Parker Hannifin Corporation Annual Shareholders Meeting October 24, 2012

Transcription

1 Parker Hannifin Corporation Annual Shareholders Meeting October 24, 2012 Presented by: Don Washkewicz Chairman, CEO & President

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. 2

3 Non-GAAP Financial Measures This presentation reflects certain non-gaap financial measures, the reconciliations for which can be found at

4 Presentation Agenda FY2012 Review Business Update Outlook for FY2013 4

5 FY2012 Results 5

6 FY12 Results Another Outstanding Year! 6

7 FY12 Results Setting New Records! 7

8 Operating Margin Goal 15% 8

9 30 Years before Win Strategy R O S % 15% Goal 11.1%

10 FY12 Record We Did It! 15.2% 10

11 The Win Strategy Result 11.1% 15.2% R O S % 15% Goal

12 New 15% Record Accomplished in a Difficult Global Economy 12

13 All Time Records Sales $13.1B Net Income $1.2B Net Income 8.8% Operating Margin 15.2% Ind l N/A 17.8% 13 Cash From Operating Activities $1.5B EPS $7.45

14 FY12 Performance Congratulations Global Team! 14

15 Global Market Trends 15

16 Parker FY12 Country Growth Canada +16% Brazil 0% S. Korea +10% France -1% USA +9% U.K. -4% Sweden +9% China -4% Germany +8% Italy -7% 16

17 FY12 Presentation Key Financials 17

18 FY12 Results $MM FY11-12 FY11 FY12 Change Net Sales $12,346 $13, % Net Income * $1,049 $1, % ROS 8.5% 8.8% --- EPS $6.37 $ % 18 * attributable to common shareholders

19 Sales Trend $Billions 8 Yr CAGR 8.4% Record 19 $14 $12 $10 $8 $6 $4 $2 $

20 Operating Income Record in millions $2,500 $2,000 $1,500 $1,000 $500 $681 $1009 $1255 $1484 $1707 $1004 $1143 $1823 $ $ Fiscal Year 5-Year CAGR 6.2%

21 EPS $/Share Record $7.45 $6.37 $5.53 $4.68 $2.95 $3.52 $3.13 $3.40 $1.86 $0.75 $ Fiscal Year 21 From continuing operations

22 FY12 Cash Flow 22

23 Cash Flow $ s $ Millions 23 $1,600 $1,500 $1,400 $1,300 $1,200 $1,100 $1,000 $900 $800 $700 $600 $500 $ Fiscal Year From operating activities, before discretionary pension contributions

24 -20.0% Danaher Goodrich Emerson Parker Dover 75th Percentile Pall Illinois Tool Rockwell Cooper Cummins 50th Percentile Caterpillar Ingersoll Rand Deere 35th Percentile Textron Honeywell Eaton SPX Flowserve -0.6% JCI ITT JCI ITT 2.4% 3.2% 4.2% 5.7% 5.6% 6.1% 5.9% 6.7% -2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% * 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 PH Fiscal 2012 vs Peer Calendar 2011* 7.8% 7.5% 8.1% 8.0% 9.0% 8.7% Free Cash Flow % of Sales 10.0% 9.9% 9.8% 9.8% 10.7% 10.5% 14.2% Parker 24

25 FY12 Other Accomplishments 25

26 #1 on Director Experience 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 Industrial Manufacturing 248 $ Marathon Oil Mining, Oil & Gas PPG Industries Industrial Manufacturing Sherwin-Williams Industrial Manufacturing R.R. Donnelly & Sons Business Services Apple Technology Micron Technology Technology Radio Shack Consumer Services Ecolab Industrial Manufacturing General Cable Technology

27 Parker Delivers Strong Returns Total Shareholder Returns (Annual Equivalent) S&P 500 Index S&P 500 Industrials Parker 25.0% 23.6% 20.0% 15.0% 10.0% 10.9% 5.0% 5.1% 0.0% (5.0%) 3 Year 5 Year 10 Year 27

28 FY12 Dividends Increased 23% 28

29 FY12 Share Repurchase 6.4 Million Shares $ 455 Million 29

30 Strengthened Balance Sheet 2012 Debt to Total Cap Q1 Q2 Q3 Q4 25.8% 25.2% 24.3% 26.1% Target 40% Max. 30

31 FY12 Accomplishments Winovation Progress 31

32 The Challenges of Mankind Energy Defense Food Life Sciences Water Infrastructure Environment Transportation 32

33 Active projects in the funnel 3% of Sales 33

34 34 Energy Recovery

35 A New Division is born.. HDS - Hybrid Drive Systems HDS Division Columbus, Ohio Production Refuse Vehicle 35 Ohio Governor Kasich Visits

36 Innovation Video follows presentation 36

37 FY2012 Win Strategy 37

38 Win Strategy 10 Year Report Card 38

39 39

40 $6.0 billion Sales Doubled $12.3 billion $24.27 Total Shareholder Return of 270% $

41 Parker s Win Strategy Vision The #1 Motion & Control Company Goals #1 Premier Customer Service Financial Performance Profitable Growth S T R A T E G I E S Delivery of Quality Products on Time Value Added Services Best Systems-PHconnect Suppliers STRATEGIC PROCUREMENT Operation LEAN Customers STRATEGIC PRICING European Initiatives Internal Acquisitions Globalization Innovative Products Systems Solutions Strong Distribution Empowered Employees 41

42 Parker s Culture The Customer is #1 42

43 Goal #2 Vision The #1 Motion & Control Company Goals #1 Premier Customer Service Financial Performance Profitable Growth Financial Performance S Internal Delivery of Quality Parts Suppliers STRATEGIC T on Time PROCUREMENT Acquisitions Globalization R A Innovative Products Value Added Services Operation LEAN T E G Best Systems-PHconnect Customers STRATEGIC Systems Solutions PRICING I E S European Initiatives Strong Distribution Empowered Employees 43

44 The Win Strategy Objective Maximize ROIC 44

45 Return on Net Assets Performance 25.0% 20.0% Record 24.9% Return on Sales 15.0% 10.0% 5.0% 0.0% Goal Net Assets/Sales FY 2006 FY 2007 FY 2008 FY2009 FY2010 FY2011 FY

46 46 Lean Records

47 Inventory to Sales 20.0% 18.7% 18.0% 16.0% 17.9% 17.0% 17.5% 16.4% 17.1% 16.8% 15.4% 15.7% 15.6% 14.6% 14.5% Record 10.7% 14.0% 12.0% 14.0% 14.0% 13.4% 12.9% 12.6% 13.5% 12.7% 12.9% 12.6% 12.7% 13.1% 13.4% 13.5% 12.8% 12.2% 12.4% 12.7% 11.8% 12.4% 12.3%12.1% 11.7% 12.2% 11.7% 12.3% 11.9% 11.4% 11.4% 10.9% 11.2% 10.7% 10.0% FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 Goal = 10 47

48 Productivity Sales/Employee $000 s Record FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 48 With annualized acquisition volume

49 Global Growth 49

50 A Clear Roadmap Win Strategy Vision The #1 Motion & Control Company Goals #1 Premier Customer Service Financial Performance Profitable Growth S T R A T E G I E S Quality Products on Time Value Added Services Best Systems-PHconnect Suppliers STRATEGIC PROCUREMENT Operation LEAN Customers STRATEGIC PRICING European Initiatives Internal Acquisitions Globalization Innovative Products Systems Solutions Strong Distribution Empowered Employees 50

51 FY12 Acquisitions $141M Asia Pacific Filtration Instrumentation & Fluid Connectors $22 million $16 million $100 million Automation Fluid Connectors Hydraulics India $3 million $35 million * $200 million * 51 * Revenues previously consolidated

52 Global Growth Europe Middle East Africa 52

53 European Headquarters Etoy, Switzerland 113 Employees 53

54 Growth in new sales companies Middle East +52% Turkey +90% Russia +23% Ireland +26% Hungary +61% +$62 Million 54

55 507 ParkerStores - EMEA + 54 Stores in FY12

56 New Parker Store Hungary - Distribution Hidro Land Győr 20 years with Parker 56

57 Global Growth Asia 57

58 Asia Sales Growth B Taiyo Korea Year CAGR 5.4% B.6B.8B 1.4B 1.6B 1.3B 1.4B 1.8B 1.8B PLAN All shown at FY13 Rates Fiscal Year Rest 603 China 903 Japan + KPL 168

59 GDP Growth Major Countries CHINA INDIA 8.6% 6% % 10 % Source: IMA Asia Qtr

60 952 ParkerStores - Asia Stores in FY12

61 Profitable Growth Growth through Strong Distribution 62

62 ParkerStores - Global Stores in FY FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12

63 Global Growth Aerospace Growth 64

64 Recent Platform Wins $20B Airbus A350XWB Hydraulic System Fuel Systems Fuel Tank Inerting System COMAC C919 Flight Control System Hydraulic System Fuel System Bombardier C-Series Flight Control System Hydraulic System Fuel System $20 Billion Embraer Legacy 450/500 Flight Control System Hydraulic System Fuel System Gulfstream AAP Flight Control System Hydraulic System Components Bombardier Global 7000/8000 Flight Control System Hydraulic System 65

65 66 FY13 Plan

66 67 Forecast

67 FY13 Assumptions 68

68 FY13 Assumptions 69

69 FY13 Assumptions U.S.A. Election Year Economy 70

70 Fiscal Year 2013 FY st Quarter Results 71

71 First Quarter Results $MM 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 72

72 First Quarter Results $MM FY12 FY13 Change Net Sales $3,234 $3,215 (.6%) Int l Acquisition Integration Expense Net Income * $297 $240 (19.3%) Net ROS 9.2% 7.5% --- Aerospace R&D Diluted EPS * $1.91 $1.57 (17.8%) * Attributable to common shareholders 73

73 FY13 Acquisitions Year to Date Hydraulics Filtration $200 million Fluid Connectors $4 million Filtration $237M $13 million $20 million 134

74 The Future -- What does good look like? 10% CAGR 20% Market Share The Premier Diversified Industrial Top quartile ROIC ROS NxNW A/S 75 Top quartile P/E Multiple

75 Video: Runwise Advanced Series Hydraulic Hybrid Chassis for Refuse Vehicles 76

76 77 Thank You