« Back

Parker Earns 52 Cents in First Quarter; Recent Events Complicate Full-Year Outlook

October 16, 2001

CLEVELAND, Oct. 16 /PRNewswire/ -- Parker Hannifin Corporation (NYSE: PH) today reported first-quarter net income for the period ended September 30, 2001 of $60.6 million, or 52 cents per diluted share, on sales of $1.48 billion. Net income for the same period last year was $125 million, or $1.09 per share, which included a net benefit from non-recurring items of 25 cents. The company's adoption this year of FAS 142, which eliminates goodwill amortization, also affects last year's quarterly comparison by 11 cents per share, making the "apples-to-apples" comparison 52 cents for this quarter, versus 95 cents in fiscal year 2001. Without the contribution of acquisitions and businesses previously held for sale, revenues in the company's base business were down by 11.4 percent, reflecting significantly lower volume, especially in the North American Industrial segment.

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

"We've reduced production levels and stepped up consolidation activities, but excess operating capacity continues to weigh on our profitability," said Parker CEO Don Washkewicz. "In the aftermath of September 11th, we want our customers and shareholders to know Parker's fundamentals remain sound. We're getting leaner and strengthening our systems foothold with strategic acquisitions that absolutely are achieving earnings accretion. And the product innovations noted in our latest annual report are being very well received by our customers."

The company's Aerospace segment, which comprises 21 percent of revenues, achieved double-digit increases in sales and operating income in the quarter, as demand held prior to September 11 and the group benefited from previously implemented lean initiatives. The Aerospace operating margin was 18.2 percent for the period.

Against last year's tough comparisons, quarterly sales and operating income in the company's North American and International Industrial businesses were lower. Sales and operating income fell in all of the North American Industrial businesses, most sharply in the company's higher-margin technology markets, including semiconductors and telecommunications. As a result, the return on sales in the North American Industrial segment dropped to 6.2 percent. And, with slowing sales and ongoing realignment in the International Industrial business, that operating margin was 6.7 percent.

In the "Other" segment, which includes Climate & Industrial Controls and the addition of Astron and Wynn Oil since last year, the return on sales was 7.9 percent.

Outlook

"For our near-term performance, it's difficult to predict what the net effect of the current economic climate and unsettled world events will be, so we are managing very tightly," said Washkewicz. "The commercial aerospace sector is facing severe challenges that will most certainly affect some sixty percent of our Aerospace business. Our industrial side will just as certainly be buoyed by interest-rate relief, although we won't see the effects of that soon enough to change our current-year outlook."

For the next quarter, company officials anticipate continued weakness in industrial and other markets, as well as a precipitous drop in commercial aerospace following the events of September 11th. Based on these conditions, earnings in the second quarter of fiscal year 2002 are expected to be between 30 and 42 cents per share. And, with no immediate evidence of an upturn in sight, earnings for the full year are expected to range from $2.20 to $2.50 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 of $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.

    PARKER HANNIFIN CORPORATION - SEPTEMBER 30, 2001
    CONSOLIDATED STATEMENT OF INCOME

                                            Three Months Ended September 30,
    (Dollars in thousands except per
     share amounts)                                   2001              2000

    Net sales                                   $1,475,867        $1,485,131
    Cost of sales                                1,197,625         1,159,029
    Gross profit                                   278,242           326,102
    Selling, general and administrative
     expenses                                      165,415           162,441
    Other income (deductions):
       Interest expense                            (20,454)          (21,168)
       Interest and other income, net                  117            51,377
                                                   (20,337)           30,209
    Income before income taxes                      92,490           193,870
    Income taxes                                    31,909            68,824
    Net income                                     $60,581          $125,046

    Earnings per share:
       Basic earnings per share                       $.53             $1.10
       Diluted earnings per share                     $.52             $1.09

    Average shares outstanding during
     period - Basic                            115,166,914       113,929,685
    Average shares outstanding during
     period - Diluted                          115,752,698       114,561,981

    Cash dividends per common share                   $.18              $.17

    Note:  Selling, general and administrative expenses for the three months
    ended September 30, 2000 includes $14,709 of goodwill amortization
    ($12,641 after tax or $.11 per share).


    PRO FORMA RESULTS EXCLUDING GOODWILL AMORTIZATION
                                            Three Months Ended September 30,
    (Dollars in thousands except per
     share amounts)                                2001               2000

    Reported net income                           $60,581           $125,046
    Add back goodwill amortization                                    12,641
    Adjusted net income                           $60,581           $137,687

    Earnings per share:
       Reported basic earnings per share             $.53              $1.10
       Goodwill amortization                                             .11
       Adjusted basic earnings per share             $.53              $1.21
       Reported diluted earnings per share           $.52              $1.09
       Goodwill amortization                                             .11
       Adjusted diluted earnings per share           $.52              $1.20

    BUSINESS SEGMENT INFORMATION BY INDUSTRY
                                             Three Months Ended September 30,
    (Dollars in thousands)                          2001              2000
    Net sales
      Industrial:
        North America                             $650,840          $770,105
        International                              296,291           308,084
      Aerospace                                    312,500           270,388
      Other                                        216,236           136,554
    Total                                       $1,475,867        $1,485,131

    Segment operating income
      Industrial:
        North America                              $40,465          $106,939
        International                               19,828            24,264
      Aerospace                                     56,892            44,276
      Other                                         16,992            11,865
    Total segment operating income                 134,177           187,344
    Corporate general and administrative
     expenses                                       16,939            17,384
    Income from operations before
     interest expense and other                    117,238           169,960
    Interest expense                                20,454            21,168
    Other expense (income)                           4,294           (45,078)
    Income before income taxes                     $92,490          $193,870

    Note: Income before income taxes for the three months ended September 30,
    2000 includes $14,709 of goodwill amortization ($6,691 in Industrial North
    America; $2,925 in Industrial International; $1,860 in Aerospace; $1,088
    in Other; and $2,145 in Other expense (income)).

    BUSINESS SEGMENT INFORMATION BY INDUSTRY
    EXCLUDING GOODWILL AMORTIZATION
                                             Three Months Ended September 30,
    (Dollars in thousands)                         2001              2000
    Net sales
      Industrial:
        North America                             $650,840          $770,105
        International                              296,291           308,084
      Aerospace                                    312,500           270,388
      Other                                        216,236           136,554
    Total                                       $1,475,867        $1,485,131

    Segment operating income
      Industrial:
        North America                              $40,465          $113,630
        International                               19,828            27,189
      Aerospace                                     56,892            46,136
      Other                                         16,992            12,953
    Total segment operating income                 134,177           199,908
    Corporate general and administrative
     expenses                                       16,939            17,384
    Income from operations before
     interest expense and other                    117,238           182,524
    Interest expense                                20,454            21,168
    Other expense (income)                           4,294           (47,223)
    Income before income taxes                     $92,490          $208,579

    Note: Amounts for the three months ended September 30, 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 months ended September 30, 2001.

    CONSOLIDATED BALANCE SHEET

    (Dollars in thousands)                               September 30,
                                                       2001        2000
    Assets
    Current assets:
    Cash and cash equivalents                      $35,384           $55,190
    Restricted investments                          86,992
    Accounts receivable, net                       920,958           953,904
    Inventories                                  1,047,713         1,027,213
    Prepaid expenses                                43,580            34,741
    Deferred income taxes                          109,376            86,754
    Assets held for sale                                             241,667
    Total current assets                         2,244,003         2,399,469
    Plant and equipment, net                     1,600,157         1,435,642
    Excess cost of investments over net
     assets acquired                             1,083,467           862,892
    Other assets                                   568,348           631,723
    Total assets                                $5,495,975        $5,329,726

    Liabilities and shareholders' equity
    Current liabilities:
    Notes payable                                 $583,428          $596,109
    Accounts payable                               380,009           360,787
    Accrued liabilities                            452,821           419,789
    Accrued domestic and foreign taxes              81,315           109,832
    Total current liabilities                    1,497,573         1,486,517
    Long-term debt                                 874,228           953,434
    Pensions and other postretirement
     benefits                                      206,427           303,909
    Deferred income taxes                          144,243           111,401
    Other liabilities                              192,866            80,295
    Shareholders' equity                         2,580,638         2,394,170
    Total liabilities and shareholders'
     equity                                     $5,495,975        $5,329,726

    CONSOLIDATED STATEMENT OF CASH FLOWS
                                             Three Months Ended September 30,
    (Dollars in thousands)                          2001              2000

    Cash flows from operating activities:
    Net income                                     $60,581          $125,046
    Depreciation and amortization                   61,763            67,432
    Net change in receivables,
     inventories, and trade payables                60,965          (124,443)
    Net change in other assets and
     liabilities                                    27,300           (12,921)
    Other, net                                      (7,512)          (35,150)
    Net cash provided by operating
     activities                                    203,097            19,964
    Cash flows from investing activities:
    Acquisitions (less cash acquired of
     $5,240 in 2000)                              (135,545)         (485,923)
    Capital expenditures                           (48,798)          (66,083)
    Other, net                                     (20,210)           71,958
    Net cash used in investing activities         (204,553)         (480,048)
    Cash flows from financing activities:
    Net (payments for) proceeds from
     common share activity                            (149)            1,725
    Net proceeds from debt                          35,843           466,007
    Dividends                                      (20,731)          (19,361)
    Net cash provided by financing activities       14,963           448,371
    Effect of exchange rate changes on cash         (1,688)           (1,557)
    Net increase (decrease) in cash and
     cash equivalents                               11,819           (13,270)
    Cash and cash equivalents at
     beginning of period                            23,565            68,460
    Cash and cash equivalents at end of period     $35,384           $55,190

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 Corporation/

Follow Us

Follow Parker Hannifin on social media:
Follow Parker Hannifin on social media