Parker Hannifin Corporation Annual Shareholders Meeting€¦ · Presented by: Don Washkewicz...

Presented by: Don Washkewicz Chairman, CEO & President

October 24, 2012

Parker Hannifin Corporation Annual Shareholders Meeting

2

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 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; uncertainties surrounding timing, successful completion or integration of acquisitions; ability to realize anticipated cost savings from business realignment activities; 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.

Non-GAAP Financial Measures

This presentation reflects certain non-GAAP financial measures, the reconciliations for which can be found at www.phstock.com

4

FY2012 Review

Business Update

Outlook for FY2013

Presentation Agenda

5

FY2012 Results

6

Another Outstanding

Year!

FY12 Results

7

Setting New Records !

FY12 Results

8

Operating Margin Goal

15%

123456789

1011121314

1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000

15% Goal

R O S

14 13 12 11 10 9 8 7 6 5 4 3 2 1

15 15

30 Years before Win Strategy

11.1% 11.1%

10

15.2%

FY12 Record We Did It!

123456789

10111213141516

1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012

R O S

16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1

The Win Strategy Result

15.2%

15% Goal 11.1%

11.1%

New 15% Record

12

Accomplished in a Difficult Global

Economy

All Time Records

13

Sales $13.1B

Net Income 8.8% Net Income

$1.2B

Cash From Operating Activities

$1.5B EPS $7.45

Operating Margin 15.2%

Ind’l N/A 17.8%

14

Congratulations Global Team !

FY12 Performance

15

Global Market Trends

16

Parker FY12 Country Growth

France -1%

China -4%

USA +9% U.K. -4%

Germany +8%

Brazil 0% Canada +16%

S. Korea +10%

Italy -7%

Sweden +9%

17

FY12 Presentation

Key Financials

18

FY11-12 FY11 FY12 Change

Net Sales $12,346 $13,146 6.5%

Net Income * $1,049 $1,152 9.8%

ROS 8.5% 8.8% ---

EPS $6.37 $7.45 17.0%

* attributable to common shareholders

FY12 Results $MM

19

Sales Trend

6.98.1

9.410.7

12.1

10.3 10.0

12.3 13.1

$0$2$4$6$8

$10$12$14

2004 2005 2006 2007 2008 2009 2010 2011 2012

8 Yr CAGR 8.4% 2004-2012

$Billions

Record

20

Operating Income

$681$1009

$1255$1484

$1707

$1004$1143

$1823$2003

$

$500

$1,000

$1,500

$2,000

$2,500

in m

illio

ns

2004 2005 2006 2007 2008 2009 2010 2011 2012Fiscal Year

5-Year CAGR 6.2%

Record

21

EPS

$0.75 $1.08$1.86

$2.95$3.52

$4.68$5.53

$3.13 $3.40

$6.37

$7.45

0.001.002.003.004.005.006.007.008.00

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Fiscal Year

$/Share

From continuing operations

Record

22

FY12

Cash Flow

23

Cash Flow $’s

631 663737

10511118

1329

1129

1530

1319

936

1567

$400$500$600$700$800$900

$1,000$1,100$1,200$1,300$1,400$1,500$1,600

02 03 04 05 06 07 08 09 10 11 12Fiscal Year

$ M

illio

ns

From operating activities, before discretionary pension contributions

24

-0.6%

2.4%

3.2%

4.2%

5.6%

5.7%

5.9%

6.1%

6.7%

7.5%

7.8%

8.0%

8.1%

8.7%

9.0%

9.8%

9.8%

9.9%

10.0%

10.5%

10.7%

14.2%

-2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0%

ITT

JCI

Flowserve

SPX

Eaton

Honeywell

Textron

35th Percentile

Deere

Ingersoll Rand

Caterpillar

50th Percentile

Cummins

Cooper

Rockwell

Illinois Tool

Pall

75th Percentile

Dover

Parker

Emerson

Goodrich

Danaher

Free Cash FlowPH Fiscal 2012 vs Peer Calendar 2011*

-20.0%JCI

ITT

Free Cash Flow %

Parker

* Data for Parker is fiscal year 2012 vs. peers 2011 calendar year end. Free Cash Flow = Cash from Operating Activities less Capital Expenditures

Free Cash Flow % of Sales

25

Other Accomplishments

FY12

26

Parker Board ranked #1 in “highest average director weight” – average business experience of each director by James Drury survey

ADW Rank Company ADW

# of Directors Industry

Revenue Rank

Revenue ($B)

1 Parker Hannifin 9.2 11 Industrial Manufacturing 248 $10.0

2 Marathon Oil 8.9 12 Mining, Oil & Gas 29 68.4

3 PPG Industries 8.9 10 Industrial Manufacturing 181 13.4

4 Sherwin-Williams 8.8 10 Industrial Manufacturing 308 7.8

5 R.R. Donnelly & Sons 8.8 8 Business Services 247 10.0

6 Apple 8.7 7 Technology 35 65.2

7 Micron Technology 8.7 7 Technology 287 8.5

8 Radio Shack 8.7 6 Consumer Services 492 4.5

9 Ecolab 8.5 10 Industrial Manufacturing 378 6.1

10 General Cable 8.5 6 Technology 465 4.9

#1 on Director Experience

(5.0%)

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

3 Year 5 Year 10 Year

S&P 500 Index S&P 500 Industrials Parker

27

Parker Delivers Strong Returns Total Shareholder Returns

(Annual Equivalent)

23.6%

5.1%

10.9%

28

FY12 Dividends

Increased 23%

29

FY12 Share Repurchase

6.4 Million Shares

$ 455 Million

30

Strengthened Balance Sheet

Q1 Q2 Q3 Q4

25.8% 25.2% 24.3% 26.1%

2012 Debt to Total Cap

Target 40% Max.

31

FY12 Accomplishments

Winovation Progress

32

The Challenges of Mankind…

Defense Energy

Food

Water

Life Sciences

Infrastructure

Environment Transportation

33

Active projects in the funnel

3% of Sales

34

Energy Recovery

A New Division is born.. HDS - Hybrid Drive Systems

35

HDS Division Columbus, Ohio

Ohio Governor Kasich Visits

Production Refuse Vehicle

36

Innovation Video follows presentation

37

FY2012

Win Strategy

38

Win Strategy 10 Year Report Card

40

$24.27 Total Shareholder Return of 270% $89.74

$6.0 billion Sales Doubled $12.3

billion

41

Parker’s Win Strategy

Goals #1 Premier Customer Service

Financial Performance

Profitable Growth

S T R A T E G I E S

Internal

Acquisitions Globalization ♦Delivery of Quality

Products on Time

♦ Value Added Services

♦ Best Systems-PHconnect

♦ Suppliers ⇒ STRATEGIC PROCUREMENT

♦Operation ⇒ LEAN

♦ Customers ⇒ STRATEGIC PRICING

♦ European Initiatives

♦

♦ Innovative Products

♦ Systems Solutions

♦ Strong Distribution

Vision The #1 Motion & Control Company

Empowered Employees

42

Parker’s Culture

The Customer is #1

43



Profitable Growth

S T R A T E G I E S

Internal

Acquisitions Globalization ♦Delivery of Quality Parts

on Time







♦





Empowered Employees

Goal #2


44

The “Win Strategy” Objective

Maximize ROIC

45

Return on Net Assets Performance

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

0.50 0.60 0.70 0.80 0.90 1.00 Net Assets/Sales

Ret

urn

on

Sal

es

Goal

FY 2006 FY 2007 FY 2008 FY2009 FY2010 FY2012 FY2011

Record 24.9%

46

Lean Records

47

17.5%

18.7%

17.9%

17.1%16.8%

17.0%16.4%

15.7%15.6%

15.4%

14.6%

14.0%14.0%

14.5%

13.4%

12.6%

12.9%13.5%

12.7%

12.6%12.7%

12.9%

12.2%

11.8%

12.4%

13.1%12.8%

12.3%12.1%

12.4%

11.7%

12.2%

13.4% 13.5%

12.7%

11.7%

12.3%11.9%

11.4% 11.4%11.2%

10.9%

10.7%10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12

Goal = 10¢

Inventory to Sales

Record 10.7%

48

125 130 132135

154168

174189

204

179191

218226

120

140

160

180

200

220

FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12

Productivity Sales/Employee

$000’s

With annualized acquisition volume

Record

49

Global Growth

50



Profitable Growth

S T R A T E G I E S

Internal

Acquisitions Globalization ♦Quality Products on Time







♦





Empowered Employees

A Clear Roadmap – “Win Strategy”

51

FY12 Acquisitions $141M Asia Pacific Instrumentation &

Fluid Connectors Filtration

$22 million $16 million $100 million

Automation Fluid Connectors Hydraulics

India

$3 million $35 million * $200 million *

* Revenues previously consolidated

52

Europe – Middle East Africa

Global Growth

53

European Headquarters Etoy, Switzerland

113 Employees

Growth in new sales companies

• Middle East +52% • Turkey +90% • Russia +23% • Ireland +26% • Hungary +61%

54

+$62 Million

507 ParkerStores - EMEA + 54 Stores in

FY12

56

New Parker Store

Hidro Land Győr

20 years with Parker

Hungary - Distribution

57

Asia

Global Growth

59

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013PLAN

.5B .6B.8B

1.4B1.6B

1.3B 1.4B1.8B 1.8B

Asia Sales Growth

All shown at FY13 Rates

2.0B

Fiscal Year

Japan + KPL 168

China 903

Korea 418

Rest 603

Taiyo 273

2.0

1.6

1.2

.8

.4

0

5 Year CAGR 5.4%

60

02468

10121416

2009 2010 2011 2012 2013

CHINA

02468

10121416

2009 2010 2011 2012 2013

INDIA

% %

Source: IMA Asia Qtr 2 2012

GDP – Growth Major Countries

8.6% 6%

952 ParkerStores - Asia + 134 Stores in FY12

62

Profitable Growth

Growth through Strong Distribution

ParkerStores - Global

386 417 450 489

628

821

1053

1351

1531

1685

1891

2092

0

500

1000

1500

2000

2500

FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12

+ 201 Stores in FY12

64

Global Growth

Aerospace Growth

Recent Platform Wins $20B

Airbus A350XWB • Hydraulic System

• Fuel Systems • Fuel Tank Inerting System

Gulfstream AAP • Flight Control System

• Hydraulic System Components

COMAC C919 • Flight Control System

• Hydraulic System • Fuel System

Bombardier Global 7000/8000 • Flight Control System

• Hydraulic System

Bombardier C-Series • Flight Control System


Embraer Legacy 450/500 • Flight Control System


65

$20 Billion

66

FY13 Plan

Forecast

67

FY13 Assumptions

68

FY13 Assumptions

69

70

FY13 Assumptions

U.S.A. Election Year Economy

71

FY2013 1st Quarter Results

Fiscal Year 2013

72

First Quarter Results

FY12 FY13 Change

Net Sales $3,234 $3,215 (.6%)

Net Income * $297 $240 (19.3%)

Net ROS 9.2% 7.5% ---

Diluted EPS * $1.91 $1.57 (17.8%)

* Attributable to common shareholders

$MM

73

First Quarter Results

FY12 FY13 Change

Net Sales $3,234 $3,215 (.6%)

Net Income * $297 $240 (19.3%)

Net ROS 9.2% 7.5% ---

Diluted EPS * $1.91 $1.57 (17.8%)

* Attributable to common shareholders

$MM

Int’l Acquisition Integration Expense

Aerospace R&D

134

FY13 Acquisitions – Year to Date

Hydraulics

Fluid Connectors

Filtration

$4 million $200 million

$13 million

Filtration

$20 million

$237M

75

20% Market Share

Top quartile ROIC

The Premier Diversified Industrial

A/S

ROS NxNW

Top quartile P/E Multiple

10% CAGR

The Future -- What does good look like?

76

Video: Runwise Advanced Series Hydraulic Hybrid Chassis for

Refuse Vehicles

77

Thank You

Parker Hannifin Corporation Annual Shareholders Meeting€¦ · Presented by: Don Washkewicz...

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