Parker Reports Fiscal 2018 Third Quarter Results

Fiscal 2018 third quarter sales increased 20% to a record $3.75 billion compared with $3.12 billion in the prior year quarter. Net income increased to a record $366.1 million compared with $238.8 million in the third quarter of fiscal 2017. Fiscal 2018 third quarter earnings per share were also a record at $2.70, compared with $1.75 in the prior year quarter. Adjusted for business realignment expenses and CLARCOR costs to achieve, earnings per share were $2.80, an increase of 33% compared with $2.11 in the prior year quarter. Cash flow from operations for the first nine months of fiscal 2018 was $904.8 million or 8.6% of sales, compared with $789.3 million or 9.2% of sales in the prior year period, or 11.8% excluding a discretionary pension contribution in fiscal 2017. A reconciliation of earnings per share to adjusted earnings per share and cash flows from operations to cash flows from operations excluding a discretionary pension contribution is included in the financial tables of this press release.

"We achieved record performance this quarter, supported by broad-based demand improvement across our key end markets and regions," said Chairman and Chief Executive Officer, Tom Williams. "Organic sales increased 8% growing faster than the overall market and positive order trends continued as orders grew 11%. Segment operating margin performance was strong and adjusted EDITDA margins increased 120 basis points to 17.6%. Industrial North America incremental margins were impacted by higher sales volume, which required us to run consolidating plants for longer than expected. Our productivity metrics for these plants improved as the quarter progressed and we expect steady improvement in Industrial North America incremental margins as plant closures continue during the rest of calendar year 2018. Overall, we are very pleased with the progress we are making."

Segment Results

Diversified Industrial Segment: North American third quarter sales increased 25% to $1.8 billion, and operating income increased 23% to $280.7 million compared with $227.4 million in the same period a year ago. International third quarter sales increased 23% to $1.4 billion, and operating income increased 34% to $205.3 million compared with $153.0 million in the same period a year ago.

Aerospace Systems Segment: Third quarter sales increased 4% to $598.4 million, and operating income increased 33% to $106.7 million compared with $80.0 million in the same period a year ago.

Parker reported the following orders for the quarter ending March 31, 2018, compared with the same quarter a year ago:

• Orders increased 11% for total Parker

• Orders increased 11% in the Diversified Industrial North America businesses

• Orders increased 8% in the Diversified Industrial International businesses

• Orders increased 17% in the Aerospace Systems Segment on a rolling 12-month average basis

Outlook

For the fiscal year ending June 30, 2018, the company has increased guidance for earnings from continuing operations to the range of $7.76 to $7.96 per share, or $9.95 to $10.15 per share on an adjusted basis.

Fiscal 2018 earnings are adjusted for expected business realignment expenses of approximately $50 million and CLARCOR costs to achieve of approximately $45 million, while savings remain as previously forecasted. A reconciliation of forecasted earnings per share to adjusted forecasted earnings per share is included in the financial tables of this press release.

Williams added, "We expect record performance in fiscal year 2018 that will serve as a solid foundation for us to achieve new five year targets that include 19% total segment operating margins and a greater than 10% compound annual growth rate in adjusted earnings per share by fiscal year 2023."