Parker Reports Fiscal 2019 Second Quarter Results

Net income was $311.7 million compared with $56.2 million in the fiscal 2018 second quarter. Fiscal 2019 second quarter earnings per share were a second quarter record at $2.36, compared with $0.41 in the prior year quarter. Adjusted earnings per share were $2.51, compared with adjusted earnings per share of $2.15 in the prior year quarter. Fiscal 2019 second quarter earnings included an $0.11 per share adjustment to income tax expense related to U.S. Tax Reform. Cash flow from operations for the first half of fiscal 2019 was $541.0 million or 7.8% of sales, compared with $456.8 million or 6.8% of sales in the prior year period. Excluding a discretionary pension contribution in fiscal 2019, cash flow from operations for the first half of fiscal 2019 was 10.7% of sales.

"This was a strong quarter as The Win Strategy drove organic sales growth of 6% and second quarter records for sales, total segment operating margins, net income, and EPS," said Chairman and Chief Executive Officer, Tom Williams. "Our teams exceeded expectations, achieving 16.4% total segment operating margins and increased operating cash flow as compared to the prior year period. During the quarter, we deployed capital to repurchase $500 million worth of Parker shares. We remain on track to deliver record earnings in fiscal year 2019."

Second Quarter Fiscal 2019 Segment Results

Diversified Industrial Segment: North American second quarter sales increased 4% to $1.6 billion and operating income increased 14% to $257.8 million, compared with $225.8 million in the same period a year ago. International second quarter sales decreased 3% to $1.2 billion and operating income increased 15% to $189.1 million, compared with $164.8 million in the same period a year ago.

Aerospace Systems Segment: Second quarter sales increased 12% to $616.3 million, compared with $549.7 million in the prior year period and operating income increased 39% to $121.5 million, compared with $87.1 million in the same period a year ago.

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

• Orders increased 1% for total Parker
• Orders were flat in the Diversified Industrial North America businesses
• Orders decreased 2% in the Diversified Industrial International businesses
• Orders increased 10% in the Aerospace Systems Segment on a rolling 12-month average basis

Outlook

For the fiscal year ending June 30, 2019, the company has increased guidance for earnings from continuing operations to the range of $11.04 to $11.54 per share, or $11.35 to $11.85 per share on an adjusted basis. Fiscal year 2019 guidance is adjusted on a pre-tax basis for expected business realignment expenses of approximately $19 million and CLARCOR costs to achieve of approximately $16 million and an income tax expense adjustment of $14 million related to U.S. Tax Reform. Guidance assumes organic sales growth in the range of 2.0% to 4.0%.

Williams added, "Our Win Strategy execution positions us to deliver strong profitability and record earnings in fiscal 2019, despite signs of moderating end market demand and the impact of a stronger U.S. dollar. Completing a record year in fiscal 2019, and ongoing initiatives guided by the Win Strategy, solidifies our confidence in achieving our fiscal 2023 five-year performance goals."