01—Abstract
Summary
Summary of the 10-K filed August 23, 2019. Cited figures are marked; the original filing is the authoritative source.
Parker-Hannifin Corporation's 2019 10-K report highlights a year of stable net sales, totaling $14.3 billiona, with slight growth driven by the Aerospace Systems segment, partially offset by currency headwinds.
The company demonstrated improved profitability with a higher gross profit margin, attributed to operational efficiencies in the Diversified Industrial Segment and increased aftermarket and OEM volume in Aerospace. Significant strategic developments include the announcement of two major acquisitions: LORD Corporation and Exotic Metals Forming Company LLC, signaling a strong focus on growth through strategic M&A. The company's financial health remains robust, evidenced by strong operating cash flow and a healthy liquidity position.
While long-term debt increased due to financing for acquisitions, Parker-Hannifin maintains its investment-grade credit profile. The report also details ongoing efforts in business realignment and simplification initiatives, aimed at enhancing operational efficiency and driving future profitability. Investors can look to Parker-Hannifin's diversified market exposure, commitment to innovation, and strategic acquisitions as key drivers for future performance, balanced against global economic uncertainties and integration risks.
02—Key points
Key Highlights
- Net sales remained stable at $14.3 billion, with slight growth driven by the Aerospace Systems segment.
- Gross profit margin improved to 25.3% due to higher profitability in Aerospace and cost efficiencies in Diversified Industrial.
- Announced definitive agreements to acquire LORD Corporation for approximately $3.7 billion and Exotic Metals Forming Company LLC for approximately $1.7 billion.
- Operating cash flow increased to $1.73 billion, supporting investments and financing activities.
- Total debt increased significantly to $6.52 billion, primarily due to debt issuance for upcoming acquisitions.
- The company continues to focus on business simplification and realignment initiatives to improve operating margins.
- Maintains an investment-grade credit rating (A- from S&P as of July 2019) despite increased leverage from acquisitions.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2019, Parker-Hannifin Corp kept $0.11.
- Revenue$14.32B100.0%
- Cost of revenue−$10.69B74.6%
- Gross profit$3.63B25.4%
- Operating costs−$1.40B9.7%
- Operating income$2.24B15.6%
- Interest, other & tax−$711.7M5.0%
- Net income$1.52B10.6%
04—Financials
Financial Highlights
Figures from 10-KFY2019filed August 23, 2019Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $14.32B$14.30B | +0.1% |
| Cost of Revenue | $10.69B$10.74B | −0.5% |
| Gross Profit | $3.63B$3.56B | +1.9% |
| R&D Expenses | $294.85M$327.88M | −10.1% |
| SG&A Expenses | $1.54B$1.64B | −5.9% |
| Operating Income | $2.24B$2.04B | +9.7% |
| Interest Expense | $190.14M$213.87M | −11.1% |
| Net Income | $1.52B$1.06B | +43.6% |
| EPS (Basic) | $11.73$7.98 | +47.0% |
| EPS (Diluted) | $11.57$7.83 | +47.8% |
| Shares Outstanding (Basic) | 130.00M133.00M | −2.3% |
| Shares Outstanding (Diluted) | 131.78M135.43M | −2.7% |
05—Questions
Frequently Asked Questions
What were the key financial results for fiscal year 2019?
For the fiscal year ended June 30, 2019, Parker-Hannifin reported net sales of $14.3 billion, largely consistent with the prior year. Net income attributable to common shareholders was $1.51 billion, or $11.48 per diluted share. Gross profit margin improved to 25.3% due to operational efficiencies and increased volume in the Aerospace segment. Operating cash flow was strong at $1.73 billion.
What are the company's primary growth strategies discussed in the report?
Parker-Hannifin's growth strategies include serving customers with innovative systems and products, executing "The Win Strategy" initiatives, maintaining a decentralized structure, and acquiring strategic businesses that offer a strong strategic fit. The report specifically highlights the announced acquisitions of LORD Corporation and Exotic Metals Forming Company LLC as key components of their growth strategy.
How has the company managed its debt and liquidity?
The company's long-term debt increased significantly to $6.52 billion in fiscal year 2019, primarily to fund the planned acquisitions of LORD Corporation and Exotic Metals Forming Company LLC. Despite the increased leverage, Parker-Hannifin maintained an investment-grade credit rating. The company reported strong operating cash flow of $1.73 billion, providing a solid source of liquidity. As of June 30, 2019, the company had $1.41 billion available under its revolving credit facility.
What are the main risks and challenges facing Parker-Hannifin as outlined in the report?
Key risks include sensitivity to global macroeconomic conditions, currency exchange rate fluctuations, geopolitical instability, risks associated with acquisitions and integration, increased cybersecurity threats, raw material price volatility, and competition. The report also notes potential challenges in managing expanded operations and retaining key employees during integration phases.
06—Continue