8-K
Parker-Hannifin Corp (PH)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): February 2, 2023
PARKER-HANNIFIN CORPORATION
(Exact Name of Registrant as Specified in Charter)
| Ohio | 1-4982 | 34-0451060 |
|---|---|---|
| (State or other jurisdiction of<br><br>Incorporation or Organization) | (Commission File Number) | (I.R.S. Employer<br><br>Identification No.) |
| 6035 Parkland Boulevard, Cleveland, Ohio | 44124-4141 | |
| (Address of Principal Executive Offices) | (Zip Code) |
Registrant's telephone number, including area code: (216) 896-3000
Not Applicable
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol | Name of Each Exchange on which Registered |
|---|---|---|
| Common Shares, $.50 par value | PH | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
| Emerging growth company ☐ |
|---|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition
On February 2, 2023, Parker-Hannifin Corporation issued a press release and presented a Webcast announcing results of operations for the quarter ended December 31, 2022. A copy of the press release is furnished as Exhibit 99.1 to this report. A copy of the Webcast presentation is furnished as Exhibit 99.2 to this report.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits:
99.1 Press release issued by Parker-Hannifin Corporation, datedFebruary 2, 2023.
99.2 Webcast presentation by Parker-Hannifin Corporation, datedFebruary 2, 2023.
104 Cover Page Interactive Data File (embedded within the Inline XBRL document)
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.
| PARKER-HANNIFIN CORPORATION | ||
|---|---|---|
| By: /s/ Todd M. Leombruno | ||
| Todd M. Leombruno | ||
| Executive Vice President and Chief Financial Officer | ||
| Date: | February 2, 2023 |
Document
| For Release: | Immediately | Exhibit 99.1 |
|---|---|---|
| Contact: | Media - | |
| Aidan Gormley - Director, Global Communications and Branding | 216-896-3258 | |
| aidan.gormley@parker.com | ||
| Financial Analysts - | ||
| Jeff Miller - Vice President, Investor Relations | 216-896-2708 | |
| jeffrey.miller@parker.com | ||
| Stock Symbol: | PH - NYSE |
Parker Reports Fiscal 2023 Second Quarter Results
-
Record sales, record adjusted net income and record adjusted EPS -
Sales increased 22% to $4.67 billion; organic sales increased 10% -
Total segment operating margin was 15.3%, or 21.5% adjusted -
Net income was $395.2 million, or $618.9 million adjusted -
EBITDA margin was 19.1%, or 22.4% adjusted -
EPS were $3.04, or $4.76 adjusted -
Company increases full year organic growth and adjusted EPS guidance
CLEVELAND, February 2, 2023 -- Parker Hannifin Corporation (NYSE: PH), the global leader in motion and control technologies, today reported results for the fiscal 2023 second quarter ended December 31, 2022. Fiscal 2023 second quarter sales were a record at $4.67 billion, an increase of 22%, compared with $3.82 billion in the second quarter of fiscal 2022. Net income was $395.2 million compared with $387.6 million in the prior year quarter. Adjusted net income was $618.9 million, an increase of 6% compared with $582.2 million in the second quarter of fiscal 2022. Earnings per share were $3.04 compared with $2.97 in the second quarter of fiscal 2022. Adjusted earnings per share increased 7% to a record of $4.76 compared with $4.46 in the prior year quarter. Fiscal 2023 year-to-date cash flow from operations was $1.08 billion, or 12.1% of sales, compared with $1.01 billion, or 13.3% of sales, in the prior year. A reconciliation of non-GAAP measures is included in the financial tables of this press release and includes various expenses associated with the completion of the acquisition of Meggitt plc and the related divestiture of the Aircraft Wheel and Brake Division during fiscal 2023.
“This was another quarter that highlights the consistency with which Parker is able to achieve record levels of performance,” said Chief Executive Officer, Jenny Parmentier. “Our results include the first full quarter of the Meggitt acquisition, which performed very well as our integration teams continue to make great progress. Overall organic sales growth was impressive, with increased organic sales in every
segment. Our strong sales and segment margin performance contributed to record adjusted earnings per share for the quarter. Our team continues to drive excellent performance.”
Segment Results
Diversified Industrial Segment: North American second quarter sales increased 18% to $2.14 billion and operating income was $419.9 million compared with $337.4 million in the same period a year ago. On an adjusted basis, North American operating income was $466.9 million, or 21.8% of sales, a 50 basis point increase compared with the prior year quarter. International second quarter sales were flat at $1.40 billion and operating income was $285.5 million compared with $291.6 million in the same period a year ago. On an adjusted basis, International operating income was $305.8 million, or 21.9% of sales.
Aerospace Systems Segment: Second quarter sales increased 84% to $1.14 billion and operating income was $8.8 million compared with $114.8 million in the same period a year ago. On an adjusted basis, operating income was $234.6 million, or 20.6% of sales.
Parker reported the following orders for the quarter ending December 31, 2022, compared with the same quarter a year ago:
· Orders increased 3% for total Parker
· Orders increased 2% in the Diversified Industrial North America businesses
· Orders decreased 4% in the Diversified Industrial International businesses
· Orders increased 22% in the Aerospace Systems Segment on a rolling 12-month average basis.
Outlook
Parker's outlook for the fiscal year ending June 30, 2023 has been updated. The company expects fiscal 2023 organic sales growth to be in the range of 6% to 8% and earnings per share in the range of $13.50 to $14.00, or $19.20 to $19.70 on an adjusted basis. A reconciliation of forecasted earnings per share to adjusted forecasted earnings per share is included in the financial tables of this press release.
Parmentier added, "We expect another year of record performance in fiscal 2023. Longer term, we feel very positive about our plans to deliver $300 million of synergies from the acquisition of Meggitt and remain committed to our fiscal year 2027 financial targets. We have a bright future ahead driven by our business system The Win Strategy™, a transformed portfolio and secular growth trends.”
NOTICE OF CONFERENCE CALL: Parker Hannifin's conference call and slide presentation to discuss its fiscal 2023 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 Hannifin
Parker 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 66 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 Reclassification
Effective July 1, 2022, the company began classifying certain expenses, previously classified as cost of sales, as selling, general and administrative expenses (“SG&A”) or within other (income) expense, net. During the integration of recently acquired businesses, the company has seen diversity in practice of the classifications of certain expenses, and the reclassification was made to better align the presentation of expenses on the Consolidated Statement of Income with management’s internal reporting. The expenses reclassified from cost of sales to SG&A relate to certain administrative activities conducted in production facilities and research and development. Foreign currency transaction expense was also reclassified from cost of sales to other (income) expense, net on the Consolidated Statement of Income. These reclassifications had no impact on net income, earnings per share, cash flows, segment reporting or the financial position of the Company and were retrospectively applied to all periods presented in the financial tables of this press release.
Note on Orders
Orders 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, and divestitures. 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 Income
Net income referenced in this press release is equal to net income attributable to common shareholders.
Note on Non-GAAP Financial Measures
This press release contains references to non-GAAP financial information including (a) adjusted net income; (b) adjusted earnings per share; (c) adjusted segment operating margins; (d) adjusted segment operating income; (e) EBITDA margin; (f) adjusted EBITDA margin and (g) organic sales growth. The adjusted net income, earnings per share, segment operating margin, adjusted segment operating income and organic sales measures are presented to allow investors and the company to meaningfully evaluate changes in net income, earnings per share and segment operating margins 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. Comparable descriptions of record adjusted results in this release refer only to the period from the first quarter of FY2011 to the periods presented in this release. This period coincides with recast historical financial results provided in association with our FY2014 change in segment reporting. A reconciliation of non-GAAP measures is included in the financial tables of this press release.
Forward-Looking Statements
Forward-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,” “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 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.
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 Meggitt PLC; 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 business and operating initiatives, including the timing, price and execution of share repurchases and other capital initiatives; availability, cost increases of or other limitations on our access to raw materials, component products and/or commodities if associated costs 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 international conflicts and efforts to combat terrorism and cyber security risks; uncertainties surrounding the ultimate resolution of outstanding legal proceedings, including the outcome of any appeals; local and global political and 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 (including fluctuations associated with any potential credit rating decline) and credit availability; inability to obtain, or meet conditions imposed for, required governmental and regulatory approvals; changes in consumer habits and preferences; government actions, including the impact of changes in the tax laws in the United States and foreign jurisdictions and any judicial or regulatory interpretation thereof; and large
scale disasters, such as floods, earthquakes, hurricanes, industrial accidents and pandemics. Readers should consider these forward-looking statements in light of risk factors discussed in Parker’s Annual Report on Form 10-K for the fiscal year ended June 30, 2022 and other periodic filings made with the SEC.
| PARKER HANNIFIN CORPORATION - DECEMBER 31, 2022 | Exhibit 99.1 | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| CONSOLIDATED STATEMENT OF INCOME | ||||||||||||||||||
| (Unaudited) | Three Months Ended December 31, | Six Months Ended December 31, | ||||||||||||||||
| (Dollars in thousands, except per share amounts) | 2022 | 2021* | 2022 | 2021* | ||||||||||||||
| Net sales | $ | 4,674,811 | $ | 3,824,580 | $ | 8,907,586 | $ | 7,587,389 | ||||||||||
| Cost of sales | 3,236,812 | 2,567,595 | 6,032,268 | 5,071,977 | ||||||||||||||
| Selling, general and administrative expenses | 814,966 | 585,858 | 1,650,770 | 1,212,607 | ||||||||||||||
| Interest expense | 146,931 | 61,360 | 264,725 | 120,710 | ||||||||||||||
| Other (income) expense, net | (40,641) | 119,443 | (60,265) | 120,026 | ||||||||||||||
| Income before income taxes | 516,743 | 490,324 | 1,020,088 | 1,062,069 | ||||||||||||||
| Income taxes | 121,282 | 102,595 | 236,590 | 222,877 | ||||||||||||||
| Net income | 395,461 | 387,729 | 783,498 | 839,192 | ||||||||||||||
| Less: Noncontrolling interests | 224 | 129 | 407 | 435 | ||||||||||||||
| Net income attributable to common shareholders | $ | 395,237 | $ | 387,600 | $ | 783,091 | $ | 838,757 | ||||||||||
| *Prior period amounts have been reclassified to reflect the income statement reclassification, as described in the attached press release. | ||||||||||||||||||
| Earnings per share attributable to common shareholders: | ||||||||||||||||||
| Basic earnings per share | $ | 3.08 | $ | 3.02 | $ | 6.10 | $ | 6.52 | ||||||||||
| Diluted earnings per share | $ | 3.04 | $ | 2.97 | $ | 6.03 | $ | 6.42 | ||||||||||
| Average shares outstanding during period - Basic | 128,313,322 | 128,493,725 | 128,369,162 | 128,610,223 | ||||||||||||||
| Average shares outstanding during period - Diluted | 130,045,013 | 130,581,665 | 129,961,696 | 130,585,212 | ||||||||||||||
| CASH DIVIDENDS PER COMMON SHARE | ||||||||||||||||||
| (Unaudited) | Three Months Ended December 31, | Six Months Ended December 31, | ||||||||||||||||
| (Amounts in dollars) | 2022 | 2021 | 2022 | 2021 | ||||||||||||||
| Cash dividends per common share | $ | 1.33 | $ | 1.03 | $ | 2.66 | $ | 2.06 | RECONCILIATION OF ORGANIC GROWTH | |||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||||||
| (Unaudited) | Three Months Ended December 31, | Six Months Ended December 31, | ||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||||
| Sales growth - as reported | 22.2 | % | 12.1 | % | 17.4 | % | 14.2 | % | ||||||||||
| Adjustments: | ||||||||||||||||||
| Acquisitions | 16.5 | % | — | % | 10.2 | % | — | % | ||||||||||
| Divestitures | (0.5) | % | — | % | (0.3) | % | — | % | ||||||||||
| Currency | (4.1) | % | (1.1) | % | (4.7) | % | (0.2) | % | ||||||||||
| Organic sales growth | 10.3 | % | 13.2 | % | 12.2 | % | 14.4 | % | ||||||||||
| PARKER HANNIFIN CORPORATION - DECEMBER 31, 2022 | Exhibit 99.1 | |||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||||||
| RECONCILIATION OF NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS TO ADJUSTED NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS | ||||||||||||||||||
| (Unaudited) | Three Months Ended December 31, | Six Months Ended December 31, | ||||||||||||||||
| (Dollars in thousands) | 2022 | 2021 | 2022 | 2021 | ||||||||||||||
| Net income attributable to common shareholders | $ | 395,237 | $ | 387,600 | $ | 783,091 | $ | 838,757 | ||||||||||
| Adjustments: | ||||||||||||||||||
| Acquired intangible asset amortization expense | 142,256 | 78,741 | 229,270 | 158,512 | ||||||||||||||
| Business realignment charges | 5,378 | 3,645 | 9,239 | 6,659 | ||||||||||||||
| Integration costs to achieve | 33,418 | 807 | 45,409 | 2,009 | ||||||||||||||
| Acquisition-related expenses | 1,983 | 19,142 | 162,241 | 71,341 | ||||||||||||||
| Loss on deal-contingent forward contracts | — | 149,382 | 389,992 | 149,382 | ||||||||||||||
| Gain on Aircraft Wheel and Brake divestiture | — | — | (372,930) | — | ||||||||||||||
| Amortization of inventory step-up to fair value | 111,973 | — | 130,331 | — | ||||||||||||||
| Tax effect of adjustments1 | (71,391) | (57,139) | (142,246) | (87,780) | ||||||||||||||
| Adjusted net income attributable to common shareholders | $ | 618,854 | $ | 582,178 | $ | 1,234,397 | $ | 1,138,880 | ||||||||||
| RECONCILIATION OF EARNINGS PER DILUTED SHARE TO ADJUSTED EARNINGS PER DILUTED SHARE | ||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||||||
| (Unaudited) | Three Months Ended December 31, | Six Months Ended December 31, | ||||||||||||||||
| (Amounts in dollars) | 2022 | 2021 | 2022 | 2021 | ||||||||||||||
| Earnings per diluted share | $ | 3.04 | $ | 2.97 | $ | 6.03 | $ | 6.42 | ||||||||||
| Adjustments: | ||||||||||||||||||
| Acquired intangible asset amortization expense | 1.09 | 0.60 | 1.76 | 1.21 | ||||||||||||||
| Business realignment charges | 0.04 | 0.03 | 0.07 | 0.05 | ||||||||||||||
| Integration costs to achieve | 0.26 | 0.01 | 0.35 | 0.02 | ||||||||||||||
| Acquisition-related expenses | 0.02 | 0.15 | 1.26 | 0.55 | ||||||||||||||
| Loss on deal-contingent forward contracts | — | 1.14 | 3.00 | 1.14 | ||||||||||||||
| Gain on Aircraft Wheel and Brake divestiture | — | — | (2.87) | — | ||||||||||||||
| Amortization of inventory step-up to fair value | 0.86 | — | 1.00 | — | ||||||||||||||
| Tax effect of adjustments1 | (0.55) | (0.44) | (1.09) | (0.67) | ||||||||||||||
| Adjusted earnings per diluted share | $ | 4.76 | $ | 4.46 | $ | 9.51 | $ | 8.72 | ||||||||||
| 1This line item reflects the aggregate tax effect of all non-tax adjustments reflected in the preceding line items of the table. We estimate the tax effect of each adjustment item by applying our overall effective tax rate for continuing operations to the pre-tax amount, unless the nature of the item and/or the tax jurisdiction in which the item has been recorded requires application of a specific tax rate or tax treatment, in which case the tax effect of such item is estimated by applying such specific tax rate or tax treatment. | ||||||||||||||||||
| PARKER HANNIFIN CORPORATION - DECEMBER 31, 2022 | Exhibit 99.1 | |||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||
| RECONCILIATION OF EBITDA TO ADJUSTED EBITDA | ||||||||||||||||||
| (Unaudited) | Three Months Ended December 31, | Six Months Ended December 31, | ||||||||||||||||
| (Dollars in thousands) | 2022 | 2021 | 2022 | 2021 | ||||||||||||||
| Net sales | $ | 4,674,811 | $ | 3,824,580 | $ | 8,907,586 | $ | 7,587,389 | ||||||||||
| Net income | $ | 395,461 | $ | 387,729 | $ | 783,498 | $ | 839,192 | ||||||||||
| Income taxes | 121,282 | 102,595 | 236,590 | 222,877 | ||||||||||||||
| Depreciation | 87,488 | 65,362 | 154,455 | 131,113 | ||||||||||||||
| Amortization | 142,256 | 78,741 | 229,270 | 158,512 | ||||||||||||||
| Interest expense | 146,931 | 61,360 | 264,725 | 120,710 | ||||||||||||||
| EBITDA | 893,418 | 695,787 | 1,668,538 | 1,472,404 | ||||||||||||||
| Adjustments: | ||||||||||||||||||
| Business realignment charges | 5,378 | 3,645 | 9,239 | 6,659 | ||||||||||||||
| Integration costs to achieve | 33,418 | 807 | 45,409 | 2,009 | ||||||||||||||
| Acquisition-related expenses | 1,983 | 19,142 | 162,241 | 71,341 | ||||||||||||||
| Loss on deal-contingent forward contracts | — | 149,382 | 389,992 | 149,382 | ||||||||||||||
| Gain on Aircraft Wheel and Brake divestiture | — | — | (372,930) | — | ||||||||||||||
| Amortization of inventory step-up to fair value | 111,973 | — | 130,331 | — | ||||||||||||||
| Adjusted EBITDA | $ | 1,046,170 | $ | 868,763 | $ | 2,032,820 | $ | 1,701,795 | ||||||||||
| EBITDA margin | 19.1 | % | 18.2 | % | 18.7 | % | 19.4 | % | ||||||||||
| Adjusted EBITDA margin | 22.4 | % | 22.7 | % | 22.8 | % | 22.4 | % | ||||||||||
| BUSINESS SEGMENT INFORMATION | ||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||||||
| (Unaudited) | Three Months Ended December 31, | Six Months Ended December 31, | ||||||||||||||||
| (Dollars in thousands) | 2022 | 2021 | 2022 | 2021 | ||||||||||||||
| Net sales | ||||||||||||||||||
| Diversified Industrial: | ||||||||||||||||||
| North America | $ | 2,140,685 | $ | 1,807,024 | $ | 4,272,445 | $ | 3,600,739 | ||||||||||
| International | 1,397,699 | 1,399,179 | 2,752,712 | 2,775,615 | ||||||||||||||
| Aerospace Systems | 1,136,427 | 618,377 | 1,882,429 | 1,211,035 | ||||||||||||||
| Total net sales | $ | 4,674,811 | $ | 3,824,580 | $ | 8,907,586 | $ | 7,587,389 | ||||||||||
| Segment operating income | ||||||||||||||||||
| Diversified Industrial: | ||||||||||||||||||
| North America | $ | 419,921 | $ | 337,417 | $ | 872,907 | $ | 671,119 | ||||||||||
| International | 285,520 | 291,555 | 579,460 | 582,731 | ||||||||||||||
| Aerospace Systems | 8,793 | 114,796 | 100,944 | 233,047 | ||||||||||||||
| Total segment operating income | 714,234 | 743,768 | 1,553,311 | 1,486,897 | ||||||||||||||
| Corporate general and administrative expenses | 48,901 | 42,587 | 100,561 | 91,659 | ||||||||||||||
| Income before interest expense and other expense | 665,333 | 701,181 | 1,452,750 | 1,395,238 | ||||||||||||||
| Interest expense | 146,931 | 61,360 | 264,725 | 120,710 | ||||||||||||||
| Other expense | 1,659 | 149,497 | 167,937 | 212,459 | ||||||||||||||
| Income before income taxes | $ | 516,743 | $ | 490,324 | $ | 1,020,088 | $ | 1,062,069 | ||||||||||
| PARKER HANNIFIN CORPORATION - DECEMBER 31, 2022 | Exhibit 99.1 | |||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||
| RECONCILIATION OF SEGMENT OPERATING MARGINS TO ADJUSTED SEGMENT OPERATING MARGINS | ||||||||||||||||||
| (Unaudited) | Three Months Ended December 31, | Six Months Ended December 31, | ||||||||||||||||
| (Dollars in thousands) | 2022 | 2021 | 2022 | 2021 | ||||||||||||||
| Diversified Industrial North America sales | $ | 2,140,685 | $ | 1,807,024 | $ | 4,272,445 | $ | 3,600,739 | ||||||||||
| Diversified Industrial North America operating income | $ | 419,921 | $ | 337,417 | $ | 872,907 | $ | 671,119 | ||||||||||
| Adjustments: | ||||||||||||||||||
| Acquired intangible asset amortization | 44,358 | 47,024 | 90,632 | 94,287 | ||||||||||||||
| Business realignment charges | 1,338 | 660 | 1,471 | 1,613 | ||||||||||||||
| Integration costs to achieve | 1,270 | 329 | 1,317 | 660 | ||||||||||||||
| Adjusted Diversified Industrial North America operating income | $ | 466,887 | $ | 385,430 | $ | 966,327 | $ | 767,679 | ||||||||||
| Diversified Industrial North America operating margin | 19.6 | % | 18.7 | % | 20.4 | % | 18.6 | % | ||||||||||
| Adjusted Diversified Industrial North America operating margin | 21.8 | % | 21.3 | % | 22.6 | % | 21.3 | % | ||||||||||
| (Unaudited) | Three Months Ended December 31, | Six Months Ended December 31, | ||||||||||||||||
| (Dollars in thousands) | 2022 | 2021 | 2022 | 2021 | ||||||||||||||
| Diversified Industrial International sales | $ | 1,397,699 | $ | 1,399,179 | $ | 2,752,712 | $ | 2,775,615 | ||||||||||
| Diversified Industrial International operating income | $ | 285,520 | $ | 291,555 | $ | 579,460 | $ | 582,731 | ||||||||||
| Adjustments: | ||||||||||||||||||
| Acquired intangible asset amortization | 16,819 | 18,958 | 33,624 | 38,700 | ||||||||||||||
| Business realignment charges | 3,039 | 2,387 | 4,918 | 4,451 | ||||||||||||||
| Integration costs to achieve | 425 | 478 | 564 | 1,349 | ||||||||||||||
| Adjusted Diversified Industrial International operating income | $ | 305,803 | $ | 313,378 | $ | 618,566 | $ | 627,231 | ||||||||||
| Diversified Industrial International operating margin | 20.4 | % | 20.8 | % | 21.1 | % | 21.0 | % | ||||||||||
| Adjusted Diversified Industrial International operating margin | 21.9 | % | 22.4 | % | 22.5 | % | 22.6 | % | ||||||||||
| (Unaudited) | Three Months Ended December 31, | Six Months Ended December 31, | ||||||||||||||||
| (Dollars in thousands) | 2022 | 2021 | 2022 | 2021 | ||||||||||||||
| Aerospace Systems sales | $ | 1,136,427 | $ | 618,377 | $ | 1,882,429 | $ | 1,211,035 | ||||||||||
| Aerospace Systems operating income | $ | 8,793 | $ | 114,796 | $ | 100,944 | $ | 233,047 | ||||||||||
| Adjustments: | ||||||||||||||||||
| Acquired intangible asset amortization | 81,079 | 12,759 | 105,014 | 25,525 | ||||||||||||||
| Business realignment charges | 1,001 | 598 | 2,850 | 595 | ||||||||||||||
| Integration costs to achieve | 31,723 | — | 43,528 | — | ||||||||||||||
| Amortization of inventory step-up to fair value | 111,973 | — | 130,331 | — | ||||||||||||||
| Adjusted Aerospace Systems operating income | $ | 234,569 | $ | 128,153 | $ | 382,667 | $ | 259,167 | ||||||||||
| Aerospace Systems operating margin | 0.8 | % | 18.6 | % | 5.4 | % | 19.2 | % | ||||||||||
| Adjusted Aerospace Systems operating margin | 20.6 | % | 20.7 | % | 20.3 | % | 21.4 | % | ||||||||||
| PARKER HANNIFIN CORPORATION - DECEMBER 31, 2022 | Exhibit 99.1 | |||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||
| RECONCILIATION OF SEGMENT OPERATING MARGINS TO ADJUSTED SEGMENT OPERATING MARGINS | ||||||||||||||||||
| (Unaudited) | Three Months Ended December 31, | Six Months Ended December 31, | ||||||||||||||||
| (Dollars in thousands) | 2022 | 2021 | 2022 | 2021 | ||||||||||||||
| Total segment sales | $ | 4,674,811 | $ | 3,824,580 | $ | 8,907,586 | $ | 7,587,389 | ||||||||||
| Total segment operating income | $ | 714,234 | $ | 743,768 | $ | 1,553,311 | $ | 1,486,897 | ||||||||||
| Adjustments: | ||||||||||||||||||
| Acquired intangible asset amortization | 142,256 | 78,741 | 229,270 | 158,512 | ||||||||||||||
| Business realignment charges | 5,378 | 3,645 | 9,239 | 6,659 | ||||||||||||||
| Integration costs to achieve | 33,418 | 807 | 45,409 | 2,009 | ||||||||||||||
| Amortization of inventory step-up to fair value | 111,973 | — | 130,331 | — | ||||||||||||||
| Adjusted total segment operating income | $ | 1,007,259 | $ | 826,961 | $ | 1,967,560 | $ | 1,654,077 | ||||||||||
| Total segment operating margin | 15.3 | % | 19.4 | % | 17.4 | % | 19.6 | % | ||||||||||
| Adjusted total segment operating margin | 21.5 | % | 21.6 | % | 22.1 | % | 21.8 | % | ||||||||||
| PARKER HANNIFIN CORPORATION - DECEMBER 31, 2022 | Exhibit 99.1 | |||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | ||||||||||||
| CONSOLIDATED BALANCE SHEET | ||||||||||||||||||
| (Unaudited) | December 31, | June 30, | December 31, | |||||||||||||||
| (Dollars in thousands) | 2022 | 2022 | 2021 | |||||||||||||||
| Assets | ||||||||||||||||||
| Current assets: | ||||||||||||||||||
| Cash and cash equivalents | $ | 756,055 | $ | 535,799 | $ | 449,481 | ||||||||||||
| Marketable securities and other investments | 21,611 | 27,862 | 40,511 | |||||||||||||||
| Trade accounts receivable, net | 2,578,045 | 2,341,504 | 2,041,953 | |||||||||||||||
| Non-trade and notes receivable | 371,474 | 543,757 | 314,897 | |||||||||||||||
| Inventories | 3,095,722 | 2,214,553 | 2,307,306 | |||||||||||||||
| Prepaid expenses and other | 462,093 | 6,383,169 | 2,753,501 | |||||||||||||||
| Total current assets | 7,285,000 | 12,046,644 | 7,907,649 | |||||||||||||||
| Property, plant and equipment, net | 2,839,524 | 2,122,758 | 2,202,932 | |||||||||||||||
| Deferred income taxes | 133,348 | 110,585 | 146,567 | |||||||||||||||
| Investments and other assets | 1,206,194 | 788,057 | 794,814 | |||||||||||||||
| Intangible assets, net | 8,387,917 | 3,135,817 | 3,343,612 | |||||||||||||||
| Goodwill | 10,668,904 | 7,740,082 | 7,999,901 | |||||||||||||||
| Total assets | $ | 30,520,887 | $ | 25,943,943 | $ | 22,395,475 | ||||||||||||
| Liabilities and equity | ||||||||||||||||||
| Current liabilities: | ||||||||||||||||||
| Notes payable and long-term debt payable within one year | $ | 1,994,333 | $ | 1,724,310 | $ | 2,201,653 | ||||||||||||
| Accounts payable, trade | 1,966,757 | 1,731,925 | 1,597,025 | |||||||||||||||
| Accrued payrolls and other compensation | 453,037 | 470,132 | 335,417 | |||||||||||||||
| Accrued domestic and foreign taxes | 236,227 | 250,292 | 294,255 | |||||||||||||||
| Other accrued liabilities | 1,053,049 | 1,682,659 | 829,141 | |||||||||||||||
| Total current liabilities | 5,703,403 | 5,859,318 | 5,257,491 | |||||||||||||||
| Long-term debt | 12,025,860 | 9,755,825 | 6,250,525 | |||||||||||||||
| Pensions and other postretirement benefits | 807,124 | 639,939 | 959,741 | |||||||||||||||
| Deferred income taxes | 1,751,321 | 307,044 | 558,986 | |||||||||||||||
| Other liabilities | 898,703 | 521,897 | 600,452 | |||||||||||||||
| Shareholders' equity | 9,322,380 | 8,848,011 | 8,755,082 | |||||||||||||||
| Noncontrolling interests | 12,096 | 11,909 | 13,198 | |||||||||||||||
| Total liabilities and equity | $ | 30,520,887 | $ | 25,943,943 | $ | 22,395,475 | ||||||||||||
| PARKER HANNIFIN CORPORATION - DECEMBER 31, 2022 | Exhibit 99.1 | |||||||||||||||||
| --- | --- | --- | --- | --- | ||||||||||||||
| CONSOLIDATED STATEMENT OF CASH FLOWS | ||||||||||||||||||
| (Unaudited) | Six Months Ended December 31, | |||||||||||||||||
| (Dollars in thousands) | 2022 | 2021 | ||||||||||||||||
| Cash flows from operating activities: | ||||||||||||||||||
| Net income | $ | 783,498 | $ | 839,192 | ||||||||||||||
| Depreciation and amortization | 383,725 | 289,625 | ||||||||||||||||
| Share incentive plan compensation | 89,709 | 79,385 | ||||||||||||||||
| Gain on sale of businesses | (377,251) | (1,520) | ||||||||||||||||
| Gain on disposal of property, plant and equipment | (2,551) | (7,880) | ||||||||||||||||
| Gain on marketable securities | (1,354) | (4,948) | ||||||||||||||||
| Gain on investments | (2,929) | (1,487) | ||||||||||||||||
| Net change in receivables, inventories and trade payables | 112,216 | (147,481) | ||||||||||||||||
| Net change in other assets and liabilities | (112,066) | (16,498) | ||||||||||||||||
| Other, net | 203,137 | (22,919) | ||||||||||||||||
| Net cash provided by operating activities | 1,076,134 | 1,005,469 | ||||||||||||||||
| Cash flows from investing activities: | ||||||||||||||||||
| Acquisitions (net of cash of $89,704 in 2022) | (7,146,110) | — | ||||||||||||||||
| Capital expenditures | (185,704) | (105,606) | ||||||||||||||||
| Proceeds from sale of property, plant and equipment | 11,632 | 22,392 | ||||||||||||||||
| Proceeds from sale of businesses | 447,300 | 2,466 | ||||||||||||||||
| Purchases of marketable securities and other investments | (25,198) | (10,150) | ||||||||||||||||
| Maturities and sales of marketable securities and other investments | 30,594 | 13,742 | ||||||||||||||||
| Payments of deal-contingent forward contracts | (1,405,418) | — | ||||||||||||||||
| Other | 251,174 | 2,789 | ||||||||||||||||
| Net cash used in investing activities | (8,021,730) | (74,367) | ||||||||||||||||
| Cash flows from financing activities: | ||||||||||||||||||
| Net payments for common stock activity | (119,944) | (317,512) | ||||||||||||||||
| Net proceeds from debt | 1,536,211 | 1,900,844 | ||||||||||||||||
| Financing fees paid | (8,911) | (52,108) | ||||||||||||||||
| Dividends paid | (342,360) | (265,556) | ||||||||||||||||
| Net cash provided by financing activities | 1,064,996 | 1,265,668 | ||||||||||||||||
| Effect of exchange rate changes on cash | (11,221) | 6,978 | ||||||||||||||||
| Net (decrease) increase in cash, cash equivalents and restricted cash | (5,891,821) | 2,203,748 | ||||||||||||||||
| Cash, cash equivalents and restricted cash at beginning of year | 6,647,876 | 733,117 | ||||||||||||||||
| Cash, cash equivalents and restricted cash at end of period | $ | 756,055 | $ | 2,936,865 | ||||||||||||||
| PARKER HANNIFIN CORPORATION - DECEMBER 31, 2022 | Exhibit 99.1 | |||||||||||||||||
| --- | --- | |||||||||||||||||
| RECONCILIATION OF FORECASTED EARNINGS PER DILUTED SHARE TO ADJUSTED FORECASTED EARNINGS PER DILUTED SHARE | ||||||||||||||||||
| (Unaudited) | ||||||||||||||||||
| (Amounts in dollars) | Fiscal Year 2023 | |||||||||||||||||
| Forecasted earnings per diluted share | $13.50 to $14.00 | |||||||||||||||||
| Adjustments: | ||||||||||||||||||
| Business realignment charges | 0.23 | |||||||||||||||||
| Costs to achieve | 0.54 | |||||||||||||||||
| Acquisition-related intangible asset amortization expense | 4.00 | |||||||||||||||||
| Acquisition-related expenses | 2.55 | |||||||||||||||||
| Loss on deal-contingent forward contracts | 3.00 | |||||||||||||||||
| Gain on Aircraft Wheel & Brake divestiture | (2.87) | |||||||||||||||||
| Tax effect of adjustments1 | (1.75) | |||||||||||||||||
| Adjusted forecasted earnings per diluted share | $19.20 to $19.70 | |||||||||||||||||
| 1This line item reflects the aggregate tax effect of all non-tax adjustments reflected in the preceding line items of the table. We estimate the tax effect of each adjustment item by applying our overall effective tax rate for continuing operations to the pre-tax amount, unless the nature of the item and/or the tax jurisdiction in which the item has been recorded requires application of a specific tax rate or tax treatment, in which case the tax effect of such item is estimated by applying such specific tax rate or tax treatment. |
earningscallpresentation
Parker Hannifin Corporation Fiscal 2023 Second Quarter Earnings Presentation February 2, 2023 Exhibit 99.2
Forward-Looking Statements and Non-GAAP Financial Measures Forward-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,” “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 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. 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 Meggitt PLC; 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 business and operating initiatives, including the timing, price and execution of share repurchases and other capital initiatives; availability, cost increases of or other limitations on our access to raw materials, component products and/or commodities if associated costs 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 international conflicts and efforts to combat terrorism and cyber security risks; uncertainties surrounding the ultimate resolution of outstanding legal proceedings, including the outcome of any appeals; local and global political and 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 (including fluctuations associated with any potential credit rating decline) and credit availability; inability to obtain, or meet conditions imposed for, required governmental and regulatory approvals; changes in consumer habits and preferences; government actions, including the impact of changes in the tax laws in the United States and foreign jurisdictions and any judicial or regulatory interpretation thereof; and large scale disasters, such as floods, earthquakes, hurricanes, industrial accidents and pandemics. Readers should consider these forward-looking statements in light of risk factors discussed in Parker’s Annual Report on Form 10-K for the fiscal year ended June 30, 2022 and other periodic filings made with the SEC. This presentation contains references to non-GAAP financial information including organic sales for Parker and by segment, adjusted earnings per share, adjusted segment operating margin for Parker and by segment, adjusted net income, EBITDA, EBITDA margin, adjusted EBITDA, adjusted EBITDA margin, Gross Debt to Adjusted EBITDA, Net Debt to Adjusted EBITDA and free cash flow. EBITDA is defined as earnings before interest, taxes, depreciation and amortization. For Parker, adjusted EBITDA is defined as EBITDA before business realignment, Integration costs to achieve, acquisition related expenses, and other one-time items. Free cash flow is defined as cash flow from operations less capital expenditures. Although organic sales, adjusted earnings per share, adjusted segment operating margin for Parker and by segment, adjusted net income, EBITDA, adjusted EBITDA, EBITDA margin, adjusted EBITDA margin and free cash flow are not measures of performance calculated in accordance with GAAP, we believe that they are useful to an investor in evaluating the company performance for the period. Detailed reconciliations of these non-GAAP financial measures to the comparable GAAP financial measures have been included in the appendix to this presentation. Effective July 1, 2022, the company began classifying certain expenses, previously classified as cost of sales, as selling, general and administrative expenses (“SG&A”) or within other (income) expense, net. During the integration of recently acquired businesses, the company has seen diversity in practice of the classifications of certain expenses, and the reclassification was made to better align the presentation of expenses on the Consolidated Statement of Income with management’s internal reporting. The expenses reclassified from cost of sales to SG&A relate to certain administrative activities conducted in production facilities and research and development. Foreign currency transaction expense was also reclassified from cost of sales to other (income) expense, net on the Consolidated Statement of Income. These reclassifications had no impact on net income, earnings per share, cash flows, segment reporting or the financial position of the Company and were retrospectively applied to all periods presented in the financial tables of this presentation. Please visit www.PHstock.com for more information 2
What Drives Parker? Great Generators and Deployers of Cash Living Up to Our Purpose Top Quartile Performance vs. Proxy Peers 3
Focused on Top Quartile Performance Safety, Purpose and Engagement Delivering Meggitt cost synergies of $300 million Performance acceleration from The Win Strategy™ 3.0 Continuing our culture of continuous improvement Committed to FY27 Targets Parker’s Transformation Continues with a Promising Future Ahead 4
Win Strategy 3.0 Accelerating Performance 6 Safety #1 High Performance Teams & Leaders Culture of Kaizen Digital Leadership Zero Defects Best-in-Class Lead Times Strategic Positioning Portfolio Transformation Global CapEx Spend & Secular Trends Annual Cash Incentive Plan (ACIP) Simplification Value Pricing Lean Enterprise Supply Chain Leadership Driving Top Quartile Performance
Capital Deployment Priorities Dividend: Maintain record and target 5-year average payout 30-35% of net income CapEx: Target 2% of sales to fund organic growth and productivity 10b5-1 share repurchase program Near term: Debt reduction Strategic acquisitions and/or discretionary share repurchase 7 Great Generators & Deployers of Cash
FY23 Q2: Excellent Operating Performance Safety is our top priority, leveraging high-performance teams, lean and kaizen • 16% reduction in incidents vs. prior year Sales were $4.7B, an increase of 22% vs. prior year; organic growth 10%1 Strong segment operating margin performance driving full year guidance increase Meggitt integration & synergies on schedule 1. Adjusted numbers include certain non-GAAP financial measures. See Appendix for additional details and reconciliations. The Win Strategy & Portfolio Changes Deliver Record Performance 8
Excellent Progress on Meggitt Integration Proven Track Record of Delivering on Synergy Targets Recent Highlights Key leaders in place 20+ value creation & functional teams Team member & customer engagement Win Strategy implementation 9
$60 $150 $250 $300 $70 $150 $200 $240 FY23E FY24E FY25E FY26E Synergies Driving Meggitt Margin Expansion Expect 30% Adj. EBITDA Margin by FY26 Note: Pre-tax synergy estimate. Synergies Cumulative Cost to Achieve 10 Synergies and Operational Excellence 16.5% of Sales Safety, Lean, Kaizen, HPT’s, Simplification SG&A Footprint Optimization Supply Chain
Financial Summary FY23 Q2 vs. FY22 Q2 1. Sales figures As Reported. Adjusted numbers include certain non-GAAP financial measures. See Appendix for additional details and reconciliations. Note: FY22 Q2 As Reported: Segment Operating Margin of 19.4%, EBITDA Margin of 18.2%, Net Income of $388M, EPS of $2.97. $ Millions, except per share amounts Q2 FY23 Q2 FY23 Q2 FY22 YoY Change As Reported Adjusted¹ Adjusted¹ Adjusted Sales $4,675 $4,675 $3,825 +22% Segment Operating Margin 15.3% 21.5% 21.6% (10 bps) EBITDA Margin 19.1% 22.4% 22.7% (30 bps) Net Income $395 $619 $582 +6% EPS $3.04 $4.76 $4.46 +7% 12
Adjusted Earnings per Share Bridge FY22 Q2 to FY23 Q2 1. FY22 Q2 As Reported EPS of $2.97. FY23 Q2 As Reported EPS of $3.04. Adjusted numbers include certain non-GAAP financial measures. See Appendix for additional details and reconciliations. 13
FY23 Q2 Segment Performance Sales As Reported $ Organic %¹ Segment Operating Margin As Reported Segment Operating Margin Adjusted1 Order Rates2 Commentary $2,141M +13.5% Organic 19.6% 21.8% +50 bps YoY +2% • Broad based growth continues • Gradual supply chain improvement $1,398M +8.6% Organic 20.4% 21.9% (50) bps YoY (4%) • Organic growth in all regions • China COVID impacting supply chain $1,136M +4.9% Organic 0.8%3 20.6% (10) bps YoY +22% • Robust commercial sales & order growth • Meggitt performance & synergies on track $4,675M +10.3% Organic 15.3% 21.5% (10) bps YoY +3% • Record sales levels • Excellent operating performance 1. Adjusted numbers include certain non-GAAP financial measures. See Appendix for additional details and reconciliations. 2. Order Rates exclude acquisitions, divestitures, & currency. Industrial is a 3-month YoY comparison of total dollars. Aerospace is a rolling 12-month YoY comparison. 3. Aerospace as reported segment operating margin includes one-time purchase accounting related adjustments. See Appendix for additional details and reconciliations. Diversified Industrial International Diversified Industrial North America Parker Aerospace Systems 14
$1,076 $1,005 $890 $900 FY23 FY22 Cash Flow from Operations Free Cash Flow FY23 Q2 YTD Cash Flow Performance Cash Flow from Operations of 12.1% Free Cash Flow of 10.0%1 • Capex of 2.1% of sales Transaction expenses: • A use of cash of ~2% of sales Free Cash Flow Conversion of 114%1 1. Adjusted numbers include certain non-GAAP financial measures. See Appendix for additional details and reconciliations. $ Millions % to Sales 12.1% 10.0% 13.3% 11.9% 1 15
Capital Deployment & Leverage Highlights Quarterly dividend of $1.33 declared on January 26, 2023 • 66 fiscal year record of increasing annual dividends per share paid Leverage at FY23 Q2: • 3.6x Gross Debt / Adjusted EBITDA1 • 3.4x Net Debt / Adjusted EBITDA1 • ~$200M net debt reduction during the quarter Current debt ratings: Baa1 / BBB+; A2 / P2 1. Adjusted numbers include certain non-GAAP financial measures. See Appendix for additional details and reconciliations. 16
FY23 Adjusted Guidance Increased EPS Midpoint: $13.75 As Reported, $19.45 Adjusted Sales Growth vs. Prior Year Reported Organic1 Diversified Industrial North America 11% - 13% 7.5% - 9.5% Diversified Industrial International (3)% - (1)% 4% - 6% Aerospace Systems 64% - 66% 5.5% - 7.5% Parker 14.5% - 16.5% 6% - 8% Segment Operating Margins As Reported Adjusted1 Diversified Industrial North America 20.2% - 20.6% 22.4% - 22.8% Diversified Industrial International 20.2% - 20.6% 21.9% - 22.3% Aerospace Systems 8.9% - 9.3% 21.0% - 21.4% Parker 17.6% - 18.0% 21.9% - 22.3% Additional Items As Reported Adjusted1 Corporate G&A $204M $204M Interest Expense $555M Other Expense $162M ($18M) Reported Tax Rate ~23.5% Diluted Shares Outstanding ~130M Earnings Per Share As Reported Adjusted1 Range $13.50 - $14.00 $19.20 - $19.70 1. Adjusted numbers include certain non-GAAP financial measures. See Appendix for additional details and reconciliations. Detail of Pre-Tax Adjustments to: Segment Margins Below Segment Acquired Intangible Asset Amortization ~$520M — Business Realignment Charges ~$30M — Integration Costs to Achieve ~$70M — Gain on AWB Divestiture — ($373M) Meggitt Acquisition Related Expenses ~$170M $162M Meggitt Deal Contingent Forward Contracts — $390M 17
FY23 Adjusted EPS Guidance Bridge Reconciliation of Q2 Beat and Guidance Increase 1. FY23 As Reported midpoint guidance EPS of $13.75. Adjusted numbers include certain non-GAAP financial measures. See Appendix for additional details and reconciliations. Updates to H2 Guidance ~$0.25 FX benefit to EPS 18
Parker’s Promising Future Highly engaged global team living up to our purpose Continue performance acceleration from The Win Strategy™ 3.0 Strategic portfolio transformation - longer cycle & more resilient Continue to be great generators and deployers of cash Focused on Top Quartile Performance 19
Upcoming Event Calendar 3Q FY23 Earnings May 4, 2023 4Q FY23 Earnings August 3, 2023 Annual Meeting of Shareholders October 25, 2023 1Q FY23 Earnings November 2, 2023
Appendix • Reconciliation of Organic Growth • Adjusted Amounts Reconciliation • Reconciliation of EPS • Reconciliation of Total Segment Operating Margin to Adjusted Total Segment Operating Margin • Reconciliation of EBITDA to Adjusted EBITDA • Reconciliation of Gross and Net Debt to Adjusted EBITDA • Reconciliation of Free Cash Flow Conversion • Supplemental Sales Information – Global Technology Platforms • Reconciliation of Forecasted EPS 21
Reconciliation of Organic Growth (Dollars in thousands) (Unaudited) Quarter-to-Date As Reported Adjusted As Reported Net Sales December 31, 2022 Acquisitions December 31, 2022 December 31, 2021 Diversified Industrial: North America 2,140,685$ 1,508$ -$ (91,816)$ 2,050,377$ 1,807,024$ International Europe 748,105 89,916 - (23,655) 814,366 732,440 Asia Pacific 574,869 62,844 - (5,579) 632,134 605,771 Latin America 74,725 (1,878) - - 72,847 60,968 International 1,397,699 150,882 - (29,234) 1,519,347 1,399,179 Total Diversified Industrial 3,538,384 152,390 - (121,050) 3,569,724 3,206,203 Aerospace Systems 1,136,427 1,987 18,327 (508,317) 648,424 618,377 Total Parker Hannifin 4,674,811$ 154,377$ 18,327$ (629,367)$ 4,218,148$ 3,824,580$ As reported Currency Divestitures Acquisitions Organic Diversified Industrial: North America 18.5 % (0.1)% 0.0 % 5.1 % 13.5 % International Europe 2.1 % (12.3)% 0.0 % 3.2 % 11.2 % Asia Pacific (5.1)% (10.4)% 0.0 % 0.9 % 4.4 % Latin America 22.6 % 3.1 % 0.0 % 0.0 % 19.5 % International (0.1)% (10.8)% 0.0 % 2.1 % 8.6 % Total Diversified Industrial 10.4 % (4.7)% 0.0 % 3.8 % 11.3 % Aerospace Systems 83.8 % (0.3)% (3.0)% 82.2 % 4.9 % Total Parker Hannifin 22.2 % (4.1)% (0.5)% 16.5 % 10.3 % Currency Divestitures 22
Adjusted Amounts Reconciliation Consolidated Statement of Income (Dollars in thousands, except per share data) (Unaudited) Quarter-to-Date FY 2023 Acquired Business Meggitt Acquisition Amortization As Reported Intangible Asset Realignment Costs to Related of Inventory Adjusted December 31, 2022 % of Sales Amortization Charges Achieve Expenses Step-Up to FV December 31, 2022 % of Sales Net sales 4,674,811$ 100.0 % -$ -$ -$ -$ -$ 4,674,811$ 100.0 % Cost of sales 3,236,812 69.2 % 37,652 3,214 3,153 - 111,973 3,080,820 65.9 % Selling, general and admin. expenses 814,966 17.4 % 104,604 2,164 30,265 1,983 - 675,950 14.5 % Interest expense 146,931 3.1 % - - - - - 146,931 3.1 % Other (income) expense, net (40,641) (0.9)% - - - - - (40,641) (0.9)% Income before income taxes 516,743 11.1 % (142,256) (5,378) (33,418) (1,983) (111,973) 811,751 17.4 % Income taxes 121,282 2.6 % 34,426 1,301 8,087 480 27,097 192,673 4.1 % Net income 395,461 8.5 % (107,830) (4,077) (25,331) (1,503) (84,876) 619,078 13.2 % Less: Noncontrolling interests 224 0.0 % - - - - - 224 0.0 % Net income - common shareholders 395,237$ 8.5 % (107,830)$ (4,077)$ (25,331)$ (1,503)$ (84,876)$ 618,854$ 13.2 % Diluted earnings per share 3.04$ (0.83)$ (0.03)$ (0.20)$ (0.01)$ (0.65)$ 4.76$ 23
Adjusted Amounts Reconciliation Consolidated Statement of Income (Dollars in thousands, except per share data) (Unaudited) Quarter-to-Date FY 2022 Acquired Business Lord Acquisition Loss on As Reported Intangible Asset Realignment Costs to Related Deal-Contingent Adjusted December 31, 2021 % of Sales Amortization Charges Achieve Expenses Forward Contracts December 31, 2021 % of Sales Net sales 3,824,580$ 100.0 % -$ -$ -$ -$ -$ 3,824,580$ 100.0 % Cost of sales* 2,567,595 67.1 % 15,314 946 35 - - 2,551,300 66.7 % Selling, general and admin. expenses* 585,858 15.3 % 63,427 2,699 772 8,880 - 510,080 13.3 % Interest expense 61,360 1.6 % - - - - - 61,360 1.6 % Other (income) expense, net* 119,443 3.1 % - - - 10,262 149,382 (40,201) (1.1)% Income before income taxes 490,324 12.8 % (78,741) (3,645) (807) (19,142) (149,382) 742,041 19.4 % Income taxes 102,595 2.7 % 17,874 827 183 4,345 33,910 159,734 4.2 % Net income 387,729 10.1 % (60,867) (2,818) (624) (14,797) (115,472) 582,307 15.2 % Less: Noncontrolling interests 129 0.0 % - - - - - 129 0.0 % Net income - common shareholders 387,600$ 10.1 % (60,867)$ (2,818)$ (624)$ (14,797)$ (115,472)$ 582,178$ 15.2 % Diluted earnings per share 2.97$ (0.47)$ (0.02)$ -$ (0.12)$ (0.88)$ 4.46$ *Prior period amounts have been recast to reflect the income statement reclassification. 24
Adjusted Amounts Reconciliation Business Segment Information (Dollars in thousands) (Unaudited) Quarter-to-Date FY 2023 Acquired Business Meggitt Acquisition Amortization As Reported Intangible Asset Realignment Costs to Related of Inventory Adjusted December 31, 2022 % of Sales Amortization Charges Achieve Expenses Step-Up to FV December 31, 2022 % of Sales2 Diversified Industrial: North America1 419,921$ 19.6% 44,358$ 1,338$ 1,270$ -$ -$ 466,887$ 21.8% International1 285,520 20.4% 16,819 3,039 425 - - 305,803 21.9% Total Diversified Industrial1 705,441 19.9% 61,177 4,377 1,695 - - 772,690 21.8% Aerospace Systems1 8,793 0.8% 81,079 1,001 31,723 - 111,973 234,569 20.6% Total segment operating income 714,234 15.3% (142,256) (5,378) (33,418) - (111,973) 1,007,259 21.5% Corporate administration 48,901 1.0% - - - - - 48,901 1.0% Income before interest and other 665,333 14.2% (142,256) (5,378) (33,418) - (111,973) 958,358 20.5% Interest expense 146,931 3.1% - - - - - 146,931 3.1% Other (income) expense 1,659 0.0% - - - 1,983 - (324) 0.0% Income before income taxes 516,743$ 11.1% (142,256)$ (5,378)$ (33,418)$ (1,983)$ (111,973)$ 811,751$ 17.4% 1. Segment operating income as a percent of sales is calculated on segment sales. 2. Adjusted amounts as a percent of sales are calculated on as reported sales. 25
Adjusted Amounts Reconciliation Business Segment Information 1. Segment operating income as a percent of sales is calculated on segment sales. 2. Adjusted amounts as a percent of sales are calculated on as reported sales. 26 (Dollars in thousands) (Unaudited) Quarter-to-Date FY 2022 Acquired Business Lord Acquisition Loss on As Reported Intangible Asset Realignment Costs to Related Deal-Contingent Adjusted December 31, 2021 % of Sales Amortization Charges Achieve Expenses Forward Contracts December 31, 2021 % of Sales2 Diversified Industrial: North America1 337,417$ 18.7% 47,024$ 660$ 329$ -$ -$ 385,430$ 21.3% International1 291,555 20.8% 18,958 2,387 478 - - 313,378 22.4% Total Diversified Industrial1 628,972 19.6% 65,982 3,047 807 - - 698,808 21.8% Aerospace Systems1 114,796 18.6% 12,759 598 - - - 128,153 20.7% Total segment operating income 743,768 19.4% (78,741) (3,645) (807) - - 826,961 21.6% Corporate administration 42,587 1.1% - - - - - 42,587 1.1% Income before interest and other 701,181 18.3% (78,741) (3,645) (807) - - 784,374 20.5% Interest expense 61,360 1.6% - - - - - 61,360 1.6% Other (income) expense 149,497 3.9% - - - 19,142 149,382 (19,027) -0.5% Income before income taxes 490,324$ 12.8% (78,741)$ (3,645)$ (807)$ (19,142)$ (149,382)$ 742,041$ 19.4%
Reconciliation of Earnings per Diluted Share to Adjusted Earnings per Diluted Share (Unaudited) Three Months Ended December 31, (Amounts in dollars) 2022 2021 Earnings per diluted share $3.04 $ 2.97 Adjustments: Acquired intangible asset amortization expense 1.09 0.60 Business realignment charges 0.04 0.03 Integration costs to achieve 0.26 0.01 Acquisition-related expenses 0.02 0.15 Loss on deal-contingent forward contracts — 1.14 Gain on Aircraft Wheel and Brake divestiture — — Amortization of inventory step-up to fair value 0.86 — Tax effect of adjustments1 (0.55) (0.44) Adjusted earnings per diluted share $4.76 $ 4.46 1. This line item reflects the aggregate tax effect of all non-tax adjustments reflected in the preceding line items of the table. We estimate the tax effect of each adjustment item by applying our overall effective tax rate for continuing operations to the pre-tax amount, unless the nature of the item and/or the tax jurisdiction in which the item has been recorded requires application of a specific tax rate or tax treatment, in which case the tax effect of such item is estimated by applying such specific tax rate or tax treatment. 27
Reconciliation of Total Segment Operating Margin to Adjusted Total Segment Operating Margin (Unaudited) Three Months Ended Three Months Ended (Dollars in thousands) December 31, 2022 December 31, 2021 Operating income Operating margin Operating income Operating margin Total segment operating income $ 714,234 15.3 % $ 743,768 19.4 % Adjustments: Acquired intangible asset amortization 142,256 78,741 Business realignment charges 5,378 3,645 Integration costs to achieve 33,418 807 Amortization of Inventory Step-up to FV 111,973 — Adjusted total segment operating income $ 1,007,259 21.5 % $ 826,961 21.6 % 28
Reconciliation of EBITDA to Adjusted EBITDA (Dollars in thousands) Three Months Ended (Unaudited) December 31, 2022 % of Sales 2021 % of Sales Net sales $ 4,674,811 100.0% $ 3,824,580 100.0% Net income $ 395,461 8.5% $ 387,729 10.1% Income taxes 121,282 2.6% 102,595 2.7% Depreciation 87,488 1.9% 65,362 1.7% Amortization 142,256 3.0% 78,741 2.1% Interest expense 146,931 3.1% 61,360 1.6% EBITDA 893,418 19.1% 695,787 18.2% Adjustments: Business realignment charges 5,378 0.1% 3,645 0.1% Meggitt costs to achieve 33,418 0.7% - 0.0% Lord costs to achieve - 0.0% 807 0.0% Acquisition-related expenses 1,983 0.0% 19,142 0.5% Loss on deal-contingent forward contracts - 0.0% 149,382 3.9% Amortization of inventory step-up to FV 111,973 2.4% - 0.0% EBITDA - Adjusted $ 1,046,170 22.4% $ 868,763 22.7% EBITDA margin 19.1 % 18.2 % EBITDA margin - Adjusted 22.4 % 22.7 % 29
Reconciliation of Gross and Net Debt / Adjusted EBITDA 30 Reconciliation of Gross and Net Debt / Adjusted EBITDA (Unaudited) (Dollars in thousands) December 31, 2022 Notes payable and long-term debt payable within one year 1,994,333$ Long-term debt 12,025,860 Add: Deferred debt issuance costs 83,758 Total gross debt 14,103,951$ Cash and cash equivalents 756,055$ Marketable securities and other investments 21,611 Total cash 777,666$ Net debt (Gross debt less total cash) 13,326,285$ TTM Net Sales 17,181,805$ Net income 1,260,492$ Income tax 311,753 Depreciation 280,656 Amortization 385,208 Interest Expense 399,267 TTM EBITDA 2,637,376$ Adjustments: Business realignment charges 17,337 Costs to achieve 48,166 Acquisition-related costs 186,627 Loss on deal-contingent forward contracts 1,256,036 Gain on Aircraft Wheel & Brake divestiture (372,930) Amortization of inventory step-up to FV 130,331 Russia liquidation 20,057 TTM Adjusted EBITDA 3,923,000$ Gross Debt/TTM Adjusted EBITDA 3.6 Net Debt/TTM Adjusted EBITDA 3.4
(Unaudited) Six Months Ended December 31, 2022 Six Months Ended December 31, 2021(Dollars in thousands) Net income $ 783,498 $ 839,192 Cash flow from operations $ 1,076,134 $ 1,005,469 Capital Expenditures (185,704) (105,606) Free cash flow $ 890,430 $ 899,863 Free cash flow conversion (free cash flow / net income) 114 % 107 % Reconciliation of Free Cash Flow Conversion 31
Supplemental Sales Information Global Technology Platforms (Unaudited) Three Months Ended December 31, (Dollars in thousands) 2022 2021 Net sales Diversified Industrial: Motion Systems $ 913,415 $ 843,655 Flow and Process Control 1,173,260 1,103,404 Filtration and Engineered Materials 1,451,709 1,259,144 Aerospace Systems 1,136,427 618,377 Total $ 4,674,811 $ 3,824,580 32
Reconciliation of EPS Fiscal Year 2023 Guidance (Unaudited) (Amounts in dollars) Fiscal Year 2023 Forecasted earnings per diluted share $13.50 to $14.00 Adjustments: Business realignment charges 0.23 Costs to achieve 0.54 Acquisition-related intangible asset amortization expense 4.00 Acquisition-related expenses 2.55 Loss on deal-contingent forward contracts 3.00 Gain on Aircraft Wheel & Brake divestiture (2.87) Tax effect of adjustments1 (1.75) Adjusted forecasted earnings per diluted share $19.20 to $19.70 1. This line item reflects the aggregate tax effect of all non-tax adjustments reflected in the preceding line items of the table. We estimate the tax effect of each adjustment item by applying our overall effective tax rate for continuing operations to the pre-tax amount, unless the nature of the item and/or the tax jurisdiction in which the item has been recorded requires application of a specific tax rate or tax treatment, in which case the tax effect of such item is estimated by applying such specific tax rate or tax treatment. 33