Parker Hannifin Earnings Per Share Up 53 Percent on Strong Sales in Record Second Quarter
CLEVELAND, Jan. 17 /PRNewswire-FirstCall/ -- Parker Hannifin Corporation (NYSE: PH), the world leader in motion and control technologies, today reported second quarter fiscal year 2007 results. The company set new second quarter records for sales and income from continuing operations, both of which increased by double digit percentages from a year ago.
Sales for the second quarter of fiscal-year 2007 were $2.5 billion, up 16.4 percent, as compared to sales of $2.2 billion from the same period last year. Income from continuing operations in the second quarter of fiscal 2007, including the realization of a 9 cent per diluted share benefit from the December renewal of the Federal Tax Credit for Increasing Research Activities, was $1.64 per diluted share, an increase of 53.3 percent over the $1.07 per diluted share posted in the same period a year ago.
"Led by exceptional performance in our Industrial International and Aerospace segments, we were able to deliver another record second quarter, and we remain solidly on track for another outstanding year in fiscal 2007," said Chairman, CEO and President Don Washkewicz. "The record results we are delivering, quarter after quarter, are being driven by our employees' ongoing execution of our Win Strategy."
Second Quarter Segment Results
In the North American Industrial segment, second quarter operating income increased 2.8 percent over the prior year to $133.9 million, on sales of $959.7 million.
In the International Industrial segment, second quarter operating income increased 78.9 percent over the prior year to $121.8 million, on sales of $922.0 million.
In the Aerospace segment, second quarter operating income increased 43.2 percent over the prior year to $67.8 million, on sales of $402.0 million.
In the Climate & Industrial Controls segment, second quarter operating income decreased 29.8 percent over the prior year to $7.0 million, on sales of $227.4 million.
Total operating margin across all segments in the second quarter was 13.2 percent versus 11.8 percent in the same period a year ago.
Fiscal Year to Date Results
For the first six months of fiscal-year 2007, sales were $5.1 billion, up 18.5 percent, as compared to sales of $4.3 billion from the same period last year. Income from continuing operations for the first six months of fiscal 2007 was $3.39 per diluted share, up 49.3 percent from the $2.27 per diluted share reported in the same period in the prior year.
Cash flow from operations for the first six months of fiscal year 2007 reached $307.6 million. "The level of cash generation allows us to be flexible in terms of strategic acquisitions, share repurchases, capital investments and dividends," said Washkewicz. "In the second quarter, cash was used to repurchase $197 million of stock, bringing the fiscal 2007 year-to- date repurchase amount to $393 million. These expenditures are in addition to the discretionary contributions of $111 million made to the employees' pension funds in the first quarter of fiscal year 2007."
"Our 16.4 percent sales growth in the quarter significantly exceeded our growth goal of 10 percent," said Washkewicz. "The growth was profitable and balanced, with 6.4 percent derived organically, 6.4 percent via acquisitions and 3.6 percent from the favorable impact of foreign currency."
"While we are very pleased with our overall results this quarter, special mention must be made of our International Industrial and Aerospace segments," continued Washkewicz. "In the International segment sales grew by 36 percent and operating income increased by nearly 80 percent. Our Aerospace business also delivered excellent results this quarter. Revenues grew by 16 percent and operating income by 43 percent. We expect continued strength in this segment of our business."
"This is especially good news as International Industrial and Aerospace now represent more than half of our total revenues," said Washkewicz. "Particularly diligent execution of the Win Strategy in Europe is enabling us to achieve margins comparable to our North American business."
As a result of the continued strong results, the company increased its guidance for fiscal year 2007 income from continuing operations from $6.05 to $6.45 per diluted share to $6.35 to $6.75 per diluted share.
In addition to this information, Parker advises shareholders to note order trends, for which the company makes a disclosure several business days after the conclusion of each month. This information is available on the company's investor information web site, at www.phstock.com.
NOTICE OF CONFERENCE CALL: Parker Hannifin's conference call and slide presentation to discuss its fiscal second-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, 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 $9 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 more than 57,000 people in 43 countries around the world. Parker has increased its annual dividends paid to shareholders for 50 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 www.parker.com, or its investor information site at www.phstock.com.
Forward-Looking Statements: Forward-looking statements contained in this document and other written reports and oral statements 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 Company's future performance and earnings projections of the Company may differ materially from current expectations, depending on economic conditions within both its industrial and aerospace markets, and the Company's ability to achieve and maintain anticipated benefits associated with announced realignment activities, strategic initiatives to improve operating margins and growth and innovation initiatives. A change in economic conditions in individual markets may have a particularly volatile effect on segment performance. Among 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, 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 interest rates. The Company undertakes no obligation to update or publicly revise these forward-looking statements to reflect events or circumstances that arise after the date of this Report.
PARKER HANNIFIN CORPORATION - DECEMBER 31, 2006 CONSOLIDATED STATEMENT OF INCOME (Unaudited) Three Months Ended Six Months Ended (Dollars in thousands December 31, December 31, except per share amounts) 2006 2005 2006 2005 Net sales $2,511,152 $2,157,537 $5,062,725 $4,271,088 Cost of sales 1,938,007 1,705,683 3,885,365 3,361,436 Gross profit 573,145 451,854 1,177,360 909,652 Selling, general and administrative expenses 292,855 245,845 584,865 482,859 Interest expense 22,304 19,587 39,476 36,058 Other (income) expense, net (6,777) 10,898 (13,403) 11,171 Income from continuing operations before income taxes 264,763 175,524 566,422 379,564 Income taxes 71,796 46,500 162,871 106,692 Income from continuing operations 192,967 129,024 403,551 272,872 Discontinued operations 28,884 Net income $192,967 $129,024 $403,551 $301,756 Earnings per share: Basic earnings per share from continuing operations $1.66 $1.09 $3.44 $2.30 Discontinued operations .24 Basic earnings per share $1.66 $1.09 $3.44 $2.54 Diluted earnings per share from continuing operations $1.64 $1.07 $3.39 $2.27 Discontinued operations .24 Diluted earnings per share $1.64 $1.07 $3.39 $2.51 Average shares outstanding during period - Basic 115,938,153 118,821,006 117,305,843 118,851,843 Average shares outstanding during period - Diluted 117,926,398 120,324,168 119,139,690 120,385,768 Cash dividends per common share $.26 $.23 $.52 $.46 BUSINESS SEGMENT INFORMATION BY INDUSTRY Three Months Ended Six Months Ended (Unaudited) December 31, December 31, (Dollars in thousands) 2006 2005 2006 2005 Net sales Industrial: North America $959,663 $929,734 $1,960,428 $1,858,965 International 922,011 676,526 1,799,715 1,297,290 Aerospace 402,039 345,274 804,397 694,081 Climate & Industrial Controls 227,439 206,003 498,185 420,752 Total $2,511,152 $2,157,537 $5,062,725 $4,271,088 Segment operating income Industrial: North America $133,890 $130,230 $287,028 $267,360 International 121,769 68,068 249,300 148,509 Aerospace 67,778 47,322 136,403 102,105 Climate & Industrial Controls 6,963 9,914 37,787 28,530 Total segment operating income $330,400 $255,534 $710,518 $546,504 Corporate general and administrative expenses 43,960 28,489 80,630 57,316 Income from continuing operations before interest expense and other 286,440 227,045 629,888 489,188 Interest expense 22,304 19,587 39,476 36,058 Other (income) expense (627) 31,934 23,990 73,566 Income from continuing operations before income taxes $264,763 $175,524 $566,422 $379,564 CONSOLIDATED BALANCE SHEET (Unaudited) (Dollars in thousands) December 31, 2006 2005 Assets Current assets: Cash and cash equivalents $157,098 $313,338 Accounts receivable, net 1,524,240 1,250,448 Inventories 1,314,400 1,153,521 Prepaid expenses 49,281 51,953 Deferred income taxes 131,228 133,508 Total current assets 3,176,247 2,902,768 Plant and equipment, net 1,706,795 1,643,941 Goodwill 2,170,715 2,012,596 Intangible assets, net 469,222 428,632 Other assets 933,316 807,860 Total assets $8,456,295 $7,795,797 Liabilities and shareholders' equity Current liabilities: Notes payable $439,180 $534,423 Accounts payable 700,973 584,347 Accrued liabilities 658,536 563,619 Accrued domestic and foreign taxes 120,094 64,496 Total current liabilities 1,918,783 1,746,885 Long-term debt 1,066,330 1,082,584 Pensions and other postretirement benefits 834,413 1,059,314 Deferred income taxes 108,669 96,894 Other liabilities 211,035 202,748 Shareholders' equity 4,317,065 3,607,372 Total liabilities and shareholders' equity $8,456,295 $7,795,797 CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) Six Months Ended December 31, (Dollars in thousands) 2006 2005 Cash flows from operating activities: Net income $403,551 $301,756 Net (income) from discontinued operations (28,884) Depreciation and amortization 148,198 136,678 Stock-based compensation 24,218 22,802 Net change in receivables, inventories, and trade payables (77,596) 5,259 Net change in other assets and liabilities (134,060) 4,778 Other, net (56,664) (12,936) Discontinued operations (9,266) Net cash provided by operating activities 307,647 420,187 Cash flows from investing activities: Acquisitions (net of cash of $1,050 in 2006 and $17,013 in 2005) (160,429) (818,036) Capital expenditures (115,441) (105,859) Proceeds from sale of businesses 92,715 Other, net 21,923 6,784 Discontinued operations (100) Net cash (used in) investing activities (253,947) (824,496) Cash flows from financing activities: Net (payments for) proceeds from common share activity (360,616) 1,813 Net proceeds from debt 354,182 434,796 Dividends (61,192) (54,669) Net cash (used in) provided by financing activities (67,626) 381,940 Effect of exchange rate changes on cash (529) (373) Net (decrease) in cash and cash equivalents (14,455) (22,742) Cash and cash equivalents at beginning of period 171,553 336,080 Cash and cash equivalents at end of period $157,098 $313,338 Note: Certain prior period amounts have been reclassified to conform to the current year presentation.
SOURCE Parker Hannifin Corporation
Released January 17, 2007