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."
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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.
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 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 firstname.lastname@example.org, or Financial Analysts, Timothy K. Pistell, Treasurer, 216-896-2130, or email@example.com, both of Parker Hannifin Corporation/