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Parker Earns 52 Cents in Current Quarter on Modest Sales Increase

October 15, 2002

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CLEVELAND, Oct 15, 2002 /PRNewswire-FirstCall via COMTEX/ -- Parker Hannifin Corporation (NYSE: PH) today reported first-quarter net income for the period ended September 30, 2002 of $61 million, or 52 cents per diluted share, on record first-quarter sales of $1.59 billion. Last year, the company earned $60.6 million, or 52 cents per diluted share, on sales of $1.48 billion.

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

"We made good progress this quarter streamlining the company, and we have the bulk of realignment behind us," said Parker President and CEO Don Washkewicz. "The economic environment remains volatile, but most encouraging is the fact that we realized some tangible benefits this quarter from the operating improvements our divisions have been working on for the past year. As the consistent performance of Aerospace suggests, we know that the extension of our lean enterprise and supply-chain strategies will create greater value in our industrial businesses going forward."

"We remain in excellent condition financially, generating strong cash flow, and tightly controlling our costs and leverage position," Washkewicz said.

The Aerospace segment, which is 19 percent of annual revenues, had lower sales and operating income in the quarter primarily due to a marked decline in commercial markets, but partially offset by an increase in military business. This segment posted an operating margin of 15.3 percent, reflecting the group's lean-enterprise discipline.

The International Industrial businesses increased sales and operating income during the quarter, primarily reflecting higher volume. As a result, International Industrial operating margin improved to 7.3 percent.

Quarterly sales and operating income in the company's North American Industrial businesses improved with strengthening mobile-equipment sales, especially in the construction and agriculture markets. North American Industrial operating margin increased to 7.0 percent.

In the "Other" segment, which includes Climate & Industrial Controls and Specialty Chemicals, the operating margin improved to 8.8 percent, despite relatively flat sales.


The company noted that it sees no definitive signs of economic recovery in recent order trends. For the fiscal second quarter ending December 31, earnings are expected to range from 33 to 43 cents per share before business- realignment costs. Reflecting continued economic volatility, the company projects full-year earnings between $2.20 and $2.50 per share, not including previously announced realignment costs. These actions are expected to include severance, operating realignments, plant closures and consolidations in the company's industrial segment.

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 48,000 people in 44 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 .

NOTICE OF CONFERENCE CALL: Parker Hannifin's conference call and slide presentation to discuss its fiscal first-quarter results is available to all interested parties via live webcast at 10 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 may also complete a pre-call system test and register for e-mail notification of future events and information available from Parker.

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 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 may differ materially from current expectations, depending on economic conditions within both its industrial and aerospace markets, and the company's ability to achieve anticipated benefits associated with announced realignment activities and strategic initiatives to improve operating margins. Among the 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; and global economic factors, including currency exchange rates, difficulties entering new markets and general economic conditions such as interest rates. In each quarterly earnings report, the company intends to provide a range stating expected earnings per share for the succeeding quarter and full fiscal year, reflecting these ranges 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.


    (Unaudited)                             Three Months Ended September 30,
    (Dollars in thousands except per
     share amounts)                                2002               2001

    Net sales                                   $1,585,904        $1,475,867
    Cost of sales                                1,299,890         1,197,625
    Gross profit                                   286,014           278,242
    Selling, general and administrative
     expenses                                      176,255           165,415
    Other income (deductions):
       Interest expense                            (19,694)          (20,454)
       Interest and other income, net                1,626               117
                                                   (18,068)          (20,337)
    Income before income taxes                      91,691            92,490
    Income taxes                                    30,716            31,909
    Net income                                     $60,975           $60,581

    Earnings per share:
       Basic earnings per share                       $.52              $.53
       Diluted earnings per share                     $.52              $.52

    Average shares outstanding during
     period - Basic                            116,232,630       115,166,914
    Average shares outstanding during
     period - Diluted                          116,607,735       115,752,698

    Cash dividends per common share                   $.18              $.18

    (Unaudited)                             Three Months Ended September 30,
    (Dollars in thousands)                          2002              2001

    Net sales
           North America                          $727,577          $650,840
           International                           365,659           296,291
        Aerospace                                  277,321           312,500
        Other                                      215,347           216,236
    Total                                       $1,585,904        $1,475,867

    Segment operating income
           North America                           $51,045           $40,465
           International                            26,646            19,828
        Aerospace                                   42,533            56,892
       Other                                        18,844            16,992
    Total segment operating income                 139,068           134,177
    Corporate general and administrative
     expenses                                       20,098            16,939
    Income from operations before
     interest expense and other                    118,970           117,238
    Interest expense                                19,694            20,454
    Other expense                                    7,585             4,294
    Income before income taxes                     $91,691           $92,490

    (Dollars in thousands)     September 30,        2002              2001
    Current assets:
    Cash and cash equivalents                      $45,730           $35,384
    Restricted investments                                            86,992
    Accounts receivable, net                       945,861           920,958
    Inventories                                  1,046,342         1,047,713
    Prepaid expenses                                44,998            43,580
    Deferred income taxes                           80,386           109,376
    Total current assets                         2,163,317         2,244,003
    Plant and equipment, net                     1,681,958         1,600,157
    Goodwill                                     1,063,925         1,083,467
    Intangible assets, net                          58,487            17,492
    Other assets                                   658,730           550,856
    Total assets                                $5,626,417        $5,495,975

    Liabilities and shareholders' equity
    Current liabilities:
    Notes payable                                 $453,130          $583,428
    Accounts payable                               413,912           380,009
    Accrued liabilities                            418,725           452,821
    Accrued domestic and foreign taxes              51,372            81,315
    Total current liabilities                    1,337,139         1,497,573
    Long-term debt                                 955,312           874,228
    Pensions and other postretirement benefits     502,289           206,427
    Deferred income taxes                           89,603           144,243
    Other liabilities                              128,916           192,866
    Shareholders' equity                         2,613,158         2,580,638
    Total liabilities and shareholders' equity  $5,626,417        $5,495,975

    (Unaudited)                             Three Months Ended September 30,
    (Dollars in thousands)                          2002              2001

    Cash flows from operating activities:
    Net income                                     $60,975           $60,581
    Depreciation and amortization                   64,073            61,763
    Net change in receivables,
     inventories, and trade payables                26,822            60,965
    Net change in other assets and liabilities     (22,282)           27,300
    Other, net                                      15,565            (7,512)
    Net cash provided by operating activities      145,153           203,097
    Cash flows from investing activities:
    Acquisitions (less cash acquired of
     $8 in 2002)                                    (1,987)         (135,545)
    Capital expenditures                           (38,614)          (59,296)
    Other, net                                       4,933            (9,712)
    Net cash used in investing activities          (35,668)         (204,553)
    Cash flows from financing activities:
    Net proceeds from (payments for)
     common share activity                             845              (149)
    Net (payments of) proceeds from debt           (90,214)           35,843
    Dividends                                      (20,842)          (20,731)
    Net cash (used in) provided by
     financing activities                         (110,211)           14,963
    Effect of exchange rate changes on cash             72            (1,688)
    Net (decrease) increase in cash and
     cash equivalents                                 (654)           11,819
    Cash and cash equivalents at
     beginning of period                            46,384            23,565
    Cash and cash equivalents at end of period     $45,730           $35,384

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, Vice President and Treasurer, +1-216-896-2130, or tpistell@parker.com, both of Parker Hannifin Corporation

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