Parker Reports Fiscal 2024 Third Quarter Results

Parker-Hannifin Corporation

• Sales were a record at $5.07 billion; organic sales increased 1%

• Segment operating margin was 21.5%, or a record 24.7% adjusted, an increase of 150 basis points

• EPS were $5.56, or a record $6.51 adjusted, an increase of 10%

• Company increases outlook for segment operating margin and EPS

• 2024 Investor Meeting scheduled for May 16 at 2 p.m. Eastern time

CLEVELAND, May 02, 2024 (GLOBE NEWSWIRE) -- Parker Hannifin Corporation (NYSE: PH), the global leader in motion and control technologies, today reported results for the fiscal 2024 third quarter ended March 31, 2024. Sales were $5.07 billion compared with $5.06 billion in the third quarter of fiscal 2023. Net income was $726.6 million compared with $590.9 million in the prior year quarter. Adjusted net income was $850.7 million, an increase of 10% compared with $771.9 million in the third quarter of fiscal 2023. Earnings per share were $5.56 compared with $4.54 in the prior year quarter. Adjusted earnings per share increased 10% to a record at $6.51 compared with $5.93 in the third quarter of fiscal 2023. Fiscal 2024 year-to-date cash flow from operations increased 20% to a record $2.1 billion, or 14.6% of sales, compared with $1.8 billion, or 12.8% of sales, in the prior year. A reconciliation of non-GAAP measures is included in the financial tables of this press release.

“We produced record results this quarter across nearly all key metrics, a reflection of the strength of our transformed portfolio and our global team’s ability to drive operational improvements,” said Chairman and Chief Executive Officer, Jenny Parmentier. “We delivered significant adjusted segment operating margin improvement with our Aerospace Systems Segment delivering another standout quarter. Our strong performance also led to record year-to-date operating cash flow.”

Segment Results
Diversified Industrial Segment: North American third quarter sales decreased 5% to $2.2 billion and operating income was $490.5 million compared with $489.3 million in the same period a year ago. On an adjusted basis, North American operating income was $538.3 million, or 24.1% of sales, a 120 basis point increase compared with the third quarter of fiscal 2023. International third quarter sales decreased 6% to $1.4 billion and operating income was $309.8 million compared with $329.5 million in the same period a year ago. On an adjusted basis, International operating income was $336.6 million, or 23.5% of sales, a 10 basis point increase compared with the prior year quarter.

Aerospace Systems Segment: Third quarter sales increased 18% to $1.4 billion and operating income was $289.3 million compared with $133.9 million in the same period a year ago. On an adjusted basis, operating income was $376.1 million, or 26.7% of sales, a 320 basis point increase compared with the prior year quarter.

Orders
The company reported the following orders for the quarter ending March 31, 2024, compared with the same quarter a year ago:

• Orders were flat for total Parker

• Orders decreased 4% in the Diversified Industrial North America businesses

• Orders decreased 8% in the Diversified Industrial International businesses

• Orders increased 15% in the Aerospace Systems Segment on a rolling 12-month average basis.

Outlook
Parker's outlook for the fiscal year ending June 30, 2024 has been updated. The company expects total sales growth in fiscal 2024 to be approximately 4%; total segment operating margin of approximately 21.2%, or 24.6% on an adjusted basis; and earnings per share in the range of $20.80 to $21.00, or $24.65 to $24.85 on an adjusted basis. Reconciliations of forecasted segment operating margin to adjusted forecasted segment operating margin and forecasted earnings per share to adjusted forecasted earnings per share are included in the financial tables of this press release.

Parmentier added, “We are increasing our outlook for fiscal 2024 based on the strong third quarter performance delivered by our team members and double-digit organic growth in aerospace. Parker remains well positioned to continue producing record performance and creating shareholder value by executing The Win Strategy™. We look forward to presenting more about our promising future at our upcoming investor day on May 16, 2024.”

NOTICE OF WEBCAST: Parker Hannifin's webcast to discuss its fiscal 2024 third quarter results is available to all interested parties via live webcast today at 11:00 a.m. ET, at www.phstock.com. A replay of the webcast will be available on the site approximately one hour after the completion of the call and will remain available for one year. To register for e-mail notification of future events please visit www.phstock.com.

About Parker Hannifin
Parker Hannifin is a Fortune 250 global leader in motion and control technologies. For more than a century the company has been enabling engineering breakthroughs that lead to a better tomorrow. Parker has increased its annual dividend per share paid to shareholders for 68 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. Beginning in the third quarter of fiscal 2023, all comparisons include acquisitions in both the numerator and denominator and exclude divestitures. Diversified Industrial comparisons are on 3-month average computations and Aerospace Systems comparisons are on rolling 12-month average computations.

Note on Net Income
Net income referenced in this press release is equal to net income attributable to common shareholders.

Note on Non-GAAP Financial Measures
This press release contains references to non-GAAP financial information including (a) adjusted net income; (b) adjusted earnings per share; (c) adjusted segment operating margins; (d) adjusted segment operating income; and (e) organic sales growth. The adjusted net income, earnings per share, segment operating margin, segment operating income and organic sales measures are presented to allow investors and the company to meaningfully evaluate changes in net income, earnings per share and segment operating margins on a comparable basis from period to period. Comparable descriptions of record adjusted results in this release refer only to the period from the first quarter of FY2011 to the periods presented in this release. This period coincides with recast historical financial results provided in association with our FY2014 change in segment reporting. A reconciliation of non-GAAP measures is included in the financial tables of this press release.

Forward-Looking Statements
Forward-looking statements contained in this and other written and oral reports are made based on known events and circumstances at the time of release, and as such, are subject in the future to unforeseen uncertainties and risks. Often but not always, these statements may be identified from the use of forward-looking terminology such as “anticipates,” “believes,” “may,” “should,” “could,” “expects,” “targets,” “is likely,” “will,” or the negative of these terms and similar expressions, and include all statements regarding future performance, earnings projections, events or developments. Neither Parker nor any of its respective associates or directors, officers or advisers, provides any representation, assurance or guarantee that the occurrence of the events expressed or implied in any forward-looking statements will actually occur. Parker cautions readers not to place undue reliance on these statements. It is possible that the future performance and earnings projections of the company, including its individual segments, may differ materially from past performance or current expectations. 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; the impact of political, social and economic instability and disruptions; ability to identify acceptable strategic acquisition targets; uncertainties surrounding timing, successful completion or integration of acquisitions and similar transactions, including the integration of Meggitt PLC; our ability to effectively manage expanded operations from acquisitions; 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, pricing 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; 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, credit availability and changes in consumer habits and preferences; ability to manage costs related to insurance and employee retirement and health care benefits; legal and regulatory developments and changes; additional liabilities relating to changes in tax rates or exposure to additional income tax liabilities; ability to enter into, own, renew, protect and maintain intellectual property and know-how; leverage and future debt service obligations; potential impairment of goodwill; compliance costs associated with environmental laws and regulations; potential labor disruptions or shortages and the ability to attract and retain key personnel; uncertainties surrounding the ultimate resolution of outstanding legal proceedings, including the outcome of any appeals; global competitive market conditions, including U.S. trade policies and resulting effects on sales and pricing; local and global political and economic conditions, including the Russia-Ukraine war and other armed conflicts and their residual effects; inability to obtain, or meet conditions imposed for, required governmental and regulatory approvals; government actions and natural phenomena such as pandemics, floods, earthquakes, hurricanes or other natural phenomena that may be related to climate change; increased cyber security threats and sophisticated computer crime; and success of business and operating initiatives. Readers should consider these forward-looking statements in light of risk factors discussed in Parker’s Annual Report on Form 10-K for the fiscal year ended June 30, 2023 and other periodic filings made with the SEC.

Contact:	Media -
	Aidan Gormley - Director, Global Communications and Branding	216-896-3258
	aidan.gormley@parker.com
	Financial Analysts -
	Jeff Miller - Vice President, Investor Relations	216-896-2708
	jeffrey.miller@parker.com
Stock Symbol:	PH - NYSE

PARKER HANNIFIN CORPORATION - MARCH 31, 2024
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)		Three Months Ended March 31,								Nine Months Ended March 31,
(Dollars in thousands, except per share amounts)			2024				2023				2024				2023
Net sales		$	5,074,356			$	5,061,665			$	14,742,791			$	13,969,251
Cost of sales			3,279,650				3,340,764				9,478,961				9,373,032
Selling, general and administrative expenses			816,337				868,393				2,496,830				2,519,163
Interest expense			123,732				151,993				387,229				416,718
Other income, net			(65,406	)			(55,866	)			(228,872	)			(116,131	)
Income before income taxes			920,043				756,381				2,608,643				1,776,469
Income taxes			193,309				165,421				548,780				402,011
Net income			726,734				590,960				2,059,863				1,374,458
Less: Noncontrolling interests			160				71				611				478
Net income attributable to common shareholders		$	726,574			$	590,889			$	2,059,252			$	1,373,980
Earnings per share attributable to common shareholders:
Basic earnings per share		$	5.65			$	4.61			$	16.03			$	10.71
Diluted earnings per share		$	5.56			$	4.54			$	15.82			$	10.58
Average shares outstanding during period - Basic			128,502,829				128,293,039				128,467,209				128,343,788
Average shares outstanding during period - Diluted			130,593,026				130,151,487				130,169,331				129,831,989
CASH DIVIDENDS PER COMMON SHARE
(Unaudited)		Three Months Ended March 31,								Nine Months Ended March 31,
(Amounts in dollars)			2024				2023				2024				2023
Cash dividends per common share		$	1.48			$	1.33			$	4.44			$	3.99

RECONCILIATION OF ORGANIC GROWTH
(Unaudited)		Three Months Ended March 31,						Nine Months Ended March 31,
		2024			2023			2024			2023
Sales growth - as reported		0.3	%		23.9	%		5.5	%		19.7	%
Adjustments:
Acquisitions		—	%		15.3	%		3.6	%		12.0	%
Divestitures		(0.3)%			(0.5)%			(0.4)%			(0.4)%
Currency		(0.6)%			(2.4)%			0.2	%		(3.9)%
Organic sales growth		1.2	%		11.5	%		2.1	%		12.0	%

PARKER HANNIFIN CORPORATION - MARCH 31, 2024
RECONCILIATION OF NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS TO ADJUSTED NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS
(Unaudited)		Three Months Ended March 31,								Nine Months Ended March 31,
(Dollars in thousands)			2024				2023				2024				2023
Net income attributable to common shareholders		$	726,574			$	590,889			$	2,059,252			$	1,373,980
Adjustments:
Acquired intangible asset amortization expense			141,216				145,147				438,763				374,417
Business realignment charges			8,468				8,241				35,914				17,480
Integration costs to achieve			13,256				31,244				29,676				76,653
Acquisition-related expenses			—				1,299				—				163,540
Loss on deal-contingent forward contracts			—				—				—				389,992
Net loss (gain) on divestitures			—				10,927				(25,651	)			(362,003	)
Amortization of inventory step-up to fair value			—				37,642				—				167,973
Tax effect of adjustments1			(38,779	)			(53,520	)			(108,403	)			(195,766	)
Adjusted net income attributable to common shareholders		$	850,735			$	771,869			$	2,429,551			$	2,006,266

RECONCILIATION OF EARNINGS PER DILUTED SHARE TO ADJUSTED EARNINGS PER DILUTED SHARE
(Unaudited)		Three Months Ended March 31,								Nine Months Ended March 31,
(Amounts in dollars)			2024				2023				2024				2023
Earnings per diluted share		$	5.56			$	4.54			$	15.82			$	10.58
Adjustments:
Acquired intangible asset amortization expense			1.08				1.12				3.36				2.88
Business realignment charges			0.06				0.06				0.27				0.13
Integration costs to achieve			0.10				0.24				0.23				0.59
Acquisition-related expenses			—				0.01				—				1.27
Loss on deal-contingent forward contracts			—				—				—				3.00
Net loss (gain) on divestitures			—				0.09				(0.20	)			(2.78	)
Amortization of inventory step-up to fair value			—				0.29				—				1.29
Tax effect of adjustments1			(0.29	)			(0.42	)			(0.82	)			(1.51	)
Adjusted earnings per diluted share		$	6.51			$	5.93			$	18.66			$	15.45
1This line item reflects the aggregate tax effect of all non-tax adjustments reflected in the preceding line items of the table. We estimate the tax effect of each adjustment item by applying our overall effective tax rate for continuing operations to the pre-tax amount, unless the nature of the item and/or the tax jurisdiction in which the item has been recorded requires application of a specific tax rate or tax treatment, in which case the tax effect of such item is estimated by applying such specific tax rate or tax treatment.

PARKER HANNIFIN CORPORATION - MARCH 31, 2024
BUSINESS SEGMENT INFORMATION
(Unaudited)		Three Months Ended March 31,								Nine Months Ended March 31,
(Dollars in thousands)			2024				2023				2024				2023
Net sales
Diversified Industrial:
North America		$	2,231,478			$	2,342,590			$	6,571,587			$	6,615,035
International			1,434,165				1,524,515				4,227,057				4,277,227
Aerospace Systems			1,408,713				1,194,560				3,944,147				3,076,989
Total net sales		$	5,074,356			$	5,061,665			$	14,742,791			$	13,969,251
Segment operating income
Diversified Industrial:
North America		$	490,452			$	489,349			$	1,458,355			$	1,362,256
International			309,759				329,498				900,944				908,958
Aerospace Systems			289,339				133,905				778,711				234,849
Total segment operating income			1,089,550				952,752				3,138,010				2,506,063
Corporate general and administrative expenses			56,782				45,780				162,340				146,341
Income before interest expense and other (income) expense, net			1,032,768				906,972				2,975,670				2,359,722
Interest expense			123,732				151,993				387,229				416,718
Other (income) expense, net			(11,007	)			(1,402	)			(20,202	)			166,535
Income before income taxes		$	920,043			$	756,381			$	2,608,643			$	1,776,469

RECONCILIATION OF SEGMENT OPERATING MARGINS TO ADJUSTED SEGMENT OPERATING MARGINS
(Unaudited)		Three Months Ended March 31,								Nine Months Ended March 31,
(Dollars in thousands)			2024				2023				2024				2023
Diversified Industrial North America sales		$	2,231,478			$	2,342,590			$	6,571,587			$	6,615,035
Diversified Industrial North America operating income		$	490,452			$	489,349			$	1,458,355			$	1,362,256
Adjustments:
Acquired intangible asset amortization			43,945				44,184				133,327				134,816
Business realignment charges			3,058				761				8,892				2,232
Integration costs to achieve			841				2,442				2,348				3,759
Adjusted Diversified Industrial North America operating income		$	538,296			$	536,736			$	1,602,922			$	1,503,063
Diversified Industrial North America operating margin			22.0	%			20.9	%			22.2	%			20.6	%
Adjusted Diversified Industrial North America operating margin			24.1	%			22.9	%			24.4	%			22.7	%
PARKER HANNIFIN CORPORATION - MARCH 31, 2024
RECONCILIATION OF SEGMENT OPERATING MARGINS TO ADJUSTED SEGMENT OPERATING MARGINS
(Unaudited)		Three Months Ended March 31,								Nine Months Ended March 31,
(Dollars in thousands)			2024				2023				2024				2023
Diversified Industrial International sales		$	1,434,165			$	1,524,515			$	4,227,057			$	4,277,227
Diversified Industrial International operating income		$	309,759			$	329,498			$	900,944			$	908,958
Adjustments:
Acquired intangible asset amortization			22,464				17,266				68,342				50,890
Business realignment charges			3,895				7,314				23,985				12,232
Integration costs to achieve			451				2,953				954				3,517
Adjusted Diversified Industrial International operating income		$	336,569			$	357,031			$	994,225			$	975,597
Diversified Industrial International operating margin			21.6	%			21.6	%			21.3	%			21.3	%
Adjusted Diversified Industrial International operating margin			23.5	%			23.4	%			23.5	%			22.8	%
(Unaudited)		Three Months Ended March 31,								Nine Months Ended March 31,
(Dollars in thousands)			2024				2023				2024				2023
Aerospace Systems sales		$	1,408,713			$	1,194,560			$	3,944,147			$	3,076,989
Aerospace Systems operating income		$	289,339			$	133,905			$	778,711			$	234,849
Adjustments:
Acquired intangible asset amortization			74,807				83,697				237,094				188,711
Business realignment charges			(12	)			166				318				3,016
Integration costs to achieve			11,964				25,849				26,374				69,377
Amortization of inventory step-up to fair value			—				37,642				—				167,973
Adjusted Aerospace Systems operating income		$	376,098			$	281,259			$	1,042,497			$	663,926
Aerospace Systems operating margin			20.5	%			11.2	%			19.7	%			7.6	%
Adjusted Aerospace Systems operating margin			26.7	%			23.5	%			26.4	%			21.6	%
(Unaudited)		Three Months Ended March 31,								Nine Months Ended March 31,
(Dollars in thousands)			2024				2023				2024				2023
Total net sales		$	5,074,356			$	5,061,665			$	14,742,791			$	13,969,251
Total segment operating income		$	1,089,550			$	952,752			$	3,138,010			$	2,506,063
Adjustments:
Acquired intangible asset amortization			141,216				145,147				438,763				374,417
Business realignment charges			6,941				8,241				33,195				17,480
Integration costs to achieve			13,256				31,244				29,676				76,653
Amortization of inventory step-up to fair value			—				37,642				—				167,973
Adjusted total segment operating income		$	1,250,963			$	1,175,026			$	3,639,644			$	3,142,586
Total segment operating margin			21.5	%			18.8	%			21.3	%			17.9	%
Adjusted total segment operating margin			24.7	%			23.2	%			24.7	%			22.5	%

PARKER HANNIFIN CORPORATION - MARCH 31, 2024
CONSOLIDATED BALANCE SHEET
(Unaudited)		March 31,			June 30,			March 31,
(Dollars in thousands)			2024			2023			2023
Assets
Current assets:
Cash and cash equivalents		$	405,484		$	475,182		$	534,831
Marketable securities and other investments			9,968			8,390			23,466
Trade accounts receivable, net			2,913,357			2,827,297			2,881,534
Non-trade and notes receivable			310,355			309,167			349,903
Inventories			2,966,336			2,907,879			3,067,614
Prepaid expenses and other			337,055			306,314			376,066
Total current assets			6,942,555			6,834,229			7,233,414
Property, plant and equipment, net			2,870,919			2,865,030			2,843,795
Deferred income taxes			72,808			81,429			131,782
Investments and other assets			1,150,784			1,104,576			1,188,671
Intangible assets, net			7,961,957			8,450,614			8,287,517
Goodwill			10,579,307			10,628,594			10,830,548
Total assets		$	29,578,330		$	29,964,472		$	30,515,727
Liabilities and equity
Current liabilities:
Notes payable and long-term debt payable within one year		$	4,080,759		$	3,763,175		$	1,992,919
Accounts payable, trade			1,964,211			2,050,934			2,080,147
Accrued payrolls and other compensation			514,021			651,319			543,527
Accrued domestic and foreign taxes			358,061			374,571			270,807
Other accrued liabilities			1,077,318			895,371			900,769
Total current liabilities			7,994,370			7,735,370			5,788,169
Long-term debt			7,290,208			8,796,284			11,412,304
Pensions and other postretirement benefits			455,254			551,510			781,139
Deferred income taxes			1,528,529			1,649,674			1,780,533
Other liabilities			709,548			893,355			960,417
Shareholders' equity			11,590,852			10,326,888			9,781,297
Noncontrolling interests			9,569			11,391			11,868
Total liabilities and equity		$	29,578,330		$	29,964,472		$	30,515,727

PARKER HANNIFIN CORPORATION - MARCH 31, 2024
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)		Nine Months Ended March 31,
(Dollars in thousands)			2024				2023
Cash flows from operating activities:
Net income		$	2,059,863			$	1,374,458
Depreciation and amortization			696,463				609,066
Stock incentive plan compensation			128,682				117,536
Gain on sale of businesses			(23,667	)			(366,345	)
Loss (gain) on property, plant and equipment and intangible assets			5,847				(1,270	)
Gain on marketable securities			(55	)			(1,391	)
Gain on investments			(2,555	)			(4,341	)
Net change in receivables, inventories and trade payables			(244,268	)			(19,052	)
Net change in other assets and liabilities			(427,509	)			(77,389	)
Other, net			(45,724	)			163,622
Net cash provided by operating activities			2,147,077				1,794,894
Cash flows from investing activities:
Acquisitions (net of cash of $89,704 in 2023)			—				(7,146,110	)
Capital expenditures			(283,328	)			(272,603	)
Proceeds from sale of property, plant and equipment			8,905				11,821
Proceeds from sale of businesses			75,561				471,720
Purchases of marketable securities and other investments			(10,091	)			(31,275	)
Maturities and sales of marketable securities and other investments			8,664				35,075
Payments of deal-contingent forward contracts			—				(1,405,418	)
Other			5,988				251,875
Net cash used in investing activities			(194,301	)			(8,084,915	)
Cash flows from financing activities:
Net payments for common stock activity			(237,689	)			(199,911	)
Acquisition of noncontrolling interests			(2,883	)			—
Net (payments for) proceeds from debt			(1,193,373	)			906,811
Financing fees paid			—				(8,911	)
Dividends paid			(571,583	)			(513,232	)
Net cash (used in) provided by financing activities			(2,005,528	)			184,757
Effect of exchange rate changes on cash			(16,946	)			(7,781	)
Net decrease in cash, cash equivalents and restricted cash			(69,698	)			(6,113,045	)
Cash, cash equivalents and restricted cash at beginning of year			475,182				6,647,876
Cash and cash equivalents at end of period		$	405,484			$	534,831

PARKER HANNIFIN CORPORATION - MARCH 31, 2024
RECONCILIATION OF FORECASTED SEGMENT OPERATING MARGIN TO ADJUSTED FORECASTED SEGMENT OPERATING MARGIN
(Unaudited)
(Amounts in percentages)		Fiscal Year 2024
Forecasted segment operating margin		~21.2%
Adjustments:
Business realignment charges		0.3%
Costs to achieve		0.2%
Acquisition-related intangible asset amortization expense		2.9%
Adjusted forecasted segment operating margin		~24.6%

RECONCILIATION OF FORECASTED EARNINGS PER DILUTED SHARE TO ADJUSTED FORECASTED EARNINGS PER DILUTED SHARE
(Unaudited)
(Amounts in dollars)		Fiscal Year 2024
Forecasted earnings per diluted share		$20.80 to $21.00
Adjustments:
Business realignment charges		0.46
Costs to achieve		0.27
Acquisition-related intangible asset amortization expense		4.44
Net gain on divestitures		(0.20)
Tax effect of adjustments1		(1.12)
Adjusted forecasted earnings per diluted share		$24.65 to $24.85
1This line item reflects the aggregate tax effect of all non-tax adjustments reflected in the preceding line items of the table. We estimate the tax effect of each adjustment item by applying our overall effective tax rate for continuing operations to the pre-tax amount, unless the nature of the item and/or the tax jurisdiction in which the item has been recorded requires application of a specific tax rate or tax treatment, in which case the tax effect of such item is estimated by applying such specific tax rate or tax treatment.