Order Trends Suggest Moderation in Earnings Growth in Fiscal Q3 and Full Year
CLEVELAND, Jan. 16 /PRNewswire/ -- Parker Hannifin Corporation (NYSE: PH) today reported a 4.5-percent increase in its fiscal second-quarter net income for the period ended December 31, 2000. "We are pleased with these results, given that many of our domestic customers placed holds on shipments scheduled at the end of the calendar year," said Chairman and CEO Duane Collins. "The acquisitions we made last year are contributing to earnings, and in every case, integration is progressing well."
(Photo: http://www.newscom.com/cgi-bin/prnh/19990816/PHLOGO )
Net income for the quarter was $78.3 million, or 68 cents per diluted share, matching the 68 cents earned last year on net income of $75.0 million. The per-share results for the current period reflect an additional 4.6 million shares outstanding, which were primarily issued in connection with recent acquisitions. The company said sales and earnings for the quarter were running ahead of company expectations up until mid-December, when customers delayed approximately $30 million in shipments. Interest expense, which increased over the prior year quarter by more than $11.6 million, also was a factor. Before interest and other expenses, operating income for the company was up 17 percent.
"With the slowing North American Industrial order trend noted in past months, we remained lean on inventories," Collins said. "In December, we initiated spending cuts and selected workforce adjustments for the remainder of the fiscal year. While the late-December drop-off was a bit sudden, we're certainly prepared to manage through this climate, and are encouraged by the prospect of further interest-rate relief."
Sales for the quarter were $1.46 billion, up from $1.24 billion last year, reflecting rebounding activity in the Aerospace and International Industrial segments, as well as sales from recent acquisitions. Currency translation offset a substantial portion of the volume gains achieved in the international business, where continued strength was noted in Latin America and the Asia- Pacific region. In the company's North American Industrial business, further growth in the semiconductor, filtration and telecommunications markets was offset by softening in the heavy-duty truck, automotive and refrigeration industries.
Parker Aerospace posted a 38-percent increase in operating income, taking its operating margin to 17.4 percent. The North American Industrial segment also reported higher operating income, up 17 percent with a 12.3-percent operating margin. In the International Industrial segment, profits were negatively affected by the Euro and recent acquisitions, resulting in an operating margin of 6.4 percent. Without acquisitions, the international margin improved to 7.6 percent.
Outlook
In the second half of fiscal 2001, the company said it plans to record further operating realignment charges and pursue early retirement of higher- interest debt, largely offsetting the gain recorded on the sale of property in the first quarter.
The outlook points to a moderation in earnings growth in the second half, due to weakening North American Industrial order trends. Excluding unusual items, the company currently expects per-share results for the quarter ended March 31 to range from $0.88 to $1.00, with results for the full fiscal year ranging from $3.30 to $3.55.
"We think these are prudent ranges given current economic uncertainty," said Collins. "Hopefully, these ranges will assist our shareholders and investors relative to performance expectations." In addition, the company noted that it discloses monthly orders several business days after the close of each month. This information is also available on the company's investor information web site.
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 46 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 .
NOTICE OF CONFERENCE CALL: Parker Hannifin's conference call to discuss its fiscal second-quarter results is available to all interested parties via live webcast at 10:30 a.m. ET, on the company's investor information web site, www.phstock.com . To access the call, click on the "Live Webcast" link. From this link, users may also complete a pre-call system test and register for e-mail notification of future events and information available from Parker.
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 company's future performance and earnings projections may differ materially from current expectations expressed in these forward-looking statements, due to a variety of factors such as 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 which cannot be recovered in product pricing; and global economic factors, including currency exchange rates and difficulties entering new markets and general economic conditions, including interest rate levels. In each quarterly earnings report, the company intends to provide a range stating expected earnings per share for the succeeding quarter and full fiscal year, reflecting these ranges as estimates of diluted earnings per share before unusual items. The company reserves the right to update the earnings projections for any reason during the quarter, including the occurrence of material events.
PARKER HANNIFIN CORPORATION - DECEMBER 31, 2000
CONSOLIDATED STATEMENT OF INCOME
(Unaudited) Three Months Ended Six Months Ended
(Dollars in thousands December 31, December 31,
except per share
amounts) 2000 1999 2000 1999
Net sales $1,460,076 $1,239,207 $2,937,442 $2,481,500
Cost of sales 1,144,821 971,298 2,296,085 1,947,919
Gross profit 315,255 267,909 641,357 533,581
Selling, general and
administrative
expenses 169,596 140,157 332,037 278,305
Income from operations 145,659 127,752 309,320 255,276
Other income
(deductions):
Interest expense (25,607) (14,028) (46,775) (28,571)
Interest and other
income, net 1,364 724 52,741 100
Total (24,243) (13,304) 5,966 (28,471)
Income before income
taxes 121,416 114,448 315,286 226,805
Income taxes 43,102 39,485 111,926 78,248
Net income $78,314 $74,963 $203,360 $148,557
Earnings per share:
Basic earnings per
share $.68 $.69 $1.78 $1.36
Diluted earnings
per share $.68 $.68 $1.77 $1.35
Average shares
outstanding during
period - Basic 114,007,029 109,188,711 113,968,357 109,129,000
Average shares
outstanding during
period - Diluted 114,831,139 110,205,954 114,696,560 110,150,338
Cash dividends per
common share $.17 $.17 $.34 $.34
BUSINESS SEGMENT INFORMATION BY INDUSTRY
Three Months Ended Six Months Ended
(Unaudited) December 31, December 31,
(Dollars in thousands) 2000 1999 2000 1999
Net sales
Industrial:
North America $829,357 $658,542 $1,705,607 $1,326,211
International 336,294 303,918 667,022 602,381
Aerospace 294,425 276,747 564,813 552,908
Total $1,460,076 $1,239,207 $2,937,442 $2,481,500
Segment operating income
Industrial:
North America $101,612 $87,200 $218,803 $180,883
International 21,441 21,787 47,318 32,999
Aerospace 51,097 36,939 95,373 71,987
Total segment operating
income 174,150 145,926 361,494 285,869
Corporate general and
administrative expenses 20,346 14,087 37,730 28,200
Income from operations
before interest
expense and other 153,804 131,839 323,764 257,669
Interest expense 25,607 14,028 46,775 28,571
Other 6,781 3,363 (38,297) 2,293
Income before income
taxes $121,416 $114,448 $315,286 $226,805
CONSOLIDATED BALANCE SHEET
(Unaudited)
(Dollars in thousands) December 31, 2000 1999
Assets
Current assets:
Cash and cash equivalents $71,529 $74,353
Accounts receivable, net 870,510 692,357
Inventories 1,065,313 915,037
Prepaid expenses 36,455 19,021
Deferred income taxes 83,296 66,722
Assets held for sale 239,356 -
Total current assets 2,366,459 1,767,490
Plant and equipment, net 1,496,932 1,214,202
Other assets 1,444,980 740,719
Total assets $5,308,371 $3,722,411
Liabilities and shareholders' equity
Current liabilities:
Notes payable $540,368 $61,123
Accounts payable 378,778 253,798
Accrued liabilities 403,053 299,742
Accrued domestic and foreign taxes 55,945 39,130
Total current liabilities 1,378,144 653,793
Long-term debt 981,953 713,592
Pensions and other postretirement
benefits 307,226 279,760
Deferred income taxes 104,144 31,247
Other liabilities 79,759 75,075
Shareholders' equity 2,457,145 1,968,944
Total liabilities and shareholders'
equity $5,308,371 $3,722,411
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited) Six Months Ended December 31,
(Dollars in thousands) 2000 1999
Cash flows from operating activities:
Net income $203,360 $148,557
Depreciation and amortization 133,554 106,962
Net change in receivables,
inventories, and trade payables (47,160) (14,099)
Net change in other assets and
liabilities (76,757) (21,637)
Other, net (38,281) (6,531)
Net cash provided by operating
activities 174,716 213,252
Cash flows from investing activities:
Acquisitions (less cash acquired of
$8,255 in 2000
and $2,609 in 1999) (485,235) (5,711)
Capital expenditures (169,573) (114,114)
Other, net 100,772 (9,897)
Net cash used in investing activities (554,036) (129,722)
Cash flows from financing activities:
Net proceeds from common share
activity 3,892 3,649
Net proceeds from (payments for) debt 418,547 (5,698)
Dividends (38,731) (37,081)
Net cash provided by (used in)
financing activities 383,708 (39,130)
Effect of exchange rate changes on
cash (1,319) (3,324)
Net increase in cash and cash
equivalents 3,069 41,076
Cash and cash equivalents at
beginning of period 68,460 33,277
Cash and cash equivalents at end of
period $71,529 $74,353
SOURCE Parker Hannifin Corporation
CONTACT: Media, Lorrie Paul Crum, VP - Corp. Communications, 216-896- 2750, or lcrum@parker.com, or Financial Analysts, Timothy K. Pistell, Treasurer, 216-896-2130, or tpistell@parker.com, both of Parker Hannifin Corporation/
