Parker Reports Fiscal 2019 Fourth Quarter and Full Year Results

Fiscal 2019 fourth quarter sales were $3.68 billion, compared with $3.82 billion in the prior year quarter. Net income increased 17% to an all-time quarterly record of $413.7 million, compared with $353.3 million in the fourth quarter of fiscal 2018. Fiscal 2019 fourth quarter earnings per share increased 21% to $3.17, compared with $2.62 in the prior year quarter. Fiscal 2019 fourth quarter adjusted earnings per share were $3.31, compared with adjusted earnings per share of $3.22 in the prior year quarter. A reconciliation of non-GAAP measures is included in the financial tables of this press release.

For the full year, fiscal 2019 sales increased to a record $14.32 billion, compared with $14.30 billion in fiscal year 2018. Organic growth of 3% was offset by currency translation and a divestiture in fiscal year 2018. Net income was a record at $1.51 billion, a 43% increase, compared with $1.06 billion in fiscal 2018. Earnings per share increased 47% to a record of $11.48, compared with $7.83 per share in the prior year. Adjusted earnings per share increased 14% to $11.85, compared with $10.42 per share in fiscal 2018.

Cash flow from operations for fiscal 2019 was a record at $1.73 billion or 12.1% of sales, compared with $1.60 billion or 11.2% of sales in the prior year period. Excluding a discretionary pension contribution, cash flow from operations for fiscal 2019 was 13.5% of sales.

“Our strong fourth quarter results contributed to what was an outstanding year for Parker, as we delivered record sales, EPS, net income, total segment operating margin and cash flow from operations," said Chairman and Chief Executive Officer, Tom Williams. "The actions we have taken under The Win Strategy™ to strengthen our business and simplify our operations are driving record financial performance and positions Parker to generate sustainable long-term shareholder value. With the dedication of our global team members, in fiscal 2019 we achieved 17.0% as reported total segment operating margin for the first time in our history, which was a full year ahead of our original target."

Segment Results
Diversified Industrial Segment: North American fourth quarter sales decreased 3% to $1.7 billion, and operating income increased 2% to $318.2 million, compared with $313.5 million in the same period a year ago. International fourth quarter sales decreased 9% to $1.3 billion, while operating income decreased 1% to $201.0 million, compared with $203.3 million in the same period a year ago.

Aerospace Systems Segment: Fourth quarter sales increased 7% to $677.9 million, and operating income decreased 4% to $121.7 million, compared with $126.7 million in the same period a year ago.

Parker reported the following orders for the quarter ending June 30, 2019, compared with the same quarter a year ago:

Orders decreased 3% for total Parker
Orders decreased 4% in the Diversified Industrial North America businesses
Orders decreased 8% in the Diversified Industrial International businesses
Orders increased 10% in the Aerospace Systems Segment on a rolling 12-month average basis

Acquisitions Update
Progress is being made toward receipt of all required regulatory approvals for the pending acquisition of LORD Corporation. In addition to the necessary regulatory approvals, the transaction remains subject to customary closing conditions and, subject to satisfaction of these approvals and conditions, is still expected to close within the previously announced timeline of four to six months from the date of the original announcement on April 29, 2019.

As previously announced on July 29, 2019, the company has also entered into a definitive share purchase agreement to acquire Exotic Metals Forming Company LLC.

Outlook
For the fiscal year ending June 30, 2020, the company has issued guidance for earnings per share in the range of $11.38 to $12.18, or $11.50 to $12.30 on an adjusted basis. Fiscal year 2020 guidance is adjusted on a pre-tax basis for expected business realignment expenses of approximately $20 million. Guidance assumes organic sales in the range (3.0%) to 0.0%. The impact from the pending LORD and Exotic Metals acquisitions is not included in fiscal 2020 guidance. 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, "Despite moderating market conditions, our ongoing focus on Win Strategy initiatives will allow us to make continued improvements in our business and deliver further segment operating margin expansion and another record earnings year in fiscal 2020. Strong cash generation has also allowed us to make meaningful investments to improve our portfolio of high margin, growth businesses through our pending acquisitions of LORD and Exotic Metals. These actions and the dedication of our global team members reinforce our confidence in achieving our fiscal 2023 financial targets and generating strong returns for our shareholders."