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"We're staying focused on our lean initiatives," said Parker CEO Don Washkewicz. "In our acquired and base businesses, we made progressive moves during this downturn to improve operating efficiencies, especially consolidating and relocating product lines."
The company noted that revenue in its base business, excluding acquisitions completed within the last year, was 14 percent lower than last year, reflecting lower volume in every segment, including Aerospace. With a two-percent decline in sales, Parker Aerospace recorded a margin of 16.1 percent during the quarter (16.8 percent excluding realignment costs).
Quarterly sales and income fell across the board on the industrial side, with a 12-percent decline in North American sales and a seven-percent drop in the International units. In both cases, operating income was substantially lower, with the most significant declines noted in what traditionally are the company's most profitable industrial markets, including factory automation, semiconductor manufacturing and telecommunications. Costs associated with realignment and the investment write-down also affected industrial margins, especially in the International business, which recorded a 2.8-percent return on sales, or 5.0 percent without these costs. The North American industrial units reported an operating margin of 3.6 percent (4.0 percent excluding realignment costs).
In the company's "Other" segment, including Climate & Industrial Controls and the addition of Astron and Wynn Oil since last year, the return on sales was 4.4 percent, or 5.2 percent without realignment costs.
Year-to-Date Results
For the first six months of fiscal 2002, the company recorded net income of $89.6 million, or 77 cents per diluted share (88 cents excluding realignment costs) on sales of $2.91 billion. A year ago, net income was $203.4 million, or $1.77 per diluted share ($1.74 excluding a net gain on the sale of real estate and goodwill amortization), with sales of $2.95 billion.
Outlook
"We have yet to see a sustained trend of improvement in industrial demand, but we do expect to see a gradual, sequential upturn in the third and fourth fiscal quarters," said Washkewicz. "And in aerospace, we're expecting military demand to begin to offset pressure on the commercial side."
The company's estimate of earnings in the third quarter of fiscal year 2002 is expected to be between 48 and 60 cents per share, while earnings for the full year are expected to range from $2.00 to $2.30 per share.
In addition to providing earnings estimates, 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 .
With annual sales exceeding $6 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 45,000 people in 45 countries around the world. 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 and other written and oral reports are made based on known events and circumstances at the time of release and 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 may differ materially from current expectations, depending on economic conditions in industrial and aerospace markets, including any adverse effects related to the events of September 11, 2001, and the company's ability to achieve anticipated benefits associated with realignment and acquisition-integration activities. 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; competitive market conditions and resulting effects on sales and pricing; increases in raw-material costs that cannot be recovered in product pricing; threats associated with terrorism; and global economic factors, including currency exchange rates and general economic conditions such as interest rates. In each quarterly earnings report, the company states a range of expected earnings per share for the succeeding quarter and full fiscal year, as estimates of diluted earnings per share before unusual items. The company makes these statements as of the date of this disclosure, and while it undertakes no obligation to update them, reserves the right to update its earnings projections for any reason during the quarter, including the occurrence of material events.
NOTICE OF CONFERENCE CALL: Parker Hannifin's conference call to discuss its fiscal second-quarter results is available to all interested parties via live webcast today at 10:30 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.
PARKER HANNIFIN CORPORATION - DECEMBER 31, 2001 CONSOLIDATED STATEMENT OF INCOME Three Months Ended Six Months Ended (Unaudited) December 31, December 31, (Dollars in thousands except per share amounts) 2001 2000 2001 2000 Net sales $1,437,330 $1,467,619 $2,913,197 $2,952,750 Cost of sales 1,203,893 1,152,364 2,401,518 2,311,393 Gross profit 233,437 315,255 511,679 641,357 Selling, general and administrative expenses 164,883 169,596 330,298 332,037 Other income (deductions): Interest expense (21,555) (25,607) (42,009) (46,775) Interest and other income, net (11) 1,364 106 52,741 (21,566) (24,243) (41,903) 5,966 Income before income taxes 46,988 121,416 139,478 315,286 Income taxes 17,926 43,102 49,835 111,926 Net income $29,062 $78,314 $89,643 $203,360 Earnings per share: Basic earnings per share $.25 $.68 $.78 $1.78 Diluted earnings per share $.25 $.68 $.77 $1.77 Average shares outstanding during period - Basic 115,010,099 114,007,029 115,088,506 113,968,357 Average shares outstanding during period - Diluted 115,618,970 114,831,139 115,685,834 114,696,560 Cash dividends per common share $.18 $.17 $.36 $.34 Note: Selling, general and administrative expenses for the three and six months ended December 31, 2000 includes $13,854 ($11,907 after tax or $.10 per share) and $28,563 ($24,548 after tax or $.21 per share) of goodwill amortization, respectively. PRO FORMA RESULTS EXCLUDING GOODWILL AMORTIZATION Three Months Ended Six Months Ended (Unaudited) December 31, December 31, (Dollars in thousands except per share amounts) 2001 2000 2001 2000 Reported net income $29,062 $78,314 $89,643 $203,360 Add back goodwill amortization 11,907 24,548 Adjusted net income $29,062 $90,221 $89,643 $227,908 Earnings per share: Reported basic earnings per share $.25 $.68 $.78 $1.78 Goodwill amortization .10 .21 Adjusted basic earnings per share $.25 $.78 $.78 $1.99 Reported diluted earnings per share $.25 $.68 $.77 $1.77 Goodwill amortization .10 .21 Adjusted diluted earnings per share $.25 $.78 $.77 $1.98 BUSINESS SEGMENT INFORMATION BY INDUSTRY Three Months Ended Six Months Ended (Unaudited) December 31, December 31, (Dollars in thousands) 2001 2000 2001 2000 Net sales Industrial: North America $646,299 $738,005 $1,297,139 $1,508,110 International 290,446 313,255 586,737 621,339 Aerospace 288,312 294,425 600,812 564,813 Other 212,273 121,934 428,509 258,488 Total $1,437,330 $1,467,619 $2,913,197 $2,952,750 Segment operating income Industrial: North America $23,576 $95,060 $64,041 $201,999 International 8,235 21,004 28,063 45,268 Aerospace 46,446 51,097 103,338 95,373 Other 9,429 6,989 26,421 18,854 Total segment operating income 87,686 174,150 221,863 361,494 Corporate general and administrative expenses 15,674 20,346 32,613 37,730 Income from operations before interest expense and other 72,012 153,804 189,250 323,764 Interest expense 21,555 25,607 42,009 46,775 Other expense (income) 3,469 6,781 7,763 (38,297) Income before income taxes $46,988 $121,416 $139,478 $315,286 Note: Income before income taxes for the three and six months ended December 31, 2000 includes $13,854 ($7,251 in Industrial North America; $2,921 in Industrial International; $1,933 in Aerospace; $1,083 in Other; and $666 in Other expense (income)) and $28,563 ($13,942 in Industrial North America; $5,846 in Industrial International; $3,793 in Aerospace; $2,171 in Other; and $2,811 in Other expense (income)) of goodwill amortization, respectively. BUSINESS SEGMENT INFORMATION BY INDUSTRY EXCLUDING GOODWILL AMORTIZATION Three Months Ended Six Months Ended (Unaudited) December 31, December 31, (Dollars in thousands) 2001 2000 2001 2000 Net sales Industrial: North America $646,299 $738,005 $1,297,139 $1,508,110 International 290,446 313,255 586,737 621,339 Aerospace 288,312 294,425 600,812 564,813 Other 212,273 121,934 428,509 258,488 Total $1,437,330 $1,467,619 $2,913,197 $2,952,750 Segment operating income Industrial: North America $23,576 $102,311 $64,041 $215,941 International 8,235 23,925 28,063 51,114 Aerospace 46,446 53,030 103,338 99,166 Other 9,429 8,072 26,421 21,025 Total segment operating income 87,686 187,338 221,863 387,246 Corporate general and administrative expenses 15,674 20,346 32,613 37,730 Income from operations before interest expense and other 72,012 166,992 189,250 349,516 Interest expense 21,555 25,607 42,009 46,775 Other expense (income) 3,469 6,115 7,763 (41,108) Income before income taxes $46,988 $135,270 $139,478 $343,849 Note: Amounts for the three and six months ended December 31, 2000 eliminates goodwill amortization, reflecting the Company's early adoption of FAS 142. It is intended to assist investors in making year-over-year comparisons with the three and six months ended December 31, 2001. CONSOLIDATED BALANCE SHEET (Unaudited) (Dollars in thousands) December 31, 2001 2000 Assets Current assets: Cash and cash equivalents $28,883 $71,529 Restricted investments 92,912 Accounts receivable, net 813,638 870,510 Inventories 1,110,732 1,065,313 Prepaid expenses 43,055 36,455 Deferred income taxes 101,303 83,296 Assets held for sale 239,356 Total current assets 2,190,523 2,366,459 Plant and equipment, net 1,701,925 1,496,932 Excess cost of investments over net assets acquired 1,074,500 847,117 Other assets 581,870 597,863 Total assets $5,548,818 $5,308,371 Liabilities and shareholders' equity Current liabilities: Notes payable $493,278 $540,368 Accounts payable 336,454 378,778 Accrued liabilities 449,027 403,053 Accrued domestic and foreign taxes 60,605 55,945 Total current liabilities 1,339,364 1,378,144 Long-term debt 1,063,061 981,953 Pensions and other postretirement benefits 216,093 307,226 Deferred income taxes 145,700 104,144 Other liabilities 199,556 79,759 Shareholders' equity 2,585,044 2,457,145 Total liabilities and shareholders' equity $5,548,818 $5,308,371 CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) Six Months Ended December 31, (Dollars in thousands) 2001 2000 Cash flows from operating activities: Net income $89,643 $203,360 Depreciation and amortization 122,516 133,554 Net change in receivables, inventories, and trade payables 135,699 (47,160) Net change in other assets and liabilities (2,582) (76,757) Other, net 5,060 (38,281) Net cash provided by operating activities 350,336 174,716 Cash flows from investing activities: Acquisitions (less cash acquired of $343 in 2001 and $8,255 in 2000) (310,178) (485,235) Capital expenditures (113,119) (169,573) Other, net (14,176) 100,772 Net cash used in investing activities (437,473) (554,036) Cash flows from financing activities: Net (payments for) proceeds from common share activity (4,710) 3,892 Net proceeds from debt 141,216 418,547 Dividends (41,430) (38,731) Net cash provided by financing activities 95,076 383,708 Effect of exchange rate changes on cash (2,621) (1,319) Net increase in cash and cash equivalents 5,318 3,069 Cash and cash equivalents at beginning of period 23,565 68,460 Cash and cash equivalents at end of period $28,883 $71,529
SOURCE Parker Hannifin Corporation
CONTACT: Media, Lorrie Paul Crum, VP - Corp. Communications, +1-216-896-2750, or lcrum@parker.com, or Financial Analysts, Timothy K. Pistell, Treasurer, +1-216-896-2130, or tpistell@parker.com, both of Parker Hannifin