Parker Hannifin Corporation will please come to order. I would like to welcome all of our shareholders who are here in person as well as those participating via the webcast. I am Tom Williams, Chairman of the Board and Chief Executive Officer of the company, and I will be presiding at this meeting. At my left is Joe Leonti, Vice President, General Counsel and Secretary of the company, who will act as secretary of the meeting. First, I'd like to introduce our Director nominees and other company representatives who are present at today's meeting.
The 10 nominees for election as our Directors are Lee Banks, President and Chief Operating Officer Bob Baughn Linda Hardy Kevin Lobo Andy Ober, Joe Sciminasi, Oke Swenson, James Barrier, Jim Wainscott and myself. Also here with us are 3 current directors who will be retiring from our Board as of today, Bob Kohlhepp, Klaus Peter Mueller and Will Schmidt. And I'd like to take the opportunity here in public, we did it last night at a retirement dinner to congratulate and thank the 3 retiring directors for their service for many, many years and congratulate them and wish them all the best in the future. It's nice to get a round of applause at a shareholder meeting. Along with Lee, Joe and myself, our other company executives present today are Cathy Seaver, Executive Vice President, Finance and Administration and Chief Financial Officer Mark Hart, Executive Vice President, Human Resources and External Affairs Skip Bowman, Vice President, President, Instrumentation Group Robin Davenport, Vice President, Corporate Finance Bill Eline, Vice President, Chief Information Officer Tomjan Pill, Vice President, Global Supply Chain Joakim Gue, President, Europe, Middle East and Africa Kirk Keller, Vice President Todd Lambrunno, Vice President, Controller Canada Lima, President, Latin America Group Rob Malone, Vice President and President, Filtration Group Craig Maxwell, Vice President, Chief Technology and Information Officer Michael O'Hara, Vice President, Global Sales and Marketing Jenny Palmertiere, Vice President and President, Engineering Materials Group Andy Ross, Vice President and President of the Fluid Connectors Group Roger Sherrard, Vice President and President of the Aerospace Group Michael We, President of Asia Pacific Group and Andy Weeks, Vice President, President of Motion Systems Group.
In addition to our Board and executive team, Lang Johnston, a representative of Corporate Election Services, as President has been appointed to act as Inspector of Election of this meeting and Bill Snyder, a Representative from Deloitte and Tuchel LP, our independent registered public accounting firm is also present. Bill will be here to make a statement if he so chooses and is available to answer any appropriate questions concerning the company's financial statements during the question and answer period at the end of the meeting. That concludes the list of our director nominees and other company representatives here in person. 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. First, for those of you here in person, you were provided with an agenda and a list
of the rules of conduct on
the back of the agenda for this meeting. To ensure an orderly meeting, we need everyone to abide by those rules of conduct. 2nd, concerning the order of this morning's events, we'll conduct the annual meeting first. And after we adjourn, Tom will take a few minutes to comment on our fiscal year 2018 and our progress and objectives under the wind strategy, followed by a brief question and answer period. 3rd, please note that in my capacity as secretary, I've delivered and present the following in connection with this annual meeting: the minutes of our last annual meeting of shareholders, which was held on October 25, 2017 the financial statements of the company for fiscal year ended June 30, 2018, certified by Deloitte and Touche, LLP an affidavit of mailing establishing the notice of this annual meeting was duly given and finally, a list of company shareholders of record as of August 31, 2018, certified by our transfer agent, Aquinity Trust Company.
Each of these items will be referenced and incorporated into the minutes of the meeting. And finally, all shareholders of record at the close of business on August 31, 2018, are entitled to vote at this meeting. All persons holding proxies are requested to give their proxies to Mr. Johnson as their Inspector of Election. All shareholders present who wish to vote in person any matter to come before this meeting and who have not already advised Mr.
Johnston and received their ballots and instructions, please see him now. Okay. Mr. Johnston, how many shares are present?
They are present in person or by proxy at this meeting at least 118,000,000 shares of common stock, a quorum for the transaction of business representing over 89% of the shares issued and outstanding.
Thank you, Mr. Johnston. At this time, we'll move on to our voting matters. So I'll turn it back over to Tom as Chairman.
Thank you, Joe. The first proposal to be voted on is the election of directors to serve for terms expiring at our Annual Meeting of Shareholders of 2019. Our Board is nominated for election of the following 10 persons as Directors of the company: Lee C. Banks, Robert G. Bon, Linda S.
Hardy, Kevin A. Lobo, Candy M. Obern, Joseph Scamanesi, O. P. Swenson, James R.
Barriere, James L. Wainscott and myself, Thomas L. Williams. The second proposal to be voted on is the ratification of the appointment of Deloitte and Touche LLP as our independent registered public accounting firm for the fiscal year ending June 30, 2019. Our Board of Directors recommend in favor of such ratification.
The 3rd proposal to be voted on is the approval on a non binding advisory basis of the compensation of our named executive officers. Our Board of Directors recommends in favor of such approval. The 4th proposal to be voted on is the approval of an amendment to our code of regulations to permit proxy access. Our Board of Directors recommends in favor of such approval. The 5th proposal to be voted on is the approval of an amendment to our code of regulations to allow the Board to amend our code of regulations to the extent permitted by Ohio law.
Our Board of Directors recommends in favor of such approval. Are there any questions or discussions on the proposals presented for a vote? Okay. That concludes the items that will be voted on today. Inspector of Election will now collect any outstanding ballots or proxy cards.
Looks like there's none. Both are now in, and I declare the polls closed. Joe, please go ahead and review the preliminary voting results. Okay. Thanks, Tom.
Based on the preliminary voting results, each of the director nominees has been elected. The appointment of Deloitte and Touche LLP as our independent registered public accounting firm for fiscal year 2019 has been ratified. The compensation of our named executive officers has been approved on a non binding advisory basis. The amendment to our code of regulations to permit proxy access has been approved. And the amendment to our code of regulations to allow the Board to amend our code of regulations to the extent permitted by Ohio law has been approved.
Please note that any ballots collected before the polls closed and not reflected in this preliminary report will be reflected in the final report of our Inspector of Election. The final results will be ultimately available and disclosed on a Form 8 ks 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. Is there any further business to come before the Annual Meeting? If not, the Annual Meeting is now adjourned. I will take a few minutes to comment on fiscal 2018 and our progress along the Win Strategy, followed by a brief Q and A period. Okay.
So I think everybody is familiar with the forward looking statement, the Safe Harbor statement. You can reference that as you get time. There's 3 things I want to cover this morning. First, there's a couple of key messages I want to talk about last year, how we see the future. We'll cover the year in a little more detail and then we'll talk about the future in a little more detail.
So key messages. Last year was a great year. I think as shareholders, you should be proud of the team that put up these results. There's all time records for sales, EPS, CFOA, cash flow from operating activities and operating margin. And we really had a strong organic growth.
We grew organically about 8.5%. The performance of the company was very strong. As we look at 2019, we're projecting the same thing, records in EPS, CFOA and operating margin and sales as well. We got our Q1 earnings call next week, November 1, and we'll give you an update on the details at that point. But the key point I want to mention is we've made a tremendous amount of progress and while we're excited about that, very early days of the Win Strategy still.
And so much so, the combination of progress and where we think we can go has allowed us to update the new financial targets, which I'll highlight for FY 2023, which I think are pretty compelling for our shareholders. So let's talk about last year's results. Starting with safety as we always do, we're after building a 0 accident environment, 0 incidents, and that's what we're trying to do. We're not going to be happy to this number is 0, but we saw a significant reduction in 21% of injuries, which is good progress towards that goal. Looking at the financials, remember I mentioned the records, I tried to circle the records here.
So you can see the sales $14,300,000,000 And of significance here and what I really like, if you look at last year's sales at $12,000,000,000 we just skipped the 13s. It's just nice to just skip $1,000,000,000 I can't commit to shareholders that we're going to do that every year, but it's a nice thing to do, so 19% growth. The 15.7% operating margin was an all time record and so was the EPS. This is as reported, so there's no adjustments for taxes and restructuring. I think the significance of both the operating margin and EPS is pretty impactful.
So if you think about operating margin, the last all time record was FY 2012 at 15.2%. We have significantly more restructuring this year than we had back then. So we beat that all time record by 50 basis points in a period of much greater restructuring. And then the EPS number, dollars 7.83 we had 2 big tax events. Of course, everybody is familiar with the Tax Reform Act that impacted most companies.
And if you take that with the facet divestiture and the tax impact of that, it's about $2.10 So we had a negative $2.10 and still delivered an all time record EPS for the company. That's like saying we're just going to have a race a quarter and still try to beat the all time record. So that's pretty significant. It's a little bit easier when you look at this next slide because we adjust that out. So this is apples to apples picking out restructuring and any tax related one time events.
And I would just call your attention to the green box and this is the change year over year looking at it and it just shows you that the team did a pretty nice job, pretty compelling numbers here. And obviously, the goal is to keep doing that. So let's talk about the future. Let's talk about it kind of at a high level. When we think about the Win Strategy, there's 2 main things we're trying to do to frame all the strategies within the companies underneath the 1 strategy versus to be a top quartile company versus our proxy peers.
Shareholders have choices. People have choices of where they want to work, customers have choices of where they want to buy, etcetera, etcetera. And if you want to be at the top of that list, be a top quartile company. We want to be known as a company that generates cash in a great fashion and deploys cash on behalf of our shareholders in a fashion that creates a lot of value. The combination of the progress you saw last year and the last several years in addition to the changes to the Win Strategy has allowed us to update our 5 year target as a company.
So the very first IR day that we had when Lee and I started our roles was in 2015, and we rolled out the 5 year targets, which you see in the middle column there, the FY 2020 targets. We are basically about 2 years ahead of schedule. We are about 2 years ahead of trying to achieve these goals. As a result, we wanted to update a new 5 year vision, which we laid out at Investor Day in March of this year. And you can see the numbers that changed year over year we put in gold.
Growth, we want to continue to grow 150 basis points faster than global industrial production in the next that's what GIPI stands for. It's a proxy for the market. That continues to be a best in practice target, 150 basis points over the cycle. 19% segment operating margin is the new target for the company over the next 5 years. A lot of shareholders, if you would remember, for years years, the target was 15%.
We raised it to 17% and now we're raising it again to 19%. So in a period of about 3 years, we've raised the target 2 times, pretty significant. EBITDA margin, we didn't have as a target in FY 2020, so we're adding that 20% of the top quartile number there. Free cash flow conversion is still best in class. Anything you can do over 100%, that's best in class.
We want to continue that. And when we do all these things, we're going to generate an EPS CAGR over this period of time with a little bit of capital deployment on top of that in the 10% plus range. So it would be a very compelling EPS growth over the next 5 years. How do we do it? What makes us stand out in the crowd?
Why would you want to be part of our team? Why would you want to own our shares? And this is the short list. It starts with the Win Strategy, which is the business system of the company. It's the operating system of the company.
It is how we do what we do. But there's a lot of structural things that makes us stand out in the crowd. And the first is our divisional structure. We are decentralized, which the beauty of that is we have people close to the P and L, close to the customers and that creates a lot more intimacy with what's going on. We have the best distribution channel in the world in the motion control space and we continue to see opportunities internationally to build that out.
A lot
of what we ship to our
customers has a very high element of intellectual property, either patents, trade secret processes and tooling, trade secret materials. It's what makes the company special is that it's hard to replicate what we do. We're globally balanced. We can serve the customers around the world. And with concerns about tariffs and trade issues, our supply chain is balanced around the world.
We make, buy and sell in region for the region, which really helps offset a lot of those challenges. And we have the broadest breadth of technologies and capabilities compared to any of our competitors. So we can solve problems at a much higher level than anybody else does and allows us to create more value for our customers. So this is our list of competitive advantages, really the strategic positioning was to how we win versus our competitors and what should attract shareholders be part of our company. So I talked about the Win Strategy being the business system of the company, and I could spend a long time talking about the Win Strategy.
So what I want to cover is the first goal, the engaged people part of the Win Strategy, which is really what sets the whole rest of the cadence across the Win Strategy. And it starts with a picture of a lot of celebrations that we took in 2017. Our Mine shareholders were in our 101st year, but last year we celebrated turning 100. And these are some snapshots of people celebrating that last year, but the engaged people strategy and initiatives underneath there is a clear cultural competitive advantage for our company. It's something that's been decades in the making.
It's what makes us special, what makes us different. And at the end of the day, it's all about people and how people take care of our customers and our shareholders. So I want to talk a little bit about that as far as what the key strategies are. And there's really 3. The first is our high performance team concept, which is the belief which we firmly believe in is that the people that do the work know better than anybody else how to get things done, how to improve things, whether you sit in a factory, you sit in a warehouse or you're in an office, you're part of a high performance team that you're going to have a piece of the pie, you're going to have responsibility for your cell, your natural work team, your values team, whatever the case may be.
And we're going to design what that team is going to be responsible for and the team is going to take ownership of those things. The other part is we're trying to drive that concept of engagement and that leadership linkage down as low as we possibly can, so that our leaders get feedback. Every year we do a survey and how our team members feel about how the company is doing, how we're progressing, things we can improve upon. We want that leadership feedback on how we're doing. So we're doing that every year.
We're going to continue to drive that down. And we're going to focus on the frontline leaders. The frontline leaders are the sergeants and lieutenants of the Army. The generals like to think we're running the place, but the sergeants and lieutenants are running the business. So we help the frontline leaders be more successful, help them do their job, listen to them, explain what we're trying to do, add them be part of the solution, help them lead the high performance teams, that's what we're after.
Long story short, the whole engagement initiative is about creating owners. It's about creating an ownership culture and ownership mindset. And you might say, why should you care about that? You think about the difference between being an owner and just being at work. If you're an owner, you think differently than if you're an employee.
And most of the times you'll hear me describe our people as team members. We want team members to think and act like an owner because when you're an owner, there's a level of caring, there's a level of intimacy, is a more inspirational effort and there's a lot of input that comes in when you're an owner. That will drive performance. When you think about the circle performance, it's engagement, it's that ownership, it's going to drive financial performance, it's going to drive safety, it's going to drive all those type of things. That's why I spent time on this because this is the first goal, but it lifts up the performance of the entire company.
So I think the people that are going to be in this video can do a much better job than what I did, just trying to describe the impact of that. So the video you're going to see, every year I try to at the shareholder meeting show a video and usually I have Craig up here showcasing our technologies, our innovative products and we're still very excited about that. This time we're going to showcase our people And you're going to see 2 things. You're going to see the power of engagement and the power of the Win Strategy because that's a lot of what the comments are from the people that are in this video. So take a listen.
Parker is a global leader in motion control technologies.
We produce products and sell to every country in the world.
What I like to tell people is that we're part of your everyday life.
We help better the lives of people around the world. We really are
here to engineer your success. Engaged people is what it all starts with.
Engagement to me is when you really care about what you do when you come to Earth.
I've been here for 42 years, and I've always felt I had a voice.
When you listen to people, you give them the chance to talk. They feel more engaged. They feel they're part of a bigger picture.
Taking ownership and having that entrepreneurial mindset means that we can make changes to make things better.
All the value streams have a high performance team, and they're put together to try and help solve problems. I love our HBT teams, small teams making improvements, making the quality better.
It gives us room to improve. It helps to bring everyone together.
Working together on the right things, getting that engaged feeling that what you're working on is going to make a difference at the end of the day.
Safety is a priority here.
Safety is number 1. And as you noticed, when you first came down the drive, we had a sign that says safety starts here. It's just the environment
that makes you feel like they're on your side and making sure that you're gonna go home the same way you showed up for work at day. Premier customer experience means quality. We have great products, good quality, and we deliver on time.
We always want to try to get better.
When we talk about premier customer experience, what we're talking about is engaging ourselves with our customers, making their problems our number one priority.
How can we satisfy our customers' needs throughout the entire course of our business dealings with them?
Exceed our customer expansion every day in every single day.
We are all part of the win strategy here, and that's what I love about the corporation.
The Win Strategy is that glue that kind of brings us all together.
Everybody's working together at the same goal.
The values that they hold that are in the Win Strategy, there's no other company that I'd rather work for.
Parker is a great place to work. It's a great company. I have not enough words to describe. We do a lot of stuff for community. We do a lot of stuff for each other.
It's like a family. It really is.
I like Parker because it's a company who respect people and allow people to grow.
There's a lot of people that have been here for years and people don't stick around if the company is not good.
I feel like the work we do makes a difference. I brag about that all the time. From fluid connectors to electronics to particles and turbine engines.
I now know that when I board an aircraft, I feel safe. It feels great to be a part of a winning team.
Everybody likes to win, and I've been a part of this winning team for a long time.
Parker, engineering. Engineering. Engineering. Your success. Your success.
Engineering. Your success.
See, I told you to do a better job than I did. Great video, great people. So that concludes my presentation. I just want to say thank you to all our team members around the world for their hard work last year. I'll thank you in advance for FY 2019, thank the Board for all their effort on behalf of the shareholders.
And I want to especially thank our shareholders because without you and your ownership, we're not here. So thank you.
Have a
great day. I'll take questions for anybody at the end that wants to ask me some questions. I'll let the management team here, but that concludes our session. Thank you very much.