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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
