CLEVELAND, Aug. 1 /PRNewswire-FirstCall/ -- Parker Hannifin Corporation (NYSE: PH) today reported record year end results in sales, earnings and cash flow from operations. The company delivered strong growth in revenues for the year and the quarter as annual sales topped $9 billion for the first time in Parker's 88-year history. Earnings per diluted share for the year and the quarter also reached all time highs, while cash flow from operations reached a record $954.6 million, or 10.2 percent of sales, surpassing last year's record of $853.5 million.
For the full year, revenue reached a record $9.4 billion, an increase of 16.3 percent over the previous year, with organic growth driving nearly half of the increase. Income from continuing operations increased 19.7 percent to $638.3 million, and earnings per diluted share from continuing operations increased to $5.28. Earnings per diluted share from continuing operations were $5.36 for the year before the impact of an 8 cents loss on the divestiture of the company's Thermoplastics division in December 2005. In fiscal year 2005, the company had income from continuing operations of $533.2 million, or $4.43 per diluted share, on sales of $8.1 billion.
The following table is a summary of earnings per diluted share for the fourth quarter and full fiscal year 2006. Within the table, fourth quarter fiscal 2006 includes an expense of 3 cents per diluted share, and total fiscal year 2006 includes an expense of 18 cents per diluted share, both associated with FAS 123R. Fourth Quarter Total Year FY 2006 FY 2005 FY 2006 FY 2005 EPS as Reported $1.59 $1.34 $5.57 $5.02 Discontinued Operations $0.04 $0.04 $0.29 $0.59 EPS from Continuing Operations as Reported $1.55 $1.30 $5.28 $4.43 Loss on Sale of Thermoplastics $0.08 EPS from Continuing Operations Adjusted $1.55 $1.30 $5.36 $4.43
Fourth quarter sales increased 20.4 percent from the prior year, with almost half of the increase coming through organic growth. Sales in the fourth quarter reached $2.6 billion, compared to $2.2 billion in the same period last year. Fourth-quarter income from continuing operations increased 20.4 percent to $187.9 million and fourth quarter earnings per diluted share from continuing operations increased to $1.55. This compares to income from continuing operations of $156.1 million and earnings per diluted share from continuing operations of $1.30 in the same period last year.
"By continuing to execute Parker's Win Strategy, our employees delivered another outstanding year of record results for our shareholders," said Chairman and CEO Don Washkewicz. "We have demonstrated our ability to grow our business year after year after year. In 2006, the company grew by more than 16 percent, nearly half of which was organic. This is the 2nd year in a row in which we've achieved organic growth of more than 8 percent. All segments contributed strongly to this growth, reflecting continued demand around the world for our motion and control technologies. We continue to rank our return on invested capital (ROIC) near the top quartile among our peers. In addition, our ability to generate record levels of cash flow enabled us to continue investing in strategic acquisitions during the year. Our focused and disciplined use of our cash flow allowed us to add nearly $1.0 billion in annualized revenues through 13 acquisitions this year, furthering our reputation as the motion and control industry consolidator of choice."
In the North American Industrial segment, fourth-quarter operating income improved 28.6 percent to $165.2 million on sales of $1.1 billion. For the full year, North American Industrial operating income was up 27.5 percent to $597.2 million on sales of $4.0 billion.
In the International Industrial segment fourth-quarter operating income increased 39.8 percent to $106.3 million on sales of $831.2 million. For the full year, International Industrial operating income was up 32.4 percent to $353.8 million on sales of $2.9 billion.
In the Climate & Industrial Controls segment, fourth-quarter operating income increased 31.2 percent to $31.0 million on sales of $293.9 million. For the full year, Climate & Industrial Controls operating income was up 11.2 percent to $83.3 million on sales of $985.1 million.
In the Aerospace segment, fourth-quarter operating income increased 18.4 percent to $64.4 million on sales of $419.9 million. For the full year, Aerospace reported operating income up 11 percent to $221.0 million on sales of $1.5 billion.
The company projects earnings from continuing operations for fiscal year 2007 to range from $5.80 to $6.30 per diluted share.
"Our proven mix of organic and acquisitive growth, our balance of OEM and MRO sales, and our past, present and future execution of the Parker Win Strategy lead us to project another year of strong sales and earnings in fiscal 2007," added Washkewicz. "We will continue to use our strong cash flow to grow our business through both internal initiatives and strategic acquisitions. In addition, the diversity of the many markets we serve in the motion and control industry helps mitigate market risk, counter business cyclicality and create ever widening opportunities for profitable growth."
"Going forward, we will continue to rely on the dedication of our talented employees, the expertise of our global distribution network, and the opportunities provided by our customers to deliver value to shareholders."
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 http://www.phstock.com.
NOTICE OF CONFERENCE CALL: Parker Hannifin's conference call and slide presentation to discuss its fiscal fourth-quarter results is available to all interested parties via live webcast today at 10:00 a.m. ET, on the company's investor information web site, http://www.phstock.com. To access the call, click on the "Live Webcast" link. From this link, users also may complete a pre-call system test and register for e-mail notification of future events and information available from Parker.
With annual sales exceeding $9 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 57,000 people in 46 countries around the world. Parker has increased its annual dividends paid to shareholders for 50 consecutive years, among the top five longest-running dividend-increase records in the S&P 500 index. For more information, visit the company's web site at http://www.parker.com, or its investor information site at http://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 and innovation initiatives. A change in economic conditions in individual markets may have a particularly volatile effect on segment results. 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; the company's ability to manage costs related to employee retirement and health care benefits and insurance; and global economic factors, including manufacturing activity, air travel trends, currency exchange rates, difficulties entering new markets and general economic conditions such as inflation and 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, 2006 CONSOLIDATED STATEMENT OF INCOME Three Months Ended June 30, Year Ended June 30, (Dollars in thousands except per share amounts) 2006 2005 2006 2005 Net sales $2,616,732 $2,172,497 $9,385,888 $8,068,805 Cost of sales 2,053,991 1,708,074 7,367,618 6,391,477 Gross profit 562,741 464,423 2,018,270 1,677,328 Selling, general and administrative expenses 277,087 232,795 1,036,646 860,278 Interest expense 18,667 16,375 75,763 66,869 Other expense, net 1,661 342 5,903 11,910 Income from continuing operations before income taxes 265,326 214,911 899,958 738,271 Income taxes 77,445 58,840 261,682 205,105 Income from continuing operations 187,881 156,071 638,276 533,166 Discontinued operations 6,007 5,341 34,891 71,526 Net income $193,888 $161,412 $673,167 $604,692 Earnings per share: Basic earnings per share from continuing operations $1.57 $1.32 $5.35 $4.49 Discontinued operations .05 .04 .30 .60 Basic earnings per share $1.62 $1.36 $5.65 $5.09 Diluted earnings per share from continuing operations $1.55 $1.30 $5.28 $4.43 Discontinued operations .04 .04 .29 .59 Diluted earnings per share $1.59 $1.34 $5.57 $5.02 Average shares outstanding during period - Basic 119,687,216 118,816,542 119,211,192 118,794,564 Average shares outstanding during period - Diluted 121,572,305 120,191,274 120,884,182 120,449,006 Cash dividends per common share $.23 $.20 $.92 $.78 Note: Certain prior period amounts have been reclassified to conform to the current year presentation. BUSINESS SEGMENT INFORMATION BY INDUSTRY Three Months Ended June 30, Year Ended June 30, (Dollars in thousands) 2006 2005 2006 2005 Net sales Industrial: North America $1,071,719 $940,071 $3,993,370 $3,516,627 International 831,200 642,902 2,902,508 2,398,439 Aerospace 419,875 364,023 1,504,922 1,359,431 Climate & Industrial Controls 293,938 225,501 985,088 794,308 Total $2,616,732 $2,172,497 $9,385,888 $8,068,805 Segment operating income Industrial: North America $165,185 $128,409 $597,204 $468,213 International 106,318 76,040 353,760 267,207 Aerospace 64,430 54,408 221,005 199,187 Climate & Industrial Controls 30,974 23,602 83,256 74,843 Total segment operating income $366,907 $282,459 $1,255,225 $1,009,450 Corporate general and administrative expenses 40,220 32,351 133,695 111,615 Income from continuing operations before interest expense and other 326,687 250,108 1,121,530 897,835 Interest expense 18,667 16,375 75,763 66,869 Other expense 42,694 18,822 145,809 92,695 Income from continuing operations before income taxes $265,326 $214,911 $899,958 $738,271 Note: Certain prior period amounts have been reclassified to conform to the current year presentation. CONSOLIDATED BALANCE SHEET (Dollars in thousands) June 30, 2006 2005 Assets Current assets: Cash and cash equivalents $171,553 $336,080 Accounts receivable, net 1,592,323 1,225,423 Inventories 1,182,878 1,017,045 Prepaid expenses 64,238 49,669 Deferred income taxes 127,986 127,490 Total current assets 3,138,978 2,755,707 Plant and equipment, net 1,693,794 1,581,348 Goodwill 2,010,458 1,371,024 Intangible assets, net 471,095 239,891 Other assets 859,107 831,595 Net assets of discontinued operations 81,138 Total assets $8,173,432 $6,860,703 Liabilities and shareholders' equity Current liabilities: Notes payable $72,039 $31,962 Accounts payable 770,665 569,047 Accrued liabilities 698,014 601,962 Accrued domestic and foreign taxes 140,387 97,853 Total current liabilities 1,681,105 1,300,824 Long-term debt 1,059,461 938,424 Pensions and other postretirement benefits 811,479 1,056,230 Deferred income taxes 118,544 35,340 Other liabilities 261,640 189,738 Shareholders' equity 4,241,203 3,340,147 Total liabilities and shareholders' equity $8,173,432 $6,860,703 Note: Certain prior period amounts have been reclassified to conform to the current year presentation. CONSOLIDATED STATEMENT OF CASH FLOWS Year Ended June 30, (Dollars in thousands) 2006 2005 Cash flows from operating activities: Net income $673,167 $604,692 Net (income) from discontinued operations (34,891) (71,526) Depreciation and amortization 280,971 262,690 Stock-based compensation 33,448 - Net change in receivables, inventories, and trade payables (36,278) 48,154 Net change in other assets and liabilities 68,517 (8,710) Other, net (27,036) 29,064 Discontinued operations (3,259) (10,858) Net cash provided by operating activities 954,639 853,506 Cash flows from investing activities: Acquisitions (net of cash of $42,429 in 2006 and $21,720 in 2005) (835,981) (558,569) Capital expenditures (198,113) (154,905) Proceeds from sale of businesses 92,715 120,000 Other, net 20,236 30,507 Discontinued operations (100) (2,416) Net cash (used in) investing activities (921,243) (565,383) Cash flows from financing activities: Net proceeds from (payments for) common share activity 16,931 (23,724) Net (payments of) debt (101,480) (21,202) Dividends (109,643) (92,612) Net cash (used in) financing activities (194,192) (137,538) Effect of exchange rate changes on cash (3,731) 1,648 Net (decrease) increase in cash and cash equivalents (164,527) 152,233 Cash and cash equivalents at beginning of period 336,080 183,847 Cash and cash equivalents at end of period $171,553 $336,080 Note: Certain prior period amounts have been reclassified to conform to the current year presentation.
SOURCE Parker Hannifin Corporation
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Web site: http://www.phstock.com