Parker-Hannifin Corporation Business Report FY ended Jun. 2016

Financial Overview

(in million USD)

	FY ended Jun. 30, 2016	FY ended Jun. 30, 2015	Rate of Change (%)	Factors
Net Sales	11,360.8	12,711.7	(10.6)	1)
Operating Income	1,575.7	1,838.4	(14.3)	-
Sales by segment
Diversified Industrial segment	9,100.5	10,457.1	(13.0)	2)

Factors
1) Net Sales
-Net sales for the fiscal year ended in June 30, 2016 decreased by 10.6% from the previous year to USD 11,360.8 million. Negative impacts caused by currency rate changes contributed to an approximately 3% decrease in sales, while decreased sales volumes in the Diversified Industrial segment contributed to a 7.8% decrease in sales.

2) Diversified Industrial Sales
-During the fiscal year ended June 30, 2016, sales for the Diversified Industrial Segment decreased by 13.0% to USD 9,100.5 million. While acquisitions within the last 12 months increased sales by approximately USD 8 million, the negative effect of currency exchange rates combined with lower demand from distributors and end-users in most markets offset these gains

Recent Developments

-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)

-The Company announced that its RunWise Hydraulic Hybrid Drive Transmission fulfills proposed fuel-economy standards, unveiled in mid-June by the U.S. Environmental Protection Agency (EPA). The new standards call for large diesel-powered vehicles such as refuse trucks manufactured from 2021-2027 to use 16% to 24% less fuel depending on their size by 2027. There are more than 200 refuse haulers equipped with the RunWise hydraulic transmission that have reduced fuel consumption by 43% on average compared to conventional diesel fuel refuse haulers. The reduction is nearly double the proposed requirements from the EPA. Additionally, the California Air Resources Board has also certified the RunWise transmission, paired with Cummins Engine Co.'s 2015 model-year engine, as a validated technology to help improve fuel economy and efficiency in California refuse fleets by up to 50%. (From a press release on September 21, 2015)

-No single customer accounted for more than 4% of the Company’s total net sales during the fiscal year ended June 30, 2016.

Contracts

-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)

R&D Expenditures

(in million USD)

	FY ended Jun. 30, 2016	FY ended Jun. 30, 2015	FY ended Jun. 30, 2014
Total	359.8	403.1	410.1

Capital Expenditures

(in million USD)

	FY ended Jun. 30, 2016	FY ended Jun. 30, 2015	FY ended Jun. 30, 2014
Overall	149.4	215.5	216.3

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)