Form 8-K PARKER HANNIFIN CORP For: Aug 02
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 2, 2018
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 2, 2018, Parker-Hannifin Corporation issued a press release and presented a Webcast announcing results of operations for the quarter ended June 30, 2018. 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:
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/ Catherine A. Suever | |||
Catherine A. Suever | |||
Executive Vice President - Finance & | |||
Administration and Chief Financial Officer | |||
Date: August 2, 2018 | |||
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 2018 Fourth Quarter and Full Year Results
– | Fourth quarter sales increased 9% to an all-time quarterly record of $3.82 billion |
– | Demand remained strong with fourth quarter organic growth of 9% and order rates increased 8% |
– | Fourth quarter total segment operating margins a record at 16.9% as reported, 17.5% adjusted |
– | Fourth quarter EPS increased 22% to $2.62, or an increase of 31% to $3.22, on an adjusted basis |
– | Fourth quarter EBITDA margins increased 100 bps to 17.4%, or 18.8% on an adjusted basis |
– | Full year operating cash flow reached a record $1.6 billion or 11.2% of sales |
– | Fiscal 2019 full year guidance anticipates another record year for sales and operating margins |
CLEVELAND, August 2, 2018 -- Parker Hannifin Corporation (NYSE: PH), the global leader in motion and control technologies, today reported results for the fiscal 2018 fourth quarter and full year ended June 30, 2018. Fiscal 2018 fourth quarter sales increased 9% to $3.82 billion compared with $3.50 billion in the prior year quarter. Net income increased 20% to $353.3 million compared with $293.4 million in the prior year quarter. Fiscal 2018 fourth quarter earnings per share increased 22% to $2.62, compared with $2.15 in the fiscal 2017 fourth quarter. On an adjusted basis, earnings per share increased 31% to $3.22, compared with $2.45 in the prior year quarter. A reconciliation of non-GAAP measures is included in the financial tables of this press release.
For the full year, fiscal 2018 sales were $14.3 billion, a 19% increase compared with $12.0 billion in fiscal year 2017. Net income was $1,061.3 million, an 8% increase compared with $983.8 million in fiscal 2017. Earnings per share increased 8% to $7.83 compared with $7.25 per share in the prior year. Adjusted earnings per share increased 28% to $10.42 compared with $8.11 per share in fiscal 2017.
Cash flow from operations for fiscal year 2018 was $1.6 billion or 11.2% of sales, compared with $1.3 billion or 10.8% of sales in the prior year period. Excluding a discretionary pension contribution, fiscal 2017 full year cash flow from operations was 12.7% of sales. Free cash flow conversion in fiscal year 2018 was 127%. During the fourth quarter of fiscal 2018, the company’s significant uses of cash included debt repayment of $925 million, a quarterly dividend payment of $100 million and the repurchase of $150 million in Parker shares.
“We ended fiscal 2018 by achieving a number of records in the quarter, which contributed to Parker delivering the strongest year of financial performance in the company’s history,” said Chairman and Chief Executive Officer, Tom Williams. “Sales were a record in the fourth quarter with organic growth of 9%, more than double the rate of growth for global industrial production. Order rates also increased 8%, indicating continued strong market demand. Total segment operating margins reached a record 16.9%, or 17.5% adjusted, with strong performance across all operating segments, and EBITDA margins increased to 17.4% or 18.8% adjusted.
“For the year, Parker achieved records in sales, segment operating margins, earnings per share and cash flow from operations. We deployed cash efficiently to pay down debt, maintain our dividend increase record and repurchase shares. Fiscal 2018 demonstrates the success of the Win Strategy™ and reflects the engagement and dedication of our global team members.”
Fiscal 2018 Fourth Quarter Segment Results
Diversified Industrial Segment: North American fourth quarter sales increased 8% to $1.8 billion, and operating income increased 20% to $313.5 million compared with $261.5 million in the same period a year ago. International fourth quarter sales increased 12% to $1.4 billion, and operating income increased 26% to $203.3 million compared with $161.5 million in the same period a year ago.
Aerospace Systems Segment: Fourth quarter sales increased 6% to $636.4 million, compared with $602.8 million in the prior year period, and operating income increased 13% to $126.7 million compared with $111.7 million in the same period a year ago.
Parker reported the following orders for the quarter ending June 30, 2018, compared with the same quarter a year ago:
• | Orders increased 8% for total Parker |
• | Orders increased 9% in the Diversified Industrial North America businesses |
• | Orders increased 5% in the Diversified Industrial International businesses |
• | Orders increased 10% in the Aerospace Systems Segment on a rolling 12-month average basis |
Outlook
For the fiscal year ending June 30, 2019, the company has issued guidance for earnings from continuing operations in the range of $10.50 to $11.30 per share, or $10.70 to $11.50 per share on an adjusted basis. Fiscal year 2019 guidance is adjusted on a pre-tax basis for expected business realignment expenses of approximately $22 million and CLARCOR costs to achieve of approximately $13 million. Guidance assumes organic sales growth in the range of 2.3% to 5.1%.
Williams added, “Fiscal 2019 will see us make continued progress toward achieving our new five-year financial targets that will maintain Parker’s position among the best performing diversified industrial companies and generate significant long-term value for our shareholders. While we have made meaningful progress, we have the opportunity to drive further improvement by building upon our strong financial position and distinct competitive advantages.”
NOTICE OF CONFERENCE CALL: Parker Hannifin's conference call and slide presentation to discuss its fiscal 2018 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. A replay of the webcast will be accessible on Parker's investor relations website, www.phstock.com, 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 and information available from Parker please visit www.phstock.com.
Parker Hannifin is a Fortune 250 global leader in motion and control technologies. For more than 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 62 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 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 charges, CLARCOR costs to achieve, U.S. Tax Cuts and Jobs Act adjustments, the net loss on sale and writedown of assets, and acquisition-related expenses; (b) the effect of business realignment charges, CLARCOR costs to achieve on forecasted earnings from continuing operations per share; (c) and cash flows from operations without the effect of a discretionary pension contribution. The effects of business realignment charges, CLARCOR costs to achieve, U.S. Tax Reform adjustments, the net loss on sale and writedown of assets, acquisition-related expenses and a discretionary pension contribution are removed to allow investors and the company to meaningfully evaluate changes in earnings per share, segment operating margins and cash flows from operations on a comparable basis from period to period. This press release 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, the loss on sale and writedown of assets and acquisition-related expenses. 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 and full year versus the prior periods.
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 the 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; global 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 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, 2018 | Exhibit 99.1 | |||||||||||||||
CONSOLIDATED STATEMENT OF INCOME | ||||||||||||||||
Three Months Ended June 30, | Twelve Months Ended June 30, | |||||||||||||||
(Dollars in thousands except per share amounts) | 2018 | 2017 | 2018 | 2017 | ||||||||||||
Net sales | $ | 3,817,477 | $ | 3,496,238 | $ | 14,302,392 | $ | 12,029,312 | ||||||||
Cost of sales | 2,835,885 | 2,654,682 | 10,762,841 | 9,188,962 | ||||||||||||
Selling, general and administrative expenses | 422,423 | 402,352 | 1,657,152 | 1,453,935 | ||||||||||||
Interest expense | 53,040 | 52,787 | 213,873 | 162,436 | ||||||||||||
Other expense (income), net | 8,202 | (14,194 | ) | (33,751 | ) | (104,662 | ) | |||||||||
Income before income taxes | 497,927 | 400,611 | 1,702,277 | 1,328,641 | ||||||||||||
Income taxes | 144,599 | 107,252 | 640,962 | 344,797 | ||||||||||||
Net income | 353,328 | 293,359 | 1,061,315 | 983,844 | ||||||||||||
Less: Noncontrolling interests | 72 | 54 | 514 | 432 | ||||||||||||
Net income attributable to common shareholders | $ | 353,256 | $ | 293,305 | $ | 1,060,801 | $ | 983,412 | ||||||||
Earnings per share attributable to common shareholders: | ||||||||||||||||
Basic earnings per share | $ | 2.66 | $ | 2.20 | $ | 7.98 | $ | 7.37 | ||||||||
Diluted earnings per share | $ | 2.62 | $ | 2.15 | $ | 7.83 | $ | 7.25 | ||||||||
Average shares outstanding during period - Basic | 132,696,489 | 133,278,324 | 133,004,613 | 133,377,547 | ||||||||||||
Average shares outstanding during period - Diluted | 135,001,851 | 136,154,741 | 135,426,834 | 135,559,764 | ||||||||||||
Cash dividends per common share | $ | 0.76 | $ | 0.66 | $ | 2.74 | $ | 2.58 | ||||||||
RECONCILIATION OF EARNINGS PER DILUTED SHARE TO ADJUSTED EARNINGS PER DILUTED SHARE | ||||||||||||||||
(Unaudited) | Three Months Ended June 30, | Twelve Months Ended June 30, | ||||||||||||||
(Amounts in dollars) | 2018 | 2017 | 2018 | 2017 | ||||||||||||
Earnings per diluted share | $ | 2.62 | $ | 2.15 | $ | 7.83 | $ | 7.25 | ||||||||
Adjustments: | ||||||||||||||||
Business realignment charges | 0.10 | 0.11 | 0.26 | 0.30 | ||||||||||||
Clarcor costs to achieve | 0.04 | — | 0.20 | — | ||||||||||||
Net loss on sale and writedown of assets | 0.39 | — | 0.41 | — | ||||||||||||
U.S. Tax Reform one-time impact, net | 0.07 | — | 1.72 | — | ||||||||||||
Acquisition-related expenses | — | 0.19 | — | 0.56 | ||||||||||||
Adjusted earnings per diluted share | $ | 3.22 | $ | 2.45 | $ | 10.42 | $ | 8.11 | ||||||||
RECONCILIATION OF EBITDA TO ADJUSTED EBITDA | ||||||||||||||||
(Unaudited) | ||||||||||||||||
(Dollars in thousands) | Three Months Ended June 30, | |||||||||||||||
2018 | 2017 | |||||||||||||||
Net sales | $ | 3,817,477 | $ | 3,496,238 | ||||||||||||
Earnings before income taxes | $ | 497,927 | $ | 400,611 | ||||||||||||
Depreciation and amortization | 114,769 | 118,686 | ||||||||||||||
Interest expense | 53,040 | 52,787 | ||||||||||||||
EBITDA | 665,736 | 572,084 | ||||||||||||||
Adjustments: | ||||||||||||||||
Business realignment charges | 17,843 | 21,437 | ||||||||||||||
Clarcor costs to achieve | 8,292 | — | ||||||||||||||
Loss on sale and writedown of assets | 26,513 | — | ||||||||||||||
Acquisition-related expenses | — | 36,303 | ||||||||||||||
Adjusted EBITDA | $ | 718,384 | $ | 629,824 | ||||||||||||
EBITDA margin | 17.4 | % | 16.4 | % | ||||||||||||
Adjusted EBITDA margin | 18.8 | % | 18.0 | % | ||||||||||||
PARKER HANNIFIN CORPORATION - JUNE 30, 2018 | Exhibit 99.1 | |||||||||||||||
BUSINESS SEGMENT INFORMATION | ||||||||||||||||
Three Months Ended June 30, | Twelve Months Ended June 30, | |||||||||||||||
(Dollars in thousands) | 2018 | 2017 | 2018 | 2017 | ||||||||||||
Net sales | ||||||||||||||||
Diversified Industrial: | ||||||||||||||||
North America | $ | 1,804,948 | $ | 1,665,483 | $ | 6,726,900 | $ | 5,366,809 | ||||||||
International | 1,376,118 | 1,227,999 | 5,259,793 | 4,377,776 | ||||||||||||
Aerospace Systems | 636,411 | 602,756 | 2,315,699 | 2,284,727 | ||||||||||||
Total net sales | $ | 3,817,477 | $ | 3,496,238 | $ | 14,302,392 | $ | 12,029,312 | ||||||||
Segment operating income | ||||||||||||||||
Diversified Industrial: | ||||||||||||||||
North America | $ | 313,493 | $ | 261,509 | $ | 1,076,021 | $ | 873,552 | ||||||||
International | 203,340 | 161,499 | 765,188 | 579,207 | ||||||||||||
Aerospace Systems | 126,735 | 111,732 | 397,970 | 337,496 | ||||||||||||
Total segment operating income | 643,568 | 534,740 | 2,239,179 | 1,790,255 | ||||||||||||
Corporate general and administrative expenses | 58,471 | 51,925 | 200,901 | 172,632 | ||||||||||||
Income before interest expense and other expense | 585,097 | 482,815 | 2,038,278 | 1,617,623 | ||||||||||||
Interest expense | 53,040 | 52,787 | 213,873 | 162,436 | ||||||||||||
Other expense | 34,130 | 29,417 | 122,128 | 126,546 | ||||||||||||
Income before income taxes | $ | 497,927 | $ | 400,611 | $ | 1,702,277 | $ | 1,328,641 | ||||||||
RECONCILIATION OF TOTAL SEGMENT OPERATING MARGIN TO ADJUSTED TOTAL SEGMENT OPERATING MARGIN | ||||||||||||||||
(Unaudited) | ||||||||||||||||
(Dollars in thousands) | Three Months Ended | Three Months Ended | ||||||||||||||
June 30, 2018 | June 30, 2017 | |||||||||||||||
Operating income | Operating margin | Operating income | Operating margin | |||||||||||||
Total segment operating income | $ | 643,568 | 16.9 | % | $ | 534,740 | 15.3 | % | ||||||||
Adjustments: | ||||||||||||||||
Business realignment charges | 17,843 | 20,653 | ||||||||||||||
Clarcor costs to achieve | 8,292 | — | ||||||||||||||
Acquisition-related expenses | — | 32,182 | ||||||||||||||
Adjusted total segment operating income | $ | 669,703 | 17.5 | % | $ | 587,575 | 16.8 | % | ||||||||
PARKER HANNIFIN CORPORATION - JUNE 30, 2018 | Exhibit 99.1 | |||||||||
CONSOLIDATED BALANCE SHEET | ||||||||||
June 30, | June 30, | |||||||||
(Dollars in thousands) | 2018 | 2017 | ||||||||
Assets | ||||||||||
Current assets: | ||||||||||
Cash and cash equivalents | $ | 822,137 | $ | 884,886 | ||||||
Marketable securities and other investments | 32,995 | 39,318 | ||||||||
Trade accounts receivable, net | 2,145,517 | 1,930,751 | ||||||||
Non-trade and notes receivable | 328,399 | 254,987 | ||||||||
Inventories | 1,621,304 | 1,549,494 | ||||||||
Prepaid expenses | 134,886 | 120,282 | ||||||||
Total current assets | 5,085,238 | 4,779,718 | ||||||||
Plant and equipment, net | 1,856,237 | 1,937,292 | ||||||||
Deferred income taxes | 57,623 | 36,057 | ||||||||
Goodwill | 5,504,420 | 5,586,878 | ||||||||
Intangible assets, net | 2,015,520 | 2,307,484 | ||||||||
Other assets | 801,049 | 842,475 | ||||||||
Total assets | $ | 15,320,087 | $ | 15,489,904 | ||||||
Liabilities and equity | ||||||||||
Current liabilities: | ||||||||||
Notes payable | $ | 638,466 | $ | 1,008,465 | ||||||
Accounts payable | 1,430,306 | 1,300,496 | ||||||||
Accrued liabilities | 929,833 | 933,762 | ||||||||
Accrued domestic and foreign taxes | 198,878 | 153,137 | ||||||||
Total current liabilities | 3,197,483 | 3,395,860 | ||||||||
Long-term debt | 4,318,559 | 4,861,895 | ||||||||
Pensions and other postretirement benefits | 1,177,605 | 1,406,082 | ||||||||
Deferred income taxes | 234,858 | 221,790 | ||||||||
Other liabilities | 526,089 | 336,931 | ||||||||
Shareholders' equity | 5,859,866 | 5,261,649 | ||||||||
Noncontrolling interests | 5,627 | 5,697 | ||||||||
Total liabilities and equity | $ | 15,320,087 | $ | 15,489,904 | ||||||
PARKER HANNIFIN CORPORATION - JUNE 30, 2018 | Exhibit 99.1 | |||||||
CONSOLIDATED STATEMENT OF CASH FLOWS | ||||||||
Twelve Months Ended June 30, | ||||||||
(Dollars in thousands) | 2018 | 2017 | ||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 1,061,315 | $ | 983,844 | ||||
Depreciation and amortization | 466,085 | 355,229 | ||||||
Stock incentive plan compensation | 118,831 | 80,339 | ||||||
Loss (gain) on sale of businesses | 19,666 | (41,285 | ) | |||||
(Gain) loss on disposal of assets | (24,422 | ) | 1,494 | |||||
(Gain) on sale of marketable securities | (2 | ) | (1,032 | ) | ||||
Loss on sale and impairment of investments | 33,759 | — | ||||||
Net change in receivables, inventories and trade payables | (268,280 | ) | 5,741 | |||||
Net change in other assets and liabilities | 227,463 | (126,943 | ) | |||||
Other, net | (34,128 | ) | 45,084 | |||||
Net cash provided by operating activities | 1,600,287 | 1,302,471 | ||||||
Cash flows from investing activities: | ||||||||
Acquisitions (net of cash of $157,426 in 2017) | — | (4,069,197 | ) | |||||
Capital expenditures | (247,667 | ) | (203,748 | ) | ||||
Proceeds from sale of plant and equipment | 81,881 | 14,648 | ||||||
Proceeds from sale of businesses | 177,741 | 85,610 | ||||||
Purchases of marketable securities and other investments | (80,607 | ) | (465,666 | ) | ||||
Maturities and sales of marketable securities and other investments | 83,905 | 1,279,318 | ||||||
Other, net | 4,837 | (6,113 | ) | |||||
Net cash provided by (used in) investing activities | 20,090 | (3,365,148 | ) | |||||
Cash flows from financing activities: | ||||||||
Net payments for common stock activity | (377,359 | ) | (335,876 | ) | ||||
Net (payments for) proceeds from debt | (939,325 | ) | 2,463,884 | |||||
Dividends | (365,288 | ) | (345,380 | ) | ||||
Net cash (used in) provided by financing activities | (1,681,972 | ) | 1,782,628 | |||||
Effect of exchange rate changes on cash | (1,154 | ) | (56,718 | ) | ||||
Net (decrease) in cash and cash equivalents | (62,749 | ) | (336,767 | ) | ||||
Cash and cash equivalents at beginning of period | 884,886 | 1,221,653 | ||||||
Cash and cash equivalents at end of period | $ | 822,137 | $ | 884,886 | ||||
PARKER HANNIFIN CORPORATION - JUNE 30, 2018 | Exhibit 99.1 | ||||||
RECONCILIATION OF CASH FLOW FROM OPERATIONS TO ADJUSTED CASH FLOW FROM OPERATIONS | |||||||
(Unaudited) | Twelve Months Ended | ||||||
(Dollars in thousands) | June 30, 2018 | Percent of Sales | |||||
As reported cash flow from operations | $ | 1,600,287 | 11.2 | % | |||
Discretionary pension contribution | — | ||||||
Adjusted cash flow from operations | $ | 1,600,287 | 11.2 | % | |||
Twelve Months Ended | |||||||
June 30, 2017 | Percent of Sales | ||||||
As reported cash flow from operations | $ | 1,302,471 | 10.8 | % | |||
Discretionary pension contribution | 220,000 | ||||||
Adjusted cash flow from operations | $ | 1,522,471 | 12.7 | % | |||
CALCULATION OF FREE CASH FLOW CONVERSION | |||||||
(Unaudited) | Twelve Months Ended | ||||||
(Dollars in thousands) | June 30, 2018 | ||||||
Net Income | $ | 1,061,315 | |||||
Cash flow from operations | 1,600,287 | ||||||
Capital expenditures | (247,667 | ) | |||||
Free cash flow | $ | 1,352,620 | |||||
Free cash flow conversion (free cash flow/net income) | 127 | % | |||||
PARKER HANNIFIN CORPORATION - JUNE 30, 2018 | Exhibit 99.1 | |||
RECONCILIATION OF FORECASTED EARNINGS PER DILUTED SHARE TO ADJUSTED FORECASTED EARNINGS PER DILUTED SHARE | ||||
(Unaudited) | ||||
(Amounts in dollars) | ||||
Fiscal Year 2019 | ||||
Forecasted earnings per diluted share | $10.50 - $11.30 | |||
Adjustments: | ||||
Business realignment charges | 0.13 | |||
Clarcor costs to achieve | 0.07 | |||
Adjusted forecasted earnings per diluted share | $10.70 - $11.50 | |||
Exhibit 99.2 Parker Hannifin Corporation 4th Quarter & Fiscal Year 2018 Earnings Release August 2, 2018
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. These statements may be identified from the 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 Reform 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 Reform 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; global 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 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 organic sales, which are sales amounts adjusted to remove the effects of acquisitions, divestitures 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 discretionary pension plan contributions, (c) as reported and forecast segment operating income and operating margins reported in accordance with U.S. GAAP to as reported and forecast segment operating income and operating margins without the effect of business realignment charges, CLARCOR costs to achieve and acquisition-related expenses, (d) Below the Line Items reported in accordance with U.S. GAAP to Below the Line Items without the effect of the net loss on sale and write-down of assets, and (e) Income tax in accordance with U.S. GAAP to Income tax without the effect of U.S. Tax Reform one-time impact, net (f) as reported and forecast earnings per diluted share reported in accordance with U.S. GAAP to as reported and forecast earnings per diluted share without the effect of business realignment charges, CLARCOR costs to achieve, net loss on sale and write-down of assets 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, net loss on sale and write-down of assets, and acquisition-related expenses. 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, divestitures, currency exchange rates, discretionary pension plan contributions, business realignment charges, CLARCOR costs to achieve, acquisition-related expenses, net loss on sale and write-down of assets and U.S. Tax Reform one-time 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, segment operating income, operating margins, Below the Line Items, Income Tax and earnings per diluted share on a comparable basis from period to period. Full year adjusted guidance removes business realignment charges, CLARCOR costs to achieve. Please visit www.PHstock.com for more information 2
Agenda • Highlights of Quarter and Full Year Results • Results & Outlook • Questions & Answers 3
Highlights of Quarter and FY18 Results Fourth Quarter Results . Safety - 21% reduction – creating an ownership culture . All-time records for sales & segment operating margins . 4th Quarter records for Net Income, Net Income ROS & EPS . Strong organic growth, 9% and order growth, 8% . Adjusted EBITDA margins up 80 bps Full Year Fiscal 2018 Highlights . All-time records for Sales, EPS, Segment Operating Margins, Cash Flow . 8% Organic growth, improvement in Segment & EBITDA Margins . Strong cash generation; increased dividend, reduced debt, shares repurchased . Clarcor integration going well . EBITDA performance: on track to hit 300 bps margin expansion early 4
FY19 Outlook and Looking Ahead Fiscal 2019 Guidance . Anticipating record year for sales and EPS . Adjusted EPS in the range of $10.70 to $11.50 . Solid organic growth of 2.3% to 5.1% partially offset by currency headwinds Going Forward . Positive momentum: market conditions and growth initiatives . Continued strong performance in Aerospace Systems . Build on strong margin performance in international businesses . North America – lower restructuring expenses, margin improvement . FY19: stronger balance sheet for deployment priorities . FY18 performance and FY19 guide a solid start against new 5-year targets 5
Diluted Earnings Per Share 4th Quarter & Fiscal Year 2018 ¹Adjusted for Business Realignment Charges, CLARCOR Costs to Achieve, Loss on the Sale and Write Down of Assets, and U.S. Tax Reform Impact ²Adjusted for Business Realignment Charges, Acquisition-related expenses ³Adjusted for Business Realignment Charges, CLARCOR Costs to Achieve, Net Loss on the Sale and Write Down of Assets, and U.S. Tax Reform Impact 6
Influences on Adjusted Earnings Per Share 4th Quarter FY2018 vs. 4th Quarter FY2017 ¹Adjusted for Business Realignment Charges, Acquisition-related expenses ²Adjusted for Business Realignment Charges, CLARCOR Costs to Achieve, Loss on the Sale and Write Down of Assets, and U.S. Tax Reform Impact 7
Influences on Adjusted Earnings Per Share FY2018 vs. FY2017 ¹Adjusted for Business Realignment Charges, Acquisition-related expenses ²Adjusted for Business Realignment Charges, CLARCOR Costs to Achieve, Net Loss on the Sale and Write Down of Assets, and U.S. Tax Reform Impact 8
Sales & Segment Operating Margin Total Parker $ in millions 4th Quarter Full Year % % FY2018 Change FY2017 FY2018 Change FY2017 Sales As Reported $ 3,816 9.2 % $ 3,496 $14,302 18.9 % $12,029 Acquisitions - - % 971 8.1 % Divestitures (15) (0.4)% (15) (0.1)% Currency 31 0.9 % 295 2.5 % Organic Sales $ 3,800 8.7 % $13,051 8.4 % % of % of % of FY2018 Sales FY2017 Sales FY2018 Sales FY2017 % of Sales Segment Operating Margin As Reported $ 644 16.9 % $ 535 15.3 % $ 2,239 15.7 % $ 1,790 14.9 % Business Realignment 18 21 46 56 CLARCOR Costs to Achieve 8 37 Acquisition-Related Expenses 32 58 Adjusted $ 670 17.5 % $ 588 16.8 % $ 2,322 16.2 % $ 1,904 15.8 % 9
Sales & Segment Operating Margin Diversified Industrial North America $ in millions 4th Quarter Full Year % % FY2018 Change FY2017 FY2018 Change FY2017 Sales As Reported $ 1,805 8.4 % $ 1,665 $ 6,727 25.3 % $ 5,367 Acquisitions - - % 798 14.9 % Divestitures (6) (0.4)% (6) (0.1)% Currency (0) (0.0)% 21 0.4 % Organic Sales $ 1,811 8.8 % $ 5,914 10.1 % % of % of % of FY2018 Sales FY2017 Sales FY2018 Sales FY2017 % of Sales Segment Operating Margin As Reported $ 313 17.4 % $ 262 15.7 % $ 1,076 16.0 % $ 874 16.3 % Business Realignment 3 10 9 20 CLARCOR Costs to Achieve 6 29 Acquisition-Related Expenses 32 58 Adjusted $ 322 17.8 % $ 304 18.2 % $ 1,114 16.6 % $ 952 17.7 % 10
Sales & Segment Operating Margin Diversified Industrial International $ in millions 4th Quarter Full Year % % FY2018 Change FY2017 FY2018 Change FY2017 Sales As Reported $ 1,376 12.1 % $ 1,228 $ 5,259 20.1 % $ 4,378 Acquisitions - - % 173 3.9 % Divestitures (9) (0.7)% (9) (0.2)% Currency 31 2.6 % 269 6.2 % Organic Sales $ 1,354 10.2 % $ 4,826 10.2 % % of % of % of FY2018 Sales FY2017 Sales FY2018 Sales FY2017 % of Sales Segment Operating Margin As Reported $ 203 14.8 % $ 161 13.2 % $ 765 14.5 % $ 579 13.2 % Business Realignment 16 11 34 33 CLARCOR Costs to Achieve 2 8 Adjusted $ 221 16.1 % $ 172 14.0 % $ 807 15.3 % $ 612 14.0 % 11
Sales & Segment Operating Margin Aerospace Systems $ in millions 4th Quarter Full Year % % FY2018 Change FY2017 FY2018 Change FY2017 Sales As Reported $ 636 5.6 % $ 603 $ 2,316 1.4 % $ 2,285 Acquisitions - - % - - % Currency 1 0.1 % 5 0.2 % Organic Sales $ 635 5.5 % $ 2,311 1.2 % % of % of % of FY2018 Sales FY2017 Sales FY2018 Sales FY2017 % of Sales Segment Operating Margin As Reported $ 127 19.9 % $ 112 18.5 % $ 398 17.2 % $ 337 14.8 % Business Realignment 0 (0) 3 3 Adjusted $ 127 19.9 % $ 112 18.5 % $ 401 17.3 % $ 340 14.9 % 12
Order Rates Jun 2018 Mar 2018 Jun 2017 Mar 2017 Total Parker + 8 % + 11 % + 8 % + 8 % Diversified Industrial North America + 9 % + 11 % + 10 % + 9 % Diversified Industrial International + 5 % + 8 % + 10 % + 13 % Aerospace Systems + 10 % + 17 % + 1 % 0 % 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 13
Cash Flow from Operating Activities Dollars in millions ¹Adjusted for Discretionary Pension Plan Contribution Full Year FY 2018 % of Sales FY 2017 % of Sales As Reported Cash Flow From Operating Activities 1,600 11.2% 1,302 10.8% Discretionary Pension Plan Contribution 220 Adjusted Cash Flow From Operating Activities 1,600 11.2% 1,522 12.7% 14
Free Cash Flow Conversion Free Cash Flow / Net Income 250% 200% 150% 100% 50% 0% * Free Cash Flow = Cash Provided by Operating Activities - Capital Expenditures + Discretionary Pension Contribution 15
FY2019 Guidance EPS Midpoint: $10.90 As Reported, $11.10 Adjusted Sales Growth vs. Prior Year Total Growth Organic Growth Diversified Industrial North America 2.6% - 5.6% 3.1% - 6.1% Diversified Industrial International (2.5)% - 0.5% 1.1% - 4.1% Aerospace Systems 2.5% - 4.5% 2.5% - 4.5% Total Parker 0.7% - 3.5% 2.3% - 5.1% Segment Operating Margins As Reported Adjusted¹ Diversified Industrial North America 16.4% - 17.2% 16.6% - 17.4% Diversified Industrial International 15.3% - 15.7% 15.6% - 16.0% Aerospace Systems 17.2% - 17.6% 17.2% - 17.6% Total Parker 16.1% - 16.7% 16.3% - 16.9% Below the Line Items Corporate General & Administrative Expense, Interest and Other $483M Tax Rate Full Year 23% Shares Diluted Shares Outstanding 135.1 M Earnings Per Share As Reported Adjusted¹ Range $10.50 - $11.30 $10.70 - $11.50 ¹Expected FY19 Adjusted Segment Operating Margins and Adjusted Earnings Per Share exclude: $22M Business Realignment Charges $13M Clarcor Costs to Achieve $35M Total Realignment 16
FY2019 Guidance FY19 Guidance vs FY18 Actual ¹Adjusted for Business Realignment Charges, CLARCOR Costs to Achieve, Net Loss on the Sale and Write Down of Assets, and U.S. Tax Reform Impact ²Adjusted for Business Realignment Charges, CLARCOR Costs to Achieve 17
Key Takeaways . Anticipating another record year . The Win Strategy is working well . Two overarching themes: Top quartile performance Great generators/deployers of cash . Bright future ahead – Unique competitive advantages Parker among the best diversified industrial companies 18
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Appendix • Consolidated Statement of Income • Adjusted Amounts Reconciliation • Reconciliation of EPS • Business Segment Information • Reconciliation of Total Segment Operating Margin to Adjusted Total Segment Operating Margin • Reconciliation of EBITDA to Adjusted EBITDA • Consolidated Balance Sheet • Consolidated Statement of Cash Flows • Reconciliation of Cash Flow from Operations to Adjusted Cash Flow from Operations • Reconciliation of Free Cash Flow Conversion • Reconciliation of Organic Growth • Reconciliation of EPS • Supplemental Sales Information – Global Technology Platforms
Consolidated Statement of Income Three Months Ended June 30, Tw elve Months Ended June 30, (Dollars in thousands except per share amounts) 2018 2017 2018 2017 Net sales $ 3,817,477 $ 3,496,238 $ 14,302,392 $ 12,029,312 Cost of sales 2,835,885 2,654,682 10,762,841 9,188,962 Selling, general and administrative expenses 422,423 402,352 1,657,152 1,453,935 Interest expense 53,040 52,787 213,873 162,436 Other expense (income), net 8,202 (14,194) (33,751) (104,662) Income before income taxes 497,927 400,611 1,702,277 1,328,641 Income taxes 144,599 107,252 640,962 344,797 Net income 353,328 293,359 1,061,315 983,844 Less: Noncontrolling interests 72 54 514 432 Net income attributable to common shareholders $ 353,256 $ 293,305 $ 1,060,801 $ 983,412 Earnings per share attributable to common shareholders: Basic earnings per share $ 2.66 $ 2.20 $ 7.98 $ 7.37 Diluted earnings per share $ 2.62 $ 2.15 $ 7.83 $ 7.25 Average shares outstanding during period - Basic 132,696,489 133,278,324 133,004,613 133,377,547 Average shares outstanding during period - Diluted 135,001,851 136,154,741 135,426,834 135,559,764 Cash dividends per common share $ .76 $ .66 $ 2.74 $ 2.58 21
Adjusted Amounts Reconciliation FOURTH QUARTER FY 2018 Loss on As Reported Business Costs to Sale of Business/ Tax Act Adjusted Jun-18 Realignment Achieve Investment W/D Impact Jun-18 Net sales 3,817,477 3,817,477 Cost of sales 2,835,885 7,873 4,793 2,823,219 Selling, general and administrative expenses 422,423 9,970 2,490 409,963 Interest expense 53,040 - 53,040 Other expense (income), net 8,202 - 1,009 26,513 (19,320) Income before income taxes 497,927 (17,843) (8,292) (26,513) - 550,575 Income taxes 144,599 4,961 2,305 (26,315) (8,574) 116,976 Net income 353,328 (12,882) (5,987) (52,828) (8,574) 433,599 Less: Noncontrolling interests 72 - 72 Net income attributable to common shareholders 353,256 (12,882) (5,987) (52,828) (8,574) 433,527 EPS attributable to common shareholders: Diluted earnings per share 2.62 (0.10) (0.04) (0.39) (0.07) 3.22 FOURTH QUARTER FY 2018 Loss on As Reported Business Costs to Sale of Business/ Adjusted Jun-18 Realignment Achieve Investment W/D Jun-18 Segment Operating Income Diversified Industrial: North America 313,493 2,359 5,998 - 321,850 International 203,340 15,326 2,294 - 220,960 Aerospace Systems 126,735 158 - - 126,893 Total segment operating income 643,568 (17,843) (8,292) - 669,703 Corporate administration 58,471 - - - 58,471 Income before interest expense and other 585,097 (17,843) (8,292) - 611,232 Interest expense 53,040 - - - 53,040 Other expense 34,130 - - 26,513 7,617 22 Income before income taxes 497,927 (17,843) (8,292) (26,513) 550,575
Reconciliation of EPS (Unaudited) Three Months Ended June 30, Tw elve Months Ended June 30, (Amounts in dollars) 2018 2017 2018 2017 Earnings per diluted share $ 2.62 $ 2.15 $ 7.83 $ 7.25 Adjustments: Business realignment charges 0.10 0.11 0.26 0.30 Clarcor costs to achieve 0.04 - 0.20 - Net loss on sale and w ritedow n of assets 0.39 - 0.41 - U.S. Tax Reform one-time impact, net 0.07 - 1.72 - Acquisition-related expenses - 0.19 - 0.56 Adjusted earnings per diluted share $ 3.22 $ 2.45 $ 10.42 $ 8.11 23
Business Segment Information Three Months Ended June 30, Tw elve Months Ended June 30, (Dollars in thousands) 2018 2017 2018 2017 Net sales Diversified Industrial: North America $ 1,804,948 $ 1,665,483 $ 6,726,900 $ 5,366,809 International 1,376,118 1,227,999 5,259,793 4,377,776 Aerospace Systems 636,411 602,756 2,315,699 2,284,727 Total $ 3,817,477 $ 3,496,238 $ 14,302,392 $ 12,029,312 Segment operating income Diversified Industrial: North America $ 313,493 $ 261,509 $ 1,076,021 $ 873,552 International 203,340 161,499 765,188 579,207 Aerospace Systems 126,735 111,732 397,970 337,496 Total segment operating income 643,568 534,740 2,239,179 1,790,255 Corporate general and administrative expenses 58,471 51,925 200,901 172,632 Income before interest and other expense 585,097 482,815 2,038,278 1,617,623 Interest expense 53,040 52,787 213,873 162,436 Other expense 34,130 29,417 122,128 126,546 Income before income taxes $ 497,927 $ 400,611 $ 1,702,277 $ 1,328,641 24
Reconciliation of Total Segment Operating Margin to Adjusted Total Segment Operating Margin (Unaudited) Three Months Ended Three Months Ended (Dollars in thousands) June 30, 2018 June 30, 2017 Operating income Operating margin Operating income Operating margin Total segment operating income 643,568 16.9% 534,740 15.3% Adjustments: Business realignment charges 17,843 20,653 Clarcor costs to achieve 8,292 - Acquisition-related expenses - 32,182 Adjusted total segment operating income $ 669,703 17.5% $ 587,575 16.8% 25
Reconciliation of EBITDA to Adjusted EBITDA (Unaudited) Three Months Ended June 30, (Dollars in thousands) 2018 2017 Net sales $ 3,817,477 $ 3,496,238 Earnings before income taxes $ 497,927 $ 400,611 Depreciation and amortization 114,769 118,686 Interest expense 53,040 52,787 EBITDA 665,736 572,084 Adjustments: Business realignment charges 17,843 21,437 Clarcor costs to achieve 8,292 - Loss on sale and w ritedow n of assets 26,513 - Acquisition-related expenses - 36,303 Adjusted EBITDA $ 718,384 $ 629,824 EBITDA m ar gin 17.4% 16.4% Adjusted EBITDA margin 18.8% 18.0% 26
Consolidated Balance Sheet June 30, June 30, (Dollars in thousands) 2018 2017 Assets Current assets: Cash and cash equivalents $ 822,137 $ 884,886 Marketable securities and other investments 32,995 39,318 Trade accounts receivable, net 2,145,517 1,930,751 Non-trade and notes receivable 328,399 254,987 Inventories 1,621,304 1,549,494 Prepaid expenses 134,886 120,282 Total current assets 5,085,238 4,779,718 Plant and equipment, net 1,856,237 1,937,292 Deferred income taxes 57,623 36,057 Goodw ill 5,504,420 5,586,878 Intangible assets, net 2,015,520 2,307,484 Other assets 801,049 842,475 Total assets $ 15,320,087 $ 15,489,904 Liabilities and equity Current liabilities: Notes payable $ 638,466 $ 1,008,465 Accounts payable 1,430,306 1,300,496 Accrued liabilities 929,833 933,762 Accrued domestic and foreign taxes 198,878 153,137 Total current liabilities 3,197,483 3,395,860 Long-term debt 4,318,559 4,861,895 Pensions and other postretirement benefits 1,177,605 1,406,082 Deferred income taxes 234,858 221,790 Other liabilities 526,089 336,931 Shareholders' equity 5,859,866 5,261,649 Noncontrolling interests 5,627 5,697 27 Total liabilities and equity $ 15,320,087 $ 15,489,904
Consolidated Statement of Cash Flows Tw elve Months Ended June 30, (Dollars in thousands) 2018 2017 Cash flows from operating activities: Net income $ 1,061,315 $ 983,844 Depreciation and amortization 466,085 355,229 Stock incentive plan compensation 118,831 80,339 Loss (Gain) on sale of businesses 19,666 (41,285) (Gain) loss on disposal of assets (24,422) 1,494 (Gain) on sale of marketable securities (2) (1,032) Loss on sale and impairment of investments 33,759 - Net change in receivables, inventories and trade payables (268,280) 5,741 Net change in other assets and liabilities 227,463 (126,943) Other, net (34,128) 45,084 Net cash provided by operating activities 1,600,287 1,302,471 Cash flow s from investing activities: Acquisitions (net of cash of $157,426 in 2017) - (4,069,197) Capital expenditures (247,667) (203,748) Proceeds from sale of plant and equipment 81,881 14,648 Proceeds from sale of businesses 177,741 85,610 Purchases of marketable securities and other investments (80,607) (465,666) Maturities and sales of marketable securities and other investments 83,905 1,279,318 Other, net 4,837 (6,113) Net cash provided by (used in) investing activities 20,090 (3,365,148) Cash flows from financing activities: Net payments for common stock activity (377,359) (335,876) Net (payments for) proceeds from debt (939,325) 2,463,884 Dividends (365,288) (345,380) Net cash (used in) provided by financing activities (1,681,972) 1,782,628 Effect of exchange rate changes on cash (1,154) (56,718) Net (decrease) in cash and cash equivalents (62,749) (336,767) Cash and cash equivalents at beginning of period 884,886 1,221,653 28 Cash and cash equivalents at end of period $ 822,137 $ 884,886
Reconciliation of Cash Flow from Operations to Adjusted Cash Flow from Operations (Unaudited) Twelve Months Tw elve Months Ended June 30, Ended June 30, (Amounts in thousands) 2018 2017 Percent of sales Percent of sales As reported cash flow from operations $ 1,600,287 11.2% $ 1,302,471 10.8% Discretionary pension contribution - 220,000 Adjusted cash flow from operations $ 1,600,287 11.2% $ 1,522,471 12.7% 29
Reconciliation of Free Cash Flow Conversion (Unaudited) Twelve Months Ended June 30, 2018 Net income $ 1,061,315 Cash flow from operations 1,600,287 Capital expenditures (247,667) Free cash flow $ 1,352,620 Free cash flow conversion (free cash flow/net income) 127% 30
Reconciliation of Organic Growth Fiscal Year 2019 Guidance Sales Growth Range Divestitures Currency Organic Growth Range Industrial North America 2.6% - 5.6% -0.3% -0.2% 3.1% - 6.1% Industrial International (2.5)% - 0.5% -0.6% -3.0% 1.1% - 4.1% Aerospace Systems 2.5% - 4.5% 0.0% 0.0% 2.5% - 4.5% Total Parker 0.7% - 3.5% -0.4% -1.2% 2.3% - 5.1% 31
Reconciliation of EPS Fiscal Year 2019 Guidance (Unaudited) (Amounts in dollars) Fiscal Year 2019 Forecasted earnings per diluted share $10.50 - $11.30 Adjustments: Business realignment charges 0.13 Clarcor costs to achieve 0.07 Adjusted forecasted earnings per diluted share $10.70 - $11.50 32
Supplemental Sales Information Global Technology Platforms (Unaudited) (Dollars in thousands) Three Months Ending Fiscal Year-to-Date September 30, December 31, March 31, June 30, September 30, December 31, March 31, June 30, 2017 2017 2018 2018 2017 2017 2018 2018 Net sales Diversified Industrial: Motion Systems $ 809,747 $ 825,695 $ 928,012 $ 938,881 $ 809,747 $ 1,635,442 $ 2,563,454 $ 3,502,335 Flow and Process Control 995,347 997,837 1,154,468 1,173,988 995,347 1,993,184 3,147,652 4,321,640 Filtration and Engineered Materials 1,028,371 997,453 1,068,697 1,068,197 1,028,371 2,025,824 3,094,521 4,162,718 Aerospace Systems 531,186 549,688 598,414 636,411 531,186 1,080,874 1,679,288 2,315,699 Total $ 3,364,651 $ 3,370,673 $ 3,749,591 $ 3,817,477 $ 3,364,651 $ 6,735,324 $ 10,484,915 $ 14,302,392 33