Parker-Hannifin Corporation (PH) Earnings Call Transcript & Summary

Good morning, everybody. The 2022 Annual Meeting of Shareholders of Parker-Hannifin Corporation will please come to order. I'd like to welcome all of our shareholders who are here in person as well as those joining via the webcast. I am Tom Williams, Chairman of the Board and Chief Executive Officer of the company. I will be presiding at this meeting and with me is Joe Leonti, Vice President, General Counsel and Secretary of the company, who will act as secretary of this meeting. First, I'd like to introduce our director nominees and other company representatives who are present at today's meeting. The directors here today are: Lee Banks, Vice Chairman and President of the company; Jill Evanko; Lance Fritz; Linda Harty; Bill Lacey; Kevin Lobo; Joe Scaminace; Åke Svensson; Laura Thompson; Jim Wainscott; and myself. And along with Lee, Joe and myself, also present today are Jenny Parmentier, Chief Operating Officer; Todd Leombruno, Executive Vice President and Chief Financial Officer; and many other company executives. In addition to our Board and the executive team, Richard Kretz, a representative of Broadridge Financial Services is present and has been appointed to act as Inspector of Election for this meeting. And Julie Wahrman, a representative from Deloitte & Touche, LLP, our independent registered public accounting firm, is also present. Julie will be available to answer appropriate questions concerning the company's financial statements during the question-and-answer period following the meeting. Before we move on to our voting matters, I'd first like to turn it over to Joe to cover a few procedural items.

Okay. Thank you, Tom. Good morning, everyone. First, for those of you who are here in person, you were provided with a copy of today's agenda and the rules of conduct for the meeting. As you can see on the agenda, we're going to hit the annual meeting of shareholders first. And after we adjourn that, Tom is going to make some important comments and announcements and we'll have a brief question-and-answer period. To ensure that we have an orderly meeting, we ask that you all please abide by the rules of conduct. Second thing is in my capacity as secretary, I have delivered and present the following documents, which will be referenced and incorporated in the minutes of the meeting. I have the minutes of last year's Annual Meeting of Shareholders, which was held on October 27, 2021. I have the financial statements of the company for the fiscal year ended June 30, 2022, certified by Deloitte & Touche. I have an affidavit of mailing establishing that notice of this annual meeting was duly given. And I've got a list of the company's shareholders of record as of September 2, 2022, which has been certified by our transfer agent, Equiniti Trust Company. Lastly, all shareholders of record at the close of business on September 2, 2022, are entitled to vote here at the annual meeting, so we ask any shareholders who are present and either still holding proxies or wanting to vote here in person, please see Mr. Kretz now. Okay. Mr. Kretz has advised that at this meeting, there are present or in person -- or by proxy at least 110 million shares of Parker common stock, which is a quorum for the transaction of business and represents over 85% of our issued and outstanding shares. So at this time, we'll move on to our voting matters. And for that, I'll turn it back over to Tom as Chairman.

Thank you, Joe. I will now present the matters to be voted on. The first proposal to be voted on is the election of directors to serve for our terms expiring at the annual meeting in 2023. Our Board has nominated and recommends in favor of the following 12 persons as election as Directors of the company: Lee Banks, Jill Evanko, Lance Fritz, Linda Harty, Bill Lacey, Kevin Lobo, Joe Scaminace, Åke Svensson, Laura Thompson, James Verrier, Jim Wainscott, and myself, Tom Williams. The second proposal to be voted on is the approval of the compensation of our named executive officers on a nonbinding advisory basis. Our Board of Directors recommends in favor of this proposal. And a third proposal to be voted on is the ratification of the appointment of Deloitte & Touche, LLP as our independent registered public accounting firm for the fiscal year ending June 30, 2023. Our Board of Directors recommends in favor of this proposal. That concludes the items that will be voted on today. Are there any questions or discussions on the proposals presented for a vote? [Voting]

Inspector of Election will now collect any remaining outstanding ballots or proxy cards. The votes are now in. I declare the polls closed. Joe, please go ahead and review the preliminary voting results.

Okay. Thank you, Tom. Based on the preliminary voting results, each of our director nominees has been elected. The compensation of our named executive officers has been approved on a nonbinding advisory basis. And the appointment of Deloitte & Touche, LLP as our independent registered public accounting firm for fiscal year 2023 has been ratified. Please note that any ballots that are -- have been collected before the polls closed and not reflected in this preliminary report will be reflected in the final report of our Inspector of Election. And the final voting results will be soon available and disclosed on the Form 8-K that will be filed with the U.S. Securities and Exchange Commission after the votes have been certified by our Inspector of Election.

Thank you, Joe. With no further business to be addressed at this meeting, the annual meeting is now adjourned and I'd like to make a few comments and announcements. First, I want to remind everybody that updating -- we'll be updating investors on our first quarter financial performance in the next earnings call, which is November 3, 2022. And second, we have some important organization announcement to make this morning. One of the top priorities for the Board and for me is talent development and succession planning, especially for the CEO position. In coordination with the Board, I've been planning my transition for many years and believe December 31 of this year is the right time to step down as CEO. To enable this and the transition, I plan to continue as Executive Chairman from January 1, 2023, to December 31, 2023, at which time I intend to retire from Parker and from the Board. It has been a real honor to lead this great company. And I'm very thankful for the dedication, the support and the ownership of our team members globally. I have lots of individual [indiscernible], but I will save that for another day. Working together as one global team, we have transformed our company's portfolio and performance to find the purpose of the company in a way that really resonates with our people. And we are well positioned for a very promising future ahead. So who will lead us into this promising future? I am pleased to announce that the Board of Directors has elected effective January 1, 2023, as our new CEO and only the 9th CEO in our history, Jenny Parmentier. Also effective January 1, 2023, the Board approved an increase in the size of the Board from 12 to 13 directors, and the appointment of Jenny as a member of the Board. Jenny will report to the Board of Directors. Jenny is a proven leader with a track record of success in many positions, most recently as our Chief Operating Officer. She has been a Group President of two of our operating groups, has been a general manager twice as well. She's a great person and a great leader and the right person to lead us into the future. Succeeding Jenny, the Board has elected as Chief Operating Officer, effective January 1, 2023, Andy Ross. You can applaud for that. Andy will report to Lee Banks, our Vice Chairman and President. Andy has 24 years of experience with Parker and has been a Group President of two of our operating groups. He's been a Vice President of Sales, he's been a Vice President of Operations and a General Manager of 2 of our divisions. Another great leader who is ready for this next level of responsibility. Jenny, Lee, Andy and Todd Leombruno, our Executive Vice President and CFO, will form the office of chief executive as of January 1, 2023. Succeeding Andy Ross, the Board of Directors has elected effective January 1, 2023, as Vice President and President of Fluid Connectors Group, William Bowman, aka Skip Bowman. Skip was most recently President of Instrumentation Group. He's been the Vice President of Operations twice and a General Manager 3 times. Skip's capabilities and experience make him ideally suited for this role. Going forward, our shareholders should be excited like we are about Parker's promising future. This future will be driven by a deep and talented leadership team, The Win Strategy, our portfolio transformation, our position for growth in key secular trends, our interconnected technologies, and last and most importantly, our people and our culture. Our culture is the real trade secret of Parker, is truly a performance culture where team members think and act like owners of the company, enabling us to perform regardless of the macro environment. I have complete confidence in our team and the promising future ahead. If there are any questions from the floor, we'll now open it up for a brief Q&A.

Yes, sir.