Parker Reports Second Quarter Sales, Net Income and Earnings per Share
- Company revises guidance for fiscal 2009
CLEVELAND, Jan. 20 /PRNewswire-FirstCall/ -- Parker Hannifin Corporation (NYSE: PH), the world leader in motion and control technologies, today reported results for its fiscal 2009 second quarter ending December 31, 2008. Fiscal 2009 second quarter sales were $2.7 billion, a decline of 5.0 percent from $2.8 billion in the same quarter a year ago. Net income declined 26.7 percent to $155.4 million from $211.9 million in the second quarter of fiscal 2008. Earnings per diluted share declined 22.0 percent to 96 cents compared with $1.23 in last year's second quarter. Cash flow from operations for the first six months of fiscal 2009 was $444.5 million, or 7.7 percent of sales.
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"Current quarter results reflect the fact that the global recession has deepened and widened in recent months and creates some uncertainty for the remainder of our fiscal year and throughout calendar 2009," said Chairman, CEO and President Don Washkewicz. "Although we are positioned to fare much better in this recession than in the past, current market conditions are unprecedented and have required us to lower our expectations for the year and reduce costs across our operations. As a direct result of the actions we have taken under the Win Strategy during the past seven years, including our ability to adjust and manage inventory on a real-time basis, Parker is better prepared to adapt to changing market circumstances and weather the challenges ahead."
Segment Results
In the Industrial North America segment, second-quarter sales increased slightly to $993.0 million, and operating income declined 24.0 percent to $107.6 million, compared with the same period a year ago.
In the Industrial International segment, second-quarter sales declined 11.5 percent to $1.0 billion, and operating income declined 34.3 percent to $115.1 million, compared with the same period a year ago.
In the Aerospace segment, second-quarter sales increased 10.0 percent to $473.7 million, and operating income increased 34.2 percent to $69.7 million, compared with the same period a year ago.
In the Climate & Industrial Controls segment, second-quarter sales declined 21.8 percent to $179.2 million, and the segment recorded an operating loss of $12.8 million, compared with an operating profit of $5.4 million in the same period a year ago.
Orders
In addition to financial results, Parker also reported a decline of 20 percent in total orders for the quarter ending December 31, 2008, compared with the same quarter a year ago. Parker reported the following orders by operating segment:
-- Orders declined 18 percent in the Industrial North America segment, compared with the same quarter a year ago.
-- Orders declined 28 percent in the Industrial International segment, compared with the same quarter a year ago.
-- Orders increased 2 percent in the Aerospace segment on a rolling 12 month average basis.
-- Orders declined 28 percent in the Climate and Industrial Controls segment, compared with the same quarter a year ago.
Outlook
For fiscal 2009, the company revised guidance for earnings from continuing operations to the range of $3.85 to $4.25 per diluted share. Previous guidance for earnings from continuing operations was $5.35 to $5.75 per diluted share.
"While the outlook holds many challenges, Parker has a seasoned management team that has experience managing through a downturn," added Washkewicz. "Workforce and expense reductions have been implemented throughout the company and contingency plans are in place should further actions become necessary. In short, we are prepared to adjust our costs appropriately to reflect changing demand levels. At the same time, we will stay vigilantly focused on long-term growth and are confident that we will emerge in an even stronger position as demand in our end markets improves."
NOTICE OF CONFERENCE CALL: Parker Hannifin's conference call and slide presentation to discuss its fiscal second-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, 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.
With annual sales exceeding $12 billion, 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 62,000 people in 48 countries around the world. Parker has increased its annual dividends paid to shareholders for 52 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 http://www.parker.com, or its investor information 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 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 or suppliers, including delays or cancellations in shipments 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; 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.
PARKER HANNIFIN CORPORATION - DECEMBER 31, 2008
CONSOLIDATED STATEMENT OF INCOME
(Unaudited) Three Months Ended Six Months Ended
(Dollars in thousands December 31, December 31,
except per share 2008 2007 2008 2007
amounts)
Net sales $2,688,656 $2,829,060 $5,753,344 $5,616,316
Cost of sales 2,121,450 2,194,137 4,458,672 4,316,434
Gross profit 567,206 634,923 1,294,672 1,299,882
Selling, general
and administrative
expenses 337,183 318,961 669,866 643,922
Interest expense 30,307 26,016 58,403 48,437
Other expense
(income), net 1,843 (6,224) 11,801 (6,389)
Income before
income taxes 197,873 296,170 554,602 613,912
Income taxes 42,472 84,307 149,025 172,452
Net income $155,401 $211,863 $405,577 $441,460
Earnings per share:
Basic earnings
per share $.97 $1.26 $2.49 $2.61
Diluted earnings
per share $.96 $1.23 $2.47 $2.56
Average shares
outstanding during
period - Basic 160,839,120 168,063,375 162,627,269 168,923,092
Average shares
outstanding
during period -
Diluted 161,755,586 171,993,863 164,272,066 172,456,317
Cash dividends
per common share $.25 $.21 $.50 $.42
BUSINESS SEGMENT INFORMATION BY INDUSTRY
(Unaudited) Three Months Ended Six Months Ended
(Dollars in thousands) December 31, December 31,
2008 2007 2008 2007
Net sales
Industrial:
North America $993,040 $991,419 $2,100,117 $1,997,247
International 1,042,741 1,177,749 2,265,933 2,278,637
Aerospace 473,667 430,698 952,140 857,988
Climate & Industrial
Controls 179,208 229,194 435,154 482,444
Total $2,688,656 $2,829,060 $5,753,344 $5,616,316
Segment operating income
Industrial:
North America $107,615 $141,680 $268,101 $296,862
International 115,122 175,227 318,074 358,660
Aerospace 69,658 51,917 137,806 109,353
Climate & Industrial
Controls (12,814) 5,421 2,685 20,927
Total segment operating
income $279,581 $374,245 $726,666 $785,802
Corporate general and
administrative expenses 42,372 40,039 82,746 85,348
Income from operations
before interest expense
and other 237,209 334,206 643,920 700,454
Interest expense 30,307 26,016 58,403 48,437
Other expense 9,029 12,020 30,915 38,105
Income before income taxes $197,873 $296,170 $554,602 $613,912
PARKER HANNIFIN CORPORATION - DECEMBER 31, 2008
CONSOLIDATED BALANCE SHEET
(Unaudited)
(Dollars in thousands) December 31, 2008 2007
Assets
Current assets:
Cash and cash equivalents $261,990 $197,650
Accounts receivable, net 1,682,338 1,745,683
Inventories 1,519,651 1,477,267
Prepaid expenses 69,498 63,774
Deferred income taxes 145,131 137,206
Total current assets 3,678,608 3,621,580
Plant and equipment, net 1,888,023 1,804,979
Goodwill 2,884,187 2,669,678
Intangible assets, net 1,236,724 627,702
Other assets 427,649 493,567
Total assets $10,115,191 $9,217,506
Liabilities and shareholders' equity
Current liabilities:
Notes payable $1,022,112 $865,058
Accounts payable 751,942 756,495
Accrued liabilities 777,462 770,016
Accrued domestic and foreign taxes 116,183 104,919
Total current liabilities 2,667,699 2,496,488
Long-term debt 1,882,693 1,151,469
Pensions and other postretirement benefits 480,561 361,605
Deferred income taxes 216,131 118,203
Other liabilities 286,426 312,505
Shareholders' equity 4,581,681 4,777,236
Total liabilities and shareholders' equity $10,115,191 $9,217,506
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited) Six Months Ended December 31,
(Dollars in thousands) 2008 2007
Cash flows from operating activities:
Net income $405,577 $441,460
Depreciation and amortization 175,885 155,146
Stock-based compensation 28,451 30,086
Net change in receivables,
inventories, and trade payables 72,151 (90,157)
Net change in other assets and
liabilities (247,558) (42,674)
Other, net 10,009 (20,260)
Net cash provided by operating activities 444,515 473,601
Cash flows from investing activities:
Acquisitions (net of cash of $24,191
in 2008 and $11,396 in 2007) (705,128) (463,051)
Capital expenditures (174,391) (118,742)
Proceeds from sale of plant and equipment 10,550 13,571
Other, net (2,973) (2,701)
Net cash (used in) investing activities (871,942) (570,923)
Cash flows from financing activities:
Net (payments for) common share activity (430,080) (475,943)
Net proceeds from debt 911,428 670,344
Dividends (81,331) (71,867)
Net cash provided by financing activities 400,017 122,534
Effect of exchange rate changes on cash (36,648) (268)
Net (decrease) increase in cash and
cash equivalents (64,058) 24,944
Cash and cash equivalents at beginning of
period 326,048 172,706
Cash and cash equivalents at end of period $261,990 $197,650
SOURCE Parker Hannifin Corporation
Released January 20, 2009