Parker Reports Strong Fiscal 2010 Fourth Quarter and Issues Guidance for Increased Earnings in Fiscal 2011

CLEVELAND, Aug. 3 /PRNewswire-FirstCall/ -- Parker Hannifin Corporation (NYSE: PH), the global leader in motion and control technologies, today reported results for the fiscal 2010 fourth quarter and year ending June 30, 2010.  Fiscal 2010 fourth quarter sales were $2.8 billion, an increase of 26.0 percent from $2.2 billion in the same quarter a year ago.  Net income for the fourth quarter was $222.2 million, compared with $49.5 million in the fourth quarter of fiscal 2009.  Earnings per diluted share for the quarter were $1.35, compared with $0.31 in last year's fourth quarter.   Cash flow from operations in the quarter was $377.4 million, or 13.5 percent of sales, compared with $413.1 million, or 18.7 percent of sales in the fourth quarter of fiscal 2009.  

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"Order levels continued to increase this quarter and showed broad-based improvements across segments and regions both sequentially and year over year," said Chairman, CEO and President Don Washkewicz.   "These contributed to the 27 percent increase in organic sales for the quarter, while foreign currency translation negatively impacted sales by 1 percent.  Our total segment operating margin performance was particularly strong at 13.9 percent.  Additionally, our Industrial North America segment margins reached 15.7 percent reflecting ongoing success in executing our Win Strategy."

Fiscal 2010 sales were $10.0 billion, a decline of 3.1 percent from $10.3 billion in the previous year.  Fiscal 2010 net income increased 9.0 percent to $554.1 million from $508.5 million in fiscal 2009.  Earnings per diluted share increased 8.6 percent to $3.40, compared with $3.13 in the previous year.   Cash flow from operations for fiscal 2010 increased to $1.2 billion, or 12.2 percent of sales, compared with $1.1 billion, or 11.0 percent of sales in the prior year.  

Reflecting on the year, Washkewicz added, "In fiscal year 2010, Parker employees responded decisively to the conditions in our global markets.  Our actions allowed us to deliver on what we committed to our shareholders, which was to produce much improved performance late in the year as order levels improved.   Throughout fiscal year 2010, economic circumstances focused our priorities on managing our business for cash, while maintaining balance sheet strength and targeting 10 percent total segment operating margins.  We were successful across all of these measures.  Fiscal 2010 highlighted how our Win Strategy allowed us to withstand the worst economic downturn in 60 years and still deliver much higher operating margin levels than at the lowest point in past recessions.  Despite being slightly down on revenues, we generated increased operating margins, increased diluted earnings per share and increased cash flow from operations."  

Segment Results

In the Industrial North America segment, fourth-quarter sales increased 33.1 percent to $1.0 billion, and operating income was $162.9 million, compared with $53.7 million in the same period a year ago.   For the full year, Industrial North America sales declined 3.0 percent to $3.6 billion, and operating income increased 23.3 percent to $487.1 million, compared with fiscal 2009.

In the Industrial International segment, fourth-quarter sales increased 30.4 percent to $1.0 billion, and operating income was $140.3 million, compared with a loss of $5.7 million in the same period a year ago.  For the full year, Industrial International sales declined 2.2 percent to $3.8 billion, and operating income increased 12.4 percent to $394.1 million, compared with fiscal 2009.

In the Aerospace segment, fourth-quarter sales increased 5.9 percent to $477.6 million, and operating income increased 9.5 percent to $64.1 million, compared with the same period a year ago. For the full year, Aerospace sales declined 7.4 percent to $1.7 billion, and operating income declined 20.6 percent to $208.0 million, compared with fiscal 2009.

In the Climate & Industrial Controls segment, fourth-quarter sales increased 27.0 percent to $240.3 million, and segment operating income was $20.5 million compared with an operating profit of $0.9 million in the same period a year ago.    For the full year, Climate & Industrial Controls sales increased 2.4 percent to $814.0 million, and the segment reported an operating profit of $53.5 million, compared with an operating loss of $3.7 million in fiscal 2009.

Orders

Parker reported an increase of 35 percent in total orders for the quarter ending June 30, 2010, compared with the same quarter a year ago.  The company reported the following orders by operating segment:  

    --  Orders increased 46 percent in the Industrial North America segment,
        compared with the same quarter a year ago.
    --  Orders increased 46 percent in the Industrial International segment,
        compared with the same quarter a year ago.
    --  Orders declined 3 percent in the Aerospace segment on a rolling 12-month
        average basis.
    --  Orders increased 35 percent in the Climate and Industrial Controls
        segment, compared with the same quarter a year ago.

Outlook

For fiscal 2011, the company has issued guidance for earnings from continuing operations in the range of $3.60 to $4.40 per diluted share.

Washkewicz added, "We are in a very strong position for the year ahead.  Parker has clearly demonstrated its ability to generate strong incremental returns on increased revenues. Our focus will continue to be on executing the Win Strategy, and given our financial flexibility, we anticipate ongoing investments in research and development, international expansion, acquisitions and distribution to grow our business."

NOTICE OF CONFERENCE CALL: Parker Hannifin's conference call and slide presentation to discuss its fiscal 2010 fourth quarter and full year 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 54 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 and 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 results. Among the 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, and changes in contract cost and revenue estimates for new development programs; uncertainties surrounding timing, successful completion or integration of acquisitions; ability to realize anticipated cost savings from business realignment actions; 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 - JUNE 30, 2010

CONSOLIDATED STATEMENT OF INCOME



                            Three Months Ended June   Twelve Months Ended June
                            30,                       30,

(Dollars in thousands
except per share
amounts)                    2010         2009         2010         2009



Net                                                                $
sales                       $ 2,786,470  $ 2,210,958  $ 9,993,166  10,309,015

Cost of sales               2,114,190    1,814,069    7,847,067    8,181,348

Gross
profit                      672,280      396,889      2,146,099    2,127,667

Selling, general and
administrative
expenses                    349,328      302,521      1,277,080    1,290,379

Interest
expense                     26,896       25,275       103,599      112,071

Other expense,
net                         3,896        5,899        10,603       42,134

Income before
income taxes                292,160      63,194       754,817      683,083

Income taxes                69,108       14,801       198,452      172,939

Net
income                      223,052      48,393       556,365      510,144

Less:
Noncontrolling
interests                   889          (1,123)      2,300        1,629

Net income attributable to
common shareholders         $ 222,163    $  49,516    $ 554,065    $ 508,515



Earnings per share
attributable to common
shareholders:

Basic earnings
per share                   $ 1.38       $ .31        $ 3.44       $ 3.15

Diluted
earnings per
share                       $ 1.35       $  .31       $ 3.40       $ 3.13



Average shares
outstanding during
period - Basic              161,310,414  160,472,872  160,909,655  161,564,111

Average shares
outstanding during
period - Diluted            163,997,297  161,548,615  162,901,717  162,719,148



Cash dividends
per common
share                       $ .26        $ .25        $ 1.01       $ 1.00

BUSINESS SEGMENT INFORMATION BY INDUSTRY

                                                      Twelve Months Ended June
                        Three Months Ended June 30,   30,

(Dollars in
thousands)              2010         2009            2010         2009

Net sales

Industrial:

North America           $ 1,034,573  $ 777,464       $ 3,623,460  $ 3,734,613

International           1,033,971    793,163         3,811,464    3,895,874

Aerospace               477,629      451,109         1,744,283    1,883,273

Climate &
Industrial
Controls                240,297      189,222         813,959      795,255

Total                   $ 2,786,470  $ 2,210,958     $ 9,993,166  $ 10,309,015

Segment operating
income



Industrial:

North America           $ 162,933    $ 53,733        $ 487,137    $ 394,923

International           140,295      (5,693)         394,089      350,662

Aerospace               64,052       58,483          208,002      261,953

Climate &
Industrial
Controls                20,513       947             53,452       (3,737)

Total segment
operating income        387,793      107,470         1,142,680    1,003,801

Corporate general and
administrative
expenses                54,911       29,006          153,965      152,118

Income from
operations
before interest

expense and other
expense                 332,882      78,464          988,715      851,683

Interest expense        26,896       25,275          103,599      112,071

Other expense
(income)                13,826       (10,005)        130,299      56,529

Income before
income taxes            $ 292,160    $ 63,194        $ 754,817    $ 683,083

PARKER HANNIFIN CORPORATION - JUNE 30, 2010

CONSOLIDATED BALANCE SHEET



(Dollars in thousands)             June 30,  2010         2009

Assets

Current assets:

Cash and cash equivalents                    $ 575,526    $ 187,611

Accounts receivable, net                     1,599,941    1,417,305

Inventories                                  1,171,655    1,254,550

Prepaid expenses                             111,545      142,335

Deferred income taxes                        130,129      121,980

Total current assets                         3,588,796    3,123,781

Plant and equipment, net                     1,697,881    1,880,554

Goodwill                                     2,786,334    2,903,077

Intangible assets, net                       1,150,051    1,273,862

Other assets                                 687,320      674,628

Total assets                                 $ 9,910,382  $ 9,855,902



Liabilities and equity

Current liabilities:

Notes payable                                $ 363,272    $ 481,467

Accounts payable                             888,743      649,718

Accrued liabilities                          776,527      761,462

Accrued domestic and foreign taxes           176,349      113,107

Total current liabilities                    2,204,891    2,005,754

Long-term debt                               1,413,634    1,839,705

Pensions and other postretirement benefits   1,500,928    1,233,271

Deferred income taxes                        135,321      183,457

Other liabilities                            196,208      243,275

Shareholders' equity                         4,367,965    4,268,199

Noncontrolling interests                     91,435       82,241

Total liabilities and equity                 $ 9,910,382  $ 9,855,902

CONSOLIDATED STATEMENT OF CASH FLOWS

                                                Twelve Months Ended June 30,

(Dollars in thousands)                          2010       2009



Cash flows from operating activities:

Net income                                      $ 556,365  $ 510,144

Depreciation and
amortization                                    362,509    357,737

Share incentive plan
compensation                                    59,318     47,215

Net change in receivables, inventories, and
trade payables                                  92,949     511,797

Net change in other assets and
liabilities                                     155,991    (286,103)

Other, net                                      (8,310)    (11,598)

Net cash provided by operating activities       1,218,822  1,129,192

Cash flows from investing activities:

Acquisitions (net of cash of $24,203 in
2009)                                           (5,451)    (722,635)

Capital expenditures                            (129,222)  (270,733)

Proceeds from sale of plant and equipment       11,929     28,986

Other, net                                      (23,429)   3,551

Net cash (used in) investing activities         (146,173)  (960,831)

Cash flows from financing activities:

Net (payments for) common share activity        (994)      (440,551)

Net (payments for) proceeds from debt           (486,263)  327,778

Dividends                                       (162,739)  (161,575)

Net cash (used in) financing activities         (649,996)  (274,348)

Effect of exchange rate changes on cash         (34,738)   (32,450)

Net increase (decrease) in cash and cash
equivalents                                     387,915    (138,437)

Cash and cash equivalents at beginning of
period                                          187,611    326,048

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

SOURCE Parker Hannifin Corporation