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Parker Hannifin Announces Record Third Quarter Sales; Earnings From Continuing Operations of $1.18 Per Share

April 18, 2005

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CLEVELAND, April 18, 2005 /PRNewswire-FirstCall via COMTEX/ -- Parker Hannifin Corporation (NYSE: PH) today reported fiscal third-quarter income from continuing operations of $142.2 million, or $1.18 per diluted share on sales of $2.14 billion for the period ended March 31, 2005, compared to income from continuing operations of $105.7 million, or 88 cents per diluted share on sales of $1.88 billion in the same period last year. In the current quarter, the company recorded a charge from discontinued operations of $2.8 million, or three cents per diluted share. The charge reflects the ongoing accounting for the sale of the company's Wynn Oil specialty chemicals business in December 2004.

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

As previously announced, in the quarter the company recorded six cents per diluted share related to realignment costs, divestiture activities, and tax- related professional fees; and a tax benefit of 10 cents per diluted share.

"We are pleased to report record third quarter sales up 14 percent and strong earnings per share from continuing operations up 34 percent year-over- year. We continue to generate strong cash flow from operations at $517 million for the first nine months of fiscal 2005, up four percent from the same period last year," said Parker Chairman and CEO Don Washkewicz. "Our third quarter performance is primarily the result of our employees' ongoing execution of our Win Strategy, including the recent acquisition of Sporlan and Acadia, which should continue to help Parker reduce future revenue volatility."

Third Quarter Segment Results

In the North American Industrial segment, operating income improved 36 percent to $120.1 million on sales of $925.0 million. The segment benefited from strong demand in the oil and gas, mining, construction, and heavy-duty truck markets.

International Industrial units increased operating income 47 percent to $63.1 million on sales of $623.3 million. The improvements in this segment were largely the result of implementing the company's Win Strategy initiatives.

In the company's Climate & Industrial Controls segment, third-quarter operating income increased 24 percent to $26.5 million on sales of $226.8 million. Despite a softening in the automotive market, the business is benefiting from the successful integration of the Sporlan acquisition and the expected seasonal ramp up in the air conditioning and refrigeration markets.

Aerospace reported an increase in operating income of six percent to $44.0 million on sales of $337.3 million, reflecting increased commercial OEM business.

In the "Other" segment, comprised of Astron metal buildings, operating income was $2.4 million on sales of $29.2 million.

Year-to-Date Results

For the first nine months of fiscal 2005, the company's income from continuing operations increased 81 percent to $386.6 million, or $3.21 per diluted share on sales of $6.0 billion. Income from continuing operations for the first nine months of last year was $213.6 million, or $1.80 cents per diluted share on sales of $5.03 billion. Income from discontinued operations for the first nine months of fiscal 2005 was $56.7 million, or 47 cents per diluted share, which includes profit from operations and the gain on the divestiture of the Wynn Oil specialty chemicals business.

Cash Flow and Inventories

For the first nine months, cash flow from operations was $516.7 million, or 8.6 percent of sales. For the same period last year, cash flow from operations was $495.0 million, or 9.8 percent of sales.

During the quarter, inventories were reduced by $48 million, which includes the effects of currency and acquisitions, and the company's ongoing lean manufacturing efforts.

Outlook

The company raised fiscal 2005 full-year earnings estimates to be between $4.72 and $4.92 per diluted share, which includes 47 cents per diluted share from discontinued operations.

"We are on target to achieve record sales and earnings in fiscal 2005," added Washkewicz. "While we have a few markets experiencing some softness, we are very encouraged by the continued strength in our industrial and aerospace markets.

"Our Win Strategy is a multi-faceted approach for capturing and focusing the creativity of our entire global organization. We are especially pleased with our success in expanding our business into high growth regions, as evidenced by our most recent announcement of entering into a joint venture with Tianjin Tejing Hydraulics Company to produce hydraulic systems in China."

NOTICE OF CONFERENCE CALL: Parker Hannifin's conference call and slide presentation to discuss its fiscal third-quarter results is available to all interested parties via live webcast today at 10:00 a.m. ET, on the company's investor information web site, http://www.phstock.com . To access the call, click on the "Live Webcast" link. From this link, users also may complete a pre-call system test and register for e-mail notification of future events and information available from Parker.

With annual sales approaching $8 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 46 countries around the world. Parker has increased its annual dividends paid to shareholders for 48 consecutive years, among the top five longest-running dividend-increase records in the S&P 500 index. For more information, visit the company's web site at http://www.parker.com , or its investor information site at http://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 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 future performance and earnings projections of the company and individual segments 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, strategic initiatives to improve operating margins, and growth initiatives. A change in economic conditions in individual markets may have a particularly volatile effect on segment results. 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; uncertainties surrounding timing, successful completion or integration of acquisitions; threats associated with and efforts to combat terrorism; competitive market conditions and resulting effects on sales and pricing; increases in raw-material costs that cannot be recovered in product pricing; the company's ability to manage costs related to employee retirement and health care benefits and insurance; and global economic factors, including currency exchange rates, difficulties entering new markets and general economic conditions such as inflation and interest rates. The company makes these statements as of the date of this disclosure, and undertakes no obligation to update them.

PARKER HANNIFIN CORPORATION - MARCH 31, 2005
    CONSOLIDATED STATEMENT OF INCOME

                                Three Months Ended         Nine months ended
    (Unaudited)                     March 31,                  March 31,
    (Dollars in thousands
     except per share amounts)   2005         2004         2005         2004

    Net sales               $2,141,708   $1,879,057   $6,004,563   $5,034,502
    Cost of sales            1,712,884    1,526,297    4,769,640    4,122,981
    Gross profit               428,824      352,760    1,234,923      911,521
    Selling, general and
     administrative
     expenses                  218,207      195,452      636,187      553,893
    Other income
     (deductions):
       Interest expense        (17,116)     (17,229)     (50,620)     (56,247)
       Interest and other
        (expense), net          (1,872)        (792)     (11,101)      (3,188)
                               (18,988)     (18,021)     (61,721)     (59,435)
    Income from continuing
     operations before
     income taxes              191,629      139,287      537,015      298,193
    Income taxes                49,454       33,547      150,454       84,572
    Income from continuing
     operations                142,175      105,740      386,561      213,621
    Discontinued
     operations                 (2,805)       2,108       56,719        6,689
    Net income                $139,370     $107,848     $443,280     $220,310

    Earnings (loss) per share:
       Basic earnings per
        share from continuing
        operations               $1.19         $.89        $3.25        $1.82
       Discontinued operations    (.02)         .02          .48          .05
       Basic earnings per share  $1.17         $.91        $3.73        $1.87
       Diluted earnings
        per share from
        continuing operations    $1.18         $.88        $3.21        $1.80
       Discontinued operations    (.03)         .02          .47          .05
       Diluted earnings
        per share                $1.15         $.90        $3.68        $1.85

    Average shares
     outstanding during
     period - Basic        119,173,986  118,242,311  118,787,238  117,545,386
    Average shares
     outstanding during
     period - Diluted      120,769,762  119,637,727  120,534,917  118,803,626

    Cash dividends per
     common share                 $.20         $.19         $.58         $.57

    Note:  Certain prior period amounts have been reclassified to conform to
           the current year presentation.



    BUSINESS SEGMENT INFORMATION BY INDUSTRY

    (Unaudited)                   Three Months Ended       Nine months ended
                                       March 31,               March 31,
    (Dollars in thousands)          2005        2004        2005        2004
    Net sales
        Industrial:
           North America         $924,975    $815,239  $2,576,556  $2,168,428
           International          623,343     541,634   1,755,537   1,404,903
        Aerospace                 337,314     314,651     995,409     889,074
        Climate & Industrial
         Controls                 226,831     181,172     568,807     481,820
        Other                      29,245      26,361     108,254      90,277
    Total                      $2,141,708  $1,879,057  $6,004,563  $5,034,502

    Segment operating income
        Industrial:
           North America         $120,133     $88,605    $339,804    $180,487
           International           63,079      42,857     191,167     103,808
        Aerospace                  43,945      41,638     144,779     113,960
       Climate & Industrial
        Controls                   26,513      21,432      51,241      49,405
       Other                        2,379        (409)     13,896       2,749
    Total segment operating
     income                      $256,049    $194,123    $740,887    $450,409
    Corporate general and
     administrative expenses       23,447      25,435      79,418      73,441
    Income from continuing
     operations before interest
     expense and other            232,602     168,688     661,469     376,968
    Interest expense               17,116      17,229      50,620      56,247
    Other expense                  23,857      12,172      73,834      22,528
    Income from continuing
     operations before income
     taxes                       $191,629    $139,287    $537,015    $298,193

    Note:  Certain prior period amounts have been reclassified to conform to
           the current year presentation.



    CONSOLIDATED BALANCE SHEET

    (Unaudited)
    (Dollars in thousands)     March 31,             2005              2004
    Assets
    Current assets:
    Cash and cash equivalents                     $104,284          $169,956
    Accounts receivable, net                     1,283,675         1,163,145
    Inventories                                  1,072,248           970,880
    Prepaid expenses                                42,466            36,952
    Deferred income taxes                          108,384           107,000
    Total current assets                         2,611,057         2,447,933
    Plant and equipment, net                     1,620,928         1,622,954
    Goodwill                                     1,481,185         1,218,130
    Intangible assets, net                         199,349            58,458
    Other assets                                   842,906           808,966
    Net assets of discontinued operations                             53,921
    Total assets                                $6,755,425        $6,210,362

    Liabilities and shareholders' equity
    Current liabilities:
    Notes payable                                  $18,098          $165,448
    Accounts payable                               533,674           493,454
    Accrued liabilities                            567,932           515,526
    Accrued domestic and foreign taxes             123,518           137,528
    Total current liabilities                    1,243,222         1,311,956
    Long-term debt                                 966,814           968,326
    Pensions and other postretirement benefits     825,045           955,201
    Deferred income taxes                           75,911            21,579
    Other liabilities                              183,382           162,636
    Shareholders' equity                         3,461,051         2,790,664
    Total liabilities and shareholders' equity  $6,755,425        $6,210,362

    Note:  Certain prior period amounts have been reclassified to conform to
           the current year presentation.



    CONSOLIDATED STATEMENT OF CASH FLOWS

    (Unaudited)                                   Nine months ended March 31,
    (Dollars in thousands)                           2005              2004

    Cash flows from operating activities:
    Net income                                    $443,280          $220,310
    Net (income) from discontinued operations      (56,719)           (6,689)
    Depreciation and amortization                  197,284           188,876
    Net change in receivables,
     inventories, and trade payables               (63,218)           23,760
    Net change in other assets and liabilities      (2,024)           98,856
    Other, net                                      (1,942)          (30,114)
    Net cash provided by operating activities      516,661           494,999
    Cash flows from investing activities:
    Acquisitions (net of cash of $4,653
     in 2005 and $63,054 in 2004)                 (530,901)         (201,101)
    Capital expenditures                          (112,978)         (101,715)
    Proceeds from sale of business                 120,000                 -
    Other, net                                      27,476            27,134
    Net cash (used in) investing activities       (496,403)         (275,682)
    Cash flows from financing activities:
    Net proceeds from common share activity          5,946            42,443
    Net proceeds (payments of) debt                (21,175)         (277,865)
    Dividends                                      (68,880)          (66,845)
    Net cash (used in) financing activities        (84,109)         (302,267)
    Net cash (used in) provided by
     discontinued operations                       (19,004)            8,735
    Effect of exchange rate changes on cash          3,292            (1,679)
    Net (decrease) in cash and cash equivalents    (79,563)          (75,894)
    Cash and cash equivalents at
     beginning of period                           183,847           245,850
    Cash and cash equivalents at end of period    $104,284          $169,956

    Note:  Certain prior period amounts have been reclassified to conform to
           the current year presentation.

SOURCE Parker Hannifin Corporation

Media, Jennifer Eaton, Corp. Communications, +1-216-896-2895, or after hours, +1-216-407-6165, or jeaton@parker.com, or Financial Analysts, Pamela Huggins, VP & Treasurer, +1-216-896-2240, or phuggins@parker.com , both of Parker Hannifin Corporation

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