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Parker Posts Fiscal Second Quarter Results

January 18, 2005

Click here to view this release in printable (PDF) format

CLEVELAND, Jan 18, 2005 /PRNewswire-FirstCall via COMTEX/ -- Parker Hannifin Corporation (NYSE: PH) today reported fiscal second-quarter net income of $171.1 million, or $1.41 cents per diluted share, on sales of $1.94 billion for the period ended December 31, 2004, compared to net income of $55.8 million, or 47 cents per diluted share on sales of $1.59 billion in the same period last year. The current-quarter results include 47 cents per diluted share related to the operations and sale of the company's Wynn Oil specialty chemicals business, which was divested on December 31, 2004, and is now reflected on the company's financial statements as discontinued operations.

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

The company again reported strong cash from operations in the first half of fiscal 2005 of $352.2 million, or 9.1 percent of sales, compared with $371.2 million, or 11.8 percent of sales in the prior year.

"We are very pleased with our second quarter results, particularly with our 22 percent sales growth, doubling net income from continuing operations, and strong cash flow," said Parker Chairman and CEO Don Washkewicz. "We're still in the early stages of a broad-based, worldwide industrial recovery and we're continuing to see positive results in nearly all of the end markets we serve, notably the recent uptick in Aerospace."

Second Quarter Segment Results

In the North American Industrial segment, operating income improved 105 percent to $99.9 million on sales of $819.2 million. International Industrial units increased operating income 108 percent to $61.6 million on sales of $583.2 million.

In the company's Climate & Industrial Controls segment, second-quarter sales increased 22 percent to $176.5 million and operating income decreased 15 percent to $8.9 million. The decline in operating income is primarily the result of a slowdown in production schedules in the automotive market.

Aerospace reported an increase in operating income of 42 percent to $49.5 million on sales of $327.0 million.

In the "Other" segment, comprised of Astron metal buildings, operating income was $4.7 million on sales of $37.0 million.

Year-to-Date Results

For the first six months of fiscal 2005, the company's net income increased 170 percent to $303.9 million, or $2.52 per diluted share ($2.03 from continuing operations) on sales of $3.86 billion. Net income for the first six months of last year was $112.5 million, or 95 cents per diluted share on sales of $3.16 billion.

Outlook

The company estimates earnings per share for the third quarter of fiscal year 2005 to be between $1.10 and $1.30 per diluted share. Fiscal 2005 full year earnings are estimated to be between $4.75 and $5.15 per diluted share, which includes 49 cents per diluted share from discontinued operations.

"Our Win Strategy continues to drive sales and margin growth and we're staying focused on executing those initiatives," adds Washkewicz. "The results we've seen in the first half of the year, combined with the continued positive trends in monthly order rates, give us confidence that we will deliver our projected results for the remainder of the year."

NOTICE OF CONFERENCE CALL: Parker Hannifin's conference call and slide presentation to discuss its fiscal second-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 of more than $7 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 - DECEMBER 31, 2004
    CONSOLIDATED STATEMENT OF INCOME

                               Three months ended         Six months ended
    (Unaudited)                    December 31,              December 31,
    (Dollars in thousands
     except per share amounts)  2004         2003         2004         2003

    Net sales               $1,942,887   $1,593,340   $3,862,855   $3,155,445
    Cost of sales            1,546,357    1,313,802    3,056,756    2,596,684
    Gross profit               396,530      279,538      806,099      558,761
    Selling, general and
     administrative expenses   220,846      183,524      417,980      358,441
    Other income (deductions):
       Interest expense        (17,288)     (17,267)     (33,504)     (39,018)
       Interest and other
        (expense), net           1,618         (760)      (9,229)      (2,396)
                               (15,670)     (18,027)     (42,733)     (41,414)
    Income from continuing
     operations before
     income taxes              160,014       77,987      345,386      158,906
    Income taxes                46,161       24,493      101,000       51,025
    Income from continuing
     operations                113,853       53,494      244,386      107,881
    Discontinued operations     57,274        2,277       59,524        4,581
    Net income                $171,127      $55,771     $303,910     $112,462

    Earnings per share:
       Basic earnings per
        share from continuing
        operations                $.96         $.46        $2.06         $.92
       Discontinued operations     .48          .01          .50          .04
       Basic earnings per share  $1.44         $.47        $2.56         $.96
       Diluted earnings
        per share from
        continuing operations     $.94         $.45        $2.03         $.91
       Discontinued operations     .47          .02          .49          .04
       Diluted earnings
        per share                $1.41         $.47        $2.52         $.95

    Average shares
     outstanding during
     period - Basic        118,899,161  117,490,153  118,593,863  117,196,923
    Average shares
     outstanding during
     period - Diluted      121,122,955  119,003,881  120,417,493  118,386,575

    Cash dividends per
     common share                 $.19         $.19         $.38         $.38

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



    BUSINESS SEGMENT INFORMATION BY INDUSTRY
                                  Three months ended       Six months ended
    (Unaudited)                      December 31,            December 31,
    (Dollars in thousands)         2004        2003        2004        2003
    Net sales
        Industrial:
           North America         $819,243    $685,412  $1,651,581  $1,353,189
           International          583,221     441,445   1,132,194     863,269
        Aerospace                 326,961     289,792     658,095     574,423
        Climate & Industrial
         Controls                 176,506     144,698     341,976     300,648
        Other                      36,956      31,993      79,009      63,916
    Total                      $1,942,887  $1,593,340  $3,862,855  $3,155,445

    Segment operating income
        Industrial:
           North America          $99,862     $48,837    $219,671     $91,882
           International           61,615      29,619     128,088      60,951
        Aerospace                  49,540      34,837     100,834      72,322
       Climate & Industrial
        Controls                    8,911      10,459      24,728      27,973
       Other                        4,744         983      11,517       3,158
    Total segment operating
     income                      $224,672    $124,735    $484,838    $256,286
    Corporate general and
     administrative expenses       30,616      25,087      55,971      48,006
    Income from continuing
     operations before
     interest expense and other   194,056      99,648     428,867     208,280
    Interest expense               17,288      17,267      33,504      39,018
    Other expense                  16,754       4,394      49,977      10,356
    Income from continuing
     operations before income
     taxes                       $160,014     $77,987    $345,386    $158,906

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



    CONSOLIDATED BALANCE SHEET
    (Unaudited)
    (Dollars in thousands)    December 31,            2004              2003
    Assets
    Current assets:
    Cash and cash equivalents                     $116,861          $138,047
    Accounts receivable, net                     1,158,785           898,219
    Inventories                                  1,119,993           984,493
    Prepaid expenses                                42,070            37,302
    Deferred income taxes                          115,187           101,718
    Total current assets                         2,552,896         2,159,779
    Plant and equipment, net                     1,667,789         1,626,889
    Goodwill                                     1,464,322         1,117,936
    Intangible assets, net                         205,085            60,542
    Other assets                                   791,002           757,883
    Net assets of discontinued operations                             55,488
    Total assets                                $6,681,094        $5,778,517

    Liabilities and shareholders' equity
    Current liabilities:
    Notes payable                                  $81,082           $36,154
    Accounts payable                               490,134           435,883
    Accrued liabilities                            535,755           437,111
    Accrued domestic and foreign taxes              98,907            86,776
    Total current liabilities                    1,205,878           995,924
    Long-term debt                                 988,828           975,223
    Pensions and other postretirement benefits     828,423           937,697
    Deferred income taxes                           85,436            15,091
    Other liabilities                              185,127           150,309
    Shareholders' equity                         3,387,402         2,704,273
    Total liabilities and shareholders' equity  $6,681,094        $5,778,517

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



    CONSOLIDATED STATEMENT OF CASH FLOWS
    (Unaudited)                                Six months ended December 31,
    (Dollars in thousands)                            2004              2003

    Cash flows from operating activities:
    Net income                                    $303,910          $112,462
    Net (income) from discontinued operations      (59,524)           (4,581)
    Depreciation and amortization                  132,106           127,139
    Net change in receivables,
     inventories, and trade payables                (4,593)          136,660
    Net change in other assets and liabilities     (28,384)            3,384
    Other, net                                       8,644            (3,878)
    Net cash provided by operating activities      352,159           371,186
    Cash flows from investing activities:
    Acquisitions (net of cash of $2,522
     in 2004)                                     (486,980)           (6,877)
    Capital expenditures                           (78,877)          (69,921)
    Proceeds from sale of business                 120,000
    Other, net                                      20,090            12,290
    Net cash (used in) investing activities       (425,767)          (64,508)
    Cash flows from financing activities:
    Net proceeds from common share activity         20,255            32,551
    Net proceeds from (payments of) debt            42,886          (408,972)
    Dividends                                      (45,065)          (44,437)
    Net cash provided by (used in)
     financing activities                           18,076          (420,858)
    Net cash (used in) provided by
     discontinued operations                       (16,199)            5,135
    Effect of exchange rate changes on cash          4,745             1,242
    Net (decrease) in cash and cash
     equivalents                                   (66,986)         (107,803)
    Cash and cash equivalents at
     beginning of period                           183,847           245,850
    Cash and cash equivalents at end of period    $116,861          $138,047

    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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