CLEVELAND, July 30 /PRNewswire/ -- As the manufacturing recession continues, Parker Hannifin Corporation (NYSE: PH) today said the fourth quarter, which usually is a strong one, weighed on the company's full-year results. Quarterly net income excluding costs associated with operating realignments and other corporate accruals was $66.8 million, or 57 cents per diluted share, compared with last year's fourth-quarter income of $113 million, or 99 cents per diluted share. For the full year, the company earned $340.8 million, or $2.96 per diluted share, compared with $368.2 million, or $3.31 per diluted share, in the prior year. The current-year results reflect a net benefit of five cents per diluted share from non-recurring items, including a gain on the sale of real estate, offset by the previously noted operating-realignment actions and accruals; and the early retirement of debt. These results also reflect higher interest expense and nearly 4 million additional shares outstanding issued for acquisitions.
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Acquisitions contributed much of the increase in annual revenues, which reached $5.98 billion, up 11 percent from last year's sales record. "The acquisitions we've made bring tremendous potential, not only contributing to the top line, but strategically and operationally," said Parker CEO Don Washkewicz.
Noting that American industry is experiencing its first major setback since the early 90s, Washkewicz said, "We've had to be fast and decisive in our response to this downturn. Our manufacturing facilities were quick to adjust to depressed market conditions, by consolidating operations, accelerating acquisition integration and implementing spending cuts in all areas. These immediate moves are painful and costly, but the flexibility to align ourselves with demand keeps us strong and focused."
Operating Results & Supply Chain Initiatives
For the quarter and the year, Parker Aerospace led the company's operating performance with higher income and margins attributed to operating realignments and lean initiatives made throughout the business during fiscal year 2000, when its major markets were down. Operating income in the Aerospace segment was up more than 20 percent for the year, with an annual operating margin of 18.2 percent.
Conditions and comparisons were tougher for both the company's North American and International industrial markets, particularly in the fourth quarter. In the International Industrial business, operating income without operating realignment costs was 17.3-percent lower in the quarterly comparison, but 5.5-percent higher annually, at a 7.7-percent return on sales. Quarterly operating income without realignment items in the North American Industrial business was down 57.5 percent, while the annual income comparison was 11.4-percent lower. For the year, the North American Industrial margin was 11.4 percent.
The company noted that with this report, further detail is provided with the addition of an "Other" segment, which includes businesses outside of the Industrial and Aerospace segments. This new classification includes the company's climate controls and Astron businesses, for which combined annual revenue is $556.8 million. Operating income without realignment items for this segment was down 16.7 percent for the quarter and 9.3 percent for the year, with an annual return on sales of 7.7 percent.
"Beyond actions we've taken for the current climate, we're also taking aggressive steps across our supply chain to improve operating margins for the long term," said Washkewicz. "Specifically, we're securing company-wide procurement contracts. We are expanding lean initiatives worldwide; implementing those that have proven so effective at Aerospace everywhere else in the company. The fastest-paying rewards are in customer service, inventory management and better asset utilization."
"And we continue to build on our greatest growth assets -- our people, our products and our ability to provide engineered systems and solutions that yield greater returns for us and our customers."
The company noted it remains cautious in its outlook for the next quarter and the fiscal year. Going forward, with its early adoption of FAS 142 provisions, the company will not amortize goodwill, accounting for 44 cents in the new fiscal year. After this effect, Parker said it expects first-quarter earnings to be between 50 and 65 cents per share, and, with the beginnings of an economic recovery anticipated in the second half, fiscal year 2002 earnings are expected to range from $2.90 to $3.35 per share.
In addition to providing earnings estimates, 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 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 .
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 in North American industrial markets and the company's ability to achieve anticipated benefits associated with announced inventory reductions and restructuring and acquisition-integration activities. 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; 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. 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 makes these statements as of the date of this disclosure, and while it undertakes no obligation to update them, reserves the right to update its earnings projections for any reason during the quarter, including the occurrence of material events.
PARKER HANNIFIN CORPORATION - JUNE 30, 2001 CONSOLIDATED STATEMENT OF INCOME (Dollars in thousands Three Months Ended Year Ended except per share June 30, June 30, amounts) 2001 2000 2001 2000 Net sales $1,484,796 $1,488,702 $5,979,604 $5,385,618 Cost of sales 1,195,520 1,143,041 4,728,156 4,186,850 Gross profit 289,276 345,661 1,251,448 1,198,768 Selling, general and administrative expenses 188,346 156,347 679,963 575,906 Other income (deductions): Interest expense (19,344) (16,041) (90,362) (59,183) Interest and other income, net (5,062) (796) 52,473 (1,492) (24,406) (16,837) (37,889) (60,675) Income before income taxes 76,524 172,477 533,596 562,187 Income taxes 27,166 59,505 189,426 193,955 Income before extraordinary item 49,358 112,972 344,170 368,232 Extraordinary item - extinguishment of debt (3,378) Net income $49,358 $112,972 $340,792 $368,232 Earnings per share: Basic earnings per share before extraordinary item $.43 $1.00 $3.01 $3.34 Extraordinary item - extinguishment of debt - - (.03) - Basic earnings per share $.43 $1.00 $2.98 $3.34 Diluted earnings per share before extraordinary item $.42 $.99 $2.99 $3.31 Extraordinary item - extinguishment of debt - - (.03) - Diluted earnings per share $.42 $.99 $2.96 $3.31 Average shares outstanding during period - Basic 114,843,825 113,691,025 114,304,977 110,330,711 Average shares outstanding during period - Diluted 115,615,197 114,481,201 115,064,447 111,244,632 Cash dividends per common share $.18 $.17 $.70 $.68 BUSINESS SEGMENT INFORMATION BY INDUSTRY Three Months Ended Year Ended June 30, June 30, (Dollars in thousands) 2001 2000 2001 2000 Net sales Industrial: North America $691,119 $716,886 $2,941,697 $2,486,372 International 311,117 316,933 1,275,516 1,175,880 Aerospace 323,365 297,218 1,205,624 1,138,328 Other 159,195 157,665 556,767 585,038 Total $1,484,796 $1,488,702 $5,979,604 $5,385,618 Segment operating income Industrial: North America $37,990 $116,100 $322,786 $379,251 International 14,755 22,086 92,561 84,317 Aerospace 60,988 54,597 218,851 175,710 Other 10,988 14,446 41,451 47,084 Total segment operating income $124,721 $207,229 $675,649 $686,362 Corporate general and administrative expenses 29,970 16,075 85,738 58,210 Income from operations before interest expense and other 94,751 191,154 589,911 628,152 Interest expense 19,344 16,041 90,362 59,183 Other (1,117) 2,636 (34,047) 6,782 Income before income taxes $76,524 $172,477 $533,596 $562,187 CONSOLIDATED BALANCE SHEET (Dollars in thousands) June 30, 2001 2000 Assets Current assets: Cash and cash equivalents $23,565 $68,460 Accounts receivable, net 922,325 840,040 Inventories 1,008,864 974,196 Prepaid expenses 39,486 32,706 Deferred income taxes 91,439 73,711 Assets held for sale 110,683 164,000 Total current assets 2,196,362 2,153,113 Plant and equipment, net 1,548,688 1,340,915 Other assets 1,592,611 1,152,271 Total assets $5,337,661 $4,646,299 Liabilities and shareholders' equity Current liabilities: Notes payable $546,502 $335,298 Accounts payable 367,806 372,666 Accrued liabilities 436,947 394,131 Accrued domestic and foreign taxes 61,874 84,208 Total current liabilities 1,413,129 1,186,303 Long-term debt 857,078 701,762 Pensions and other postretirement benefits 318,527 299,741 Deferred income taxes 131,708 77,939 Other liabilities 88,304 71,096 Shareholders' equity 2,528,915 2,309,458 Total liabilities and shareholders' equity $5,337,661 $4,646,299 CONSOLIDATED STATEMENT OF CASH FLOWS Year Ended June 30, (Dollars in thousands) 2001 2000 Cash flows from operating activities: Net income $340,792 $368,232 Depreciation and amortization 264,527 206,408 Net effect of extraordinary loss 3,378 - Net change in receivables, inventories, and trade payables (42,557) (3,346) Net change in other assets and liabilities (14,729) (21,181) Other, net (19,246) (12,073) Net cash provided by operating activities 532,165 538,040 Cash flows from investing activities: Acquisitions (less cash acquired of $10,143 in 2001 and $1,158 in 2000) (583,254) (351,011) Capital expenditures (334,748) (230,482) Other, net 98,174 1,784 Net cash used in investing activities (819,828) (579,709) Cash flows from financing activities: Net proceeds from common share activity 15,971 1,202 Net proceeds from debt 308,087 154,621 Dividends (79,921) (74,963) Net cash provided by financing activities 244,137 80,860 Effect of exchange rate changes on cash (1,369) (4,008) Net (decrease) increase in cash and cash equivalents (44,895) 35,183 Cash and cash equivalents at beginning of period 68,460 33,277 Cash and cash equivalents at end of period $23,565 $68,460
SOURCE Parker Hannifin Corporation
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