Parker Reports Record Fiscal 2011 Third Quarter Sales, Net Income and Earnings per Share and Increases Dividend 16 Percent

CLEVELAND, April 27, 2011 /PRNewswire/ -- Parker Hannifin Corporation (NYSE: PH), the global leader in motion and control technologies, today reported record results for the fiscal 2011 third quarter ended March 31, 2011.  Fiscal 2011 third quarter sales were $3.2 billion, a third quarter record representing an increase of 23.9 percent from $2.6 billion in the same quarter a year ago.  Net income was an all-time quarterly record of $281.6 million, an increase of 82.4 percent from $154.4 million in the third quarter of fiscal 2010.  Earnings per diluted share for the quarter were also an all-time quarterly record at $1.68, compared with $0.94 in last year's third quarter.   Cash flow from operations for the first nine months of fiscal 2011 was $799.9 million, or 9.0 percent of sales, compared with cash flow from operations of $841.4 million, or 11.7 percent of sales in the prior year period.

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"Our third quarter performance reflects the continued strength that we see across our end markets and regions and our ability to leverage that strength into higher operating margins and record quarterly earnings per share," said Chairman, CEO and President Don Washkewicz.   "Customer orders also increased significantly in the quarter.  All segments reported a double-digit increase in sales and order levels. Total organic sales increased 21 percent in the quarter with acquisitions contributing 1 percent and currency contributing 2 percent. Margin performance was also a positive as total segment operating margin was a third quarter record of 14.8 percent, led by Industrial North America segment margin of 16.1 percent and Industrial International segment margin of 15.5 percent.  Further reflecting our continued strong balance sheet and cash flow, the Board of Directors today approved a 16 percent increase in our quarterly dividend from 32 cents to 37 cents per common share."

Segment Results

In the Industrial North America segment, third quarter sales increased 23.0 percent to $1.2 billion, and operating income was $189.5 million compared with $133.6 million in the same period a year ago.  

In the Industrial International segment, third quarter sales increased 29.9 percent to $1.3 billion, and operating income was $199.8 million compared with $109.3 million in the same period a year ago.  

In the Aerospace segment, third quarter sales increased 12.1 percent to $503.8 million, and operating income was $69.0 million compared with $49.8 million in the same period a year ago.

In the Climate and Industrial Controls segment, third quarter sales increased 24.9 percent to $264.5 million, and operating income was $22.6 million compared with $16.3 million in the same period a year ago.    

Orders

Parker reported an increase of 24 percent in total orders for the quarter ended March 31, 2011, compared with the same quarter a year ago.  The company reported the following orders by operating segment:  

    --  Orders increased 20 percent in the Industrial North America segment,
        compared with the same quarter a year ago.
    --  Orders increased 22 percent in the Industrial International segment,
        compared with the same quarter a year ago.
    --  Orders increased 44 percent in the Aerospace segment on a rolling
        12-month average basis.
    --  Orders increased 14 percent in the Climate and Industrial Controls
        segment, compared with the same quarter a year ago.

Outlook

For fiscal 2011, the company has increased guidance for earnings from continuing operations from the previous range of $5.80 to $6.20 per diluted share to a new range of $6.20 to $6.40 per diluted share.

Washkewicz added, "Our performance year-to-date reflects the ongoing economic recovery and the continued execution of our Win Strategy, now in its tenth year.  Parker continues to position itself favorably for continued earnings growth by focusing on premier service to our customers, lean operations and ongoing investments in leading edge innovations across the company. Parker expects to deliver record earnings in fiscal 2011, with a strong order backlog going into fiscal year 2012."  

NOTICE OF CONFERENCE CALL: Parker Hannifin's conference call and slide presentation to discuss its fiscal 2011 third quarter results are available to all interested parties via live webcast today at 10:00 a.m. ET, on the company's investor information web site at www.phstock.com. To access the call, click on the "Live Webcast" link. From this link, users also may complete a pre-call system test and register for e-mail notification of future events and information available from Parker.  A replay of the conference call will also be available at www.phstock.com for one year after the call.

With annual sales of $10 billion in fiscal year 2010, Parker Hannifin is the world's leading diversified manufacturer of motion and control technologies and systems, providing precision-engineered solutions for a wide variety of mobile, industrial and aerospace markets. The company employs approximately 55,000 people in 46 countries around the world. Parker has increased its annual dividends paid to shareholders for 55 consecutive fiscal years, among the top five longest-running dividend-increase records in the S&P 500 index. For more information, visit the company's web site at www.parker.com, or its investor information web site at www.phstock.com.

Notes on Orders

Orders provide near-term perspective on the company's outlook, particularly when viewed in the context of prior and future quarterly order rates. However, orders are not in themselves an indication of future performance. All comparisons are at constant currency exchange rates, with the prior year restated to the current-year rates. All exclude acquisitions until they can be reflected in both the numerator and denominator. Aerospace comparisons are rolling 12-month average computations. The total Parker orders number is derived from a weighted average of the year-over-year quarterly percent change in orders for the Industrial North America, Industrial International, and Climate and Industrial Controls segments, and the year-over-year 12-month rolling average of orders for the Aerospace segment.

Forward-Looking Statements

Forward-looking statements contained in this and other written and oral reports are made based on known events and circumstances at the time of release, and as such, are subject in the future to unforeseen uncertainties and risks. All statements regarding future performance, earnings projections, events or developments are forward-looking statements. It is possible that the future performance and earnings projections of the company, including its individual segments, may differ materially from current expectations, depending on economic conditions within its mobile, industrial and aerospace markets, and the company's ability to maintain and achieve anticipated benefits associated with announced realignment activities, strategic initiatives to improve operating margins, actions taken to combat the effects of the current economic environment, and growth, innovation and global diversification initiatives. A change in economic conditions in individual markets may have a particularly volatile effect on segment performance. Among other factors which may affect future performance are: changes in business relationships with and purchases by or from major customers, suppliers or distributors, including delays or cancellations in shipments, disputes regarding contract terms or significant changes in financial condition, changes in contract cost and revenue estimates for new development programs and changes in product mix; uncertainties surrounding timing, successful completion or integration of acquisitions; ability to realize anticipated costs savings from business realignment activities; threats associated with and efforts to combat terrorism; uncertainties surrounding the ultimate resolution of outstanding legal proceedings, including the outcome of any appeals; competitive market conditions and resulting effects on sales and pricing; increases in raw material costs that cannot be recovered in product pricing; the company's ability to manage costs related to insurance and employee retirement and health care benefits; and global economic factors, including manufacturing activity, air travel trends, currency exchange rates, difficulties entering new markets and general economic conditions such as inflation, deflation, interest rates and credit availability. The company makes these statements as of the date of this disclosure, and undertakes no obligation to update them unless otherwise required by law.

PARKER HANNIFIN CORPORATION - MARCH 31, 2011

CONSOLIDATED STATEMENT OF INCOME

(Unaudited)

                      Three Months Ended March 31,  Nine Months Ended March 31,

(Dollars in thousands
except per share
amounts)              2011          2010            2011         2010



Net sales             $ 3,240,103   $ 2,614,823     $ 8,936,040  $ 7,206,696

Cost of sales         2,463,083     2,062,451       6,796,685    5,732,877

Gross profit          777,020       552,372         2,139,355    1,473,819

Selling, general and
administrative
expenses              375,069       316,069         1,054,332    927,752

Interest expense      24,619        25,951          74,883       76,703

Other (income)
expense, net          (12,385)      3,959           (22,191)     6,707

Income before income
taxes                 389,717       206,393         1,032,331    462,657

Income taxes          108,069       52,013          269,835      129,344

Net income            281,648       154,380         762,496      333,313

Less: Noncontrolling
interests             2,059         517             5,556        1,411

Net income
attributable to
common shareholders   $ 279,589     $ 153,863       $ 756,940    $ 331,902



Earnings per share
attributable to
common shareholders:

Basic earnings per
share                 $ 1.72        $ .96           $ 4.68       $ 2.06

Diluted earnings per
share                 $ 1.68        $ .94           $ 4.58       $ 2.04



Average shares
outstanding during
period - Basic        162,160,426   160,931,123     161,711,394  160,776,068

Average shares
outstanding during
period - Diluted      166,690,347   163,632,703     165,270,482  162,698,305



Cash dividends per
common share          $ .32         $ .25           $ .88        $ .75





BUSINESS SEGMENT
INFORMATION BY
INDUSTRY

(Unaudited)           Three Months Ended March 31,  Nine Months Ended March 31,

(Dollars in
thousands)            2011           2010           2011         2010

Net sales

Industrial:

North America         $ 1,178,714    $ 958,594      $ 3,289,098  $ 2,588,887

International         1,293,047      995,186        3,533,259    2,777,493

Aerospace             503,806        449,247        1,400,116    1,266,654

Climate & Industrial
Controls              264,536        211,796        713,567      573,662

Total                 $ 3,240,103    $ 2,614,823    $ 8,936,040  $ 7,206,696

Segment operating
income



Industrial:

North America         $ 189,463      $ 133,598      $ 538,254    $ 324,204

International         199,798        109,335        551,374      253,794

Aerospace             68,984         49,778         176,404      143,950

Climate & Industrial
Controls              22,577         16,298         53,630       32,939

Total segment
operating income      480,822        309,009        1,319,662    754,887

Corporate general and
administrative
expenses              41,734         41,280         112,681      99,054

Income from
operations before
interest

expense and other     439,088        267,729        1,206,981    655,833

Interest expense      24,619         25,951         74,883       76,703

Other expense         24,752         35,385         99,767       116,473

Income before income
taxes                 $ 389,717      $ 206,393      $ 1,032,331  $ 462,657







CONSOLIDATED BALANCE
SHEET

(Unaudited)           March 31,      March 31,      June 30,

(Dollars in
thousands)            2011           2010           2010

Assets

Current assets:

Cash and cash
equivalents           $ 1,107,955    $ 380,561      $ 575,526

Accounts receivable,
net                   1,950,980      1,563,150      1,599,941

Inventories           1,390,862      1,196,558      1,171,655

Prepaid expenses      89,692         90,153         111,545

Deferred income taxes 151,840        123,906        130,129

Total current assets  4,691,329      3,354,328      3,588,796

Plant and equipment,
net                   1,788,377      1,782,426      1,697,881

Goodwill              2,976,232      2,882,709      2,786,334

Intangible assets,
net                   1,191,072      1,207,440      1,150,051

Other assets          729,852        631,345        687,320

Total assets          $ 11,376,862   $ 9,858,248    $ 9,910,382



Liabilities and
equity

Current liabilities:

Notes payable         $ 173,233      $ 366,684      $ 363,272

Accounts payable      1,085,126      785,244        888,743

Accrued liabilities   844,852        748,955        776,527

Accrued domestic and
foreign taxes         237,209        171,092        176,349

Total current
liabilities           2,340,420      2,071,975      2,204,891

Long-term debt        1,683,731      1,535,905      1,413,634

Pensions and other
postretirement
benefits              1,341,920      1,151,046      1,500,928

Deferred income taxes 159,777        177,512        135,321

Other liabilities     267,285        226,266        196,208

Shareholders' equity  5,481,908      4,609,629      4,367,965

Noncontrolling
interests             101,821        85,915         91,435

Total liabilities and
equity                $ 11,376,862   $ 9,858,248    $ 9,910,382





CONSOLIDATED
STATEMENT OF CASH
FLOWS

(Unaudited)           Nine Months Ended March 31,

(Dollars in
thousands)            2011           2010



Cash flows from
operating activities:

Net income            $ 762,496      $ 333,313

Depreciation and
amortization          254,125        278,015

Share incentive plan
compensation          56,792         48,145

Net change in
receivables,
inventories, and
trade payables        (239,968)      61,432

Net change in other
assets and
liabilities           (35,202)       117,870

Other, net            1,690          2,622

Net cash provided by
operating activities  799,933        841,397

Cash flows from
investing activities:

Acquisitions (net of
cash of $385 in 2011) (60,227)       (5,451)

Capital expenditures  (158,455)      (90,862)

Proceeds from sale of
plant and equipment   23,818         4,054

Other, net            (8,251)        (12,184)

Net cash (used in)
investing activities  (203,115)      (104,443)

Cash flows from
financing activities:

Net proceeds from
(payments for) common
share activity        4,198          (4,178)

Net proceeds from
(payments for) debt   15,035         (409,363)

Dividends             (142,906)      (120,786)

Net cash (used in)
financing activities  (123,673)      (534,327)

Effect of exchange
rate changes on cash  59,284         (9,677)

Net increase in cash
and cash equivalents  532,429        192,950

Cash and cash
equivalents at
beginning of period   575,526        187,611

Cash and cash
equivalents at end of
period                $ 1,107,955    $ 380,561

SOURCE Parker Hannifin Corporation