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- Company Generates Strong Operating Cash, Issues Outlook for Fiscal 2010
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"We started the year strongly, however, our performance in the second half
of the year reflected the impact of the ongoing global recession, which
resulted in significantly reduced order rates," said Chairman, CEO and
President
Fiscal 2009 fourth quarter sales were
Reflecting on the quarter Washkewicz added, "Our fourth quarter
performance was influenced by order rates which declined year-over-year and
sequentially from the third quarter levels. This led to a 32 percent decline
in organic sales for the quarter, while foreign currency translation
negatively impacted sales by 5 percent and acquisitions contributed 3 percent
to sales. The decline in sales was the primary driver of lower profitability
levels, and our
"As we move into fiscal 2010, we will continue to manage our business for cash, while maintaining productivity levels and reducing inventories. Actions to reduce our workforce to align with customer order rates, a broad-based wage freeze, reduced work weeks and significantly reduced discretionary spending are anticipated to benefit us more fully in the year ahead. While many challenges and uncertainties await, our ability to respond reflects favorably on our management team and is a credit to the remarkable performance of Parker employees throughout our company. They have stepped up to the challenges presented to them with their capabilities, loyalty, perseverance and sacrifice."
Segment Results
In the
In the
In the Aerospace segment, fourth-quarter sales decreased 11.5 percent to
In the Climate & Industrial Controls segment, fourth-quarter sales
declined 34.6 percent to
Orders
In addition to financial results, Parker also reported a decline of 38
percent in total orders for the quarter ending
-- Orders declined 40 percent in theIndustrial North America segment, compared with the same quarter a year ago. -- Orders declined 43 percent in theIndustrial International segment, compared with the same quarter a year ago. -- Orders declined 22 percent in the Aerospace segment on a rolling 12 month average basis. -- Orders declined 31 percent in the Climate and Industrial Controls segment, compared with the same quarter a year ago.
Outlook
For fiscal 2010, the company has issued guidance for earnings from
continuing operations in the range of
Washkewicz added, "In the year ahead, we will continue to focus on maintaining a strong balance sheet, managing for cash and maintaining our costs at a level consistent with reduced demand. We anticipate that conditions will not improve appreciably in our markets for the balance of this calendar year. However, near-term challenges aside, the actions that we continue to implement give me every confidence that we will emerge from this recession far stronger than we have ever been, poised to benefit significantly from the recovery."
NOTICE OF CONFERENCE CALL:
With annual sales exceeding
Notes on Orders
Orders provide near-term perspective on the company's outlook,
particularly when viewed in the context of prior and future quarterly order
rates. However, orders are not in themselves an indication of future
performance. All comparisons are at constant currency exchange rates, with the
prior year restated to the current-year rates. All exclude acquisitions until
they can be reflected in both the numerator and denominator. Aerospace
comparisons are rolling 12-month average computations. The Total Parker orders
number is derived from a weighted average of the year-over-year quarterly
percent change in orders for the
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 future performance and earnings projections of the company and individual segments may differ materially from current expectations, depending on economic conditions within its mobile, industrial and aerospace markets, and the company's ability to maintain and achieve anticipated benefits associated with announced realignment activities, strategic initiatives to improve operating margins, actions taken to combat the effects of the current recession, and growth, innovation and global diversification 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, disputes regarding contract terms or significant changes in financial condition; uncertainties surrounding timing, successful completion or integration of acquisitions; threats associated with and efforts to combat terrorism; uncertainties surrounding the ultimate resolution of outstanding legal proceedings, including the outcome of any appeals; 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, deflation, interest rates and credit availability. The company makes these statements as of the date of this disclosure, and undertakes no obligation to update them.
CONSOLIDATED STATEMENT OF INCOME
(Dollars in thousands except per share amounts)
Three Months Ended June 30, Year Ended June 30,
2009 2008 2009 2008
-----------------------------------------------------------------------
Net sales $2,210,958 $3,346,752 $10,309,015 $12,145,605
Cost of sales 1,814,069 2,575,422 8,181,348 9,339,072
------------- --------- --------- --------- ---------
Gross profit 396,889 771,330 2,127,667 2,806,533
Selling, general and
administrative expenses 302,521 373,138 1,290,379 1,364,082
Interest expense 25,275 25,019 112,071 98,996
Other expense, net 4,776 18,355 43,763 16,931
------------------ ----- ------ ------ ------
Income before income
taxes 64,317 354,818 681,454 1,326,524
Income taxes 14,801 102,253 172,939 377,058
------------ ------ ------- ------- -------
Net income $49,516 $252,565 $508,515 $949,466
---------- ------- -------- -------- --------
Earnings per share:
-------------------
Basic earnings per
share $.31 $1.51 $3.15 $5.64
------------------ ---- ----- ----- -----
Diluted earnings
per share $.31 $1.47 $3.13 $5.53
--------------- ---- ----- ----- -----
Average shares
outstanding during
period - Basic 160,472,872 167,545,162 161,564,111 168,285,487
Average shares
outstanding during
period - Diluted 161,548,615 171,441,236 162,719,148 171,643,835
------------------- ----------- ----------- ----------- -----------
Cash dividends per
common share $.25 $.21 $1.00 $.84
------------------ ---- ---- ----- ----
BUSINESS SEGMENT INFORMATION BY INDUSTRY
(Dollars in thousands)
Three Months Ended June 30, Year Ended June 30,
2009 2008 2009 2008
------------------------------------------------------------------------
Net sales
Industrial:
North America $777,464 $1,165,685 $3,734,613 $4,249,918
International 793,163 1,381,824 3,895,874 5,006,310
Aerospace 451,109 509,791 1,883,273 1,837,888
Climate & Industrial
Controls 189,222 289,452 795,255 1,051,489
-------------------- ------- ------- ------- ---------
Total $2,210,958 $3,346,752 $10,309,015 $12,145,605
----- ---------- ---------- ----------- -----------
Segment operating income
Industrial:
North America $53,733 $162,940 $394,923 $607,821
International (5,693) 213,022 350,662 788,925
Aerospace 58,483 72,847 261,953 250,523
Climate & Industrial
Controls 947 20,285 (3,737) 59,494
-------------------- --- ------ ------ ------
Total segment operating
income $107,470 $469,094 $1,003,801 $1,706,763
Corporate general and
administrative expenses 29,006 59,461 152,118 192,966
------------------------ ------ ------ ------- -------
Income from operations
before interest
expense and other 78,464 409,633 851,683 1,513,797
Interest expense 25,275 25,019 112,071 98,996
Other (income) expense (11,128) 29,796 58,158 88,277
---------------------- ------- ------ ------ ------
Income before income
taxes $64,317 $354,818 $681,454 $1,326,524
-------------------- ------- -------- -------- ----------
CONSOLIDATED BALANCE SHEET
(Dollars in thousands) June 30, 2009 2008
-----------------------------------------------------------
Assets
------
Current assets:
Cash and cash equivalents $187,611 $326,048
Accounts receivable, net 1,417,305 2,046,726
Inventories 1,254,550 1,494,694
Prepaid expenses 142,335 82,326
Deferred income taxes 121,980 145,831
--------------------- ------- -------
Total current assets 3,123,781 4,095,625
Plant and equipment, net 1,880,554 1,926,522
Goodwill 2,903,077 2,798,092
Intangible assets, net 1,273,862 1,020,609
Other assets 674,628 546,006
------------ ------- -------
Total assets $9,855,902 $10,386,854
------------ ---------- -----------
Liabilities and
shareholders' equity
---------------------
Current liabilities:
Notes payable $481,467 $118,864
Accounts payable 649,718 961,886
Accrued liabilities 761,462 919,370
Accrued domestic and foreign
taxes 113,107 183,136
---------------------------- ------- -------
Total current liabilities 2,005,754 2,183,256
Long-term debt 1,839,705 1,952,452
Pensions and other
postretirement benefits 1,233,271 491,935
Deferred income taxes 183,457 162,678
Other liabilities 314,090 337,562
Shareholders' equity 4,279,625 5,258,971
-------------------- --------- ---------
Total liabilities and
shareholders' equity
---------------------- ---------- -----------
CONSOLIDATED STATEMENT OF CASH FLOWS
Year Ended June 30,
(Dollars in thousands) 2009 2008
-------------------------------------------------------------
Cash flows from operating
activities:
Net income $508,515 $949,466
Depreciation and amortization 357,737 326,724
Share incentive plan
compensation 47,215 44,947
Net change in receivables,
inventories, and trade
payables 511,797 (93,136)
Net change in other assets
and liabilities (284,474) 132,231
Other, net (11,598) (43,622)
---------- ------- -------
Net cash provided by
operating activities 1,129,192 1,316,610
--------------------- --------- ---------
Cash flows from investing
activities:
Acquisitions (net of cash
of
$21,276 in 2008) (722,635) (921,014)
Capital expenditures (270,733) (280,327)
Proceeds from sale of plant
and equipment 28,986 29,997
Other, net 3,551 544
---------- ----- ---
Net cash (used in) investing
activities (960,831) (1,170,800)
------------------ -------- ----------
Cash flows from financing
activities:
Net (payments for) common
share activity (440,551) (523,557)
Net proceeds from debt 327,778 667,039
Dividends (161,575) (142,260)
--------- -------- --------
Net cash (used in) provided
by financing activities (274,348) 1,222
--------------------------- -------- -----
Effect of exchange rate
changes on cash (32,450) 6,310
----------------------- ------- -----
Net (decrease)
increase in cash and cash
equivalents (138,437) 153,342
Cash and cash equivalents at
beginning of period 326,048 172,706
---------------------------- ------- -------
Cash and cash equivalents at
end of period $187,611 $326,048
---------------------------- -------- --------
SOURCE
CONTACT: Media:
Christopher M. Farage - Vice President, Corp.
Communications, +1-216-896-2750
cfarage@parker.com
or
Financial Analysts:
Pamela Huggins, Vice President - Treasurer, +1-216-896-2240
phuggins@parker.com
both of
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