Parker(PH) - 2024 Q2 - Quarterly Report

Financial Performance - Net sales increased to $4,821 million in Q3 2023, up from$ 4,675 million in Q3 2022, driven by higher sales in the Aerospace Systems Segment[85] - Gross profit margin improved to 35.7% in Q3 2023, compared to 30.8% in Q3 2022, due to price increases, favorable product mix, and moderating material costs[85][87] - Net income rose to $682 million in Q3 2023, representing 14.1% of sales, up from$ 395 million (8.5% of sales) in Q3 2022[85] - Operating margin in North America increased to 21.9% in Q3 2023, up from 19.6% in Q3 2022, driven by price increases and cost containment[94][102] - Aerospace Systems Segment operating margin increased to 20.1% in the current-year quarter, up from 0.8% in the prior-year quarter[108] - Cash flows from operating activities increased by $276 million to$ 1,352 million in the first six months of fiscal 2024 compared to the same period in fiscal 2023[118] Sales and Revenue - The acquisition of Meggitt contributed approximately $501 million to net sales in the first six months of fiscal 2024[86] - Currency exchange rate changes increased net sales by$ 25 million in Q3 2023, with $16 million attributable to the Diversified Industrial Segment and$ 9 million to the Aerospace Systems Segment[85] - Diversified Industrial North America sales decreased 1.4% in Q3 2023, but increased 1.6% in the first six months of fiscal 2024, with currency exchange rate changes adding $7 million and$ 18 million, respectively[96] - Diversified Industrial International sales increased by 0.5% in the current-year quarter and 1.5% in the first six months of fiscal 2024, with currency exchange rates contributing $9 million and$ 34 million, respectively[98] - The Acquisition contributed approximately $38 million to sales in the first six months of fiscal 2024 for Diversified Industrial International[98] - Sales in the Asia Pacific region decreased in the current-year quarter and first six months of fiscal 2024, primarily due to lower end-user demand in semiconductor, construction equipment, and industrial machinery markets[100] - Aerospace Systems Segment sales increased by$ 386 million in the first six months of fiscal 2024 due to the Acquisition[109] Expenses and Costs - Selling, general and administrative expenses (SG&A) decreased to $807 million in Q3 2023, down from$ 815 million in Q3 2022, primarily due to lower research and development expenses[89] - Corporate general and administrative expenses remained flat at $50 million in the current-year quarter and$ 106 million in the first six months of fiscal 2024[115] - Capital expenditures increased to $204 million in fiscal 2024 from$ 186 million in fiscal 2023[121] - A 100 basis point increase in near-term interest rates would increase annual interest expense on variable rate debt by approximately $23 million[136] Tax and Dividends - The effective tax rate for Q3 2023 was 21.4%, down from 23.5% in Q3 2022, due to a net decrease in tax costs and an increase in discrete tax benefits[85][93] - The company declared a quarterly dividend of$ 1.48 per share on October 25, 2023, and January 25, 2024, marking 294 consecutive quarters of dividend payments[120] Inventory and Receivables - Days sales outstanding for trade accounts receivable was 50 days at December 31, 2023, compared to 51 days at June 30, 2023 and December 31, 2022[118] - Days supply of inventory on hand was 96 days at December 31, 2023, compared to 85 days at June 30, 2023 and 98 days at December 31, 2022[119] Acquisitions and Divestitures - The company repurchased 0.2 million common shares for $100 million during fiscal 2024, compared to 0.4 million shares for$ 100 million in fiscal 2023[121] - Net proceeds from the sale of the aircraft wheel and brake business were approximately $441 million in fiscal 2023[121] Financial Position and Liquidity - The company's foreign subsidiaries held$ 327 million in cash and cash equivalents as of December 31, 2023, down from $422 million as of June 30, 2023[122] - The company is authorized to sell up to$ 3.0 billion of short-term commercial paper notes, with $1.2 billion outstanding as of December 31, 2023[123] - The company has a$ 3.0 billion line of credit, with $1.8 billion available as of December 31, 2023[124] - The company's debt to debt-shareholders' equity ratio was 0.51 to 1.0 as of December 31, 2023, below the covenant limit of 0.65 to 1.0[127] - The company's long-term credit ratings as of December 31, 2023 were BBB+ (Fitch and S&P) and Baa1 (Moody's)[128] Backlog and Segment Performance - The backlog for the Diversified Industrial Segment stood at$ 4,429 million as of December 31, 2023, compared to $4,966 million in the prior year[94]