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5. Parker-Hannifin Corporation Business Report FY ended Jun. 2019

Parker-Hannifin Corporation Business Report FY ended Jun. 2019

Recent Years

Factors
1) Net Sales
-Net sales for the fiscal year ended in June 30, 2019 increased by only 0.1% over the previous fiscal year to USD 14,320.3 million. The increase in sales was due to an increase in sale volumes, specifically in the Aerospace Systems Segment. These gains were almost entirely offset by negative currency translation effects, which decreased sales by approximately USD 305 million.

2) Diversified Industrial sales
-During the fiscal year ended June 30, 2019, sales for the Diversified Industrial Segment declined by 1.5% to USD 11,809.5 million. North American segment sales increased by approximately 1.2% while International segment sales decreased by 4.9%. Excluding the effects of divestitures and currency translation, North American and International sales both increased by 1.8% and 1.1%, respectively. In North America, sales increased due to higher demand in the heavy-duty truck, engine and construction equipment markets. The segment’s International operations had higher sales in Asia Pacific and Latin America regions, and lower sales in Europe.

Acquisitions

-On October 29, 2019, the Company completed the acquisition of Lord Corporation, a leading manufacturer of adhesives, coatings, vibration and motion control technologies. The Company acquired Lord Corporation for approximately USD 3.675 billion in cash. The acquisition is expected to enhance the Company’s capabilities in material science as well as electrification and aerospace product offerings. The Company has created an integration team and integration plan to develop synergies and ensure a smooth transition between itself and Lord Corporation.

-In December 2016, the Company and Clarcor Inc. announced that they have entered into a definitive agreement under which the Company will acquire Clarcor for approximately USD 4.3 billion in cash, including the assumption of net debt. Clarcor, headquartered in Franklin, Tennessee, is a diversified marketer and manufacturer of mobile, industrial and environmental filtration products with annual sales of approximately USD 1.4 billion and 6,000 employees worldwide. Clarcor adds a broad array of industrial air and liquid filtration products and technologies to the Company’s filtration portfolio. The Company plans to finance the transaction using cash and new debt. The transaction is expected to be completed in the first quarter of Parker’s fiscal year 2018, subject to customary closing conditions. (From a press release on December 1, 2016)

-In July 2016, the Company announced that it has acquired Jaeger Automobil-Technik GmbH and Jaeger Automotive Polska Sp. z.o.o. from Arnold Jaeger Holding GmbH, headquartered in Hannover, Germany. The Jaeger Group is a pioneer in rubber to plastic direct bonded sealing systems for automotive markets and a leading developer of two-component (2K) direct injection molding technology. The acquired businesses combined have annual sales of approximately USD 45 million and nearly 250 employees. Their products are used to seal and protect key components of automotive systems. The acquisition will become a business unit of the Company's Praedifa Technology Division in the Engineered Materials Group. (From a press release on July 1, 2016)

Recent Developments

-No single customer accounted for more than 3% of the Company’s total net sales during the fiscal year ended June 30, 2019.

-In June 2016, the Company has announced that its RunWise-equipped refuse vehicles have recorded more than four million miles on the road. The RunWise Advanced Series Hybrid Drive System captures more than 71% of a vehicle's otherwise lost braking energy and uses stored energy to save up to 4,300 gallons of fuel per year, per truck. (From a press release on June 7, 2016)

Contracts

-In April 2016, the Company announced that the city of Orlando, Florida, U.S. launched ten new Autocar E3 hybrid refuse trucks featuring the Company’s RunWise Advanced Series Hybrid Drive System. The launch of the ten trucks completes the city’s plans to expand its refuse truck fleet. Feedback from the City of Orlando indicated that the new trucks provided an average fuel savings of 48%, reduced brake changes, and increased productivity. A case study was done for Orlando’s first nine RunWise trucks indicating that the nine vehicles would provide a combined USD 2.8 million in savings over a ten-year period. (From a press release on April 22, 2016)

Outlook

-The Company expects that its sales will remain level or decrease by up to 3.0% in the fiscal year ending June 30, 2020 compared to the previous fiscal year.

Product Development

Three-stage diesel fuel filtration media
-Racor, a brand in the Company’s Engine and Mobile Filtration Division, is launching an innovative new coalescing filtration media that represents a technological step change in diesel fuel filtration. Unlike conventional barrier water separators commonly found on mobile equipment, which separate water from fuel with a single hydrophobic barrier filter element, the new Aquabloc3D elements use three distinct stages to ensure only clean fuel passes up to the engine. Aquabloc3D coalescing filtration systems offer longer service life and considerably improved water separation in bio-diesel fuels. Aquabloc3D has been designed as an upgrade and replacement for existing water separator spin-on filters found on a wide range of trucks, buses, agricultural and construction machinery. (From a press release on July 11, 2018)

Sound dampening technology for power take-off units
-The Company’s Chelsea Products Division introduced the QT Gear, a patent pending sound dampening technology which can be applied to Parker Power Take-Offs (PTOs) that are engine driven by a live PTO drive gear in the transmission. The new gear assembly design out the torsional vibrations found in diesel engine applications, with no change to the durability or torque capacity of the PTO. (From a press release on March 7, 2018)

Investments in U.S.

-The Company announced on June 30 that it has expanded operations at its location in Holly Springs, Mississippi with a USD 685,000 corporate investment. The expansion is the result of production moving to the Holly Springs facility from South Carolina. Additional hiring will bring employment at the facility to 124. The Mississippi Development Authority provided assistance for equipment relocation. The Company has nearby operations in Batesville, Olive Branch, and Madison, Mississippi. (From Mississippi Development Authority release on June 30, 2016)