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CLEVELAND, Jul 29, 2003 /PRNewswire-FirstCall via COMTEX/ -- Parker Hannifin Corporation (NYSE: PH) today reported fourth-quarter net income for the period ended June 30, 2003 of $49.1 million, or 42 cents per diluted share, on sales of $1.66 billion. Net income during the quarter was reduced by six cents per share in realignment costs, partially offset by a gain of four cents per share on the sale of a non-core business. For the same period last year, the company reported a quarterly net loss of $11.9 million -- 10 cents per diluted share - - on sales of $1.66 billion. Last year's fourth-quarter net loss included 44 cents per diluted share in business-realignment costs and asset impairments.
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Net income for the full year was up 51 percent, at $196.3 million, or $1.68 per diluted share, including the four-cent per share divestiture gain and 16 cents per share in realignment costs. The company posted record revenues of $6.41 billion for the full year, although without acquisitions, divestitures made in fiscal-year 2002 and a favorable currency effect from business outside the United States, sales would have been down by one percent. In fiscal-year 2002, net income was $130.2 million, or $1.12 per diluted share, including a reduction of 25 cents per share in realignment costs and 32 cents per share in goodwill impairment.
"It was another difficult year in our industrial and aerospace markets, and we again absorbed a substantial increase in pension, insurance and medical costs," said Parker CEO Don Washkewicz. "Yet we still achieved margin improvement this year in all segments except aerospace. Clearly, execution of our Win Strategy is beginning to pay off, and we expect it to make another positive contribution to profitability in the coming year."
The company again had strong cash flow from operations, running at a rate of 10 percent of sales, and used a portion of cash generated during the year to contribute $108 million to its pension plans, consistent with its commitment to maintaining well funded plans for employees. Robust cash flow also enabled the company to pay down $146 million of debt and continue its 47- year record of returning higher dividends to shareholders. As of year end, the company had $246 million in cash, and is well positioned to invest in growth.
"We're managing our cash-to-cash cycle very well, and with our lean enterprise initiatives, we further reduced the number of days' inventory and capital expenditures this year," Washkewicz said. "In terms of realigning the business during the recession, we've closed more than 80 facilities in the past three years."
Operating Results
Industrial, mobile and aerospace demand remained severely depressed, with recent weakening in agriculture and air-conditioning markets. In aerospace, the company noted that JetBlue's recent order for 100 Embraer-190 jets is a positive for the company, as was another order by US Airways in May for regional jets. "In the aerospace business, we're concentrating on taking care of our customers, and engineering the best systems," said Washkewicz. "We continue to enjoy success by first positioning ourselves as a global engineering partner and systems integrator, and serving our customers well in the aftermarket, evidenced by Parker's recent top-five ranking among 35 different Airbus suppliers."
In the North American Industrial units, fourth-quarter operating income of $34.6 million was 11.6 percent lower than last year, while sales were 6.8 percent lower, at $716 million, consistent with the decline since March in North American order trends. Full-year operating income in this segment was up 10 percent, at $155.3 million on marginally higher revenues of $2.84 billion, for an operating margin of 5.5 percent.
In the International Industrial businesses, fourth-quarter operating income was $23.5 million on sales of $428.4 million, for an operating margin of 5.5 percent. For the year, the international businesses recorded sales of $1.58 billion, with operating income of $96.3 million, a 6.1-percent operating margin.
In the company's Climate & Industrial Controls business, which previously was included in the "Other" segment, fourth-quarter operating income was $19.1 million on sales of $181.4 million, a 10.5 percent return on sales. The business generated full-year operating income of $63.4 million on sales of $665.6 million, a return on sales of 9.5 percent.
Parker Aerospace saw a 3.5-percent drop in fourth-quarter sales to $276.8 million, while operating income fell nine percent to $34 million, for a return on sales of 12.3 percent. For the year, operating income in the aerospace business was $157.3 million on sales of $1.11 billion, a 14.2-percent return on sales.
In the "Other" segment, comprised of the Wynn Specialty Chemical and Astron metal buildings units, quarterly operating income was $4.6 million on $58 million in sales, for an operating margin of 8.0 percent. Full-year sales were $210.3 million, and operating income was $11.6 million, for a return on sales of 5.5 percent.
Outlook
In the future, the company will provide guidance using a range of expected rate-of-change percentages (up or down from the prior year) for revenue and operating income by segment, in addition to assumptions for non-operating items such as administrative costs, interest expense and tax rates. The aim is for investors to supplement this information with real-time economic data, including the company's monthly disclosure of order rates, to factor into analytical models.
For fiscal-year 2004, the company said it expects sales to grow marginally, while further improvement in operating margins is expected for every segment except aerospace. A new table entitled "Outlook" is attached to provide detail on sales and operating-margin expectations by business segment, in addition to assumptions regarding non-operating items.
Washkewicz said the company has assumed no economic recovery in its plans for the new fiscal year. "So far, the only bright spots are the strong growth rates we're seeing in Asia and Latin America. Going forward, now that the financial performance initiatives of our Win Strategy are in place throughout our business worldwide, we will be placing additional emphasis on the growth goal of the Win Strategy." He noted that the company has established new funding priorities and incentive measures to stimulate investment in and increase its yield from organic growth, with a stronger focus on innovation.
In addition to the information provided herein, 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 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 .
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 projections. 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; and global economic factors, including currency exchange rates, difficulties entering new markets and general economic conditions such as interest rates. The company makes these statements as of the date of this disclosure, and undertakes no obligation to update them.
PARKER HANNIFIN CORPORATION - JUNE 30, 2003
CONSOLIDATED STATEMENT OF INCOME
Three Months Ended June 30, Year Ended June 30,
(Dollars in thousands
except per share amounts) 2003 2002 2003 2002
Net sales $1,660,661 $1,657,593 $6,410,610 $6,149,122
Cost of sales 1,382,628 1,405,807 5,309,775 5,116,570
Gross profit 278,033 251,786 1,100,835 1,032,552
Selling, general and
administrative
expenses 185,290 223,939 721,065 726,001
Income from operations 92,743 27,847 379,770 306,551
Other income
(deductions):
Interest expense (22,162) (19,551) (81,561) (82,484)
Interest and other
(expense), net 3,108 (6,298) (827) (6,031)
(19,054) (25,849) (82,388) (88,515)
Income before income
taxes 73,689 1,998 297,382 218,036
Income taxes 24,607 13,848 101,110 87,886
Net income $49,082 $(11,850) $196,272 $130,150
Earnings per share:
Basic earnings per
share $.42 $(.10) $1.69 $1.13
Diluted earnings
per share $.42 $(.10) $1.68 $1.12
Average shares
outstanding during
period - Basic 116,509,222 115,954,864 116,381,880 115,408,872
Average shares
outstanding during
period - Diluted 116,961,265 116,589,133 116,894,506 116,060,719
Cash dividends per
common share $.19 $.18 $.74 $.72
BUSINESS SEGMENT INFORMATION BY INDUSTRY
Three Months Ended June 30, Year Ended June 30,
(Dollars in thousands) 2003 2002 2003 2002
Net sales
Industrial:
North America $716,086 $768,368 $2,840,628 $2,792,315
International 428,429 366,203 1,584,443 1,278,694
Aerospace 276,825 286,807 1,109,566 1,172,608
Climate & Industrial
Controls 181,356 185,408 665,629 612,533
Other 57,965 50,807 210,344 292,972
Total $1,660,661 $1,657,593 $6,410,610 $6,149,122
Segment operating income
Industrial:
North America $34,624 $39,184 $155,258 $141,315
International 23,482 10,560 96,301 60,721
Aerospace 33,971 37,333 157,295 189,353
Climate & Industrial
Controls 19,055 16,912 63,441 47,980
Other 4,642 (7,048) 11,584 6,663
Total segment operating
income 115,774 96,941 483,879 446,032
Corporate general and
administrative expenses 17,992 23,172 80,147 73,335
Income from operations
before interest
expense and other 97,782 73,769 403,732 372,697
Interest expense 22,162 19,551 81,561 82,484
Other expense (income) 1,931 52,220 24,789 72,177
Income before income taxes $73,689 $1,998 $297,382 $218,036
Note: Certain prior period amounts have been reclassified to conform to
the current year presentation.
CONSOLIDATED BALANCE SHEET
(Dollars in thousands) June 30, 2003 2002
Assets
Current assets:
Cash and cash equivalents $245,850 $46,384
Accounts receivable, net 1,002,060 1,006,313
Inventories 997,167 1,051,968
Prepaid expenses 51,949 48,532
Deferred income taxes 99,781 82,421
Total current assets 2,396,807 2,235,618
Plant and equipment, net 1,657,425 1,696,965
Goodwill 1,108,610 1,083,768
Intangible assets, net 59,444 51,286
Other assets 763,347 684,946
Total assets $5,985,633 $5,752,583
Liabilities and shareholders' equity
Current liabilities:
Notes payable $424,235 $416,693
Accounts payable 437,103 443,525
Accrued liabilities 497,295 451,310
Accrued domestic and foreign taxes 65,094 48,309
Total current liabilities 1,423,727 1,359,837
Long-term debt 966,332 1,088,883
Pensions and other postretirement
benefits 920,420 508,313
Deferred income taxes 20,780 76,955
Other liabilities 133,463 135,079
Shareholders' equity 2,520,911 2,583,516
Total liabilities and shareholders'
equity $5,985,633 $5,752,583
CONSOLIDATED STATEMENT OF CASH FLOWS
Year Ended June 30,
(Dollars in thousands) 2003 2002
Cash flows from operating activities:
Net income $196,272 $130,150
Depreciation and amortization 259,178 281,598
Net change in receivables,
inventories, and trade payables 140,625 171,078
Net change in other assets and
liabilities (66,397) 1,371
Other, net 27,811 46,849
Net cash provided by operating
activities 557,489 631,046
Cash flows from investing activities:
Acquisitions (less cash acquired of
$196 in 2003 and $3,118 in 2002) (16,648) (388,315)
Capital expenditures (158,260) (206,564)
Other, net 37,723 (13,839)
Net cash (used in) investing
activities (137,185) (608,718)
Cash flows from financing activities:
Net proceeds from common share
activity 9,386 20,250
Net (payments of) proceeds from debt (145,764) 61,711
Dividends (85,833) (82,838)
Net cash (used in) financing
activities (222,211) (877)
Effect of exchange rate changes on
cash 1,373 1,368
Net increase in cash and cash
equivalents 199,466 22,819
Cash and cash equivalents at
beginning of period 46,384 23,565
Cash and cash equivalents at end of
period $245,850 $46,384
Non-cash transactions:
Stock issued for acquisitions $13,081
Outlook: Parker Hannifin Corporation: Next quarter versus same quarter last year
Segments: Sales Growth vs. FY 2003
Industrial North America 2.0% to 5.0%
Industrial ROW 5.0% to 8.0%
Aerospace -8.0% to -5.0%
Climate & Industrial Controls -3.0% to 0.0%
Other 2.0% to 5.0%
Segments: Operating Income Change vs. FY 2003
Industrial North America 20.0% to 30.0%
Industrial ROW 20.0% to 30.0%
Aerospace -30.0% to -15.0%
Climate & Industrial Controls 0.0% to 10.0%
Other 10.0% to 20.0%
Assumptions
Corporate Admin. + or - 5% vs. FY 2003
Interest Expense + or - 5% vs. FY 2003
Other same as FY 2003
Tax Rate 34.5%
Earnings
Earnings per diluted share are expected to be 20% to 30% below the first
quarter of FY 2003
SOURCE Parker Hannifin Corporation
Media, Lorrie Paul Crum, VP - Corp. Communications, +1-216-896-2750, or After hours, +1-330-666-4196, or lcrum@parker.com, or Financial Analysts, Pamela Huggins, VP & Treasurer, +1-216-896-2240, or phuggins@parker.com, both of Parker Hannifin
