Parker Reports Fiscal 2010 First Quarter Sales, Net Income and Earnings Per Share

- Cash Flows Remain Strong, Company Increases Full-Year Outlook

CLEVELAND, Oct. 20 /PRNewswire-FirstCall/ -- Parker Hannifin Corporation (NYSE: PH), the global leader in motion and control technologies, today reported results for the fiscal 2010 first quarter ending September 30, 2009. Fiscal 2010 first quarter sales were $2.2 billion, a decline of 27 percent from $3.1 billion in the first quarter a year ago. Fiscal 2010 first quarter net income declined 71 percent to $73.5 million, from a record $250.2 million in the first quarter of fiscal 2009. Earnings per diluted share declined 70 percent to $0.45, compared with $1.50 in the previous period. Cash flow from operations for the first quarter of fiscal 2010 was $260.1 million, or 11.6 percent of sales, compared with $307.3 million, or 10.0 percent of sales in the prior year period.

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"Our results this quarter continue to reflect the impact of the global recession on our business, coupled with the fact that we are comparing current results with the record performance we achieved in the first quarter a year ago," said Chairman, CEO and President Don Washkewicz. "Our sales declined 28 percent organically in the quarter, while foreign currency translation negatively impacted sales by 1 percent and acquisitions contributed 2 percent to sales. We were pleased to note that orders, although down year-over-year, have steadily improved sequentially from the levels we witnessed in the June quarter, and our actions to reduce costs have begun to have a positive effect on margins."

"The implementation of the Win Strategy throughout our operations has allowed us to perform much better in this down cycle than in previous recessions. We continue to take additional actions to reduce costs and generate strong cash flows. These actions have helped us attain an impressive decremental marginal return on sales of 30 percent during the quarter. Importantly, our operating cash flows as a percentage of sales remained strong at 11.6 percent, well above our targeted level of 10 percent. This strong cash performance has enabled us to pay down our outstanding debt by an additional $162 million in the quarter, and positions us well for growth when the recovery ultimately takes hold."

Segment Results

In the Industrial North America segment, first quarter sales declined 29.3 percent to $783.1 million, and operating income declined 52.5 percent to $76.2 million, compared with the same period a year ago.

In the Industrial International segment, first quarter sales declined 30.5 percent to $850.3 million, and operating income declined 69.5 percent to $61.8 million compared with the same period a year ago.

In the Aerospace segment, first quarter sales decreased 12.9 percent to $416.9 million, and operating income declined 22.0 percent to $53.1 million, compared with the same period a year ago.

In the Climate & Industrial Controls segment, first quarter sales declined 27.0 percent to $187.0 million, and segment operating income declined 32.3 percent to $10.5 million, compared with the same period a year ago.


In addition to financial results, Parker also reported a decline of 25 percent in total orders for the quarter ending September 30, 2009, compared with the same quarter a year ago. Parker reported the following orders by operating segment:

    --  Orders declined 27 percent in the Industrial North America segment,
        compared with the same quarter a year ago.
    --  Orders declined 25 percent in the Industrial International segment,
        compared with the same quarter a year ago.
    --  Orders declined 23 percent in the Aerospace segment on a rolling 12
        month average basis.

    --  Orders declined 17 percent in the Climate and Industrial Controls
        segment, compared with the same quarter a year ago.


For fiscal 2010, the company has increased its guidance for earnings from continuing operations to the range of $1.55 to $2.05 per diluted share.

Washkewicz added, "The major markets we serve present a mixed picture in terms of customer demand with some markets flattening out while others are beginning to show modest sequential improvement. While we do not believe we will see material changes in trends for the remainder of the calendar year 2009, we are cautiously optimistic that we are at the bottom of the cycle. Parker employees throughout the world continue to step up to the challenges and manage our company effectively through the downturn. Our priorities will remain unchanged as we progress through this fiscal year focused on managing for cash while simultaneously targeting strong operating margin performance."

NOTICE OF CONFERENCE CALL: Parker Hannifin's conference call and slide presentation to discuss its fiscal 2010 first 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, 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.

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 53 consecutive 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 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 in 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 recession, 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; 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 employee retirement and health care benefits and insurance; 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.


    (Dollars in
     thousands except  Three Months Ended September 30,
     per share
     amounts)             2009                 2008
    --------------        ----                 ----

    Net sales         $2,237,165           $3,064,688
    Cost of sales      1,800,945            2,337,222
    -------------      ---------            ---------
    Gross profit         436,220              727,466
    Selling, general
     and administrative
     expenses            301,843              332,683
    Interest expense      25,723               28,096
    Other (income)
     expense, net         (5,375)               8,299
    --------------        ------                -----
    Income before
     income taxes        114,029              358,388
    Income taxes          40,059              106,553
    ------------          ------              -------
    Net income            73,970              251,835
      interests              477                1,659
    ---------------          ---                -----
    Net income
     attributable to
     shareholders        $73,493             $250,176
    ----------------     -------             --------

    Earnings per share
     attributable to
     common shareholders:
       Basic earnings
        per share           $.46                $1.52
    --------------          ----                -----
        earnings per
        share               $.45                $1.50
    ----------------        ----                -----

    Average shares
     during period -
     Basic           160,629,291          164,415,418
    Average shares
     during period -
     Diluted         162,040,785          166,913,216

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

    (Unaudited)          Three Months Ended September 30,
    (Dollars in
     thousands)              2009                2008
    -----------              ----                ----
    Net sales
           North America   $783,085        $1,107,077
           International    850,250         1,223,192
        Aerospace           416,856           478,473
        Climate &
         Controls           186,974           255,946
    ---------------         -------           -------
    Total                $2,237,165        $3,064,688
    -----                ----------        ----------
    Segment operating
           North America    $76,171          $160,486
           International     61,823           202,952
        Aerospace            53,146            68,148
       Climate &
        Controls             10,497            15,499
    --------------           ------            ------
    Total segment
     operating income       201,637           447,085
    Corporate general
     and administrative
     expenses                26,302            40,374
    -------------------      ------            ------
    Income from operations
     before interest
     expense and other      175,335           406,711
    Interest expense         25,723            28,096
    Other expense            35,583            20,227
    --------------           ------            ------
    Income before
     income taxes          $114,029          $358,388
    -------------          --------          --------

    (Dollars in thousands) September 30,       2009        2008
    ---------------------- -------------       ----        ----
    Current assets:
    Cash and cash equivalents              $189,849    $608,327
    Accounts receivable, net              1,452,494   1,821,681
    Inventories                           1,266,319   1,506,793
    Prepaid expenses                        100,189      72,870
    Deferred income taxes                   124,640     147,447
    ---------------------                   -------     -------
    Total current assets                  3,133,491   4,157,118
    Plant and equipment, net              1,891,438   1,855,830
    Goodwill                              2,964,321   2,625,761
    Intangible assets, net                1,276,049     986,759
    Other assets                            671,874     507,088
    ------------                            -------     -------
    Total assets                         $9,937,173 $10,132,556
    ------------                         ---------- -----------

    Liabilities and shareholders' equity
    Current liabilities:
    Notes payable                          $304,083    $677,890
    Accounts payable                        659,764     836,873
    Accrued liabilities                     719,228     808,566
    Accrued domestic and foreign taxes      152,262     219,298
    ----------------------------------      -------     -------
    Total current liabilities             1,835,337   2,542,627
    Long-term debt                        1,855,531   1,878,933
    Pensions and other postretirement
     benefits                             1,255,515     482,895
    Deferred income taxes                   187,907     165,136
    Other liabilities                       233,270     247,092
    Shareholders' equity                  4,481,984   4,736,618
    Noncontrolling interests                 87,629      79,255
    ------------------------                 ------      ------
    Total liabilities and equity         $9,937,173 $10,132,556
    ----------------------------         ---------- -----------

    (Unaudited)            Three Months Ended September 30,
    (Dollars in thousands)      2009             2008
    -----------                 ----             ----
    Cash flows from operating
    Net income                $73,970          $251,835
    Depreciation and
     amortization              92,963            86,166
    Share incentive
     plan compensation         26,436            20,655
    Net change in receivables,
     inventories, and trade
     payables                  15,291           (54,100)
    Net change in other
     assets and liabilities    73,694            (6,755)
    Other, net                (22,301)            9,546
    ----------                -------             -----
    Net cash provided by
     operating activities     260,053           307,347
    ------------              -------           -------
    Cash flows from
     investing activities:
    Acquisitions (net of cash
     of $119 in 2008)               -           (12,088)
    Capital expenditures      (30,099)          (98,273)
    Proceeds from sale of
     plant and equipment        4,422             7,437
    Other, net                 (1,334)           (8,004)
    ----------                 ------            ------
    Net cash (used in)
     investing activities     (27,011)         (110,928)
    -----------               -------          --------
    Cash flows from
     financing activities:
    Net (payments for) common
     share activity            (1,246)         (410,590)
    Net (payments for)
     proceeds from debt      (197,279)          561,558
    Dividends                 (40,171)          (41,109)
    ---------                 -------           -------
    Net cash (used in)
     provided by financing
     activities              (238,696)          109,859
    ------------              --------          -------
    Effect of exchange
     rate changes on cash        7,892          (23,999)
    -------------                -----          -------
    Net increase in cash
     and cash equivalents        2,238          282,279
    Cash and cash equivalents
     at beginning of period    187,611          326,048
    -------------              -------          -------
    Cash and cash equivalents
     at end of period         $189,849         $608,327
    ------------              --------         --------

SOURCE Parker Hannifin Corporation