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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