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Form 8-K PARKER HANNIFIN CORP For: Aug 04

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August 4, 2015 9:22 AM EDT


        

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): August 4, 2015


PARKER-HANNIFIN CORPORATION
(Exact Name of Registrant as Specified in Charter)
Ohio
34-0451060
(State or other jurisdiction of
Incorporation or Organization)
(I.R.S. Employer
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



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))







Item 2.02 Results of Operations and Financial Condition


On August 4, 2015, Parker-Hannifin Corporation issued a press release and presented a Webcast announcing results of operations for the quarter ended June 30, 2015. 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

(c) Exhibits:

99.1    Press release issued by Parker-Hannifin Corporation, dated August 4, 2015.

99.2    Webcast presentation by Parker-Hannifin Corporation, dated August 4, 2015.





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/ Jon P. Marten
 
 
 
Jon P. Marten
 
 
 
Executive Vice President - Finance &
 
 
 
Administration and Chief Financial Officer
 
 
 
 
 
 
 
 
Date: August 4, 2015
 
 
 
 
 
 
 
 
 
 
 








Exhibit 99.1    
For Release:    Immediately                    

Contact:
Media -
 
 
Aidan Gormley -Director, Global Communications and Branding
216-896-3258
 
 
 
Financial Analysts -
 
 
Robin J. Davenport, Vice President, Corporate Finance
216-896-2265
 
 
 
 
 
Stock symbol:
PH - NYSE
 

Parker Reports Fiscal 2015 Fourth Quarter and Full Year Results

•
Fourth quarter EPS $1.27 as reported, or $1.43 adjusted
•
Fourth quarter sales and earnings impacted by currency, taxes and weakness in end markets
•
Full year EPS increased to $6.97 as reported, or $7.25 adjusted
•
Strong cash flow from operations of 10.2 percent of sales for the year, adjusted segment operating margins increased 50 basis points
•
Simplification initiative launched as part of the refreshed Win Strategy

CLEVELAND, August 4, 2015 - Parker Hannifin Corporation (NYSE: PH), the global leader in motion and control technologies, today reported results for the fiscal 2015 fourth quarter and full year ended June 30, 2015. Fiscal 2015 fourth quarter sales were $3.14 billion, compared with $3.53 billion in the same period a year ago, reflecting the effect of currency rate changes and weak end market demand. Fiscal 2015 fourth quarter net income was $179.6 million, compared with $301.2 million in the prior year quarter. Fiscal 2015 fourth quarter earnings per share were $1.27, compared with $1.98 per share in the prior year quarter. Adjusted earnings per share were $1.43 in the fiscal 2015 fourth quarter, compared with $2.06 per share in the prior year quarter. Fiscal 2015 fourth quarter earnings were negatively impacted by $0.30 per share as a result of a higher effective tax rate due to changes in the geographic mix of pre-tax profits and discrete items booked in the quarter. A reconciliation of as reported to adjusted




segment operating margins and earnings per share is included with the financial tables accompanying this news release.

“We continue to feel the effects of changes in currency rates and have been taking actions to adjust to weak macro-economic and end market conditions,” said Tom Williams, Chief Executive Officer. “Despite the significant year over year sales decline, the company performed well with adjusted segment operating margins growing to 14.9 percent from 14.4 percent in fiscal 2014. We have seen a swift and meaningful drop in order rates in the second half of our fiscal year, and particularly in the fourth quarter. As communicated in April 2015, the company completed a voluntary early retirement program during the fourth quarter. We continue to see opportunities to reduce costs around the world. We are also launching our Simplification initiative as part of the refreshed Win Strategy. Our objectives are to reduce complexity, improve speed and reduce costs, all of which will enable us to better serve our customers. These strategies will help build a more agile Parker that is better positioned to drive long-term, profitable growth and returns for shareholders.”

Fiscal 2015 full year sales were $12.7 billion, compared with $13.2 billion in fiscal 2014, primarily impacted by the effect of currency rate changes and weakening end market demand in the second half of the fiscal year. Net income for fiscal 2015 was $1.01 billion, compared with $1.04 billion in fiscal 2014. Fiscal 2015 earnings per share were $6.97, compared with $6.87 per share in fiscal 2014. Adjusted earnings per share for fiscal 2015 were $7.25, compared with $6.94 in the prior year. Fiscal 2015 full year results included $0.38 per share in transaction currency gains that are not anticipated to repeat in fiscal 2016. Despite difficult market conditions, cash flow from operations for fiscal 2015 was $1.3 billion or 10.2 percent of sales compared with $1.4 billion or 10.5 percent of sales in the prior year.

Fourth Quarter Segment Results
Diversified Industrial Segment: North American fourth quarter sales decreased 7 percent to $1.41 billion, and operating income was $228.9 million, compared with $268.7 million in the same period a year ago. International fourth quarter sales decreased 17 percent to $1.14 billion, primarily as a result of the effect




of currency rate changes, and operating income was $118.1 million, compared with $137.9 million in the same period a year ago.

Aerospace Systems Segment: Fourth quarter sales decreased 5 percent to $589.2 million, and operating income was $93.5 million, compared with $104.9 million in the same period a year ago.

Orders
Parker reported a decrease of 9 percent in orders for the quarter ending June 30, 2015, compared with the same quarter a year ago. The company reported the following orders by business:
•
Orders decreased 9 percent in the Diversified Industrial North America businesses
•
Orders decreased 5 percent in the Diversified Industrial International businesses
•
Orders decreased 14 percent in the Aerospace Systems segment on a rolling 12-month average basis.

Fiscal 2016 Outlook
For the fiscal year ending June 30, 2016, the company has issued guidance for earnings from continuing operations in the range of $6.15 to $6.85 per share, or $6.65 to $7.35 per share on an adjusted basis. Fiscal year 2016 guidance is adjusted for expected business realignment expenses of approximately $0.50 per share, of which $0.30 per share relates to the company’s Simplification initiatives.

“We anticipate continued end market weakness in fiscal year 2016,” commented Williams. “Sales are expected to be down slightly and our results will be influenced by ongoing business realignment actions designed to drive efficiencies, streamline our operations and better serve our customers. We also continue to position Parker for future growth. To focus our efforts, we are finalizing a comprehensive refresh of the Win Strategy, which is targeted at driving top quartile financial performance and returns among our industrial peer companies. We are excited about our opportunities to strengthen our leadership position and look forward to sharing the refreshed Win Strategy publicly in September during our Investor Day.”





NOTICE OF CONFERENCE CALL: Parker Hannifin's conference call and slide presentation to discuss its fiscal 2015 fourth quarter and full year 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.

With annual sales of approximately $13 billion in fiscal year 2015, Parker Hannifin is the world's leading diversified manufacturer of motion and control technologies and systems, providing precision-engineered solutions for a wide variety of mobile, industrial and aerospace markets. The company employs approximately 55,000 people in 50 countries around the world. Parker has increased its annual dividends paid to shareholders for 59 consecutive fiscal years, among the top five longest-running dividend-increase records in the S&P 500 index. For more information, visit the company's website at www.parker.com, or its investor information website at www.phstock.com.

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 percent 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 without the effect of business realignment expenses, voluntary retirement expenses, asset write downs and a gain related to a joint venture agreement; (b) the effect of business realignment expenses on forecasted earnings from continuing operations per share; and (c) segment operating margins without the effect of business realignment expenses, voluntary retirement expenses and sales related to a joint venture agreement. The effects of business realignment expenses, voluntary retirement expenses, asset write downs and a gain related to a joint venture agreement are removed to allow investors and the company to meaningfully evaluate changes in earnings per share and segment operating margins 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. All statements regarding future performance, earnings projections, events or developments are forward-looking statements. 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 are: 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; 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 the Company’s capital allocation initiatives, including timing, price and execution of share repurchases; threats associated with and efforts to combat terrorism; 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; increases in raw material costs that cannot be recovered in product pricing; the company's ability to manage costs related to insurance and employee retirement and health care benefits; 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 - JUNE 30, 2015
 
 
 
 
 
Exhibit 99.1

CONSOLIDATED STATEMENT OF INCOME
 
 
 
 
 
 
 
 
 
Three Months Ended June 30,
 
Year Ended June 30,
(Dollars in thousands except per share amounts)
2015

 
2014

 
2015

 
2014

 
 
 
 
 
 
 
 
 
Net sales
 
$
3,144,508

 
$
3,525,415

 
$
12,711,744

 
$
13,215,971

Cost of sales
 
2,420,780

 
2,685,954

 
9,655,245

 
10,188,227

Gross profit
 
723,728

 
839,461

 
3,056,499

 
3,027,744

Selling, general and administrative expenses
391,796

 
421,185

 
1,544,746

 
1,633,992

Goodwill and intangible asset impairment
—

 
—

 
—

 
188,870

Interest expense
 
34,797

 
20,163

 
118,406

 
82,566

Other (income), net
 
(6,838
)
 
(9,711
)
 
(38,893
)
 
(434,404
)
Income before income taxes
 
303,973

 
407,824

 
1,432,240

 
1,556,720

Income taxes
 
124,388

 
106,648

 
419,687

 
515,302

Net income
 
179,585

 
301,176

 
1,012,553

 
1,041,418

Less: Noncontrolling interests
 
131

 
138

 
413

 
370

Net income attributable to common shareholders
$
179,454

 
$
301,038

 
$
1,012,140

 
$
1,041,048

 
 
 
 
 
 
 
 
 
Earnings per share attributable to common shareholders:
 
 
 
 
 
 
 
   Basic earnings per share
 
$
1.29

 
$
2.02

 
$
7.08

 
$
6.98

   Diluted earnings per share
 
$
1.27

 
$
1.98

 
$
6.97

 
$
6.87

 
 
 
 
 
 
 
 
 
Average shares outstanding during period - Basic
138,674,443

 
148,967,357

 
142,925,327

 
149,099,448

Average shares outstanding during period - Diluted
141,000,940

 
151,803,746

 
145,112,150

 
151,444,103

 
 
 
 
 
 
 
 
 
Cash dividends per common share
$
0.63

 
$
0.48

 
$
2.37

 
$
1.86

 
 
 
 
 
 
 
 
 
RECONCILIATION OF NET INCOME AND EARNINGS PER DILUTED SHARE TO ADJUSTED NET INCOME AND EARNINGS PER DILUTED SHARE

(Unaudited)
 
 
 
 
 
 
 
Net income
$
179,585

 
$
301,176

 
$
1,012,553

 
$
1,041,418

Adjustments:
 
 
 
 
 
 
 
  Voluntary retirement expense
15,034

 
—

 
15,034

 
—

  Business realignment charges
7,014

 
12,854

 
25,180

 
73,684

  Asset writedowns
—

 
—

 
—

 
192,188

  Gain related to joint venture agreement
—

 
—

 
—

 
(255,652
)
Adjusted net income
$
201,633

 
$
314,030

 
$
1,052,767

 
$
1,051,638

 
 
 
 
 
 
 
 
 
Earnings per diluted share
$
1.27

 
$
1.98

 
$
6.97

 
$
6.87

Adjustments:
 
 
 
 
 
 
 
  Voluntary retirement expense
0.11

 
—

 
0.11

 
—

  Business realignment charges
0.05

 
0.08

 
0.17

 
0.49

  Asset writedowns
—

 
—

 
—

 
1.26

  Gain related to joint venture agreement
—

 
—

 
—

 
(1.68
)
Adjusted earnings per diluted share
$
1.43

 
$
2.06

 
$
7.25

 
$
6.94






PARKER HANNIFIN CORPORATION - JUNE 30, 2015
 
 
 
 
 
Exhibit 99.1

BUSINESS SEGMENT INFORMATION
 
 
 
 
 
 
 
 
 
Three Months Ended June 30,
 
Year Ended June 30,
(Dollars in thousands)
 
2015

 
2014

 
2015

 
2014

Net sales
 
 
 
 
 
 
 
 
    Diversified Industrial:
 
 
 
 
 
 
 
 
       North America
 
$
1,413,098

 
$
1,525,038

 
$
5,715,742

 
$
5,693,527

       International
 
1,142,231

 
1,382,757

 
4,741,376

 
5,287,916

    Aerospace Systems
 
589,179

 
617,620

 
2,254,626

 
2,234,528

Total net sales
 
$
3,144,508

 
$
3,525,415

 
$
12,711,744

 
$
13,215,971

Segment operating income
 
 
 
 
 
 
 
 
    Diversified Industrial:
 
 
 
 
 
 
 
 
       North America
 
$
228,861

 
$
268,669

 
$
955,501

 
$
946,493

       International
 
118,134

 
137,935

 
583,937

 
572,476

    Aerospace Systems
 
93,494

 
104,932

 
298,994

 
271,238

Total segment operating income
440,489

 
511,536

 
1,838,432

 
1,790,207

Corporate general and administrative expenses
63,077

 
49,520

 
215,396

 
181,926

Income before interest expense and other expense
377,412

 
462,016

 
1,623,036

 
1,608,281

Interest expense
 
34,797

 
20,163

 
118,406

 
82,566

Other expense (income)
 
38,642

 
34,029

 
72,390

 
(31,005
)
Income before income taxes
 
$
303,973

 
$
407,824

 
$
1,432,240

 
$
1,556,720

 
 
 
 
 
 
 
 
 
RECONCILIATION OF TOTAL SEGMENT OPERATING MARGIN TO ADJUSTED TOTAL SEGMENT OPERATING MARGIN

(Unaudited)
 
 
 
 
 
 
Year Ended
 
 
 
Year Ended
 
 
 
 
June 30, 2015
 
 
 
June 30, 2014
 
 
Total net sales as reported
$
12,711,744

 
 
 
$
13,215,971

 
 
Adjustments:
 
 
 
 
 
 
 
 
  Sales related to GE joint venture
—

 
 
 
49,510

 
 
Adjusted total net sales
 
$
12,711,744

 
 
 
$
13,166,461

 
 
 
 
 
 
 
 
 
 
 
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
Operating
 margin

 
 
 
Operating margin

Total segment operating income
 
 
 
 
 
 
 
  As reported
 
$
1,838,432

 
14.5
%
 
$
1,790,207

 
13.5
%
  Voluntary retirement expense
 
18,057

 
 
 
—

 
 
  Business realignment charges
 
31,849

 
 
 
102,449

 
 
  Adjusted
 
$
1,888,338

 
14.9
%
 
$
1,892,656

 
14.4
%





PARKER HANNIFIN CORPORATION - JUNE 30, 2015
 
 
Exhibit 99.1

CONSOLIDATED BALANCE SHEET
 
 
 
 
 
 
June 30,

 
June 30,

(Dollars in thousands)
 
2015

 
2014

Assets
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
1,180,584

 
$
1,613,555

Marketable securities and other investments
 
733,490

 
573,701

Trade accounts receivable, net
 
1,620,194

 
1,858,176

Non-trade and notes receivable
 
364,534

 
388,437

Inventories
 
1,300,459

 
1,371,681

Prepaid expenses
 
241,684

 
129,837

Deferred income taxes
 
142,147

 
136,193

Total current assets
 
5,583,092

 
6,071,580

Plant and equipment, net
 
1,664,022

 
1,824,294

Goodwill
 
2,942,679

 
3,171,425

Intangible assets, net
 
1,013,439

 
1,188,282

Other assets
 
1,091,805

 
1,018,781

Total assets
 
$
12,295,037

 
$
13,274,362

 
 
 
 
 
Liabilities and equity
 
 
 
 
Current liabilities:
 
 
 
 
Notes payable
 
$
223,142

 
$
816,622

Accounts payable
 
1,092,138

 
1,252,040

Accrued liabilities
 
894,555

 
960,523

Accrued domestic and foreign taxes
 
140,295

 
223,611

Total current liabilities
 
2,350,130

 
3,252,796

Long-term debt
 
2,723,960

 
1,508,142

Pensions and other postretirement benefits
 
1,699,197

 
1,346,224

Deferred income taxes
 
77,967

 
94,819

Other liabilities
 
336,214

 
409,573

Shareholders' equity
 
5,104,287

 
6,659,428

Noncontrolling interests
 
3,282

 
3,380

Total liabilities and equity
 
$
12,295,037

 
$
13,274,362





PARKER HANNIFIN CORPORATION - JUNE 30, 2015
 
 
 
Exhibit 99.1

CONSOLIDATED STATEMENT OF CASH FLOWS
 
 
 
 
 
 
Year Ended June 30,
(Dollars in thousands)
 
2015

 
2014

 
 
 
 
 
Cash flows from operating activities:
 
 
 
 
Net income
 
$
1,012,553

 
$
1,041,418

Depreciation and amortization
 
317,491

 
336,702

Stock incentive plan compensation
 
96,093

 
103,161

Goodwill and intangible asset impairment
 
—

 
188,870

Gain on sale of deconsolidation of subsidiary
 
—

 
(412,612
)
Gain on sale of businesses
 
(6,420
)
 
—

Loss on disposal of assets
 
14,953

 
2,997

Loss on sale of marketable securities
 
3,817

 
—

Net change in receivables, inventories, and trade payables
 
(13,948
)
 
(10,033
)
Net change in other assets and liabilities
 
(63,679
)
 
206,131

Other, net
 
(58,919
)
 
(68,741
)
Net cash provided by operating activities
 
1,301,941

 
1,387,893

Cash flows from investing activities:
 
 
 
 
Acquisitions (net of cash of $8,332 in 2015 and $1,780 in 2014)
 
(18,618
)
 
(17,593
)
Capital expenditures
 
(215,527
)
 
(216,340
)
Proceeds from sale of plant and equipment
 
19,655

 
14,368

Proceeds from sale of businesses
 
37,265

 
—

Proceeds from deconsolidation of subsidiary
 
—

 
202,498

Purchases of marketable securities and other investments
 
(1,747,333
)
 
(624,880
)
Maturities and sales of marketable securities and other investments
 
1,391,396

 
—

Other, net
 
(46,001
)
 
(4,454
)
Net cash (used in) investing activities
 
(579,163
)
 
(646,401
)
Cash flows from financing activities:
 
 
 
 
Net payments for common stock activity
 
(1,371,662
)
 
(162,298
)
Net proceeds from (payments for) debt
 
667,307

 
(517,573
)
Dividends
 
(340,389
)
 
(278,244
)
Net cash (used in) financing activities
 
(1,044,744
)
 
(958,115
)
Effect of exchange rate changes on cash
 
(111,005
)
 
48,766

Net (decrease) in cash and cash equivalents
 
(432,971
)
 
(167,857
)
Cash and cash equivalents at beginning of period
 
1,613,555

 
1,781,412

Cash and cash equivalents at end of period
 
$
1,180,584

 
$
1,613,555





 
 
 
 
Exhibit 99.1
PARKER HANNIFIN CORPORATION
 
 
 
 
RECONCILIATION OF FORECASTED EARNINGS PER DILUTED SHARE TO ADJUSTED FORECASTED EARNINGS PER DILUTED SHARE
(Unaudited)
 
 
 
 
(Amounts in dollars)
 
 
 
 
 
 
Fiscal Year 2016
 
 
Forecasted earnings per diluted share
$6.15 to $6.85
 
 
Adjustments:
 
 
 
  Business realignment charges
0.50
 
 
Adjusted forecasted earnings per diluted share
$6.65 to $7.35
 
 



4th Quarter Fiscal Year 2015 Earnings Release Parker Hannifin Corporation August 4, 2015 Exhibit 99.2

 
Forward-Looking Statements and Non-GAAP Financial Measures Safe Harbor 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. All statements regarding future performance, earnings projections, events or developments are forward-looking statements. 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 are: 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; 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 the Company's capital allocation initiatives, including timing, price and execution of share repurchases; threats associated with and efforts to combat terrorism; 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; increases in raw material costs that cannot be recovered in product pricing; the Company's ability to manage costs related to insurance and employee retirement and health care benefits; 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. This presentation reconciles (a) sales amounts reported in accordance with U.S. GAAP to sales amounts adjusted to remove the effects of acquisitions, JV sales 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, voluntary retirement expense, and JV sales, (d) net income and earnings per diluted share reported in accordance with U.S. GAAP to net income and earnings per diluted share without the effect of business realignment charges and voluntary retirement expense and with respect to the twelve-month period, asset write downs and the effect of a joint venture. The effects of acquisitions, divestitures, currency exchange rates, discretionary pension plan contributions, business realignment charges and voluntary retirement expense, asset write downs and the effect of a joint venture 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, net income and earnings per diluted share on a comparable basis from period to period. Full year adjusted guidance removes the business realignment charges. Please visit www.PHstock.com for more information 2

 
Agenda 3 • CEO Comments • Results & Outlook • Questions & Answers

 
Highlights 4th Quarter FY2015 • Fourth Quarter Sales of $3.1B • Significantly Impacted by Currency and End Markets • Segment Operating Margins 14.0% • Adjusted Segment Operating Margins 14.9% • As Reported Earnings per Share of $1.27 • Adjusted Earnings per Share of $1.43 • Tax Impact of $.30 per Share • Operating Cash Flow 16.2% of Sales • Orders Declined to - 9% 4

 
Highlights FY2015 • Full Year Sales of $12.7B • Significantly Impacted by Currency Rates • Segment Operating Margins 14.5% • Adjusted Segment Operating Margins 14.9% • As Reported Earnings per Share of $6.97 • Adjusted Earnings per Share of $7.25 • Includes Transaction Currency Gains of $.38 per Share • Operating Cash Flow of $1.3B or 10.2% of Sales • 14th consecutive year greater than 10% of sales • Capital Allocation Priorities 5

 
Diluted Earnings Per Share 4th Quarter FY2015 6 * FY 15 EPS Adjusted for Business Realignment Charges/Voluntary Retirement Expense ** FY 14 EPS Adjusted for Business Realignment Charges/Impairment/JV with GE Aviation $1.27 $1.98 $6.97 $6.87 FY15 Q4 FY14 Q4 FY15 FY14 EPS - As Reported

 
Influences on Adjusted Earnings Per Share 4th Quarter FY2015 vs. 4th Quarter FY2014 7 * FY 15 EPS Adjusted for Business Realignment Charges/Voluntary Retirement Expense ** FY 14 EPS Adjusted for Business Realignment Charges

 
Influences on Adjusted Earnings Per Share FY2015 vs. FY2014 8 * FY 15 EPS Adjusted for Business Realignment Charges/Voluntary Retirement Expense ** FY 14 EPS Adjusted for Business Realignment Charges/Impairment/JV with GE Aviation

 
Sales & Segment Operating Margin Total Parker 9 Full Year FY2015 % Change FY2014 FY2015 % Change FY2014 12,712$ (3.8)% 13,215$ 12,712$ (3.4)% 13,166$ 15 0.1 % 15 0.1 % (546) (4.1)% (546) (4.1)% 13,243$ 0.2 % 13,243$ 0.6 % FY2015 % of Sales FY2014 % of Sales 1,838$ 14.5 % 1,790$ 13.5 % 32 102 18 - 1,888$ 14.9 % 1,892$ 14.4 % As Reported Adjusted for Joint Venture $ in millions 4th Quarter FY2015 % Change FY2014 Sales As Reported 3,145$ (10.8)% 3,525$ Acquisitions 3 0.1 % Currency (210) (6.0)% Organic Sales 3,352$ (4.9)% FY2015 % of Sales FY2014 % of Sales Segment Operating Margin As Reported 440$ 14.0 % 512$ 14.5 % Business Realignment Charges 9 18 Voluntary Retirement Expense 18 - Adjusted 467$ 14.9 % 530$ 15.0 %

 
Sales & Segment Operating Margin Diversified Industrial North America 10 $ in millions 4th Quarter FY2015 % Change FY2014 Sales As Reported 1,413$ (7.3)% 1,525$ Acquisitions - - % Currency (18) (1.2)% Organic Sales 1,431$ (6.1)% FY2015 % of Sales FY2014 % of Sales Segment Operating Margin As Reported 229$ 16.2 % 268$ 17.6 % Business Realignment Charges 2 1 Voluntary Retirement Expense 13 - Adjusted 244$ 17.3 % 269$ 17.7 % Full Year FY2015 % Change FY2014 5,716$ 0.4 % 5,693$ 7 0.1 % (50) (0.9)% 5,759$ 1.2 % FY2015 % of Sales FY2014 % of Sales 955$ 16.7 % 947$ 16.6 % 4 2 13 - 972$ 17.0 % 949$ 16.7 %

 
Sales & Segment Operating Margin Diversified Industrial International 11 Full Year FY2015 % Change FY2014 4,742$ (10.3)% 5,288$ 8 0.1 % (487) (9.2)% 5,221$ (1.2)% FY2015 % of Sales FY2014 % of Sales 584$ 12.3 % 572$ 10.8 % 27 99 611$ 12.9 % 671$ 12.7 % $ in millions 4th Quarter FY2015 % Change FY2014 Sales As Reported 1,143$ (17.4)% 1,383$ Acquisitions 3 0.2 % Currency (189) (13.6)% Organic Sales 1,329$ (4.0)% FY2015 % of Sales FY2014 % of Sales Segment Operating Margin As Reported 1$ 10.3 % 138$ 10.0 % Business Realignment Charges 6 18 Adjusted 124$ 10.9 % 156$ 11.2 %

 
Sales & Segment Operating Margin Aerospace Systems 12 $ in millions 4th Quarter FY2015 % Change FY2014 Sales As Reported 589$ (4.6)% 617$ Acquisitions - - % Currency (3) (0.6)% Organic Sales 592$ (4.0)% FY2015 % of Sales FY2014 % of Sales Segment Operating Margin As Reported 93$ 15.9 % 105$ 17.0 % Business Realignment Charges 1 - Voluntary Retirement Expense 5 - Adjusted 99$ 16.9 % 105$ 17.0 % Full Year FY2015 % Change FY2014 FY2015 % Change FY2014 2,254$ 0.9 % 2,234$ 2,254$ 3.2 % 2,185$ - - % - - % (9) (0.5)% (9) (0.5)% 2,263$ 1.4 % 2,263$ 3.7 % FY2015 % of Sales FY2014 % of Sales 299$ 13.3 % 271$ 12.1 % 1 1 5 - 305$ 13.5 % 272$ 12.5 % As Reported Adjusted for Joint Venture

 
Order Rates 13 Excludes Acquisitions, Divestitures & Currency 3-month year-over-year comparisons of total dollars, except Aerospace Systems Aerospace Systems is calculated using a 12-month rolling average Jun 2015 Mar 2015 Jun 2014 Mar 2014 Total Parker 9 %- 4 %- 4 %+ 7 %+ Diversified Industrial North America 9 %- 6 %- 6 %+ 6 %+ Diversified Industrial International 5 %- 3 %- 4 %- 5 %+ Aerospace Systems 14 %- 3 %- 17 %+ 16 %+

 
Cash Flow from Operating Activities 14 $511 $570 $1,302 $1,463 FY15 Q4 FY14 Q4 FY15 FY14 4th Quarter Full Year FY 2015 % of Sales FY 2014 % of Sales FY 2015 % of Sales FY 2014 % of Sales As Reported Cash Flow From Operating Activities 5 1 16.2% 570 16.2% 1,302 10.2% 1,388 10.5% Discreti nary Pension Plan Contribution 75 Adjusted Cash Flow From Operating Activities 511 16.2 570 16.2 1,302 10.2 1,463 11.1

 
FY2016 Guidance Adjusted EPS Initiated at $7.00 Midpoint 15 FY16 Adjusted Segment Operating Margins exclude Business Realignment Charges FY16 Adjusted Earnings Per Share exclude Business Realignment Charges Sales Growth vs. Prior Year Diversified Industrial North America (3%) - 1% Diversified Industrial International (6%) - (2%) Aerospace Systems 1% - 3% Total Parker (3%) - 0% Adjusted Segment Operating Margins Diversified Industrial North America 16.8% - 17.2% Diversified Industrial International 13.6% - 14.0% Aerospace Systems 14.4% - 14.8% Total Parker 15.2% - 15.6% Below the Line Items Corporate General & Administrative Expense, Interest and Other $540 M Tax Rate Full Year 29.0% Shares Diluted Shares Outstanding 140.8 M Earnings Per Share As Reported Range $6.15 - $6.85 Adjusted Range $6.65 - $7.35

 
FY2016 Guidance FY16 Guidance vs FY15 Actual 16 * FY 15 EPS Adjusted for Business Realignment Charges/Voluntary Retirement Expenses ** FY 16 EPS Guidance Adjusted for Business Realignment Charges

 
17

 
Appendix • Consolidated Statement of Income • Reconciliation of Net Income & EPS • Business Segment Information By Industry • Reconciliation of Segment Operating Income & Segment Operating Margin • Consolidated Balance Sheet • Consolidated Statement of Cash Flows • Reconciliation of Forecasted EPS • Supplemental Sales Information – Global Technology Platforms

 
Consolidated Statement of Income 19 Three Months Ended June 30, Year Ended June 30, (Dollars in thousands except per share amounts) 2015 2014 2015 2014 Net sales 3,144,508$ 3,525,415$ 12,711,744$ 13,215,971$ Cost of sales 2,420,780 2,685,954 9,655,245 10,188,227 Gross profit 723,728 839,461 3,056,499 3,027,744 Selling, general and administrative expenses 391,796 421,185 1,544,746 1,633,992 Goodw ill and intangible asset impairment - - - 188,870 Interest expense 34,797 20,163 118,406 82,566 Other (income), net (6,838) (9,711) (38,893) (434,404) Income before income taxes 303,973 407,824 1,432,240 1,556,720 Income taxes 124,388 106,648 419,687 515,302 Net income 179,585 301,176 1,012,553 1,041,418 Less: Noncontrolling interests 131 138 413 370 Net income attributable to common shareholders 179,454$ 301,038$ 1,012,140$ 1,041,048$ Earnings per share attributable to common shareholders: Basic earnings per share 1.29$ 2.02$ 7.08$ 6.98$ Diluted earnings per share 1.27$ 1.98$ 6.97$ 6.87$ Average shares outstanding during period - Basic 138,674,443 148,967,357 142,925,327 149,099,448 Average shares outstanding during period - Diluted 141,000,940 151,803,746 145,112,150 151,444,103 Cash dividends per common share .63$ .48$ 2.37$ 1.86$

 
Reconciliation of Net Income & EPS 20 (Unaudited) Three Months Ended June 30, Year Ended June 30, 2015 2014 2015 2014 Net income 179,585$ 301,176$ 1,012,553$ 1,041,418$ Adjustments: Voluntary retirement expense 15,034 - 15,034 - Business realignment charges 7,014 12,854 25,180 73,684 Asset w ritedow ns - - - 192,188 Gain related to joint venture agreement - - - (255,652) Adjusted net income 201,633$ 314,030$ 1,052,767$ 1,051,638$ Earnings per diluted share 1.27$ 1.98$ 6.97$ 6.87$ Adjustments: Voluntary retirement expense 0.11 - 0.11 - Business realignment charges 0.05 0.08 0.17 0.49 Asset w ritedow ns - - - 1.26 Gain related to joint venture agreement - - - (1.68) Adjusted earnings per diluted share 1.43$ 2.06$ 7.25$ 6.94$

 
Business Segment Information 21 Three Months Ended June 30, Year Ended June 30, (Dollars in thousands) 2015 2014 2015 2014 Net sales Diversif ied Industrial: North America 1,413,098$ 1,525,038$ 5,715,742$ 5,693,527$ International 1,142,231 1,382,757 4,741,376 5,287,916 Aerospace Systems 589,179 617,620 2,254,626 2,234,528 Total 3,144,508$ 3,525,415$ 12,711,744$ 13,215,971$ Segment operating income Diversif ied Industrial: North America 228,861$ 268,669$ 955,501$ 946,493$ Int rnatio al 118,134 137,935 583,937 572,476 Aerospace Systems 93,494 104,932 298,994 271,238 Total segment operating income 440,489 511,536 1,838,432 1,790,207 Corporate general and administrative expenses 63,077 49,520 215,396 181,926 Income before interest and other 377,412 462,016 1,623,036 1,608,281 Interest expense 34,797 20,163 118,406 82,566 Other expense (income) 38,642 34,029 72,390 (31,005) Income before income taxes 303,973$ 407,824$ 1,432,240$ 1,556,720$

 
Reconciliation of Segment Operating Income & Segment Operating Margin 22 (Unaudited) Total net sales as reported 12,711,744$ 13,215,971$ Adjust ents: Sales related to GE joint venture - 49,510 Adjusted total net sales 12,711,744$ 13,166,461$ Total segment operating income Operating margin Operating margin As reported 1,838,432$ 14.5% 1,790,207$ 13.5% Voluntary retirement expense 18,057 - Business realignment charges 31,849 102,449 Adjusted 1,888,338$ 14.9% 1,892,656$ 14.4% Year Ended June 30, 2015 Year Ended June 30, 2014

 
Consolidated Balance Sheet 23 June 30, June 30, (Dollars in thousands) 2015 2014 Assets Current assets: Cash and cash equivalents 1,180,584$ 1,613,555$ Marketable securities and other investments 733,490 573,701 Trade accounts receivable, net 1,620,194 1,858,176 Non-trade and notes receivable 364,534 388,437 Inventories 1,300,459 1,371,681 Prepaid expenses 241,684 129,837 Deferred income taxes 142,147 136,193 Total current assets 5,583,092 6,071,580 Plant and equipment, net 1,664,022 1,824,294 Goodw ill 2,942,679 3,171,425 Intangible assets, net 1,013,439 1,188,282 Other assets 1,091,805 1,018,781 Total assets 12,295,037$ 13,274,362$ Liabilities and equity Current liabilities: Notes payable 223,142$ 816,622$ Accounts payable 1,092,138 1,252,040 Accrued liabilities 894,555 960,523 Accrued domestic and foreign taxes 140,295 223,611 Total current liabilities 2,350,130 3,252,796 Long-term debt 2,723,960 1,508,142 Pensions and other postretirement benefits 1,699,197 1,346,224 Deferred income taxes 77,967 94,819 Other liabilities 336,214 409,573 Shareholders' equity 5,104,287 6,659,428 Noncontrolling interests 3,282 3,380 Total liabilities and equity 12,295,037$ 13,274,362$

 
Consolidated Statement of Cash Flows 24 Year Ended June 30, (Dollars in thousands) 2015 2014 Cash flows from operating activities: Net income 1,012,553$ 1,041,418$ Depreciation and amortization 317,491 336,702 Stock incentive plan compensation 96,093 103,161 Goodw ill and intangible asset impairment - 188,870 Gain on deconsolidation of subsidiary - (412,612) Gain on sale of businesses (6,420) - Loss on disposal of assets 14,953 2,997 Loss on sale of marketable securities 3,817 - Net change in receivables, inventories, and trade payables (13,948) (10,033) Net change in other assets and liabilities (63,679) 206,131 Other, net (58,919) (68,741) Net cash provided by operating activities 1,301,941 1,387,893 Cash flows from investing activities: Acquisitions (net of cash of $8,332 in 2015 and $1,780 in 2014) (18,618) (17,593) Capital expenditures (215,527) (216,340) Proceeds from sale of plant and equipment 19,655 14,368 Proceeds from sale of businesses 37,265 - Proceeds from deconsolidation of subsidiary - 202,498 Purchases of marketable securities and other investments (1,747,333) (624,880) Maturities and sales of marketable securities and other investments 1,391,396 - Other, net (46,001) (4,454) Net cash (used in) investing activities (579,163) (646,401) Cash flows from financing activities: Net payments for common stock activity (1,371,662) (162,298) Net proceeds from (payments for) debt 667,307 (517,573) Dividends (340,389) (278,244) Net cash (used in) financing activities (1,044,744) (958,115) Effect of exchange rate changes on cash (111,005) 48,766 Net (decrease) in cash and cash equivalents (432,971) (167,857) Cash and cash equivalents at beginning of period 1,613,555 1,781,412 Cash and cash equivalents at end of period 1,180,584$ 1,613,555$

 
Reconciliation of Forecasted EPS 25 (Unaudited) (Amounts in dollars) Fiscal Year 2016 Forecasted earnings per diluted share $6.15 to $6.85 Adjustments: Business realignment charges .50 Adjusted forecasted earnings per diluted share $6.65 to $7.35

 
Supplemental Sales Information Global Technology Platforms 26 PARKER HANNIFIN CORPORATION SUPPLEMENTAL NET SALES INFORMATION: BY TECHNOLOGY PLATFORM (Unaudited) Three Months Ended June 30, Tw elve Months Ended June 30, (Dollars in thousands) 2015 2014 2015 2014 Net sales Diversif ied Industrial: Motion Systems 883,821$ 1,036,565$ 3,620,511$ 3,898,961$ Flow and Process Control 983,358 1,128,107 4,020,347 4,252,589 Filtration and Engineered Materials 688,150 743,123 2,816,260 2,829,893 Aerospace Systems 589,179 617,620 2,254,626 2,234,528 Total 3,144,508$ 3,525,415$ 12,711,744$ 13,215,971$

 

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