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
earnings
-- 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.
Orders
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.
Outlook
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, http://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 http://www.phstock.com 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 http://www.parker.com, or its investor information web site at http://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; 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 - MARCH 31, 2010
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
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
administrative
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
BUSINESS SEGMENT INFORMATION BY INDUSTRY (Unaudited) Three Months Ended March 31, Nine Months Ended March 31, (Dollars in thousands) 2010 2009 2010 2009 Net sales Industrial: 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 income Industrial: 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 interest 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
PARKER HANNIFIN CORPORATION - MARCH 31, 2010 CONSOLIDATED BALANCE SHEET (Unaudited) (Dollars in thousands) March 31, 2010 2009 Assets 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
CONSOLIDATED STATEMENT OF CASH FLOWS (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
Released April 20, 2010