Parker Hannifin Corporation (NYSE: PH), the global leader in motion
and control technologies, today reviewed progress being made under
the new Win StrategyTM and provided an update to its five-year
financial performance targets at an investor meeting in New York.
The Win Strategy is the Parker business system and
establishes goals for engaged people, premier customer experience,
profitable growth and financial performance.
“We have made substantial progress with the Win Strategy over
the past two years against our fiscal year 2020 targets,” said Tom
Williams, Chairman and CEO. “As we are still in the early days of
implementing the Win Strategy we have a lot of opportunity for
continued improvement. In addition, we completed a transformative
acquisition of CLARCOR and just one year into the integration we
are expecting to deliver even greater synergies than we originally
estimated.”
The meeting included a progress report on the success of the new
Win Strategy with presentations by Tom Williams, Chairman and CEO
and Lee Banks, President and Chief Operating Officer, a financial
overview by Cathy Suever, Chief Financial Officer, and detailed
reviews of three operating groups from group presidents Roger
Sherrard (Aerospace), Jenny Parmentier (Engineered Materials) and
Rob Malone (Filtration).
The company noted the following performance improvements from
the implementation of the Win Strategy:
- Safety is the company’s first priority. Since December
2014, the company has reduced its recordable incident rate by 54%,
demonstrating meaningful progress toward a goal of zero
incidents.
- Parker is actively measuring customer experience and has
identified priorities for increased Likelihood-to-Recommend scores
throughout the company.
- As previously communicated on February 1, 2018, the company
estimates that it will end fiscal year 2018 with 6.5% organic sales
growth, which would exceed the forecasted global industrial
production index by 310 basis points, well ahead of its target of
150 basis points by fiscal 2020.
- Through simplification, lean enterprise, strategic supply chain
and value pricing initiatives, Parker has significantly increased
profitability and is expected to reach 16.3% adjusted segment
operating margins and 17.6% adjusted EBITDA margins in fiscal year
2018.
Williams added, “The dedication of our global team members in
implementing the Win Strategy has generated the significant
performance improvements. As a result of the progress to date
and our focus on continuous improvement, we have established new
five year targets that will help position us to achieve top
quartile financial performance and create value for our
shareholders.”
The company outlined the following financial targets by the end
of fiscal 2023:
- Organic sales growth targeted at 150 basis points greater than
the Global Industrial Production Index.
- Profitability as measured by segment operating margins of 19%
and EBITDA margins of 20%.
- Free cash flow conversion of greater than 100%.
- A greater than 10% compound annual growth rate in adjusted
earnings per share.
“We will continue to focus on being great generators and great
deployers of cash to create long term shareholder value,” said
Williams. “While debt reduction will be important in the near-term,
our priorities for using cash remain the same as we continue our
record of increasing annual dividends and support the investment in
our business. We continue to look for acquisitions that will
help strengthen what is already a uniquely integrated portfolio of
motion and control technologies unmatched anywhere in the
world.”
A webcast replay of the event, copies of the presentations and
non-GAAP reconciliations can be accessed at www.phstock.com.
About Parker HannifinParker 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 61
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.
Forward-Looking Statements and Non-GAAP Financial
MeasuresForward-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. Among other factors which
may affect future performance and earnings projections are:
economic conditions within the company’s key markets, and the
company’s ability to maintain and achieve anticipated benefits
associated with announced realignment activities, strategic
initiatives to improve operating margins, actions taken to combat
the effects of the current economic environment, and growth,
innovation and global diversification initiatives. Additionally,
the actual impact of the U.S. Tax Cuts and Jobs Act may affect
future performance and earnings projections as the amounts
reflected in this period are preliminary estimates and exact
amounts will not be determined until a later date, and there may be
other judicial or regulatory interpretations of the U.S. Tax Cuts
and Jobs Act that may also affect these estimates and the actual
impact on the company. 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 are, as applicable: 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 CLARCOR; 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.
The presentations referenced in this release reconciles (a)
sales amounts reported in accordance with U.S. GAAP to sales
amounts adjusted to remove the effects of acquisitions and the
effects of currency exchange rates, (b) cash flow from operating
activities and cash flow from operating activities as a percent of
sales in accordance with U.S. GAAP to cash flow from operating
activities and cash flow from operating activities as a percent of
sales without the effect of a discretionary pension plan
contribution, (c) operating margins reported in accordance with
U.S. GAAP to operating margins without the effect of business
realignment charges, Clarcor costs to achieve, Clarcor acquisition
expenses and voluntary retirement expense (d) forecast earnings per
diluted share without the effect of business realignment charges,
CLARCOR costs to achieve, the gain on sale and write-down of
assets, net and U.S. tax reform one-time impact, net. This
presentation also contains references to EBITDA and adjusted
EBITDA. EBITDA is defined as earnings before interest, taxes,
depreciation and amortization. Adjusted EBITDA is defined as EBITDA
before business realignment charges, CLARCOR costs to achieve, and
a loss related to the sale of an investment. Although EBITDA and
Adjusted EBITDA are not measures of performance calculated in
accordance with GAAP, we believe that it is useful to an investor
in evaluating the results of this quarter versus one year ago. The
effects of acquisitions, currency exchange rates, the discretionary
pension plan contributions, business realignment charges, Clarcor
costs to achieve, Clarcor acquisition expenses, voluntary
retirement expense, the gain on sale and write-down of assets, net
and U.S. tax reform one-tie impact, net are removed to allow
investors and the company to meaningfully evaluate changes in
sales, and cash flow from operating activities as a percent of
sales, operating margins, and earnings per diluted share on a
comparable basis from period to period.
Please visit www.PHstock.com for more information
###
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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