243,966 163,533 otherTotal current assets 5,631,274 5,616,750 5,016,927 Property, plant and 2,223,534 2,266,476 2,292,880 equipment, netDeferred income taxes 145,972 104,251 129,751 Investments and other 800,211 774,239 778,591 assetsIntangible assets, net 3,426,540 3,519,797 3,743,314 Goodwill 8,009,340 8,059,687 7,971,897 Total assets $ 20,236,871 $ 20,341,200 $ 19,933,360 Liabilities and equity Current liabilities: Notes payable andlong-term debt payable $ 302,309 $ 2,824 $ 884,450 within one yearAccounts payable, 1,636,272 1,667,878 1,264,991 tradeAccrued payrolls and 341,355 507,027 332,110 other compensationAccrued domestic and 279,173 236,384 196,429 foreign taxesOther accrued 724,134 682,390 650,243 liabilitiesTotal current 3,283,243 3,096,503 3,328,223 liabilitiesLong-term debt 6,263,941 6,582,053 7,057,723 Pensions and otherpostretirement 997,392 1,055,638 1,864,506 benefitsDeferred income taxes 568,369 553,981 449,699 Other liabilities 618,081 639,355 577,325 Shareholders' equity 8,490,781 8,398,307 6,640,599 Noncontrolling 15,064 15,363 15,285 interestsTotal liabilities and $ 20,236,871 $ 20,341,200 $ 19,933,360 equity *Prior period has been adjusted to reflect the change in inventory accountingmethod, as described in the Company's fiscal 2021 Annual Report on Form 10-K.

PARKER HANNIFIN CORPORATION - SEPTEMBER 30, 2021CONSOLIDATED STATEMENT OF CASH FLOWS(Unaudited) Three Months Ended September 30,(Dollars in thousands) 2021 2020* Cash flows from operating activities: Net income $ 451,463 $ 320,111 Depreciation and amortization 145,522 148,442 Share incentive plan compensation 57,666 58,461 Gain on disposal of property, plant and equipment (30 ) (498 )Loss (gain) on marketable securities 804 (340 )Gain on investments (200 ) (970 )Net change in receivables, inventories and trade (137,074 ) 196,471 payablesNet change in other assets and liabilities (87,118 ) 4,207 Other, net (6,674 ) 11,490 Net cash provided by operating activities 424,359 737,374 Cash flows from investing activities: Capital expenditures (48,203 ) (42,117 )Proceeds from sale of property, plant and equipment 7,751 6,590 Purchases of marketable securities and other (7,456 ) (10,726 )investmentsMaturities and sales of marketable securities and 5,312 49,107 other investmentsOther 649 1,054 Net cash (used in) provided by investing activities (41,947 ) 3,908 Cash flows from financing activities: Net payments for common stock activity (244,731 ) (21,750 )Net payments for debt (595 ) (557,442 )Financing fees paid (42,703 ) ? Dividends paid (132,921 ) (113,542 )Net cash (used in) financing activities (420,950 ) (692,734 )Effect of exchange rate changes on cash (997 ) 8,332 Net (decrease) increase in cash, cash equivalents (39,535 ) 56,880 and restricted cashCash, cash equivalents and restricted cash at 733,117 685,514 beginning of yearCash, cash equivalents and restricted cash at end $ 693,582 $ 742,394 of period *Prior period has been adjusted to reflect the change in inventory accountingmethod, as described in the Company's fiscal 2021 Annual Report on Form 10-K.

PARKER HANNIFIN CORPORATION - SEPTEMBER 30, 2021RECONCILIATION OF FORECASTED EARNINGS PER DILUTED SHARE TO ADJUSTED FORECASTEDEARNINGS PER DILUTED SHARE (Unaudited) (Amounts in dollars) Fiscal Year 2022Forecasted earnings per diluted share $14.52 to $15.22Adjustments: Business realignment charges 0.27Costs to achieve 0.05Acquisition-related intangible asset amortization expense 2.44Acquisition-related expenses 0.40Tax effect of adjustments^1 (0.73)Adjusted forecasted earnings per diluted share $16.95 to $17.65 ^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 Stock PH - NYSE Symbol: