Summary
Parker-Hannifin Corporation's (PH) 10-Q filing for the period ending September 29, 2019, reveals a decline in net sales by 3.8% to $3.33 billion compared to the prior year's $3.48 billion. This decrease was primarily driven by lower volume in the Diversified Industrial segment, particularly in North America and internationally, though partially offset by growth in the Aerospace Systems segment. Net income attributable to common shareholders also saw a decrease, falling to $338.9 million ($2.60 diluted EPS) from $375.7 million ($2.79 diluted EPS) in the comparable period last year. Despite the top-line decline, the company executed significant strategic acquisitions, including the purchase of Exotic Metals Forming Company LLC for $1.7 billion and the subsequent acquisition of LORD Corporation for $3.45 billion shortly after the quarter's end. These acquisitions, along with a notable increase in long-term debt and commercial paper borrowings, underscore a period of substantial investment and restructuring, aimed at future growth and market expansion. The company's financial position remains solid, with a debt-to-equity ratio of 0.60 to 1.0, indicating continued compliance with financial covenants.
Financial Highlights
56 data points| Revenue | $3.33B |
| Cost of Revenue | $2.48B |
| Gross Profit | $853.52M |
| SG&A Expenses | $399.18M |
| Operating Income | $517.84M |
| Interest Expense | $69.96M |
| Net Income | $338.09M |
| EPS (Basic) | $2.63 |
| EPS (Diluted) | $2.60 |
| Shares Outstanding (Basic) | 128.46M |
| Shares Outstanding (Diluted) | 130.13M |
Key Highlights
- 1Net sales decreased by 3.8% to $3.33 billion for the three months ended September 30, 2019, compared to $3.48 billion in the prior year, largely due to lower volumes in the Diversified Industrial segment.
- 2Net income attributable to common shareholders decreased to $338.9 million ($2.60 diluted EPS) from $375.7 million ($2.79 diluted EPS) in the prior year's comparable period.
- 3The company completed the acquisition of Exotic Metals Forming Company LLC ('Exotic') for approximately $1.7 billion in cash on September 16, 2019, significantly impacting goodwill and intangible assets.
- 4Subsequent to the quarter, on October 29, 2019, Parker-Hannifin acquired LORD Corporation for approximately $3.45 billion, a move expected to bolster its engineered materials offerings.
- 5Long-term debt increased significantly from $6.52 billion to $7.37 billion, and short-term debt (notes payable and long-term debt payable within one year) rose from $0.59 billion to $1.74 billion, primarily to finance acquisitions.
- 6Operating cash flow improved substantially to $449 million from $159 million in the prior year's comparable period, driven by better working capital management.
- 7The company's backlog at September 30, 2019, was $5.02 billion, with a substantial portion expected to be recognized as revenue within the next 12 months.