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Parker Quarterly Earnings & Outlook Remain Flat; Industrial Operating Income Rises

April 15, 2003

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CLEVELAND, Apr 15, 2003 /PRNewswire-FirstCall via COMTEX/ -- Parker Hannifin Corporation (NYSE: PH) today reported third-quarter net income for the period ended March 31, 2003 of $48.7 million, or 42 cents per diluted share, on sales of $1.65 billion. Realignment costs, including severance and manufacturing relocations, reduced earnings by four cents per diluted share in the quarter. For the same period last year, net income was $52.4 million, or 45 cents per diluted share, on sales of $1.58 billion, including a reduction of two cents per diluted share in realignment costs.

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

Parker CEO Don Washkewicz noted continued weakness in the company's aerospace and North American industrial markets. "Our balance sheet remains strong, and we're maintaining strict controls on working capital and expenditures," said Washkewicz. "At the same time, we're seeing positive progress from all the work we've done to realign operations and implement the Win Strategy. We just haven't seen any improvement in the economy."

Washkewicz said the continuing strength of cash flow from operations enabled the company to make discretionary contributions of approximately $108 million to its pension plans during the quarter in the United States, Canada and the United Kingdom. "This demonstrates the company's commitment to maintaining well-funded pension plans for our employees around the world."

Washkewicz also noted that operating income was up in every segment except aerospace, where sales were two percent lower than last year and the operating margin was 13.6 percent.

In the industrial segment, operating income was up 20 percent overall. In North America, sales were flat and the operating margin was 5.8 percent. The international industrial business achieved a margin of 5.7 percent with a 28- percent sales increase, mostly driven by currency exchange rates and acquisitions.

In the "Other" segment, sales were seven-percent lower than in the prior year, reflecting the divestiture of the Wynn Warranty business last June, while operating income was up nine percent, and the margin improved to 9.0 percent.

Nine-Months' Results

Sales in the first nine months of fiscal 2003 were $4.75 billion, up six percent from the same period last year. Year-to-date net income increased to $147.2 million, or $1.26 per diluted share, reduced by 10 cents per diluted share in realignment costs and an equity-investment adjustment. In the first nine months of fiscal 2002, the company earned $142.0 million, or $1.23 per diluted share, for which realignment costs and an equity-investment adjustment reduced earnings by 13 cents per diluted share.


The company did not issue a range of projected earnings for the remaining quarter of fiscal year 2003, citing continued economic uncertainties and limited predictability of aerospace and industrial activities in the current climate. "With no discernable change in market conditions, all we can say is that we expect the coming quarter to be very similar to this one," said Washkewicz.

Parker advises shareholders to note monthly 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 .

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; uncertainties surrounding timing, successful completion or integration of acquisitions; threats associated with and efforts to combat terrorism, including the war with Iraq; the impact of Severe Acute Respiratory Syndrome on global travel; 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.


                                  Three Months              Nine Months
    (Unaudited)                  Ended March 31,           Ended March 31,
    (Dollars in thousands
     except per share amounts)  2003         2002         2003         2002

    Net sales               $1,646,844   $1,578,332   $4,749,949   $4,491,529
    Cost of sales            1,368,430    1,309,245    3,927,147    3,710,763
    Gross profit               278,414      269,087      822,802      780,766
    Selling, general and
     expenses                  182,378      171,764      535,775      502,062
    Other income (deductions):
      Interest expense         (20,349)     (20,924)     (59,399)     (62,933)
      Interest and other
        (expense), net          (1,731)         161       (3,935)         267
                               (22,080)     (20,763)     (63,334)     (62,666)
    Income before income
     taxes                      73,956       76,560      223,693      216,038
    Income taxes                25,293       24,203       76,503       74,038
    Net income                 $48,663      $52,357     $147,190     $142,000

    Earnings per share:
       Basic earnings per
        share                     $.42         $.45        $1.27        $1.23
       Diluted earnings
        per share                 $.42         $.45        $1.26        $1.23

    Average shares
     outstanding during
     period - Basic        116,506,352  115,503,613  116,339,433  115,226,875
    Average shares
     outstanding during
     period - Diluted      116,890,480  116,282,075  116,872,253  115,884,581

    Cash dividends per
     common share                 $.19         $.18         $.55         $.54


                                     Three Months           Nine Months
    (Unaudited)                     Ended March 31,       Ended March  31,
    (Dollars in thousands)         2003        2002       2003        2002

    Net sales
           North America         $727,060    $726,808  $2,124,542  $2,023,947
           International          416,434     325,754   1,156,014     912,491
        Aerospace                 280,020     284,989     832,741     885,801
        Other                     223,330     240,781     636,652     669,290
    Total                      $1,646,844  $1,578,332  $4,749,949  $4,491,529

    Segment operating income
           North America          $42,166     $38,090    $120,634    $102,131
           International           23,852      17,126      72,819      50,161
        Aerospace                  38,140      48,682     123,324     152,020
        Other                      20,039      18,358      51,328      44,779
    Total segment operating
     income                       124,197     122,256     368,105     349,091
    Corporate general and
     administrative expenses       22,662      17,550      62,155      50,163
    Income from operations
     before interest
     expense and other            101,535     104,706     305,950     298,928
    Interest expense               20,349      20,924      59,399      62,933
    Other expense                   7,230       7,222      22,858      19,957
    Income before income taxes    $73,956     $76,560    $223,693    $216,038

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

    (Dollars in thousands)        March 31,         2003              2002

    Current assets:
    Cash and cash equivalents                      $52,696           $31,917
    Restricted investments                                            98,850
    Accounts receivable, net                       991,131           981,972
    Inventories                                  1,027,939         1,070,287
    Prepaid expenses                                43,265            42,248
    Deferred income taxes                           85,329            98,682
    Total current assets                         2,200,360         2,323,956
    Plant and equipment, net                     1,661,714         1,683,768
    Goodwill                                     1,091,795         1,099,413
    Intangible assets, net                          56,223            43,734
    Other assets                                   745,995           604,146
    Total assets                                $5,756,087        $5,755,017

    Liabilities and shareholders' equity
    Current liabilities:
    Notes payable                                 $410,278          $547,764
    Accounts payable                               395,658           378,951
    Accrued liabilities                            468,744           483,631
    Accrued domestic and foreign taxes              34,700            73,263
    Total current liabilities                    1,309,380         1,483,609
    Long-term debt                                 948,164         1,052,174
    Pensions and other postretirement benefits     515,378           209,134
    Deferred income taxes                          133,242           147,726
    Other liabilities                              126,032           236,145
    Shareholders' equity                         2,723,891         2,626,229
    Total liabilities and shareholders'
     equity                                     $5,756,087        $5,755,017

    (Unaudited)                                  Nine Months Ended March 31,
    (Dollars in thousands)                          2003              2002

    Cash flows from operating activities:
    Net income                                    $147,190          $142,000
    Depreciation and amortization                  191,018           180,957
    Net change in receivables,
     inventories, and trade payables                32,197            80,272
    Net change in other assets and
     liabilities                                   (98,475)           42,779
    Other, net                                      54,238            11,976
    Net cash provided by operating activities      326,168           457,984
    Cash flows from investing activities:
    Acquisitions (less cash acquired of
     $7 in 2003 and $3,117 in 2002)                 (1,999)         (383,144)
    Capital expenditures                          (112,863)         (157,452)
    Other, net                                      13,722           (38,460)
    Net cash used in investing activities         (101,140)         (579,056)
    Cash flows from financing activities:
    Net proceeds from common share activity          3,091             3,930
    Net (payments of) proceeds from debt          (160,048)          190,132
    Dividends                                      (63,739)          (62,058)
    Net cash (used in) provided by
     financing activities                         (220,696)          132,004
    Effect of exchange rate changes on cash          1,980            (2,580)
    Net increase in cash and cash equivalents        6,312             8,352
    Cash and cash equivalents at beginning
      of period                                     46,384            23,565
    Cash and cash equivalents at end of period     $52,696           $31,917

SOURCE Parker Hannifin Corporation

Media, Lorrie Paul Crum, VP - Corp. Communications, +1-216-896-2750, or lcrum@parker.com, or Financial Analysts, Timothy K. Pistell, VP - Finance & Administration, +1-216-896-2130, or tpistell@parker.com, both of Parker Hannifin Corporation


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