Parker Reports Fiscal 2010 Third Quarter Results and Raises Guidance for the Year

CLEVELAND, April 20 /PRNewswire-FirstCall/ --

    --  Operating margins drive a significant year-over-year increase in
    --  Cash flow remains strong
    --  Recovery in demand reflected in increased order rates

Parker Hannifin Corporation (NYSE: PH), the global leader in motion and control technologies, today reported results for the fiscal 2010 third quarter ending March 31, 2010.  Fiscal 2010 third quarter sales were $2.6 billion, an increase of 11.0 percent compared with the second quarter of fiscal 2010 and an increase of 11.5 percent from $2.3 billion in the third quarter a year ago.  Fiscal 2010 third quarter net income was $153.9 million, an increase of 47.2 percent compared with the second quarter of fiscal 2010 and an increase of 188.0 percent compared with $53.4 million in the third quarter of fiscal 2009.  Fiscal 2010 third quarter earnings per diluted share were $0.94, an increase of 46.9 percent from the second quarter of fiscal 2010 and an increase of 183.4 percent compared with $0.33 in the third quarter a year ago.   Cash flow from operations for the first nine months of fiscal 2010 was $841.4 million, or 11.7 percent of sales, compared with $716.1 million, or 8.8 percent of sales in the same prior year period.  

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"It is very encouraging to see that performance continues to trend in the right direction with sequential improvements in sales and earnings for the third consecutive quarter, as well as a year-over-year increase in sales and earnings," said Chairman, CEO and President Don Washkewicz.  "Year-over-year organic sales in the quarter increased 7.9 percent and currency translation positively impacted sales by 3.6 percent. The company's continuing actions to restructure operations and control costs are yielding strong results in this recovering economy.   Segment operating margins were 11.8 percent for the quarter, while incremental marginal return on sales, reflecting the change in operating profit as a percentage of the change in sales, was 51.6 percent this quarter. Year-to-date operating cash flow as a percentage of sales was well above our 10 percent target and this was after a $100 million discretionary contribution to the company's pension plan.  

"Order levels are improving across most of our markets and regions, which give us confidence that the global economic recovery is sustainable.  Current demand levels will support continued positive financial performance for the remainder of the fiscal year.  The company will continue to focus on driving margin performance, generating strong cash flow and serving our customers globally."

Segment Results

In the Industrial North America segment, third quarter sales increased 11.9 percent to $958.6 million, and operating income increased 82.8 percent to $133.6 million, compared with the same period a year ago.  

In the Industrial International segment, third quarter sales increased 18.9 percent to $995.2 million, and operating income increased 185.6 percent to $109.3 million compared with the same period a year ago.  

In the Aerospace segment, third quarter sales declined 6.4 percent to $449.2 million, and operating income declined 24.2 percent to $49.8 million, compared with the same period a year ago.   Aerospace results were primarily impacted by lower commercial MRO sales and continued weakness in the business and regional aircraft markets.

In the Climate & Industrial Controls segment, third quarter sales increased 23.9 percent to $211.8 million, and operating income increased 321.2 percent to $16.3 million, compared with the same period a year ago.    


Parker reported an increase of 23 percent in total orders for the quarter ending March 31, 2010, compared with the same quarter a year ago.  The company reported the following orders by operating segment:  

    --  Orders increased 30 percent in the Industrial North America segment,
        compared with the same quarter a year ago.
    --  Orders increased 42 percent in the Industrial International segment,
        compared with the same quarter a year ago.
    --  Orders declined 22 percent in the Aerospace segment on a rolling
        12-month average basis.
    --  Orders increased 38 percent in the Climate and Industrial Controls
        segment, compared with the same quarter a year ago.


For fiscal 2010, the company increased its guidance for earnings from continuing operations to the range of $2.95 to $3.15 per diluted share.

Washkewicz added, "We anticipate closing the year strongly and look forward to a more stable environment in the next fiscal year.  Reflecting on performance during the deepest global recession since the great depression of the 1930's, I am extremely proud of Parker Hannifin employees around the world.  Not only did their dedication to our Win Strategy help prepare us for the downturn, but their decisive actions to manage through the recession and emerge even stronger are a credit to their tenacity and focus. Thanks to the strong cash flow our employees have helped generate, we were able to voluntarily allocate $100 million to their pension fund assets this quarter. We also have been effective in raising margin performance at the bottom of each of the last three recessions. Looking ahead to the coming years, our employees have a renewed focus on targeting new heights for financial performance and growth as the global economic recovery unfolds.  Reflecting confidence in our outlook, last week our Board approved an increase in our dividend for the 54th consecutive fiscal year."

NOTICE OF CONFERENCE CALL: Parker Hannifin's conference call and slide presentation to discuss its fiscal 2010 third quarter results are available to all interested parties via live webcast today at 9:00 a.m. ET, on the company's investor information web site, 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 for one year after the call.

With annual sales exceeding $10 billion in fiscal year 2009, 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 52,000 people in 48 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, or its investor information web site at

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; 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.




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

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

Net sales             $ 2,614,823  $ 2,344,713      $ 7,206,696  $ 8,098,057

Cost of sales         2,062,451    1,908,607        5,732,877    6,367,279

Gross profit          552,372      436,106          1,473,819    1,730,778

Selling, general and
expenses              316,069      317,992          927,752      987,858

Interest expense      25,951       28,393           76,703       86,796

Other expense, net    3,959        27,453           6,707        36,235

Income before income
taxes                 206,393      62,268           462,657      619,889

Income taxes          52,013       9,113            129,344      158,138

Net income            154,380      53,155           333,313      461,751

Less: Noncontrolling
interests             517          (267)            1,411        2,752

Net income
attributable to
common shareholders   $ 153,863    $ 53,422         $ 331,902    $ 458,999

Earnings per share
attributable to
common shareholders:

Basic earnings per
share                 $ .96        $ .33            $ 2.06       $ 2.83

Diluted earnings per
share                 $ .94        $ .33            $ 2.04       $ 2.81

Average shares
outstanding during
period - Basic        160,931,123  160,529,032      160,776,068  161,927,857

Average shares
outstanding during
period - Diluted      163,632,703  161,011,156      162,698,305  163,103,396

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


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

(Dollars in
thousands)            2010         2009             2010         2009

Net sales


North America         $ 958,594    $ 857,032        $ 2,588,887  $ 2,957,149

International         995,186      836,778          2,777,493    3,102,711

Aerospace             449,247      480,024          1,266,654    1,432,164

Climate & Industrial
Controls              211,796      170,879          573,662      606,033

Total                 $ 2,614,823  $ 2,344,713      $ 7,206,696  $ 8,098,057

Segment operating


North America         $ 133,598    $ 73,089         $ 324,204    $ 341,190

International         109,335      38,281           253,794      356,355

Aerospace             49,778       65,664           143,950      203,470

Climate & Industrial
Controls              16,298       (7,369)          32,939       (4,684)

Total segment
operating income      309,009      169,665          754,887      896,331

Corporate general
and administrative
expenses              41,280       40,366           99,054       123,112

Income from
operations before

expense and other     267,729      129,299          655,833      773,219

Interest expense      25,951       28,393           76,703       86,796

Other expense         35,385       38,638           116,473      66,534

Income before income
taxes                 $ 206,393    $ 62,268         $ 462,657    $ 619,889




(Dollars in thousands) March 31,            2010         2009


Current assets:

Cash and cash equivalents                   $ 380,561    $ 166,548

Accounts receivable, net                    1,563,150    1,532,232

Inventories                                 1,196,558    1,335,186

Prepaid expenses                            90,153       151,500

Deferred income taxes                       123,906      125,998

Total current assets                        3,354,328    3,311,464

Plant and equipment, net                    1,782,426    1,828,520

Goodwill                                    2,882,709    2,808,724

Intangible assets, net                      1,207,440    1,242,330

Other assets                                631,345      376,472

Total assets                                $ 9,858,248  $ 9,567,510

Liabilities and shareholders' equity

Current liabilities:

Notes payable                               $ 366,684    $ 747,859

Accounts payable                            785,244      658,775

Accrued liabilities                         748,955      771,913

Accrued domestic and foreign taxes          171,092      127,982

Total current liabilities                   2,071,975    2,306,529

Long-term debt                              1,535,905    1,849,286

Pensions and other postretirement benefits  1,151,046    459,004

Deferred income taxes                       177,512      202,242

Other liabilities                           226,266      209,619

Shareholders' equity                        4,609,629    4,457,563

Noncontrolling interests                    85,915       83,267

Total liabilities and equity                $ 9,858,248  $ 9,567,510


(Unaudited)                                        Nine Months Ended March 31,

(Dollars in thousands)                             2010       2009

Cash flows from operating activities:

Net income                                         $ 333,313  $ 461,751

Depreciation and amortization                      278,015    264,337

Share incentive plan compensation                  48,145     35,286

Net change in receivables, inventories, and trade
payables                                           61,432     245,488

Net change in other assets and liabilities         117,870    (285,469)

Other, net                                         2,622      (5,299)

Net cash provided by operating activities          841,397    716,094

Cash flows from investing activities:

Acquisitions (net of cash of $24,203 in 2009)      (5,451)    (720,553)

Capital expenditures                               (90,862)   (226,195)

Proceeds from sale of plant and equipment          4,054      25,899

Other, net                                         (12,184)   2,686

Net cash (used in) investing activities            (104,443)  (918,163)

Cash flows from financing activities:

Net (payments for) common share activity           (4,178)    (437,118)

Net (payments for) proceeds from debt              (409,363)  639,728

Dividends                                          (120,786)  (121,458)

Net cash (used in) provided by financing
activities                                         (534,327)  81,152

Effect of exchange rate changes on cash            (9,677)    (38,583)

Net increase (decrease) in cash and cash
equivalents                                        192,950    (159,500)

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

Cash and cash equivalents at end of period         $ 380,561  $ 166,548

SOURCE Parker Hannifin Corporation