Longbow Industrial Products Conference

Transcription

1 Longbow Industrial Products Conference New York, NY Timothy K. Pistell EVP & Chief Financial Officer September 11, 2008

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 and individual segments may differ materially from current expectations, depending on economic conditions within both its 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, and growth, innovation and global diversification initiatives. A change in economic conditions in individual markets may have a particularly volatile effect on segment results. Among the other factors which may affect future performance are: changes in business relationships with and purchases by or from major customers or suppliers, including delays or cancellations in shipments or significant changes in financial condition; uncertainties surrounding timing, successful completion or integration of acquisitions; threats associated with and efforts to combat terrorism; uncertainties surrounding the ultimate resolution of outstanding litigation; 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 employee retirement and health care benefits and insurance; and global economic factors, including manufacturing activity, air travel trends, currency exchange rates, difficulties entering new markets and general economic conditions such as inflation, interest rates and credit availability. The company makes these statements as of the date of this disclosure, and undertakes no obligation to update them. 2

3 3 Why Hold Parker?

4 World Leading Technologies Aerospace Refrigeration Electromechanical Filtration Fluid Handling Hydraulics Pneumatics Process Control Sealing & Shielding 4

5 FY08 Results Continue Recent Trends Record Results! Record sales Record operating margin % Record earnings Record ROS Record EPS Record cash flow from operations 5

6 Consistent Long-term Sales Growth 10-Year CAGR 10.1% $14.0 $ % Growth in FY08 4.8% Organic Annual Sales in billions $10.0 $8.0 $6.0 $4.0 $2.0 $ Fiscal year 6

7 Strong Operating Income Growth 5-Year CAGR - 29% 15% increase in millions $1,800 $1,600 $1,400 $1,200 $1,000 $800 $600 $400 $200 $0 18% increase $1,707 24% increase $1,484 $1,255 48% increase $1,009 $ Fiscal Year 7

8 Operating Margin Expansion International Margins > North American Margins Total Year FY05 FY06 FY07 FY08 Industrial North America 13.3% 15.0% 14.7% 14.3% Industrial International 11.1% 12.2% 13.7% 15.8% Aerospace 14.7% 14.7% 16.0% 13.6% Climate and Industrial Controls 9.4% 8.5% 7.7% 5.7% Total Parker 12.5% 13.4% 13.8% 14.1% 8

9 Cash Flow is Strong 10-Year CAGR - 15% $1, % of Sales Net cash provided by operating activities (In millions) $1,200 $1,000 $800 $600 $400 $ $ Cash from Oper. Activities Discretionary Pension Contributions

10 52 Consecutive Years of Increased Dividends $1.10 $1.00 $.90 $.80 $.70 $.60 $.50 $.40 $.30 $.20 97% Increase in Four Years *Among the top 5 longestrunning dividend increase records in the S&P 500 index. $.10 $

11 Strong Cash Flow: Rebalanced Uses FY08 Leverage % Capacity to Fund Growth Capital Expenditures 38% Acquisitions 47% Capital Expenditures 18% Acquisitions 52% Share repurchases 2% Dividends 13% Share repurchases 20% Dividends 10% 11

12 Strong ROIC 25% 20% 21% 21% 22% 21% % 15% 14% 10% 5% 0% FY04 FY05 FY06 FY07 FY08 ROIC is defined as: EBIT from continuing operations divided by average capital 12

13 Strong Total Shareholder Returns 25% Parker Annual Equivalent 20% 15% 10% 21% 22% 13% 5% 0% 3 Year 5 Year 10 year S&P 500 S&P 500 Industrials PARKER Years ending June 30,

14 Recession Planning Are We Ready For A Recession? Our Preparedness Began With The Implementation Of The Win Strategy In

15 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 I am Parker. Quality Products on Time Value Added Services Best Systems-PHconnect Suppliers STRATEGIC PROCUREMENT Operation LEAN ENTERPRISE Customers STRATEGIC PRICING European Initiatives Internal Acquisitions Globalization Innovative Products Systems Solutions Strong Distribution Empowered Employees 15

16 Still Our #1 Goal 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 I am Parker. Quality Products on Time Value Added Services Best Systems-PHconnect Suppliers STRATEGIC PROCUREMENT Operation LEAN ENTERPRISE Customers STRATEGIC PRICING European Initiatives Internal Acquisitions Globalization Innovative Products Systems Solutions Strong Distribution Empowered Employees 16

17 #1 Premier Customer Service On-Time Delivery 100.0% 98.0% 96.0% Parts Shipped On Time 95% 95% 95% Line Items Shipped Complete 94.0% 93% % On Time 92.0% 90.0% 88.0% 88% 91% 87% 91% 86.0% 84.0% 82.0% % FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 Goals Raising the bar for on-time delivery

18 #1 Premier Customer Service Customer Quality Rejected Parts Per Million (RPPM) R P P M 4,500 4,000 3,500 3,000 2,500 2,000 4,019 48% Reduction Next 3 years Stretch Goal <400 RPPM Next 7 years Stretch Goal <50 RPPM 1,500 1,000 2, FY07 FY08 Quality is a huge customer differentiator significant cost savings 18

19 Goal #2 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 I am Parker. Quality Products on Time Value Added Services Best Systems-PHconnect Suppliers STRATEGIC PROCUREMENT Operation LEAN ENTERPRISE Customers STRATEGIC PRICING European Initiatives Internal Acquisitions Globalization Innovative Products Systems Solutions Strong Distribution Empowered Employees 19

20 Financial Performance Productivity Sales/Employee 000 s Record FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 20 With annualized acquisition volume

21 Financial Performance Inventory % to Sales 20.0% 19.1% 18.0% 16.0% 18.0% 17.7% 16.9% 17.3% 16.8% 17.9% 17.1% 17.1% 16.2% 15.8% 16.5% 15.7% 14.0% 12.0% 10.0% 15.7% 14.5% 14.5% 14.0% 13.5% 13.0% 13.2% 13.5% 13.4% 12.6% 12.6% 12.6% 11.8% 12.3% 12.2% 12.1% Goal = 10% FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY % 12.3% 21

22 Financial Performance Capital Expenditures as a % of Sales 6.0% 5.6% 5.0% 4.6% 4.3% 4.0% 3.4% 3.0% 2.0% 2.5% 2.0% 1.9% 2.1% 2.2% 2.3% 1.0% 0.0% FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 22 FY08 annual depreciation: 2.1%

23 Financial Performance Capacity Optimization 60 # of Facilities Closed FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 23

24 Goal #3 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 I am Parker. Quality Products on Time Value Added Services Best Systems-PHconnect Suppliers STRATEGIC PROCUREMENT Operation LEAN ENTERPRISE Customers STRATEGIC PRICING European Initiatives Internal Acquisitions Globalization Innovative Products Systems Solutions Strong Distribution Empowered Employees 24

25 Profitable Growth Greatly Expanded Our Geography & Market Diversification Reduced Volatility Already Evidenced 25

26 Profitable Growth Globalization Industrial Revenues are More Balanced FY2002 FY2008 Industrial International 31% Industrial North America 69% Industrial International 54% Industrial North America 46% 26

27 Profitable Growth Globalization Industrial Operating Income is More Balanced FY2002 FY2008 Industrial International 30% Industrial North America 70% Industrial International 56% Industrial North America 44% 27

28 Profitable Growth Expanding into Less Cyclical Growth Markets Market Organic Growth Acquisitions Energy 28 Energy recovery vehicles Fuel cells Electrohydraulic actuation Emission friendly valves Emission controls Emission sealing Gas detection Fluid / gas distribution Power efficiency Power generation Nuclear power Wind power Solar power Wave power Oil & Gas SSD Drives Scan Subsea Cabett Texas Thermowell

29 Profitable Growth Expanding into Less Cyclical Growth Markets Market Organic Growth Acquisitions Life Sciences Fluidics Filtration Ventilator pneumatics Oxygen generation Nitrogen generation Drug delivery systems Anesthesia systems Biomass disposal domnick hunter Mitos Silver Cloud Kay Pneumatics HTR Holdings Rectus Porter Instruments 29

30 Profitable Growth Systems Solutions Delights the customer Provides optimal solution Difficult to copy Locks in MRO 30

31 Profitable Growth Strong Distribution 12,000 Worldwide Distributor Locations Distribution - Parker Distributors - Best in Class - Less cyclical, higher margins 31

32 Profitable Growth New Product Wins Power Cables & Steel Tube Umbilicals $1.6 Bil Market 32

33 Profitable Growth New Product Wins Regenerative Filtration In service on the BAE Systems ETS Trojan Prototype for M1A2 Abrams and Expeditionary Fighting Vehicle $600 Mil Market 33

34 Profitable Growth New Product Wins Parker Hydraulic Hybrid Drive System $5.8 Bil Market Testing & USEPA modeling predicts from 30% - 120% increase in fuel mileage, depending on the route duty cycles, PLUS Reduced maintenance Reduced emissions Engine-off capability Improved acceleration Increased productivity & profitability Type of vehicle FedEx plans to use for testing 34

35 Profitable Growth New Product Wins $10 Billion in Aerospace Contract Wins Representative Customers $3 Billion $2 Billion $1 Billion $2 Billion $2 Billion Flight Control Hydraulics Inerting Systems Fuel Systems Other* 35 *Includes: Fluid, Pneumatics, MRO, and Wheels & Brakes

36 Recent Acquisitions A Key to Growth FY06 Annualized Sales DENQUIP $983M FY07 Metalcrom INDIA $256M FY08 $546M FY09 YTD $ 11M 36 Many more in process Total $1.8B

37 Parker s Value Proposition Acquisitions Systems process to capture 600bp margin improvement Systems selling on Industrial and Aerospace platforms ($10 billion in contracts) Innovation Winovation driving incremental high-margin growth Lean Enterprise-wide lean delivering continuous productivity improvement Channel One new distribution location per day Globalization Over 50% of growth from international 37

38 The Key Take-aways Parker has a proven record over 60 plus years of growth and strong returns Parker continues to transform itself to meet the changing needs of its global markets and customers Parker has never been in better position to outgrow and outperform any of its competitors 38

39 The World Leader in Motion and Control 39 Thank you!