News Release

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Parker Reports Fiscal 2017 Second Quarter Results
  • Second quarter EPS increased 34% to $1.78, or $1.91 adjusted
  • Fiscal 2017 second quarter includes $0.21 per share gain associated with the sale of a product line
  • Segment operating margins strong, reaching a second quarter record of 14.4% or 14.7% adjusted
  • Total order trends positive and increased 5% compared with the prior year quarter
  • Fiscal 2017 full year earnings guidance increased

CLEVELAND, Feb. 02, 2017 (GLOBE NEWSWIRE) -- Parker Hannifin Corporation (NYSE:PH), the global leader in motion and control technologies, today reported results for the fiscal 2017 second quarter ended December 31, 2016.  Fiscal 2017 second quarter sales were $2.67 billion compared with $2.71 billion in the prior year quarter. Net income increased 32% to $241.4 million compared with $183.1 million in the prior year quarter.  Fiscal 2017 second quarter earnings per share increased 34% to $1.78, compared with $1.33 in fiscal 2016 second quarter.  During the quarter, the company completed the sale of the Autoline product line which resulted in a pre-tax gain of $45.0 million or $0.21 per share.  Earnings per share were $1.91, when adjusted for business realignment and acquisition transaction costs, compared with $1.52 in the prior year quarter, which was adjusted for business realignment costs.  Cash flow from operations for the first half of fiscal 2017 was $404.2 million or 7.5% of sales, compared with $362.6 million or 6.5% of sales in the first half of fiscal 2016.  Excluding discretionary pension contributions, cash flow from operations for the first six months of fiscal 2017 was 11.5% of sales compared with 10.1% of sales in the prior year period.

“This was a strong operational quarter for Parker driven by the benefits of the new Win Strategy™,” said Chairman and Chief Executive Officer, Tom Williams. “Sales levels were as expected with a slight year-over-year decline primarily reflecting the impact of currency.  We delivered significant margin expansion in our Industrial businesses and realized record total segment operating margins of 14.4%, or 14.7% adjusted. Total Parker order rates for the quarter continued to move in a positive direction, consistent with our previously guided expectations for sales growth in the second half of the fiscal year.”

Segment Results 
Diversified Industrial Segment: North American second quarter sales decreased 3% to $1.1 billion, and operating income increased 20% to $184.0 million compared with $153.6 million in the same period a year ago.  International second quarter sales increased 1% to $1.0 billion, while operating income increased 34% to $127.5 million compared with $95.4 million in the same period a year ago.

Aerospace Systems Segment: Second quarter sales decreased 2% to $543.8 million, and operating income decreased 11% to $72.5 million compared with $81.8 million in the same period a year ago.

Parker reported the following orders for the quarter ending December 31, 2016, compared with the same quarter a year ago:

  • Orders increased 5% for total Parker;
  • Orders were flat in the Diversified Industrial North America businesses;
  • Orders increased 10% in the Diversified Industrial International businesses; and
  • Orders increased 9% in the Aerospace Systems Segment on a rolling 12-month average basis.

CLARCOR Acquisition Update
As previously disclosed, clearance has been received with respect to the regulatory filings made for the pending CLARCOR transaction.  These events satisfied important conditions to the closing of the CLARCOR transaction. The transaction remains subject to other closing conditions, including approval by CLARCOR’s stockholders.  Based on the current date for CLARCOR’s special meeting of stockholders on February 23, 2017, and subject to the satisfaction of all closing conditions, the parties currently expect the pending CLARCOR transaction to close on or about February 28, 2017.

Outlook
For the fiscal year ending June 30, 2017, the company has revised guidance for earnings from continuing operations to the range of $6.71 to $7.21 per share, or $7.05 to $7.55 per share on an adjusted basis.  Fiscal year 2017 guidance is adjusted for expected business realignment expenses of approximately $0.25 per share and acquisition transaction related expenses of $0.09 per share and does not include any benefits or costs from the CLARCOR or Helac acquisitions in the third and fourth quarters of fiscal year 2017.  Guidance will be updated to include these acquisitions in the fiscal 2017 third quarter earnings release.

Williams added, “Our results reflect the hard work of Parker team members in better aligning our operational costs and execution of the new Win Strategy™.  We are increasing our organic growth forecast for the second half of the fiscal year from 2.3% to 3.3% at the midpoint in our new guidance. However, this increase in organic revenue is being offset by currency headwinds resulting in essentially flat full year reported annual sales growth versus fiscal 2016.   We continue to deliver outstanding performance that positions us very well as we celebrate our 100th year as a company.”

NOTICE OF CONFERENCE CALL: Parker Hannifin's conference call and slide presentation to discuss its fiscal 2017 second quarter results are available to all interested parties via live webcast today at 11:00 a.m. ET, on the company's investor information web site at www.phstock.com. To access the call, click on the "Live Webcast" link. From this link, users also may complete a pre-call system test and register for e-mail notification of future events and information available from Parker.  A replay of the conference call will also be available at www.phstock.com for one year after the call.

Parker Hannifin is a Fortune 250 global leader in motion and control technologies. For 100 years the company has engineered the success of its customers in a wide range of diversified industrial and aerospace markets.  Parker has increased its annual dividend per share paid to shareholders for 60 consecutive fiscal years, among the top five longest-running dividend-increase records in the S&P 500 index.  Learn more at www.phstock.com or @parkerhannifin.

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. 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 Non-GAAP Numbers
This press release contains references to (a) earnings per share and segment operating margins without the effect of business realignment and acquisition transaction expenses; (b) the effect of business realignment and acquisition transaction expenses on forecasted earnings from continuing operations per share; and (c) cash flows from operations without the effect of discretionary pension contributions.  The effects of business realignment expenses, acquisition transaction and discretionary pension contributions are removed to allow investors and the company to meaningfully evaluate changes in earnings per share and cash flows from operations on a comparable basis from period to period.

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. These statements may be identified from use of forward-looking terminology such as “anticipates,” “believes,” “may,” “should,” “could,” “potential,” “continues,” “plans,” “forecasts,” “estimates,” “projects,” “predicts,” “would,” “intends,” “anticipates,” “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. It is possible that the future performance and earnings projections of the company, including its individual segments, may differ materially from current expectations, depending on economic conditions within its mobile, industrial and aerospace markets, and the company's ability to maintain and achieve anticipated benefits associated with announced realignment activities, strategic initiatives to improve operating margins, actions taken to combat the effects of the current economic environment, and growth, innovation and global diversification initiatives. A change in the economic conditions in individual markets may have a particularly volatile effect on segment performance.

The risks and uncertainties in connection with forward-looking statements related to the proposed transaction between CLARCOR and the company include, but are not limited to, the occurrence of any event, change or other circumstances that could delay the closing of the proposed transaction; the possibility of non-consummation of the proposed transaction and termination of the merger agreement; the failure to obtain CLARCOR stockholder approval of the proposed transaction or to satisfy any of the other conditions to the merger agreement; the possibility that a governmental entity may prohibit, delay or refuse to grant a necessary regulatory approval in connection with the proposed transaction; the risk that stockholder litigation in connection with the proposed transaction may affect the timing or occurrence of the proposed transaction or result in significant costs of defense, indemnification and liability; adverse effects on CLARCOR’s common stock or the company’s common stock because of the failure to complete the proposed transaction; CLARCOR’s or the company’s respective businesses experiencing disruptions due to transaction-related uncertainty or other factors making it more difficult to maintain relationships with employees, business partners or governmental entities; the parties being unable to successfully implement integration strategies; and significant transaction costs related to the proposed transaction.

Among other factors which may affect future performance and earnings projections are: economic conditions within the company’s and CLARCOR’s key markets, and the company’s and CLARCOR’s ability to maintain and achieve anticipated benefits associated with announced realignment activities, strategic initiatives to improve operating margins, actions taken to combat the effects of the current economic environment, and growth, innovation and global diversification initiatives. A change in the economic conditions in individual markets may have a particularly volatile effect on segment performance. Among other factors which may affect future performance of the Company and/or CLARCOR are, as applicable: changes in business relationships with and purchases by or from major customers, suppliers or distributors, including delays or cancellations in shipments; CLARCOR’s potential inability to realize the anticipated benefits of the strategic supply partnership with GE; 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; the ability to successfully divest businesses planned for divestiture and realize the anticipated benefits of such divestitures; the determination to undertake business realignment activities and the expected costs thereof and, if undertaken, the ability to complete such activities and realize the anticipated cost savings from such activities; ability to implement successfully capital allocation initiatives, including timing, price and execution of share repurchases; availability, limitations or cost increases of raw materials, component products and/or commodities that cannot be recovered in product pricing; ability to manage costs related to insurance and employee retirement and health care benefits; compliance costs associated with environmental laws and regulations; potential labor disruptions; threats associated with and efforts to combat terrorism and cyber-security risks; uncertainties surrounding the ultimate resolution of outstanding legal proceedings, including the outcome of any appeals; competitive market conditions and resulting effects on sales and pricing; and global economic factors, including manufacturing activity, air travel trends, currency exchange rates, difficulties entering new markets and general economic conditions such as inflation, deflation, interest rates and credit availability. The company makes these statements as of the date of this disclosure, and undertakes no obligation to update them unless otherwise required by law.


PARKER HANNIFIN CORPORATION - DECEMBER 31, 2016                
CONSOLIDATED STATEMENT OF INCOME                  
                     
(Unaudited)       Three Months Ended December 31,   Six Months Ended December 31,  
(Dollars in thousands except per share amounts)     2016       2015       2016       2015    
                         
Net sales       $    2,670,804     $ 2,705,590     $    5,413,935     $ 5,574,938    
Cost of sales         2,044,484       2,140,624         4,150,490       4,341,528    
Gross profit           626,320       564,966         1,263,445       1,233,410    
Selling, general and administrative expenses       336,578       314,666         659,547       684,880    
Interest expense         33,444       34,297         67,592       70,057    
Other (income), net         (64,424 )     (13,877 )       (76,661 )     (27,056 )  
Income before income taxes         320,722       229,880         612,967       505,529    
Income taxes         79,322       46,743         161,329       127,366    
Net income           241,400       183,137         451,638       378,163    
Less:  Noncontrolling interests         95       155         204       203    
Net income attributable to common shareholders $    241,305     $ 182,982     $    451,434     $ 377,960    
                         
Earnings per share attributable to common shareholders:                
Basic earnings per share     $    1.81     $ 1.35     $    3.38     $ 2.78    
Diluted earnings per share     $    1.78     $ 1.33     $    3.33     $ 2.74    
                         
Average shares outstanding during period - Basic       133,320,109       135,373,356         133,499,744       136,108,930    
Average shares outstanding during period - Diluted       135,812,760       137,065,447         135,596,707       137,788,219    
                         
Cash dividends per common share      $  .63     $ .63     $    1.26     $ 1.26    
                         
RECONCILIATION OF EARNINGS PER DILUTED SHARE TO ADJUSTED EARNINGS PER DILUTED SHARE          
(Unaudited)       Three Months Ended December 31,   Six Months Ended December 31,  
            2016       2015       2016       2015    
Earnings per diluted share     $    1.78     $ 1.33     $    3.33     $ 2.74    
Adjustments:                    
Business realignment charges         0.04       0.19         0.10       0.30    
Acquisition expenses         0.09       -         0.09       -    
Adjusted earnings per diluted share   $    1.91     $ 1.52     $    3.52     $ 3.04    
                         
                         
                         
BUSINESS SEGMENT INFORMATION                  
(Unaudited)   Three Months Ended December 31,   Six Months Ended December 31,  
(Dollars in thousands)       2016       2015       2016       2015    
Net sales                      
Diversified Industrial:                    
North America     $    1,121,053     $ 1,160,774     $    2,288,024     $ 2,447,104    
International         1,005,968       992,464         2,020,891       2,030,911    
Aerospace Systems         543,783       552,352         1,105,020       1,096,923    
Total       $    2,670,804     $ 2,705,590     $    5,413,935     $ 5,574,938    
Segment operating income                    
Diversified Industrial:                    
North America     $    184,013     $ 153,581     $    384,624     $ 366,329    
International         127,517       95,367         264,713       224,662    
Aerospace Systems         72,516       81,764         145,797       155,767    
Total segment operating income       384,046       330,712         795,134       746,758    
Corporate general and administrative expenses       43,926       31,210         74,960       84,261    
Income before interest and other expense             340,120       299,502         720,174       662,497    
Interest expense         33,444       34,297         67,592       70,057    
Other (income) expense         (14,046 )     35,325         39,615       86,911    
Income before income taxes     $    320,722     $ 229,880     $    612,967     $ 505,529    
                         
RECONCILIATION OF TOTAL SEGMENT OPERATING MARGIN TO ADJUSTED TOTAL SEGMENT OPERATING MARGIN        
(Unaudited)                      
                         
          Three Months
Ended
December 31,
2016
      Three Months
Ended
December 31,
2015
     
               Operating margin        Operating margin  
Total segment operating income   $    384,046       14.4 %   $ 330,712       12.2 %  
Adjustments:                    
Business realignment charges         7,897           34,800        
Adjusted total segment operating income   $    391,943       14.7 %   $ 365,512       13.5 %  
                         
                         
                         
CONSOLIDATED BALANCE SHEET                    
(Unaudited)        December 31,    June 30,   December 31,      
(Dollars in thousands)           2016     2016     2015      
Assets                      
Current assets:                    
Cash and cash equivalents     $    1,520,736     $ 1,221,653     $ 1,047,494        
Marketable securities and other investments       684,299       882,342       820,682        
Trade accounts receivable, net         1,411,074       1,593,920       1,419,934        
Non-trade and notes receivable         256,545       232,183       293,913        
Inventories           1,241,593       1,173,329       1,279,760        
Prepaid expenses         133,592       104,360       141,030        
Total current assets         5,247,839       5,207,787       5,002,813        
Plant and equipment, net         1,506,201       1,568,100       1,598,185        
Deferred income taxes         482,136       605,155       383,805        
Goodwill           2,813,238       2,903,037       2,913,065        
Intangible assets, net         849,692       922,571       975,515        
Other assets         832,507       827,492       840,920        
Total assets     $    11,731,613     $ 12,034,142     $ 11,714,303        
                         
Liabilities and equity                    
Current liabilities:                    
Notes payable     $    581,487     $ 361,787     $ 574,302        
Accounts payable         997,189       1,034,589       948,157        
Accrued liabilities         720,844       841,915       736,145        
Accrued domestic and foreign taxes         125,954       127,597       105,130        
Total current liabilities         2,425,474       2,365,888       2,363,734        
Long-term debt         2,653,560       2,652,457       2,701,121        
Pensions and other postretirement benefits       1,766,209       2,076,143       1,475,351        
Deferred income taxes         50,809       54,395       64,721        
Other liabilities         304,583       306,581       306,655        
Shareholders' equity         4,527,709       4,575,255       4,799,406        
Noncontrolling interests         3,269       3,423       3,315        
Total liabilities and equity     $    11,731,613     $ 12,034,142     $ 11,714,303        
                         
                         
                         
CONSOLIDATED STATEMENT OF CASH FLOWS                  
(Unaudited)       Six Months Ended December 31,          
(Dollars in thousands)       2016       2015            
                         
Cash flows from operating activities:                  
Net income       $    451,638     $ 378,163            
Depreciation and amortization         149,085       156,093            
Stock incentive plan compensation         47,161       39,026            
(Gain) on sale of business         (44,930 )     -            
Loss (gain) on disposal of assets         310       (336 )          
(Gain) on sale of marketable securities       (230 )     (158 )          
Net change in receivables, inventories, and trade payables     44,802       41,866            
Net change in other assets and liabilities       (313,783 )     (239,277 )          
Other, net           70,123       (12,730 )          
Net cash provided by operating activities       404,176       362,647            
Cash flows from investing activities:                  
Acquisitions (net of cash of $1,760 in 2016 and $3,814 in 2015)     (29,927 )     (67,552 )          
Capital expenditures         (71,356 )     (75,419 )          
Proceeds from sale of plant and equipment       4,991       8,506            
Proceeds from sale of business         85,610       -            
Purchases of marketable securities and other investments     (393,909 )     (575,183 )          
Maturities and sales of marketable securities and other investments     506,642       527,819            
Other, net           241       (41,450 )          
Net cash provided by (used in) investing activities     102,292       (223,279 )          
Cash flows from financing activities:                  
Net payments for common stock activity       (194,110 )     (410,049 )          
Net proceeds from debt         222,425       356,591            
Dividends           (168,990 )     (171,707 )          
Net cash (used in) financing activities       (140,675 )     (225,165 )          
Effect of exchange rate changes on cash       (66,710 )     (47,293 )          
Net increase (decrease) in cash and cash equivalents       299,083       (133,090 )          
Cash and cash equivalents at beginning of period       1,221,653       1,180,584            
Cash and cash equivalents at end of period   $    1,520,736     $ 1,047,494            
                         
RECONCILIATION OF CASH FLOW FROM OPERATIONS TO ADJUSTED CASH FLOW FROM OPERATIONS          
(Unaudited)                      
          Six Months
Ended
December 31,
2016
      Six Months
Ended
December 31,
2015
     
               Percent of sales        Percent of sales  
As reported cash flow from operations   $    404,176       7.5 %   $ 362,647       6.5 %  
Discretionary pension contribution         220,000           200,000        
Adjusted cash flow from operations   $    624,176       11.5 %   $ 562,647       10.1 %  
                         
                         
                         
RECONCILIATION OF FORECASTED EARNINGS PER DILUTED SHARE TO ADJUSTED FORECASTED EARNINGS PER DILUTED SHARE      
(Unaudited)                      
(Amounts in dollars)                    
          Fiscal Year              
            2017                
Forecasted earnings per diluted share    $6.71 to $7.21               
Adjustments:                    
Business realignment charges     .25              
Acquisition expenses     .09              
Adjusted forecasted earnings per diluted share      $7.05 to $7.55               
                         
Contact:

Media –
Aidan Gormley, Director, Global Communications and Branding
216/896-3258
aidan.gormley@parker.com

Financial Analysts –
Robin J. Davenport, Vice President, Corporate Finance
216/896-2265
rjdavenport@parker.com

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