Parker Reports Fiscal 2020 Second Quarter Results

Fiscal 2020 second quarter sales were $3.50 billion, compared with $3.47 billion in the prior year quarter.  Net income was $204.5 million, compared with $311.7 million in the second quarter of fiscal 2019.  Fiscal 2020 second quarter earnings per share were $1.57, compared with $2.36 in the prior year quarter.  Adjusted earnings per share were $2.54, an increase compared with adjusted earnings per share of $2.51 in the second quarter of fiscal 2019.  Fiscal year-to-date cash flow from operations was a second quarter record at $826.0 million and reached 12.1 percent of sales, compared with 7.8 percent in the prior year period, or 10.7 percent when adjusted for a fiscal 2019 discretionary pension contribution.  A reconciliation of non-GAAP measures is included in the financial tables of this press release.

“With effective execution of The Win Strategy™, we delivered strong financial performance in the period," said Chairman and Chief Executive Officer, Tom Williams.  "Despite macro-economic headwinds, we have maintained strong adjusted total segment operating margin, adjusted EBITDA margin of 18.5 percent, solid earnings and impressive cash flow.  Cash flow from operations reached 12.1 percent of sales, despite the incumbrance of significant transaction costs from our two recently closed, transformative acquisitions.  Great progress has been made in integrating LORD Corporation and Exotic Metals Forming Company, and we remain on track to realize our previously announced synergies."

Segment Results
Diversified Industrial Segment: North American second quarter sales decreased 1 percent to $1.6 billion, and operating income was $211.3 million, compared with $257.8 million in the same period a year ago.  International second quarter sales decreased 6 percent to $1.1 billion, and operating income was $153.8 million, compared with $189.1 million in the same period a year ago.

Aerospace Systems Segment: Second quarter sales increased 19 percent to $735.0 million, and operating income was $121.0 million, compared with $121.5 million in the same period a year ago.

Parker reported the following orders for the quarter ending December 31, 2019, compared with the same quarter a year ago:

• Orders decreased 3 percent for total Parker
• Orders decreased 7 percent in the Diversified Industrial North America businesses
• Orders decreased 6 percent in the Diversified Industrial International businesses
• Orders increased 12 percent in the Aerospace Systems Segment on a rolling 12-month average basis

Outlook
For the fiscal year ending June 30, 2020, the company has increased guidance for earnings per share to the range of $8.78 to $9.38, or $10.25 to $10.85 on an adjusted basis.  Fiscal year 2020 guidance is adjusted on a pre-tax basis for expected business realignment expenses of approximately $40 million, costs to achieve of approximately $27 million, and one-time acquisition expenses of approximately $185 million pertaining to the LORD Corporation and Exotic Metals Forming Company transactions.  Guidance assumes an organic sales decline in the range of 7.6 percent to 5.1 percent.  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, "The actions we have taken under the Win Strategy to strengthen our operations have positioned Parker for a strong second half of fiscal 2020.  Thanks to our global team members for their continued focus and dedication.  We are optimistic about the future and the prospect of reaching our targeted financial goals for fiscal 2023."