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Parker Earns 45 Cents in Fiscal Q3; Industrial Orders Turning Positive

April 16, 2002

CLEVELAND, Apr 16, 2002 /PRNewswire-FirstCall via COMTEX/ -- Parker Hannifin Corporation (NYSE: PH) today reported third-quarter net income for the period ended March 31, 2002 of $52.4 million, or 45 cents per diluted share, on sales of $1.58 billion. Realignment costs, including severance and manufacturing relocations, amounted to two cents per share during the quarter. For the same period last year, net income was $88.1 million, or 77 cents per diluted share (88 cents per share excluding goodwill amortization). In that period, the company recorded a charge of three cents per share for early retirement of debt. Sales were $1.54 billion.

(Photo: http://www.newscom.com/cgi-bin/prnh/19990816/PHLOGO )

Parker CEO Don Washkewicz noted continued weakness in the company's industrial markets, but also pointed to sequential improvement in that segment's orders. "We started to see orders from large original-equipment manufacturers come back in January and February, with the trend continuing in March," said Washkewicz.

In the industrial segment, where operating income fell by 52 percent, sales in the company's North American Industrial units were two percent lower than last year, with a margin of 5.2 percent. Revenues in the International operations were five percent lower, while the return on sales was 5.3-percent.

Aerospace sales were off by 10 percent from the comparable quarter, prompting a 22-percent decline from last year's peak in operating income, and a margin of 17.1 percent.

"We expected a decline in commercial aerospace activity, but the margins are holding up well," said Washkewicz. "The divisions furthest along in the lean journey are showing the greatest sustainability of margins."

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 7.6 percent.

Nine-Months' Results

Sales in the first nine months of fiscal 2002 were even with last year, at $4.49 billion. Year-to-date net income was $142.0 million, or $1.23 per diluted share, with realignment costs amounting to 13 cents per share. In the first nine months of fiscal year 2001, the company earned $291.4 million, or $2.54 per diluted share ($2.63 excluding a net gain on the sale of real estate and goodwill amortization).

Outlook

Results for the fiscal year ending June 30 are expected to range from $1.78 to $1.90 per diluted share, excluding the 13 cents per share in realignment items recorded to date. As previously noted, the company currently is reviewing all operating units as part of its annual planning process, with the intent to ensure assets are contributing to long-term growth. This review may result in additional realignment costs to be recorded in the company's fiscal fourth quarter. Such costs currently are not quantifiable, and therefore are not reflected in this earnings forecast.

Washkewicz added, "We have the right initiatives working for us, and any improvement in the industrial economy should multiply the returns we're achieving as we continue to implement our "Win Strategy" initiatives, most notably lean and strategic procurement."

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 to future uncertainties and risks. All earnings projections and statements regarding future performance, 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, as well as the company's ability to achieve anticipated benefits associated with its "Win Strategy" initiatives, realignment and acquisition- integration activities and ability to increase sales of higher margin products. 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 potential devaluation of currencies 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 disclosure, and while it undertakes no obligation to update them, reserves the right to update earnings projections for any reason during the quarter, including the occurrence of material events.

    PARKER HANNIFIN CORPORATION - MARCH 31, 2002
    CONSOLIDATED STATEMENT OF INCOME

                                  Three Months               Nine Months
                                 Ended March 31,            Ended March 31,
                                2002         2001         2002          2001
    (Unaudited)
    (Dollars in thousands except per share amounts)


    Net sales               $1,578,332   $1,542,058   $4,491,529   $4,494,808
    Cost of sales            1,309,245    1,221,243    3,710,763    3,532,636
    Gross profit               269,087      320,815      780,766      962,172
    Selling, general and
     administrative
     expenses                  171,764      159,580      502,062      491,617
    Other income
     (deductions):
       Interest expense        (20,924)     (24,243)     (62,933)     (71,018)
       Interest and other
        income, net                161        4,794          267       57,535
                               (20,763)     (19,449)     (62,666)     (13,483)
    Income before income
     taxes                      76,560      141,786      216,038      457,072
    Income taxes                24,203       50,334       74,038      162,260
    Income before
     extraordinary item         52,357       91,452      142,000      294,812
    Extraordinary item -
     extinguishment of
     debt                                    (3,378)                   (3,378)
    Net income                 $52,357      $88,074     $142,000     $291,434

    Earnings per share:
       Basic earnings per
        share before
        extraordinary item        $.45         $.80        $1.23        $2.58
       Extraordinary item
        - extinguishment
        of debt                                (.03)                     (.03)
       Basic earnings per
        share                     $.45         $.77        $1.23        $2.55
       Diluted earnings
        per share before
        extraordinary item        $.45         $.80        $1.23        $2.57
       Extraordinary item
        - extinguishment
        of debt                                (.03)                     (.03)
       Diluted earnings
        per share                 $.45         $.77        $1.23        $2.54

    Average shares
     outstanding during
     period - Basic        115,503,613  114,439,369  115,226,875  114,125,361
    Average shares
     outstanding during
     period - Diluted      116,282,075  115,249,470  115,884,581  114,880,863

    Cash dividends per
     common share                 $.18         $.18         $.54         $.52

    Note:  Selling, general and administrative expenses for the three and nine
    months ended March 31, 2001 includes $15,185 ($13,050 after tax or $.11
    per share) and $43,748 ($37,598 after tax or $.32 per share) of goodwill
    amortization, respectively.

    PRO FORMA RESULTS EXCLUDING GOODWILL AMORTIZATION
                                          Three Months          Nine Months
                                         Ended March 31,      Ended March 31,
                                          2002      2001      2002      2001
    (Unaudited)
    (Dollars in thousands except per share amounts)

    Reported net income                 $52,357   $88,074  $142,000  $291,434
    Add back goodwill amortization                 13,050              37,598
    Adjusted net income                 $52,357  $101,124  $142,000  $329,032

    Earnings per share:
       Reported basic earnings per
        share                              $.45      $.77     $1.23     $2.55
       Goodwill amortization                          .11                 .32
       Adjusted basic earnings per
        share                              $.45      $.88     $1.23     $2.87

       Reported diluted earnings per
        share                              $.45      $.77     $1.23     $2.54
       Goodwill amortization                          .11                 .32
       Adjusted diluted earnings per
        share                              $.45      $.88     $1.23     $2.86


    BUSINESS SEGMENT INFORMATION BY INDUSTRY
                                     Three Months            Nine Months
                                    Ended March 31,         Ended March 31,
                                   2002        2001        2002        2001
    (Unaudited)
    (Dollars in thousands)
    Net sales
        Industrial:
           North America         $726,808    $742,468  $2,023,947  $2,250,578
           International          325,754     343,060     912,491     964,399
        Aerospace                 284,989     317,446     885,801     882,259
        Other                     240,781     139,084     669,290     397,572
    Total                      $1,578,332  $1,542,058  $4,491,529  $4,494,808

    Segment operating income
        Industrial:
           North America          $38,090     $82,797    $102,131    $284,796
           International           17,125      32,538      45,188      77,806
        Aerospace                  48,682      62,490     152,020     157,863
        Other                      18,358      11,609      44,779      30,463
    Total segment operating
     income                       122,255     189,434     344,118     550,928
    Corporate general and
     administrative expenses       17,550      18,038      50,163      55,768
    Income from operations
     before interest
     expense and other            104,705     171,396     293,955     495,160
    Interest expense               20,924      24,243      62,933      71,018
    Other expense (income)          7,221       5,367      14,984     (32,930)
    Income before income taxes    $76,560    $141,786    $216,038    $457,072

    Note:  Income before income taxes for the three and nine months ended
    March 31, 2001 includes $15,185 ($8,132 in Industrial North America;
    $3,253 in Industrial International; $2,056 in Aerospace; $1,081 in Other;
    and $663 in Other expense (income)) and $43,748 ($22,074 in Industrial
    North America; $9,099 in Industrial International; $5,849 in Aerospace;
    $3,252 in Other; and $3,474 in Other expense (income)) of goodwill
    amortization, respectively.


    BUSINESS SEGMENT INFORMATION BY INDUSTRY
    EXCLUDING GOODWILL AMORTIZATION
                                      Three Months           Nine Months
                                     Ended March 31,        Ended March 31,
                                    2002        2001       2002        2001
    (Unaudited)
    (Dollars in thousands)
    Net sales
        Industrial:
           North America         $726,808    $742,468  $2,023,947  $2,250,578
           International          325,754     343,060     912,491     964,399
        Aerospace                 284,989     317,446     885,801     882,259
        Other                     240,781     139,084     669,290     397,572
    Total                      $1,578,332  $1,542,058  $4,491,529  $4,494,808

    Segment operating income
        Industrial:
           North America          $38,090     $90,929    $102,131    $306,870
           International           17,125      35,791      45,188      86,905
        Aerospace                  48,682      64,546     152,020     163,712
        Other                      18,358      12,690      44,779      33,715
    Total segment operating
     income                       122,255     203,956     344,118     591,202
    Corporate general and
     administrative expenses       17,550      18,038      50,163      55,768
    Income from operations
     before interest
     expense and other            104,705     185,918     293,955     535,434
    Interest expense               20,924      24,243      62,933      71,018
    Other expense (income)          7,221       4,704      14,984     (36,404)
    Income before income taxes    $76,560    $156,971    $216,038    $500,820

    Note: Amounts for the three and nine months ended March 31, 2001
    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 nine months ended March 31, 2002.


    CONSOLIDATED BALANCE SHEET
    (Unaudited)
    (Dollars in thousands)        March 31,         2002              2001
    Assets
    Current assets:
    Cash and cash equivalents                      $31,917           $45,209
    Restricted investments                          98,850
    Accounts receivable, net                       981,972           888,760
    Inventories                                  1,070,287         1,006,037
    Prepaid expenses                                42,248            37,681
    Deferred income taxes                           98,682            93,671
    Assets held for sale                                             215,533
    Total current assets                         2,323,956         2,286,891
    Plant and equipment, net                     1,683,768         1,507,047
    Excess cost of investments over net
     assets acquired                             1,099,413           852,973
    Other assets                                   647,880           604,527
    Total assets                                $5,755,017        $5,251,438

    Liabilities and shareholders' equity
    Current liabilities:
    Notes payable                                 $547,764          $613,328
    Accounts payable                               378,951           333,212
    Accrued liabilities                            483,631           380,487
    Accrued domestic and foreign taxes              73,263            60,252
    Total current liabilities                    1,483,609         1,387,279
    Long-term debt                               1,052,174           865,456
    Pensions and other postretirement
     benefits                                      209,134           305,186
    Deferred income taxes                          147,726           120,176
    Other liabilities                              236,145            82,997
    Shareholders' equity                         2,626,229         2,490,344
    Total liabilities and shareholders'
     equity                                     $5,755,017        $5,251,438


    CONSOLIDATED STATEMENT OF CASH FLOWS
    (Unaudited)                                   Nine Months Ended March 31,
    (Dollars in thousands)                            2002              2001

    Cash flows from operating activities:
    Net income                                    $142,000          $291,434
    Depreciation and amortization                  180,957           200,785
    Net effect of extraordinary loss                                   3,378
    Net change in receivables,
     inventories, and trade payables                80,272           (78,935)
    Net change in other assets and
     liabilities                                    42,779           (78,909)
    Other, net                                      11,976           (29,461)
    Net cash provided by operating
     activities                                    457,984           308,292
    Cash flows from investing activities:
    Acquisitions (less cash acquired of
     $3,117 in 2002 and $8,256 in 2001)           (383,144)         (512,716)
    Capital expenditures                          (157,452)         (263,812)
    Other, net                                     (38,460)          105,637
    Net cash used in investing activities         (579,056)         (670,891)
    Cash flows from financing activities:
    Net proceeds from common share
     activity                                        3,930             9,824
    Net proceeds from debt                         190,132           391,216
    Dividends                                      (62,058)          (59,298)
    Net cash provided by financing
     activities                                    132,004           341,742
    Effect of exchange rate changes on
     cash                                           (2,580)           (2,394)
    Net increase (decrease) in cash and
     cash equivalents                                8,352           (23,251)
    Cash and cash equivalents at
     beginning of period                            23,565            68,460
    Cash and cash equivalents at end of
     period                                        $31,917           $45,209

SOURCE Parker Hannifin Corporation

CONTACT: Media, Lorrie Paul Crum, VP - Corp. Communications, +1-216-896-2750, or Financial Analysts, Timothy K. Pistell, Treasurer, +1-216-896-2130, both of Parker Hannifin

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