The Global Leader in Motion and Control Technologies

Transcription

1 The Global Leader in Motion and Control Technologies Baird Global Industrial Conference Chicago, IL Tom Williams Chairman & CEO November 9, 2017

2 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 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. 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 cybersecurity risks; uncertainties surrounding the ultimate resolution of outstanding legal proceedings, including the outcome of any appeals; competitive market conditions and resulting effects on sales and pricing; and global economic factors, including manufacturing activity, air travel trends, currency exchange rates, difficulties entering new markets and general economic conditions such as inflation, deflation, interest rates and credit availability. The company makes these statements as of the date of this disclosure, and undertakes no obligation to update them unless otherwise required by law. This presentation reconciles (a) segment operating income and operating margins reported in accordance with U.S. GAAP to segment operating income and operating margins without the effect of business realignment charges, CLARCOR acquisition expenses and CLARCOR costs to achieve, (b) actual and forecast earnings per diluted share reported in accordance with U.S. GAAP to actual and forecast earnings per diluted share without the effect of business realignment charges, CLARCOR costs to achieve and a loss related to the sale of an investment. The effects of business realignment charges, CLARCOR acquisition expenses, CLARCOR costs to achieve and a loss related to the sale of an investment are removed to allow investors and the company to meaningfully evaluate changes in segment operating income, operating margins, 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 and a loss related to the sale of an investment. Please visit for more information

3 Why Invest in Parker? Strong Competitive Advantages Clear Strategy and Goals Consistent Execution and Performance 3

4 Parker s Competitive Advantages Breadth of Products & Technologies Best Distribution Channel Intellectual Property System Solutions Focused on Customer Experience 4

5 The #1 Motion & Control Company Unmatched Breadth of Technology Motion Systems Hydraulics Pneumatics Electromechanical Flow & Process Control Fluid & Gas Handling Process Control Climate Control Filtration & Engineered Materials Filtration Sealing & Shielding Aerospace Systems Aerospace 5

6 Ownership From Service to Experience Growth > Market Grow DNE$ YOY 31 12

7 3-5 Year Breakthrough Objectives 150 bps 8% Year over Year DNE Growth 7

8 Progress on 5 Year Plan Win Strategy Goal FY2017 Organic Growth 150 bps > Market 1.7% vs. 1.6% GIPI 17% Operating Income 14.9% Reported 15.8% Adjusted* 8% YOY EPS Growth 23.1% Reported 25.5% Adjusted* Win Strategy Driving Significant Improvements 8 *Adjusted for Business Realignment Charges and Clarcor Acquisition Expenses

9 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 9

10 Going Forward Growth Differentiated Competitive Advantages: Breadth of Technologies Systems Capability Distribution Channel TM Win Strategy Initiatives driving Growth > Market CLARCOR Acquisition Digital Leadership New Growth Incentive Plan 10

11 Key Messages Current Performance Orders Continue to Strengthen in All Regions FY18 Organic Growth Forecasted at 5.5% New Win Strategy Drives Impressive Margin Performance CLARCOR Integration Progressing Well 11

12 Key Messages Win Strategy Execution Engraining Safety into Our Culture Meaningful Progress on Margin Expansion Growth Outpacing Industrial Production Confident in Achieving our FY2020 Financial Objectives 12

13 The Future YOY Growth in EPS, EBIT, Cash Flow, Division Net Earnings Organic Growth 150 bps > Industrial Growth 20%+ Market Share 17% Operating Income 17% ROIC Great Cash Generation & Deployment Our Goal: Top Quartile Diversified Industrial 13

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15 Safety Q1FY18 Comparison to Q1FY Recordable Injuries Rolling 12 Month Total Lost Time (Severe) Injuries Rolling 12 Month Total -24% % 170 Q1FY17 Q1FY18 Q1FY17 Q1FY18 Cultivate a Zero Accident Safety Culture 2

16 Parker s Growth Strategy Engineered Systems International Distribution Aerospace e-business, IoT and Services Market Driven Innovation Enhanced by improved growth incentive plan

17 Operating Margin Drivers to FY bps 40 bps bps bps bps 17.0% % 14.0 ROS FY15 Simplification Aerospace Supply Chain International Margins Services, Distribution & Engineered Systems ROS FY20

18 FY18 Q1 Results As Reported FY17 Q1 FY18 Q1 % Change Net Sales $2,743 $3, % Operating Margin 15.0% 15.6% EPS $1.55 $ % Adjusted FY17 Q1** FY18 Q1* % Change Net Sales $2,743 $3, % Operating Margin 15.4% 16.0% EPS $1.61 $ % *Adjusted for business realignment expenses, Clarcor costs to achieve and a loss related to the sale of an investment **Adjusted for business realignment expenses

19 FY18 Guidance As Reported FY17 FY18 % Change Net Sales $12,029 $13, % Operating Margin 14.9% 15.5% EPS $7.25 $ % Adjusted FY17** FY18* % Change Net Sales $12,029 $13, % Operating Margin 15.8% 16.3% EPS $8.11 $ % *Adjusted for business realignment charges, Clarcor costs to achieve and a loss related to the sale of an investment **Adjusted for business realignment charges and Clarcor acquisition expenses