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Parker Reports Fiscal 2010 Third Quarter Results and Raises Guidance for the Year

April 20, 2010

  • Operating margins drive a significant year-over-year increase in earnings
  • Cash flow remains strong
  • Recovery in demand reflected in increased order rates

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CLEVELAND, April 20, 2010 /PRNewswire via COMTEX/ -- Parker Hannifin Corporation (NYSE: PH), the global leader in motion and control technologies, today reported results for the fiscal 2010 third quarter ending March 31, 2010. Fiscal 2010 third quarter sales were $2.6 billion, an increase of 11.0 percent compared with the second quarter of fiscal 2010 and an increase of 11.5 percent from $2.3 billion in the third quarter a year ago. Fiscal 2010 third quarter net income was $153.9 million, an increase of 47.2 percent compared with the second quarter of fiscal 2010 and an increase of 188.0 percent compared with $53.4 million in the third quarter of fiscal 2009. Fiscal 2010 third quarter earnings per diluted share were $0.94, an increase of 46.9 percent from the second quarter of fiscal 2010 and an increase of 183.4 percent compared with $0.33 in the third quarter a year ago. Cash flow from operations for the first nine months of fiscal 2010 was $841.4 million, or 11.7 percent of sales, compared with $716.1 million, or 8.8 percent of sales in the same prior year period.

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"It is very encouraging to see that performance continues to trend in the right direction with sequential improvements in sales and earnings for the third consecutive quarter, as well as a year-over-year increase in sales and earnings," said Chairman, CEO and President Don Washkewicz. "Year-over-year organic sales in the quarter increased 7.9 percent and currency translation positively impacted sales by 3.6 percent. The company's continuing actions to restructure operations and control costs are yielding strong results in this recovering economy. Segment operating margins were 11.8 percent for the quarter, while incremental marginal return on sales, reflecting the change in operating profit as a percentage of the change in sales, was 51.6 percent this quarter. Year-to-date operating cash flow as a percentage of sales was well above our 10 percent target and this was after a $100 million discretionary contribution to the company's pension plan.

"Order levels are improving across most of our markets and regions, which give us confidence that the global economic recovery is sustainable. Current demand levels will support continued positive financial performance for the remainder of the fiscal year. The company will continue to focus on driving margin performance, generating strong cash flow and serving our customers globally."

Segment Results

In the Industrial North America segment, third quarter sales increased 11.9 percent to $958.6 million, and operating income increased 82.8 percent to $133.6 million, compared with the same period a year ago.

In the Industrial International segment, third quarter sales increased 18.9 percent to $995.2 million, and operating income increased 185.6 percent to $109.3 million compared with the same period a year ago.

In the Aerospace segment, third quarter sales declined 6.4 percent to $449.2 million, and operating income declined 24.2 percent to $49.8 million, compared with the same period a year ago. Aerospace results were primarily impacted by lower commercial MRO sales and continued weakness in the business and regional aircraft markets.

In the Climate & Industrial Controls segment, third quarter sales increased 23.9 percent to $211.8 million, and operating income increased 321.2 percent to $16.3 million, compared with the same period a year ago.


Parker reported an increase of 23 percent in total orders for the quarter ending March 31, 2010, compared with the same quarter a year ago. The company reported the following orders by operating segment:

  • Orders increased 30 percent in the Industrial North America segment, compared with the same quarter a year ago.
  • Orders increased 42 percent in the Industrial 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 increased 38 percent in the Climate and Industrial Controls segment, compared with the same quarter a year ago.


For fiscal 2010, the company increased its guidance for earnings from continuing operations to the range of $2.95 to $3.15 per diluted share.

Washkewicz added, "We anticipate closing the year strongly and look forward to a more stable environment in the next fiscal year. Reflecting on performance during the deepest global recession since the great depression of the 1930's, I am extremely proud of Parker Hannifin employees around the world. Not only did their dedication to our Win Strategy help prepare us for the downturn, but their decisive actions to manage through the recession and emerge even stronger are a credit to their tenacity and focus. Thanks to the strong cash flow our employees have helped generate, we were able to voluntarily allocate $100 million to their pension fund assets this quarter. We also have been effective in raising margin performance at the bottom of each of the last three recessions. Looking ahead to the coming years, our employees have a renewed focus on targeting new heights for financial performance and growth as the global economic recovery unfolds. Reflecting confidence in our outlook, last week our Board approved an increase in our dividend for the 54th consecutive fiscal year."

NOTICE OF CONFERENCE CALL: Parker Hannifin's conference call and slide presentation to discuss its fiscal 2010 third quarter results are available to all interested parties via live webcast today at 9:00 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. A replay of the conference call will also be available at http://www.phstock.com/ for one year after the call.

With annual sales exceeding $10 billion in fiscal year 2009, 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 mobile, industrial and aerospace markets. The company employs approximately 52,000 people in 48 countries around the world. Parker has increased its annual dividends paid to shareholders for 54 consecutive fiscal 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 web site at http://www.phstock.com/.

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 Industrial North America, Industrial International, and Climate and Industrial Controls segments, and the year-over-year 12-month rolling average of orders for the Aerospace segment.

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 economic environment, 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, suppliers or distributors, 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; ability to realize anticipated cost savings from business realignment actions; 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 insurance and employee retirement and health care benefits; 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 unless otherwise required by law.


                           Three Months Ended               Nine Months Ended
                               March 31,                        March 31,
     per share
     amounts)                 2010          2009          2010          2009
    ----------                ----          ----          ----          ----

    Net sales             $2,614,823    $2,344,713    $7,206,696    $8,098,057
    Cost of
     sales                 2,062,451     1,908,607     5,732,877     6,367,279
    -------                ---------     ---------     ---------     ---------
     profit                  552,372       436,106     1,473,819     1,730,778
     expenses                316,069       317,992       927,752       987,858
     expense                  25,951        28,393        76,703        86,796
     net                       3,959        27,453         6,707        36,235
    ---------                  -----        ------         -----        ------
     taxes                    206,393       62,268       462,657       619,889
     taxes                     52,013        9,113       129,344       158,138
    ------                     ------        -----       -------       -------
    Net income               154,380        53,155       333,313       461,751
     interests                   517          (267)        1,411         2,752
    ---------------              ---          ----         -----         -----
    Net income
     to common
     shareholders           $153,863       $53,422      $331,902      $458,999
    -------------           --------       -------      --------      --------

     per share
     to common
        per share               $.96          $.33         $2.06         $2.83
       ----------               ----          ----         -----         -----
        per share               $.94          $.33         $2.04         $2.81
       ----------               ----          ----         -----         -----

     period -
     Basic               160,931,123   160,529,032   160,776,068   161,927,857
     period -
     Diluted             163,632,703   161,011,156   162,698,305   163,103,396

     share                      $.25          $.25          $.75          $.75
    ----------                  ----          ----          ----          ----


                                  Three Months Ended       Nine Months Ended
    (Unaudited)                        March 31,               March 31,
    (Dollars in thousands)         2010         2009        2010       2009
    ----------------------         ----         ----        ----       ----
    Net sales
           North America       $958,594     $857,032  $2,588,887 $2,957,149
           International        995,186      836,778   2,777,493  3,102,711
        Aerospace               449,247      480,024   1,266,654  1,432,164
        Climate & Industrial
         Controls               211,796      170,879     573,662    606,033

    Total                    $2,614,823   $2,344,713  $7,206,696 $8,098,057
    -----                    ----------   ----------  ---------- ----------
    Segment operating

           North America       $133,598      $73,089    $324,204   $341,190
           International        109,335       38,281     253,794    356,355
        Aerospace                49,778       65,664     143,950    203,470
       Climate & Industrial
        Controls                 16,298       (7,369)     32,939     (4,684)

    Total segment
     operating income           309,009      169,665     754,887    896,331
    Corporate general and
     expenses                    41,280       40,366      99,054    123,112
    ---------------------        ------       ------      ------    -------
    Income from operations
     before interest
     expense and other          267,729      129,299     655,833    773,219
    Interest expense             25,951       28,393      76,703     86,796
    Other expense                35,385       38,638     116,473     66,534
    Income before income
     taxes                     $206,393      $62,268    $462,657   $619,889
    --------------------       --------      -------    --------   --------


    (Dollars in thousands)     March 31,       2010             2009
    ----------------------                     ----             ----
    Current assets:
    Cash and cash equivalents              $380,561         $166,548
    Accounts receivable, net              1,563,150        1,532,232
    Inventories                           1,196,558        1,335,186
    Prepaid expenses                         90,153          151,500
    Deferred income taxes                   123,906          125,998

    Total current assets                  3,354,328        3,311,464
    Plant and equipment, net              1,782,426        1,828,520
    Goodwill                              2,882,709        2,808,724
    Intangible assets, net                1,207,440        1,242,330
    Other assets                            631,345          376,472

    Total assets                         $9,858,248       $9,567,510
    ------------                         ----------       ----------

    Liabilities and shareholders' equity
    Current liabilities:
    Notes payable                          $366,684         $747,859
    Accounts payable                        785,244          658,775
    Accrued liabilities                     748,955          771,913
    Accrued domestic and foreign taxes      171,092          127,982

    Total current liabilities             2,071,975        2,306,529
    Long-term debt                        1,535,905        1,849,286
    Pensions and other postretirement
     benefits                             1,151,046          459,004
    Deferred income taxes                   177,512          202,242
    Other liabilities                       226,266          209,619
    Shareholders' equity                  4,609,629        4,457,563
    Noncontrolling interests                 85,915           83,267

    Total liabilities and equity         $9,858,248       $9,567,510
    ----------------------------         ----------       ----------


                                                        Nine Months Ended
    (Unaudited)                                             March 31,
    (Dollars in thousands)                              2010           2009
    ----------------------                              ----           ----

    Cash flows from operating activities:
    Net income                                      $333,313       $461,751
    Depreciation and amortization                    278,015        264,337
    Share incentive plan compensation                 48,145         35,286
    Net change in receivables, inventories,
     and trade payables                               61,432        245,488
    Net change in other assets and
     liabilities                                     117,870       (285,469)
    Other, net                                         2,622         (5,299)

    Net cash provided by operating activities        841,397        716,094
    -----------------------------------------        -------        -------
    Cash flows from investing activities:
    Acquisitions (net of cash of $24,203 in
     2009)                                            (5,451)      (720,553)
    Capital expenditures                             (90,862)      (226,195)
    Proceeds from sale of plant and equipment          4,054         25,899
    Other, net                                       (12,184)         2,686

    Net cash (used in) investing activities         (104,443)      (918,163)
    ---------------------------------------         --------       --------
    Cash flows from financing activities:
    Net (payments for) common share activity         (4,178)       (437,118)
    Net (payments for) proceeds from debt          (409,363)        639,728
    Dividends                                      (120,786)       (121,458)

    Net cash (used in) provided by financing
     activities                                     (534,327)        81,152
    ----------------------------------------        --------         ------
    Effect of exchange rate changes on cash           (9,677)       (38,583)
    ---------------------------------------           ------        -------
    Net increase (decrease) in cash and cash
     equivalents                                     192,950       (159,500)
    Cash and cash equivalents at beginning of
     period                                          187,611        326,048

    Cash and cash equivalents at end of
     period                                         $380,561       $166,548
    -----------------------------------             --------       --------

SOURCE Parker Hannifin Corporation

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