Parker Reports Record First Quarter Sales, Net Income, Earnings Per Diluted Share and Cash Flow from Operations

CLEVELAND, Oct. 16 /PRNewswire-FirstCall/ -- Parker Hannifin (NYSE: PH), the world leader in motion and control technologies, today reported record first quarter sales, net income, earnings per diluted share and cash flow from operations for the quarter ending September 30, 2008.

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Fiscal 2009 first quarter sales were $3.1 billion, an increase of 10.0 percent from $2.8 billion in the same quarter a year ago. Net income increased 9.0 percent to $250.2 million from $229.6 million in the first quarter of fiscal 2008. Earnings per diluted share increased 13.1 percent to $1.50 compared with $1.33 in last year's first quarter. Cash flow from operations was $307.3 million, or 10.0 percent of sales.

"Current quarter results reflect our ability to deliver record performance in the face of a rapidly changing economic climate," said Chairman, CEO and President Don Washkewicz. "We are particularly pleased that we delivered a four percent organic growth rate this quarter.

"The Win Strategy initiatives we have been implementing over the past seven years have better prepared us to weather this uncertainty in our markets. For example, today, we have exposure to a greater number of end markets, many of them less cyclical than before. We also have much better geographic balance with greater than 50 percent of our industrial segment revenues and profits generated from international markets. Additionally, our cost structure is much more flexible than in the past and our ongoing focus on lean enterprise is delivering continuing productivity improvements. While the economic outlook for the near future remains uncertain, Parker is better able to adapt to changing circumstances in our operations than in previous downturns.

"While we are currently implementing contingency plans for the short-term, we remain focused on managing our business for the long-term and utilizing our strong cash position. We recently completed four acquisitions, including three on the first day of our fiscal 2009 second quarter, which added just over $460 million in annualized revenues. These investments help us extend our geographic reach and further our exposure to growth markets such as life sciences. Additionally, we repurchased shares and increased our dividend for the 52nd consecutive year, reflecting our confidence in the future."

Segment Results

In the Industrial North America segment, first-quarter sales increased 10.1 percent to $1.1 billion, and operating income increased 3.4 percent to $160.5 million, compared with the same period a year ago.

In the Industrial International segment, first-quarter sales increased 11.1 percent to $1.2 billion, and operating income increased 10.6 percent to $203.0 million, as compared with the same period a year ago.

In the Aerospace segment, first-quarter sales increased 12.0 percent to $478.5 million, and operating income increased 18.7 percent to $68.1 million, as compared with the same period a year ago.

In the Climate & Industrial Controls segment, first-quarter sales increased 1.1 percent to $255.9 million, and operating income remained the same at $15.5 million, as compared with the same period a year ago.


In addition to financial results, Parker also reported an increase of 1 percent in total orders for the quarter ending September 30, 2008 compared with the same quarter a year ago. Parker reported the following orders by operating segment:

-- Orders increased 2 percent in the Industrial North America segment, compared with the same quarter a year ago.

-- Orders declined 4 percent in the Industrial International segment, compared with the same quarter a year ago.

-- Orders increased 9 percent in the Aerospace segment on a rolling 12 month average basis.

-- Orders increased 5 percent in the Climate and Industrial Controls segment, compared with the same quarter a year ago.


For fiscal 2009, the company revised guidance for earnings from continuing operations to the range of $5.35 to $5.75 per diluted share. Previous guidance for earnings from continuing operations was $5.65 to $6.05 per diluted share.

"There is enough uncertainty in many of our end markets and sentiment among our customers to warrant a downward revision in our earnings expectations for the year," added Washkewicz. "While this ultimately may prove to be conservative, at this time we believe it is prudent. Having said that, our earnings guidance still assumes that operating margins will be significantly above the levels we achieved at the bottom of the last economic cycle, evidence that we have made significant progress in transforming Parker into a premier diversified company."

NOTICE OF CONFERENCE CALL: Parker Hannifin's conference call and slide presentation to discuss its fiscal first-quarter results is 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 $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 commercial, 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, 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, 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 litigation; 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, interest rates and credit availability. The company makes these statements as of the date of this disclosure, and undertakes no obligation to update them.



    (Unaudited)                              Three Months Ended September 30,
    (Dollars in thousands except per             2008                    2007
     share amounts)

    Net sales                              $3,064,688              $2,787,256
    Cost of sales                           2,337,222               2,122,297
    Gross profit                              727,466                 664,959
    Selling, general and administrative
     expenses                                 332,683                 324,961
    Interest expense                           28,096                  22,421
    Other expense (income), net                 9,958                    (165)
    Income before income taxes                356,729                 317,742
    Income taxes                              106,553                  88,145
    Net income                               $250,176                $229,597

    Earnings per share:
       Basic earnings per share                 $1.52                   $1.35
       Diluted earnings per share               $1.50                   $1.33

    Average shares outstanding during
     period - Basic                       164,415,418             169,782,809
    Average shares outstanding during
     period - Diluted                     166,913,216             173,221,492

    Cash dividends per common share              $.25                    $.21

    (Unaudited)                              Three Months Ended September 30,
    (Dollars in thousands)                       2008                    2007
    Net sales
           North America                   $1,107,077              $1,005,828
           International                    1,223,192               1,100,888
        Aerospace                             478,473                 427,290
        Climate & Industrial Controls         255,946                 253,250
    Total                                  $3,064,688              $2,787,256

    Segment operating income
           North America                     $160,486                $155,182
           International                      202,952                 183,433
        Aerospace                              68,148                  57,436
        Climate & Industrial Controls          15,499                  15,506
    Total segment operating income           $447,085                $411,557
    Corporate general and administrative
     expenses                                  40,374                  45,309
    Income from operations before
     interest expense and other               406,711                 366,248
    Interest expense                           28,096                  22,421
    Other expense                              21,886                  26,085
    Income before income taxes               $356,729                $317,742

    (Dollars in thousands)  September 30,        2008                    2007
    Current assets:
    Cash and cash equivalents                $608,327                $187,917
    Accounts receivable, net                1,821,681               1,784,784
    Inventories                             1,506,793               1,353,774
    Prepaid expenses                           72,870                  69,148
    Deferred income taxes                     147,447                 128,801
    Total current assets                    4,157,118               3,524,424
    Plant and equipment, net                1,855,830               1,762,165
    Goodwill                                2,625,761               2,319,803
    Intangible assets, net                    986,759                 610,411
    Other assets                              507,088                 476,190
    Total assets                          $10,132,556              $8,692,993

    Liabilities and shareholders' equity
    Current liabilities:
    Notes payable                            $677,890                $580,542
    Accounts payable                          836,873                 779,274
    Accrued liabilities                       808,566                 703,136
    Accrued domestic and foreign taxes        219,298                 181,987
    Total current liabilities               2,542,627               2,244,939
    Long-term debt                          1,878,933               1,117,677
    Pensions and other postretirement
     benefits                                 482,895                 369,606
    Deferred income taxes                     165,136                 113,192
    Other liabilities                         319,097                 301,451
    Shareholders' equity                    4,743,868               4,546,128
    Total liabilities and shareholders'
     equity                               $10,132,556              $8,692,993

    (Unaudited)                              Three Months Ended September 30,
    (Dollars in thousands)                       2008                    2007

    Cash flows from operating activities:
    Net income                               $250,176                $229,597
    Depreciation and amortization              86,166                  76,176
    Stock-based compensation                   20,655                  23,554
    Net change in receivables,
     inventories, and trade payables          (54,100)                (79,612)
    Net change in other assets and
     liabilities                               (5,096)                 28,159
    Other, net                                  9,546                  (7,629)
    Net cash provided by operating
     activities                               307,347                 270,245
    Cash flows from investing activities:
    Acquisitions (net of cash of $119 in
     2008 and $177 in 2007)                   (12,088)                (33,551)
    Capital expenditures                      (98,273)                (56,484)
    Proceeds from sale of plant and
     equipment                                  7,437                   1,544
    Other, net                                 (8,004)                 (8,188)
    Net cash (used in) investing
     activities                              (110,928)                (96,679)
    Cash flows from financing activities:
    Net (payments for) common share
     activity                                (410,590)               (497,386)
    Net proceeds from debt                    561,558                 374,021
    Dividends                                 (41,109)                (36,544)
    Net cash provided by (used in)
     financing activities                     109,859                (159,909)
    Effect of exchange rate changes on
     cash                                     (23,999)                  1,554
    Net increase in cash and cash
     equivalents                              282,279                  15,211
    Cash and cash equivalents at
     beginning of period                      326,048                 172,706
    Cash and cash equivalents at end of
     period                                  $608,327                $187,917

SOURCE Parker Hannifin Corporation