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): May 4, 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 May 4, 2023, Parker-Hannifin Corporation issued a press release and presented a Webcast announcing results of operations for the quarter ended March 31, 2023. 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, datedMay 4, 2023.
99.2 Webcast presentation by Parker-Hannifin Corporation, datedMayearningscallpresentation.htm4, 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: | May 4, 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 Third Quarter Results
-
Record sales, and adjusted segment operating margin, EBITDA margin, net income and EPS -
Sales increased 24% to $5.1 billion; organic sales increased 12% -
Segment operating margin was 18.8%, or 23.2% adjusted, an increase of 50 bps -
Net income was $590.9 million, or $771.9 million adjusted -
EBITDA margin was 22.4%, or 24.2% adjusted, an increase of 160 bps -
EPS were $4.54, or $5.93 adjusted, an increase of 23% -
Debt reduction of $615 million in the quarter -
Company increases full year organic growth and adjusted EPS guidance
CLEVELAND, May 4, 2023 -- Parker Hannifin Corporation (NYSE: PH), the global leader in motion and control technologies, today reported results for the fiscal 2023 third quarter ended March 31, 2023. Fiscal 2023 third quarter sales were a record at $5.1 billion, an increase of 24%, compared with $4.1 billion in the third quarter of fiscal 2022. Net income was $590.9 million compared with $348.0 million in the prior year quarter. Adjusted net income was $771.9 million, an increase of 22% compared with $630.2 million in the third quarter of fiscal 2022. Earnings per share were $4.54 compared with $2.67 in the third quarter of fiscal 2022. Adjusted earnings per share increased 23% to a record of $5.93 compared with $4.83 in the prior year quarter. Fiscal 2023 year-to-date cash flow from operations increased 16% to $1.8 billion, or 12.8% of sales compared with $1.5 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 and divestitures during fiscal 2023.
“This was an outstanding quarter for Parker, driven by our engaged team that continues to deliver record financial performance,” said Chief Executive Officer, Jenny Parmentier. “For the first time, quarterly sales surpassed $5 billion and we achieved record adjusted segment operating margin and adjusted earnings per share. Demand remained strong across the company with double-digit organic sales growth, record backlog and positive order levels. Meggitt's team members and technologies are
bringing significant value to our portfolio, and we are pleased to report that the integration and synergies are ahead of schedule.”
Segment Results
Diversified Industrial Segment: North American third quarter sales increased 16% to $2.3 billion and operating income was $489.3 million compared with $414.0 million in the same period a year ago. On an adjusted basis, North American operating income was $536.7 million, or 22.9% of sales. International third quarter sales increased 6% to $1.5 billion and operating income was $329.5 million compared with $298.5 million in the same period a year ago. On an adjusted basis, International operating income was $357.0 million, or 23.4% of sales, a 70 basis point increase compared with the prior year quarter.
Aerospace Systems Segment: Third quarter sales increased 89% to $1.2 billion and operating income was $133.9 million compared with $119.0 million in the same period a year ago. On an adjusted basis, operating income was $281.3 million, or 23.5% of sales, a 160 basis point increase compared with the prior year quarter.
Orders
Beginning in the third quarter of fiscal 2023, order comparisons include Meggitt to better reflect the transformation of Parker's portfolio and its effect on order rates. The company reported the following orders for the quarter ending March 31, 2023, compared with the same quarter a year ago:
· Orders increased 2% for total Parker
· Orders decreased 4% in the Diversified Industrial North America businesses
· Orders decreased 4% in the Diversified Industrial International businesses
· Orders increased 25% in the Aerospace Systems Segment on a rolling 12-month average basis.
Outlook
Parker has increased its outlook for organic sales and earnings per share for the fiscal year ending June 30, 2023. The company expects fiscal 2023 organic sales growth to be approximately 10% and earnings per share in the range of $14.75 to $15.05, or $20.60 to $20.90 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, “Our results this quarter give us confidence in a strong finish to the fiscal year. Our continued execution of The Win Strategy™ coupled with secular growth trends and synergies from the Meggitt acquisition will support us in achieving top quartile performance and our FY27 financial goals. With many opportunities for continued improvement, I am very excited about Parker's future.”
NOTICE OF CONFERENCE CALL: Parker Hannifin's conference call and slide presentation to discuss its fiscal 2023 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 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 67 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. Beginning in the third quarter of fiscal 2023, all comparisons include acquisitions in both the numerator and denominator and exclude divestitures. Diversified Industrial comparisons are on 3-month average computations and Aerospace Systems comparisons are rolling 12-month average computations.
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 - MARCH 31, 2023 | Exhibit 99.1 | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| CONSOLIDATED STATEMENT OF INCOME | ||||||||||||||||||
| (Unaudited) | Three Months Ended March 31, | Nine Months Ended March 31, | ||||||||||||||||
| (Dollars in thousands, except per share amounts) | 2023 | 2022* | 2023 | 2022* | ||||||||||||||
| Net sales | $ | 5,061,665 | $ | 4,086,387 | $ | 13,969,251 | $ | 11,673,776 | ||||||||||
| Cost of sales | 3,340,764 | 2,709,407 | 9,373,032 | 7,781,384 | ||||||||||||||
| Selling, general and administrative expenses | 868,393 | 640,498 | 2,519,163 | 1,853,105 | ||||||||||||||
| Interest expense | 151,993 | 63,272 | 416,718 | 183,982 | ||||||||||||||
| Other (income) expense, net | (55,866) | 239,221 | (116,131) | 359,247 | ||||||||||||||
| Income before income taxes | 756,381 | 433,989 | 1,776,469 | 1,496,058 | ||||||||||||||
| Income taxes | 165,421 | 85,901 | 402,011 | 308,778 | ||||||||||||||
| Net income | 590,960 | 348,088 | 1,374,458 | 1,187,280 | ||||||||||||||
| Less: Noncontrolling interests | 71 | 71 | 478 | 506 | ||||||||||||||
| Net income attributable to common shareholders | $ | 590,889 | $ | 348,017 | $ | 1,373,980 | $ | 1,186,774 | ||||||||||
| *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 | $ | 4.61 | $ | 2.71 | $ | 10.71 | $ | 9.23 | ||||||||||
| Diluted earnings per share | $ | 4.54 | $ | 2.67 | $ | 10.58 | $ | 9.10 | ||||||||||
| Average shares outstanding during period - Basic | 128,293,039 | 128,426,675 | 128,343,788 | 128,549,040 | ||||||||||||||
| Average shares outstanding during period - Diluted | 130,151,487 | 130,343,581 | 129,831,989 | 130,438,593 | ||||||||||||||
| CASH DIVIDENDS PER COMMON SHARE | ||||||||||||||||||
| (Unaudited) | Three Months Ended March 31, | Nine Months Ended March 31, | ||||||||||||||||
| (Amounts in dollars) | 2023 | 2022 | 2023 | 2022 | ||||||||||||||
| Cash dividends per common share | $ | 1.33 | $ | 1.03 | $ | 3.99 | $ | 3.09 | RECONCILIATION OF ORGANIC GROWTH | |||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||||||
| (Unaudited) | Three Months Ended March 31, | Nine Months Ended March 31, | ||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||||
| Sales growth - as reported | 23.9 | % | 9.1 | % | 19.7 | % | 12.4 | % | ||||||||||
| Adjustments: | ||||||||||||||||||
| Acquisitions | 15.3 | % | — | % | 12.0 | % | — | % | ||||||||||
| Divestitures | (0.5) | % | — | % | (0.4) | % | — | % | ||||||||||
| Currency | (2.4) | % | (2.0) | % | (3.9) | % | (0.8) | % | ||||||||||
| Organic sales growth | 11.5 | % | 11.1 | % | 12.0 | % | 13.2 | % | ||||||||||
| PARKER HANNIFIN CORPORATION - MARCH 31, 2023 | Exhibit 99.1 | |||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||||||
| RECONCILIATION OF NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS TO ADJUSTED NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS | ||||||||||||||||||
| (Unaudited) | Three Months Ended March 31, | Nine Months Ended March 31, | ||||||||||||||||
| (Dollars in thousands) | 2023 | 2022 | 2023 | 2022 | ||||||||||||||
| Net income attributable to common shareholders | $ | 590,889 | $ | 348,017 | $ | 1,373,980 | $ | 1,186,774 | ||||||||||
| Adjustments: | ||||||||||||||||||
| Acquired intangible asset amortization expense | 145,147 | 78,865 | 374,417 | 237,377 | ||||||||||||||
| Business realignment charges | 8,241 | 3,152 | 17,480 | 9,811 | ||||||||||||||
| Integration costs to achieve | 31,244 | 933 | 76,653 | 2,942 | ||||||||||||||
| Acquisition-related expenses | 1,299 | 12,724 | 163,540 | 84,065 | ||||||||||||||
| Loss on deal-contingent forward contracts | — | 246,983 | 389,992 | 396,365 | ||||||||||||||
| Net loss (gain) on divestitures | 10,927 | — | (362,003) | — | ||||||||||||||
| Amortization of inventory step-up to fair value | 37,642 | — | 167,973 | — | ||||||||||||||
| Russia liquidation | — | 20,057 | — | 20,057 | ||||||||||||||
| Tax effect of adjustments1 | (53,520) | (80,557) | (195,766) | (168,337) | ||||||||||||||
| Adjusted net income attributable to common shareholders | $ | 771,869 | $ | 630,174 | $ | 2,006,266 | $ | 1,769,054 | ||||||||||
| RECONCILIATION OF EARNINGS PER DILUTED SHARE TO ADJUSTED EARNINGS PER DILUTED SHARE | ||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||||||
| (Unaudited) | Three Months Ended March 31, | Nine Months Ended March 31, | ||||||||||||||||
| (Amounts in dollars) | 2023 | 2022 | 2023 | 2022 | ||||||||||||||
| Earnings per diluted share | $ | 4.54 | $ | 2.67 | $ | 10.58 | $ | 9.10 | ||||||||||
| Adjustments: | ||||||||||||||||||
| Acquired intangible asset amortization expense | 1.12 | 0.61 | 2.88 | 1.82 | ||||||||||||||
| Business realignment charges | 0.06 | 0.02 | 0.13 | 0.07 | ||||||||||||||
| Integration costs to achieve | 0.24 | 0.01 | 0.59 | 0.03 | ||||||||||||||
| Acquisition-related expenses | 0.01 | 0.10 | 1.27 | 0.65 | ||||||||||||||
| Loss on deal-contingent forward contracts | — | 1.89 | 3.00 | 3.03 | ||||||||||||||
| Net loss (gain) on divestitures | 0.09 | — | (2.78) | — | ||||||||||||||
| Amortization of inventory step-up to fair value | 0.29 | — | 1.29 | — | ||||||||||||||
| Russia liquidation | — | 0.15 | — | 0.15 | ||||||||||||||
| Tax effect of adjustments1 | (0.42) | (0.62) | (1.51) | (1.29) | ||||||||||||||
| Adjusted earnings per diluted share | $ | 5.93 | $ | 4.83 | $ | 15.45 | $ | 13.56 | ||||||||||
| 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 - MARCH 31, 2023 | Exhibit 99.1 | |||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||
| RECONCILIATION OF EBITDA TO ADJUSTED EBITDA | ||||||||||||||||||
| (Unaudited) | Three Months Ended March 31, | Nine Months Ended March 31, | ||||||||||||||||
| (Dollars in thousands) | 2023 | 2022 | 2023 | 2022 | ||||||||||||||
| Net sales | $ | 5,061,665 | $ | 4,086,387 | $ | 13,969,251 | $ | 11,673,776 | ||||||||||
| Net income | $ | 590,960 | $ | 348,088 | $ | 1,374,458 | $ | 1,187,280 | ||||||||||
| Income taxes | 165,421 | 85,901 | 402,011 | 308,778 | ||||||||||||||
| Depreciation | 80,194 | 63,832 | 234,649 | 194,945 | ||||||||||||||
| Amortization | 145,147 | 78,865 | 374,417 | 237,377 | ||||||||||||||
| Interest expense | 151,993 | 63,272 | 416,718 | 183,982 | ||||||||||||||
| EBITDA | 1,133,715 | 639,958 | 2,802,253 | 2,112,362 | ||||||||||||||
| Adjustments: | ||||||||||||||||||
| Business realignment charges | 8,241 | 3,152 | 17,480 | 9,811 | ||||||||||||||
| Integration costs to achieve | 31,244 | 933 | 76,653 | 2,942 | ||||||||||||||
| Acquisition-related expenses | 1,299 | 12,724 | 163,540 | 84,065 | ||||||||||||||
| Loss on deal-contingent forward contracts | — | 246,983 | 389,992 | 396,365 | ||||||||||||||
| Net loss (gain) on divestitures | 10,927 | — | (362,003) | — | ||||||||||||||
| Amortization of inventory step-up to fair value | 37,642 | — | 167,973 | — | ||||||||||||||
| Russia liquidation | — | 20,057 | — | 20,057 | ||||||||||||||
| Adjusted EBITDA | $ | 1,223,068 | $ | 923,807 | $ | 3,255,888 | $ | 2,625,602 | ||||||||||
| EBITDA margin | 22.4 | % | 15.7 | % | 20.1 | % | 18.1 | % | ||||||||||
| Adjusted EBITDA margin | 24.2 | % | 22.6 | % | 23.3 | % | 22.5 | % | ||||||||||
| BUSINESS SEGMENT INFORMATION | ||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||||||
| (Unaudited) | Three Months Ended March 31, | Nine Months Ended March 31, | ||||||||||||||||
| (Dollars in thousands) | 2023 | 2022 | 2023 | 2022 | ||||||||||||||
| Net sales | ||||||||||||||||||
| Diversified Industrial: | ||||||||||||||||||
| North America | $ | 2,342,590 | $ | 2,014,715 | $ | 6,615,035 | $ | 5,615,454 | ||||||||||
| International | 1,524,515 | 1,439,357 | 4,277,227 | 4,214,972 | ||||||||||||||
| Aerospace Systems | 1,194,560 | 632,315 | 3,076,989 | 1,843,350 | ||||||||||||||
| Total net sales | $ | 5,061,665 | $ | 4,086,387 | $ | 13,969,251 | $ | 11,673,776 | ||||||||||
| Segment operating income | ||||||||||||||||||
| Diversified Industrial: | ||||||||||||||||||
| North America | $ | 489,349 | $ | 413,998 | $ | 1,362,256 | $ | 1,085,117 | ||||||||||
| International | 329,498 | 298,475 | 908,958 | 881,206 | ||||||||||||||
| Aerospace Systems | 133,905 | 119,016 | 234,849 | 352,063 | ||||||||||||||
| Total segment operating income | 952,752 | 831,489 | 2,506,063 | 2,318,386 | ||||||||||||||
| Corporate general and administrative expenses | 45,780 | 57,405 | 146,341 | 149,064 | ||||||||||||||
| Income before interest expense and other expense | 906,972 | 774,084 | 2,359,722 | 2,169,322 | ||||||||||||||
| Interest expense | 151,993 | 63,272 | 416,718 | 183,982 | ||||||||||||||
| Other (income) expense, net | (1,402) | 276,823 | 166,535 | 489,282 | ||||||||||||||
| Income before income taxes | $ | 756,381 | $ | 433,989 | $ | 1,776,469 | $ | 1,496,058 | ||||||||||
| PARKER HANNIFIN CORPORATION - MARCH 31, 2023 | Exhibit 99.1 | |||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||
| RECONCILIATION OF SEGMENT OPERATING MARGINS TO ADJUSTED SEGMENT OPERATING MARGINS | ||||||||||||||||||
| (Unaudited) | Three Months Ended March 31, | Nine Months Ended March 31, | ||||||||||||||||
| (Dollars in thousands) | 2023 | 2022 | 2023 | 2022 | ||||||||||||||
| Diversified Industrial North America sales | $ | 2,342,590 | $ | 2,014,715 | $ | 6,615,035 | $ | 5,615,454 | ||||||||||
| Diversified Industrial North America operating income | $ | 489,349 | $ | 413,998 | $ | 1,362,256 | $ | 1,085,117 | ||||||||||
| Adjustments: | ||||||||||||||||||
| Acquired intangible asset amortization | 44,184 | 47,408 | 134,816 | 141,695 | ||||||||||||||
| Business realignment charges | 761 | 355 | 2,232 | 1,968 | ||||||||||||||
| Integration costs to achieve | 2,442 | 297 | 3,759 | 957 | ||||||||||||||
| Adjusted Diversified Industrial North America operating income | $ | 536,736 | $ | 462,058 | $ | 1,503,063 | $ | 1,229,737 | ||||||||||
| Diversified Industrial North America operating margin | 20.9 | % | 20.5 | % | 20.6 | % | 19.3 | % | ||||||||||
| Adjusted Diversified Industrial North America operating margin | 22.9 | % | 22.9 | % | 22.7 | % | 21.9 | % | ||||||||||
| (Unaudited) | Three Months Ended March 31, | Nine Months Ended March 31, | ||||||||||||||||
| (Dollars in thousands) | 2023 | 2022 | 2023 | 2022 | ||||||||||||||
| Diversified Industrial International sales | $ | 1,524,515 | $ | 1,439,357 | $ | 4,277,227 | $ | 4,214,972 | ||||||||||
| Diversified Industrial International operating income | $ | 329,498 | $ | 298,475 | $ | 908,958 | $ | 881,206 | ||||||||||
| Adjustments: | ||||||||||||||||||
| Acquired intangible asset amortization | 17,266 | 18,704 | 50,890 | 57,404 | ||||||||||||||
| Business realignment charges | 7,314 | 2,416 | 12,232 | 6,867 | ||||||||||||||
| Integration costs to achieve | 2,953 | 636 | 3,517 | 1,985 | ||||||||||||||
| Russia liquidation | — | 6,257 | — | 6,257 | ||||||||||||||
| Adjusted Diversified Industrial International operating income | $ | 357,031 | $ | 326,488 | $ | 975,597 | $ | 953,719 | ||||||||||
| Diversified Industrial International operating margin | 21.6 | % | 20.7 | % | 21.3 | % | 20.9 | % | ||||||||||
| Adjusted Diversified Industrial International operating margin | 23.4 | % | 22.7 | % | 22.8 | % | 22.6 | % | ||||||||||
| (Unaudited) | Three Months Ended March 31, | Nine Months Ended March 31, | ||||||||||||||||
| (Dollars in thousands) | 2023 | 2022 | 2023 | 2022 | ||||||||||||||
| Aerospace Systems sales | $ | 1,194,560 | $ | 632,315 | $ | 3,076,989 | $ | 1,843,350 | ||||||||||
| Aerospace Systems operating income | $ | 133,905 | $ | 119,016 | $ | 234,849 | $ | 352,063 | ||||||||||
| Adjustments: | ||||||||||||||||||
| Acquired intangible asset amortization | 83,697 | 12,753 | 188,711 | 38,278 | ||||||||||||||
| Business realignment charges | 166 | 318 | 3,016 | 913 | ||||||||||||||
| Integration costs to achieve | 25,849 | — | 69,377 | — | ||||||||||||||
| Amortization of inventory step-up to fair value | 37,642 | — | 167,973 | — | ||||||||||||||
| Russia liquidation | — | 6,570 | — | 6,570 | ||||||||||||||
| Adjusted Aerospace Systems operating income | $ | 281,259 | $ | 138,657 | $ | 663,926 | $ | 397,824 | ||||||||||
| Aerospace Systems operating margin | 11.2 | % | 18.8 | % | 7.6 | % | 19.1 | % | ||||||||||
| Adjusted Aerospace Systems operating margin | 23.5 | % | 21.9 | % | 21.6 | % | 21.6 | % | ||||||||||
| PARKER HANNIFIN CORPORATION - MARCH 31, 2023 | Exhibit 99.1 | |||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||
| RECONCILIATION OF SEGMENT OPERATING MARGINS TO ADJUSTED SEGMENT OPERATING MARGINS | ||||||||||||||||||
| (Unaudited) | Three Months Ended March 31, | Nine Months Ended March 31, | ||||||||||||||||
| (Dollars in thousands) | 2023 | 2022 | 2023 | 2022 | ||||||||||||||
| Total net sales | $ | 5,061,665 | $ | 4,086,387 | $ | 13,969,251 | $ | 11,673,776 | ||||||||||
| Total segment operating income | $ | 952,752 | $ | 831,489 | $ | 2,506,063 | $ | 2,318,386 | ||||||||||
| Adjustments: | ||||||||||||||||||
| Acquired intangible asset amortization | 145,147 | 78,865 | 374,417 | 237,377 | ||||||||||||||
| Business realignment charges | 8,241 | 3,089 | 17,480 | 9,748 | ||||||||||||||
| Integration costs to achieve | 31,244 | 933 | 76,653 | 2,942 | ||||||||||||||
| Amortization of inventory step-up to fair value | 37,642 | — | 167,973 | — | ||||||||||||||
| Russia liquidation | — | 12,827 | — | 12,827 | ||||||||||||||
| Adjusted total segment operating income | $ | 1,175,026 | $ | 927,203 | $ | 3,142,586 | $ | 2,581,280 | ||||||||||
| Total segment operating margin | 18.8 | % | 20.3 | % | 17.9 | % | 19.9 | % | ||||||||||
| Adjusted total segment operating margin | 23.2 | % | 22.7 | % | 22.5 | % | 22.1 | % | ||||||||||
| PARKER HANNIFIN CORPORATION - MARCH 31, 2023 | Exhibit 99.1 | |||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | ||||||||||||
| CONSOLIDATED BALANCE SHEET | ||||||||||||||||||
| (Unaudited) | March 31, | June 30, | March 31, | |||||||||||||||
| (Dollars in thousands) | 2023 | 2022 | 2022 | |||||||||||||||
| Assets | ||||||||||||||||||
| Current assets: | ||||||||||||||||||
| Cash and cash equivalents | $ | 534,831 | $ | 535,799 | $ | 467,711 | ||||||||||||
| Marketable securities and other investments | 23,466 | 27,862 | 38,561 | |||||||||||||||
| Trade accounts receivable, net | 2,881,534 | 2,341,504 | 2,357,244 | |||||||||||||||
| Non-trade and notes receivable | 349,903 | 543,757 | 327,186 | |||||||||||||||
| Inventories | 3,067,614 | 2,214,553 | 2,330,242 | |||||||||||||||
| Prepaid expenses and other | 376,066 | 6,383,169 | 2,708,750 | |||||||||||||||
| Total current assets | 7,233,414 | 12,046,644 | 8,229,694 | |||||||||||||||
| Property, plant and equipment, net | 2,843,795 | 2,122,758 | 2,174,237 | |||||||||||||||
| Deferred income taxes | 131,782 | 110,585 | 144,506 | |||||||||||||||
| Investments and other assets | 1,188,671 | 788,057 | 787,986 | |||||||||||||||
| Intangible assets, net | 8,287,517 | 3,135,817 | 3,254,062 | |||||||||||||||
| Goodwill | 10,830,548 | 7,740,082 | 7,954,835 | |||||||||||||||
| Total assets | $ | 30,515,727 | $ | 25,943,943 | $ | 22,545,320 | ||||||||||||
| Liabilities and equity | ||||||||||||||||||
| Current liabilities: | ||||||||||||||||||
| Notes payable and long-term debt payable within one year | $ | 1,992,919 | $ | 1,724,310 | $ | 1,923,860 | ||||||||||||
| Accounts payable, trade | 2,080,147 | 1,731,925 | 1,732,421 | |||||||||||||||
| Accrued payrolls and other compensation | 543,527 | 470,132 | 418,876 | |||||||||||||||
| Accrued domestic and foreign taxes | 270,807 | 250,292 | 276,159 | |||||||||||||||
| Other accrued liabilities | 900,769 | 1,682,659 | 1,055,348 | |||||||||||||||
| Total current liabilities | 5,788,169 | 5,859,318 | 5,406,664 | |||||||||||||||
| Long-term debt | 11,412,304 | 9,755,825 | 6,229,654 | |||||||||||||||
| Pensions and other postretirement benefits | 781,139 | 639,939 | 904,332 | |||||||||||||||
| Deferred income taxes | 1,780,533 | 307,044 | 448,583 | |||||||||||||||
| Other liabilities | 960,417 | 521,897 | 583,228 | |||||||||||||||
| Shareholders' equity | 9,781,297 | 8,848,011 | 8,959,866 | |||||||||||||||
| Noncontrolling interests | 11,868 | 11,909 | 12,993 | |||||||||||||||
| Total liabilities and equity | $ | 30,515,727 | $ | 25,943,943 | $ | 22,545,320 | ||||||||||||
| PARKER HANNIFIN CORPORATION - MARCH 31, 2023 | Exhibit 99.1 | |||||||||||||||||
| --- | --- | --- | --- | --- | ||||||||||||||
| CONSOLIDATED STATEMENT OF CASH FLOWS | ||||||||||||||||||
| (Unaudited) | Nine Months Ended March 31, | |||||||||||||||||
| (Dollars in thousands) | 2023 | 2022 | ||||||||||||||||
| Cash flows from operating activities: | ||||||||||||||||||
| Net income | $ | 1,374,458 | $ | 1,187,280 | ||||||||||||||
| Depreciation and amortization | 609,066 | 432,322 | ||||||||||||||||
| Share incentive plan compensation | 117,536 | 109,781 | ||||||||||||||||
| Gain on sale of businesses | (366,345) | (1,472) | ||||||||||||||||
| Gain on disposal of property, plant and equipment | (1,270) | (6,782) | ||||||||||||||||
| (Gain) loss on marketable securities | (1,391) | 2,280 | ||||||||||||||||
| Gain on investments | (4,341) | (2,024) | ||||||||||||||||
| Net change in receivables, inventories and trade payables | (19,052) | (347,086) | ||||||||||||||||
| Net change in other assets and liabilities | (77,389) | 308,993 | ||||||||||||||||
| Other, net | 163,622 | (134,854) | ||||||||||||||||
| Net cash provided by operating activities | 1,794,894 | 1,548,438 | ||||||||||||||||
| Cash flows from investing activities: | ||||||||||||||||||
| Acquisitions (net of cash of $89,704 in 2023) | (7,146,110) | — | ||||||||||||||||
| Capital expenditures | (272,603) | (158,864) | ||||||||||||||||
| Proceeds from sale of property, plant and equipment | 11,821 | 29,320 | ||||||||||||||||
| Proceeds from sale of businesses | 471,720 | 3,366 | ||||||||||||||||
| Purchases of marketable securities and other investments | (31,275) | (20,012) | ||||||||||||||||
| Maturities and sales of marketable securities and other investments | 35,075 | 17,662 | ||||||||||||||||
| Payments of deal-contingent forward contracts | (1,405,418) | — | ||||||||||||||||
| Other | 251,875 | 2,766 | ||||||||||||||||
| Net cash used in investing activities | (8,084,915) | (125,762) | ||||||||||||||||
| Cash flows from financing activities: | ||||||||||||||||||
| Net payments for common stock activity | (199,911) | (372,430) | ||||||||||||||||
| Net proceeds from debt | 906,811 | 1,622,442 | ||||||||||||||||
| Financing fees paid | (8,911) | (52,655) | ||||||||||||||||
| Dividends paid | (513,232) | (398,099) | ||||||||||||||||
| Net cash provided by financing activities | 184,757 | 799,258 | ||||||||||||||||
| Effect of exchange rate changes on cash | (7,781) | 106 | ||||||||||||||||
| Net (decrease) increase in cash, cash equivalents and restricted cash | (6,113,045) | 2,222,040 | ||||||||||||||||
| 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 | $ | 534,831 | $ | 2,955,157 | ||||||||||||||
| PARKER HANNIFIN CORPORATION - MARCH 31, 2023 | 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 | $14.75 to $15.05 | |||||||||||||||||
| Adjustments: | ||||||||||||||||||
| Business realignment charges | 0.23 | |||||||||||||||||
| Costs to achieve | 0.69 | |||||||||||||||||
| Acquisition-related intangible asset amortization expense | 4.00 | |||||||||||||||||
| Acquisition-related expenses | 2.55 | |||||||||||||||||
| Loss on deal-contingent forward contracts | 3.00 | |||||||||||||||||
| Net gain on divestitures | (2.78) | |||||||||||||||||
| Tax effect of adjustments1 | (1.84) | |||||||||||||||||
| Adjusted forecasted earnings per diluted share | $20.60 to $20.90 | |||||||||||||||||
| 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 Third Quarter Earnings Presentation May 4, 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
FY23 Q3: Outstanding Performance Top quartile safety performance; 17% reduction in recordable incidents Record sales $5.1B, an increase of 24% vs. prior year; organic growth 12%1 Strong performance driving full year guidance increase Increased the quarterly dividend 11% Meggitt integration and synergies ahead of 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 3
Meggitt Integration & Synergies Ahead of Schedule 4 Focusing on safety & engagement Key leaders & structure in place Win Strategy deployment underway Working capital opportunities Increasing FY23 synergies from $60m to $75m Committed to $300M of Cost Synergies by FY26 Ansty Park, UK Lean Kaizen Event (Feb 2023)
Parker Well Positioned for Long Cycle Aerospace Growth Significant content on premier commercial and military programs Long lifecycle programs with growing aftermarket annuity Aerospace market recovery continues Comprehensive offering provides a more compelling value proposition for customers Key electrification and low carbon technologies enabling sustainable aviation 5 Aerospace & Defense Markets Now ~30% of Sales
Longer Cycle Shorter Cycle Industrial Aftermarket Longer Cycle Shorter Cycle Industrial Aftermarket FY15 FY23E Expanding Longer Cycle and Secular Trend Exposure Revenue Mix Reflects Transforming Portfolio Longer Cycle + Secular Trends FY27 Illustration Longer Cycle + Secular Trends Shorter Cycle Industrial Aftermarket 6
Portfolio Transformation Drives Record Backlog 7 1. Backlog % of NTM sales is a ratio of ending backlog of the period divided by next 12-month sales. FY23 Q3 illustration based on backlog as of 3/31/23 divided by FY23 Q4 sales guidance midpoint annualized. Q3 Backlog +3% sequentially ~3x increase in backlog dollars since FY16 ~2x increase in backlog coverage since FY16 Consistent growth over time $3.2 $4.2 $7.9 $10.9 27% ~55% 0% 10% 20% 30% 40% 50% 60% -1.0 1.0 3.0 5.0 7.0 9.0 11.0 13.0 FY16 FY19 FY22 FY23 Q3 Backlog ($B) % of Next 12-Months Sales1
Built for the Present & Future
Built to Perform Present The Win Strategy™ 3.0 Top quartile safety & engagement Lean, Kaizen, Supply Chain & Simplification ~ 30% Aerospace exposure Expanded international distribution 800 bps Innovation sales 2x previous decade New annual incentive plan 9 Better Top Line Resilience
Significant Opportunities Ahead Future Longer cycle & more resilient portfolio: ~85% Meggitt growth & synergies Win Strategy performance acceleration Supply Chain leadership Simple by Design™ Zero Defects Mega capital projects & secular trends 10 Secular Trends Aerospace Digital Clean TechnologyElectrification Drivers of Margin Expansion and Organic Growth
Summary of Fiscal 2023 3rd Quarter Highlights
FY23 Q3 Financial Summary 1. Sales figures As Reported. Adjusted numbers include certain non-GAAP financial measures. See Appendix for additional details and reconciliations. Note: FY22 Q3 As Reported: Segment Operating Margin of 20.3%, EBITDA Margin of 15.7%, Net Income of $348M, EPS of $2.67. $ Millions, except per share amounts FY23 Q3 FY23 Q3 FY22 Q3 YoY Change As Reported Adjusted¹ Adjusted¹ Adjusted Sales $5,062 $5,062 $4,086 +24% Segment Operating Margin 18.8% 23.2% 22.7% +50 bps EBITDA Margin 22.4% 24.2% 22.6% +160 bps Net Income $591 $772 $630 +22% EPS $4.54 $5.93 $4.83 +23% 12
FY23 Q3 Adjusted Earnings per Share Bridge 1. FY22 Q3 As Reported EPS of $2.67. FY23 Q3 As Reported EPS of $4.54. Adjusted numbers include certain non-GAAP financial measures. See Appendix for additional details and reconciliations. 13
FY23 Q3 Segment Performance Sales As Reported $ Organic %1 Segment Operating Margin As Reported Segment Operating Margin Adjusted1 Order Rates2 Commentary $2,343M +11.7% Organic 20.9% 22.9% Flat YoY (4%) • Solid broad-based growth continues • Productivity improvement and volume • Legacy businesses continue to outperform $1,525M +10.0% Organic 21.6% 23.4% +70 bps YoY (4%) • Organic growth exceeded forecast: EMEA +11%, APAC +8.5% • Margin expansion on volume leverage, productivity and cost management $1,195M +14.5% Organic 11.2%3 23.5% +160 bps YoY +25% • Mid-20% commercial organic growth • Favorable MRO sales mix • Strong Meggitt performance & synergies $5,062M +11.5% Organic 18.8% 23.2% +50 bps YoY +2% • Record sales & adjusted segment margin • Double digit organic growth all segments • Excellent operating execution & legacy incrementals 1. Adjusted numbers include certain non-GAAP financial measures. See Appendix for additional details and reconciliations. 2. Diversified Industrial orders are on a 3-month average computation and Aerospace Systems are rolling 12-month average computations. Beginning Q3 FY23 orders include acquisitions and exclude divestitures and currency. 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
FY23 Q3 YTD Cash Flow Performance Cash Flow from Operations of 12.8% • An increase of 16% YoY Free Cash Flow of 10.9%1 • Capex of 2.0% of sales Transaction expenses: • A use of cash of ~1.5% of sales Free Cash Flow Conversion of 111%1 1. Adjusted numbers include certain non-GAAP financial measures. See Appendix for additional details and reconciliations. 15 $1,548 $1,390 $1,795 $1,522 Cash Flow from Operations Free Cash Flow FY22 FY23 13.3% 12.8% 11.9% 10.9% 1 $ Millions % to Sales
Capital Deployment & Leverage Highlights 1. Adjusted numbers include certain non-GAAP financial measures. See Appendix for additional details and reconciliations. 16 11% quarterly dividend increase: • $1.48 declared on April 27, 2023 • 67 fiscal years of increasing annual dividends per share paid Leverage at FY23 Q3: • $615M debt reduction during Q3 • 3.2x Gross Debt / Adjusted EBITDA1 • 3.1x Net Debt / Adjusted EBITDA1 • Targeting 2.0x leverage during FY25 3.8x 3.6x 3.2x Q1 FY23 Q2 FY23 Q3 FY23 Gross Debt / Adj. EBITDA1 3.6x 3.4x 3.1x Q1 FY23 Q2 FY23 Q3 FY23 Net Debt / Adj. EBITDA1
FY23 Adjusted Guidance Increased EPS Midpoint: $14.90 As Reported, $20.75 Adjusted 1. Adjusted numbers include certain non-GAAP financial measures. See Appendix for additional details and reconciliations. 17 FY23 Q4 FY23 Reported Sales Growth ~18% ~19% Organic Sales Growth1 ~4% ~10% Adjusted Segment Operating Margin1 ~22.6% ~22.5% Adjusted EPS1 $5.32 ($5.17 - $5.47) $20.75 ($20.60 - $20.90)
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 Committed to FY27 Targets Continue to be great generators and deployers of cash Focused on Top Quartile Performance 18
Upcoming Event Calendar 4Q FY23 Earnings Release August 3, 2023 Annual Meeting of Shareholders October 25, 2023 1Q FY24 Earnings Release November 2, 2023
Appendix FY23 Guidance Details Reconciliation of Organic Growth Adjusted Amounts Reconciliation – Consolidated Adjusted Amounts Reconciliation – Business Segment 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 20
FY23 Adjusted Guidance Increased EPS Midpoint: $14.90 As Reported, $20.75 Adjusted Sales Growth vs. Prior Year Reported Organic1 Diversified Industrial North America ~15% ~11% Diversified Industrial International ~3% ~9% Aerospace Systems ~69% ~9% Parker ~19% ~10% Segment Operating Margins As Reported Adjusted1 Diversified Industrial North America ~20.5% ~22.6% Diversified Industrial International ~21.3% ~22.9% Aerospace Systems ~9.5% ~21.7% Parker ~18.3% ~22.5% Earnings Per Share As Reported Adjusted1 Range $14.75 - $15.05 $20.60 - $20.90 1. Adjusted numbers include certain non-GAAP financial measures. Detail of Pre-Tax Adjustments to: Segment Margins Below Segment Acquired Intangible Asset Amortization ~$520M — Business Realignment Charges ~$30M — Integration Costs to Achieve ~$90M — Net Gain on Divestitures — ($362M) Meggitt Acquisition Related Expenses $168M $164M Meggitt Deal Contingent Forward Contracts — $390M 21 Additional Items As Reported Adjusted1 Corporate G&A $198M $198M Interest Expense $568M Other Expense $174M ($18M) Reported Tax Rate ~23% Diluted Shares Outstanding ~130M
Reconciliation of Organic Growth 22 (Dollars in thousands) (Unaudited) Quarter-to-Date As Reported Adjusted As Reported Net Sales March 31, 2023 Acquisitions March 31, 2023 March 31, 2022 Diversified Industrial: North America 2,342,590$ (590)$ -$ (92,415)$ 2,249,585$ 2,014,715$ International Europe 880,962 51,074 - (34,205) 897,831 807,298 Asia Pacific 567,954 42,315 - (3,993) 606,276 558,823 Latin America 75,599 3,181 - - 78,780 73,236 International 1,524,515 96,570 - (38,198) 1,582,887 1,439,357 Total Diversified Industrial 3,867,105 95,980 - (130,613) 3,832,472 3,454,072 Aerospace Systems 1,194,560 783 21,995 (493,584) 723,754 632,315 Total Parker Hannifin 5,061,665$ 96,763$ 21,995$ (624,197)$ 4,556,226$ 4,086,387$ As reported Currency Divestitures Acquisitions Organic Diversified Industrial: North America 16.3 % 0.0 % 0.0 % 4.6 % 11.7 % International Europe 9.1 % (6.3)% 0.0 % 4.2 % 11.2 % Asia Pacific 1.6 % (7.6)% 0.0 % 0.7 % 8.5 % Latin America 3.2 % (4.4)% 0.0 % 0.0 % 7.6 % International 5.9 % (6.8)% 0.0 % 2.7 % 10.0 % Total Diversified Industrial 12.0 % (2.8)% 0.0 % 3.8 % 11.0 % Aerospace Systems 88.9 % (0.2)% (3.5)% 78.1 % 14.5 % Total Parker Hannifin 23.9 % (2.4)% (0.5)% 15.3 % 11.5 % Currency Divestitures
(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 Net Loss on Adjusted March 31, 2023 % of Sales Amortization Charges Achieve Expenses Step-Up to FV Divestitures March 31, 2023 % of Sales Net sales 5,061,665$ 100.0 % -$ -$ -$ -$ -$ -$ 5,061,665$ 100.0 % Cost of sales 3,340,764 66.0 % 15,345 5,033 3,575 - 37,642 - 3,279,169 64.8 % Selling, general and admin. expenses 868,393 17.2 % 129,802 3,208 27,669 1,299 - - 706,415 14.0 % Interest expense 151,993 3.0 % - - - - - - 151,993 3.0 % Other (income) expense, net (55,866) (1.1)% - - - - - 10,927 (66,793) (1.3)% Income before income taxes 756,381 14.9 % (145,147) (8,241) (31,244) (1,299) (37,642) (10,927) 990,881 19.6 % Income taxes 165,421 3.3 % 34,980 1,986 7,530 313 9,072 (361) 218,941 4.3 % Net income 590,960 11.7 % (110,167) (6,255) (23,714) (986) (28,570) (11,288) 771,940 15.3 % Less: Noncontrolling interests 71 0.0 % - - - - - - 71 0.0 % Net income - common shareholders 590,889$ 11.7 % (110,167)$ (6,255)$ (23,714)$ (986)$ (28,570)$ (11,288)$ 771,869$ 15.2 % Diluted earnings per share 4.54$ (0.84)$ (0.05)$ (0.18)$ (0.01)$ (0.22)$ (0.09)$ 5.93$ Adjusted Amounts Reconciliation Consolidated Statement of Income 23
Adjusted Amounts Reconciliation Consolidated Statement of Income 24 (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 Russia Adjusted March 31, 2022 % of Sales Amortization Charges Achieve Expenses Forward Contracts Liquidation March 31, 2022 % of Sales Net sales 4,086,387$ 100.0 % -$ -$ -$ -$ -$ -$ 4,086,387$ 100.0 % Cost of sales* 2,709,407 66.3 % 15,429 1,178 42 - - 9,493 2,683,265 65.7 % Selling, general and admin. expenses* 640,498 15.7 % 63,436 1,911 891 11,657 - 2,847 559,756 13.7 % Interest expense 63,272 1.5 % - - - - - - 63,272 1.5 % Other (income) expense, net* 239,221 5.9 % - 63 - 1,067 246,983 7,717 (16,609) (0.4)% Income before income taxes 433,989 10.6 % (78,865) (3,152) (933) (12,724) (246,983) (20,057) 796,703 19.5 % Income taxes 85,901 2.1 % 18,060 722 214 2,913 56,559 2,089 166,458 4.1 % Net income 348,088 8.5 % (60,805) (2,430) (719) (9,811) (190,424) (17,968) 630,245 15.4 % Less: Noncontrolling interests 71 0.0 % - - - - - - 71 0.0 % Net income - common shareholders 348,017$ 8.5 % (60,805)$ (2,430)$ (719)$ (9,811)$ (190,424)$ (17,968)$ 630,174$ 15.4 % Diluted earnings per share 2.67$ (0.47)$ (0.02)$ (0.01)$ (0.07)$ (1.46)$ (0.13)$ 4.83$ *Prior period amounts have been recast to reflect the income statement reclassification.
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. 25 (Dollars in thousands) (Unaudited) Quarter-to-Date FY 2023 Acquired Business Meggitt Acquisition Amortization As Reported Intangible Asset Realignment Costs to Related of Inventory Net Loss on Adjusted March 31, 2023 % of Sales Amortization Charges Achieve Expenses Step-Up to FV Divestitures March 31, 2023 % of Sales2 Diversified Industrial: North America1 489,349$ 20.9% 44,184$ 761$ 2,442$ -$ -$ -$ 536,736$ 22.9% International1 329,498 21.6% 17,266 7,314 2,953 - - - 357,031 23.4% Total Diversified Industrial1 818,847 21.2% 61,450 8,075 5,395 - - - 893,767 23.1% Aerospace Systems1 133,905 11.2% 83,697 166 25,849 - 37,642 - 281,259 23.5% Total segment operating income 952,752 18.8% (145,147) (8,241) (31,244) - (37,642) - 1,175,026 23.2% Corporate administration 45,780 0.9% - - - - - - 45,780 0.9% Income before interest and other 906,972 17.9% (145,147) (8,241) (31,244) - (37,642) - 1,129,246 22.3% Interest expense 151,993 3.0% - - - - - - 151,993 3.0% Other (income) expense (1,402) 0.0% - - - 1,299 - 10,927 (13,628) -0.3% Income before income taxes 756,381$ 14.9% (145,147)$ (8,241)$ (31,244)$ (1,299)$ (37,642)$ (10,927)$ 990,881$ 19.6%
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 Russia Adjusted March 31, 2022 % of Sales Amortization Charges Achieve Expenses Forward Contracts Liquidation March 31, 2022 % of Sales2 Diversified Industrial: North America1 413,998$ 20.5% 47,408$ 355$ 297$ -$ -$ -$ 462,058$ 22.9% International1 298,475 20.7% 18,704 2,416 636 - - 6,257 326,488 22.7% Total Diversified Industrial1 712,473 20.6% 66,112 2,771 933 - - 6,257 788,546 22.8% Aerospace Systems1 119,016 18.8% 12,753 318 - - - 6,570 138,657 21.9% Total segment operating income 831,489 20.3% (78,865) (3,089) (933) - - (12,827) 927,203 22.7% Corporate administration 57,405 1.4% - - - - - - 57,405 1.4% Income before interest and other 774,084 18.9% (78,865) (3,089) (933) - - (12,827) 869,798 21.3% Interest expense 63,272 1.5% - - - - - - 63,272 1.5% Other (income) expense 276,823 6.8% - 63 - 12,724 246,983 7,230 9,823 0.2% Income before income taxes 433,989$ 10.6% (78,865)$ (3,152)$ (933)$ (12,724)$ (246,983)$ (20,057)$ 796,703$ 19.5%
Reconciliation of EBITDA to Adjusted EBITDA 27 (Dollars in thousands) Three Months Ended (Unaudited) March 31, 2023 % of Sales 2022 % of Sales Net sales $ 5,061,665 100.0% $ 4,086,387 100.0% Net income $ 590,960 11.7% $ 348,088 8.5% Income taxes 165,421 3.3% 85,901 2.1% Depreciation 80,194 1.6% 63,832 1.6% Amortization 145,147 2.9% 78,865 1.9% Interest expense 151,993 3.0% 63,272 1.5% EBITDA 1,133,715 22.4% 639,958 15.7% Adjustments: Business realignment charges 8,241 0.2% 3,152 0.1% Meggitt costs to achieve 31,244 0.6% - 0.0% Lord costs to achieve - 0.0% 933 0.0% Acquisition-related expenses 1,299 0.0% 12,724 0.3% Loss on deal-contingent forward contracts - 0.0% 246,983 6.0% Amortization of inventory step-up to FV 37,642 0.7% - 0.0% Net loss on divestitures 10,927 0.2% - 0.0% Russia Liquidation - 0.0% 20,057 0.5% EBITDA - Adjusted $ 1,223,068 24.2% $ 923,807 22.6% EBITDA margin 22.4 % 15.7 % EBITDA margin - Adjusted 24.2 % 22.6 %
Reconciliation of Gross and Net Debt / Adjusted EBITDA 28 (Unaudited) (Dollars in thousands) March 31, 2023 Notes payable and long-term debt payable within one year 1,992,919$ Long-term debt 11,412,304 Add: Deferred debt issuance costs 79,018 Total gross debt 13,484,241$ Cash and cash equivalents 534,831$ Marketable securities and other investments 23,466 Total cash 558,297$ Net debt (Gross debt less total cash) 12,925,944$ TTM Net Sales 18,157,083$ Net income 1,503,364$ Income tax 391,273 Depreciation 297,018 Amortization 451,490 Interest Expense 487,988 TTM EBITDA 3,131,133$ Adjustments: Business realignment charges 22,426 Costs to achieve 78,477 Acquisition-related costs 175,202 Loss on deal-contingent forward contracts 1,009,053 Gain on Aircraft Wheel & Brake divestiture (372,930) Amortization of inventory step-up to FV 167,973 Net loss on divestitures 10,927 TTM Adjusted EBITDA 4,222,261$ Gross Debt/TTM Adjusted EBITDA 3.2 Net Debt/TTM Adjusted EBITDA 3.1
Reconciliation of Gross and Net Debt / Adjusted EBITDA 29 (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
Reconciliation of Gross and Net Debt / Adjusted EBITDA 30 (Unaudited) (Dollars in thousands) September 30, 2022 Notes payable and long-term debt payable within one year 1,725,077$ Long-term debt 12,238,900 Add: Deferred debt issuance costs 87,934 Total gross debt 14,051,911$ Cash and cash equivalents 502,307$ Marketable securities and other investments 19,504 Total cash 521,811$ Net debt (Gross debt less total cash) 13,530,100$ TTM Net Sales 16,331,574$ Net income 1,252,760$ Income tax 293,066 Depreciation 258,530 Amortization 321,693 Interest Expense 313,696 TTM EBITDA 2,439,745$ Adjustments: Business realignment charges 15,604 Costs to achieve 15,555 Acquisition-related costs 203,786 Loss on deal-contingent forward contracts 1,405,418 Gain on Aircraft Wheel & Brake divestiture (372,930) Amortization of inventory step-up to FV 18,358 Russia liquidation 20,057 TTM Adjusted EBITDA 3,745,593$ Gross Debt/TTM Adjusted EBITDA 3.8 Net Debt/TTM Adjusted EBITDA 3.6
Reconciliation of Free Cash Flow Conversion 31 (Unaudited) Nine Months Ended (Dollars in thousands) March 31, 2023 Net Income 1,374,458$ Cash Flow from Operations 1,794,894$ Capital Expenditures (272,603) Free Cash Flow 1,522,291$ Free Cash Flow Conversion (Free Cash Flow / Net Income) 111% (Unaudited) Nine Months Ended (Dollars in thousands) March 31, 2022 Net Income 1,187,280$ Cash Flow from Operations 1,548,438$ Capital Expenditures (158,864) Free Cash Flow 1,389,574$ Free Cash Flow Conversion (Free Cash Flow / Net Income) 117%
Supplemental Sales Information Global Technology Platforms 32 (Unaudited) (Dollars in thousands) 2023 2022 Net sales Diversified Industrial: Motion Systems $ 1,017,974 $ 895,839 Flow and Process Control 1,298,204 1,197,590 Filtration and Engineered Materials 1,550,927 1,360,643 Aerospace Systems 1,194,560 632,315 Total $ 5,061,665 $ 4,086,387 Three Months Ended March 31,
Reconciliation of EPS Q4 Fiscal Year 2023 Guidance 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 (Unaudited) (Amounts in dollars) Q4 Fiscal Year 2023 Forecasted earnings per diluted share $4.18 to $4.48 Adjustments: Business realignment charges 0.08 Costs to achieve 0.10 Acquisition-related intangible asset amortization expense 1.12 Tax effect of adjustments1 (0.31) Adjusted forecasted earnings per diluted share $5.17 to $5.47
Reconciliation of EPS Fiscal Year 2023 Guidance 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. 34 (Unaudited) (Amounts in dollars) Fiscal Year 2023 Forecasted earnings per diluted share $14.75 to $15.05 Adjustments: Business realignment charges 0.23 Costs to achieve 0.69 Acquisition-related intangible asset amortization expense 4.00 Acquisition-related expenses 2.55 Loss on deal-contingent forward contracts 3.00 Net gain on divestitures (2.78) Tax effect of adjustments1 (1.84) Adjusted forecasted earnings per diluted share $20.60 to $20.90