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Parker Reports Fiscal 2011 First Quarter Sales, Net Income, and Record Quarterly Earnings per Share

October 19, 2010

CLEVELAND, Oct 19, 2010 /PRNewswire via COMTEX/ --

 

  • Net Income More Than Triples
  • Company Increases Guidance for Fiscal 2011
  • Cash Flow Remains Strong
  • Order Rates Continue To Show Significant Increases 

 

 

Parker Hannifin Corporation (NYSE: PH), the global leader in motion and control technologies, today reported results for the fiscal 2011 first quarter ending September 30, 2010.

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Fiscal 2011 first quarter sales were $2.8 billion, an increase of 26.5 percent from $2.2 billion in the same quarter a year ago. Net income was $249.0 million compared with $74.0 million in the first quarter of fiscal 2010. Earnings per diluted share for the quarter were $1.51, which is a quarterly record and compares with $0.45 in last year's first quarter. Cash flow from operations for the first quarter of fiscal 2011 was $122.9 million, or 4.3 percent of sales, compared with cash flow from operations of $260.1 million, or 11.6 percent of sales in the prior year period. Fiscal 2011 first quarter cash flow from operations included a $200 million discretionary contribution to the company's pension plan. Excluding this discretionary contribution, cash flow from operations as a percent of sales was 11.4 percent for the first quarter of fiscal 2011.

"Demand levels continued to improve across many markets as reflected in a significant increase in sales for the first quarter," said Chairman, CEO and President Don Washkewicz. "Sales improved in every segment, with total sales increasing 27 percent organically, while foreign currency translation negatively impacted sales by 1 percent. Order rates also increased in all segments.

"We are particularly pleased with our ability to leverage improved top line performance into record level operating margins and earnings. Our total segment operating margin performance was at an all-time record level of 15.5 percent, led by record Industrial North America segment margins of 17.8 percent and record Industrial International segment margins of 16.8 percent. We also continued to deliver strong operating cash flow, which gave us the flexibility to make a discretionary contribution to our pension plan."

Segment Results

In the Industrial North America segment, first-quarter sales increased 36.0 percent to $1.1 billion, and operating income was $189.4 million compared with $76.2 million in the same period a year ago.

In the Industrial International segment, first-quarter sales increased 28.5 percent to $1.1 billion, and operating income was $183.8 million compared with $61.8 million in the same period a year ago.

In the Aerospace segment, first-quarter sales increased 4.8 percent to $436.7 million, and operating income was $43.8 million compared with $53.1 million in the same period a year ago.

In the Climate and Industrial Controls segment, first-quarter sales increased 25.5 percent to $234.7 million, and operating income was $21.6 million compared with $10.5 million in the same period a year ago.

Orders

Parker reported an increase of 29 percent in total orders for the quarter ending September 30, 2010, compared with the same quarter a year ago. The company reported the following orders by operating segment:

 

  • Orders increased 31 percent in the Industrial North America segment, compared with the same quarter a year ago.
  • Orders increased 34 percent in the Industrial International segment, compared with the same quarter a year ago.
  • Orders increased 16 percent in the Aerospace segment on a rolling 12-month average basis.
  • Orders increased 23 percent in the Climate and Industrial Controls segment, compared with the same quarter a year ago.

 

Outlook

For fiscal 2011, the company has increased guidance for earnings from continuing operations to the range of $5.20 to $5.80 per diluted share.

Washkewicz added, "First quarter performance has clearly demonstrated the company's ability to generate strong operating cash flow and strong incremental returns on increased revenues. This gives us confidence in our ability to deliver earnings per share in a higher range for fiscal year 2011. The focus of our employees will continue to be on executing the Win Strategy and our cash flow position affords us the flexibility to drive growth through investments in innovation, international expansion, acquisitions, as well as expansion of our global distribution and industrial retail channels. Thanks to the efforts of Parker's employees in all regions who are pursuing a consistent strategy, we are building momentum from a position of great strength."

NOTICE OF CONFERENCE CALL: Parker Hannifin's conference call and slide presentation to discuss its fiscal 2011 first quarter results are available to all interested parties via live webcast today at 10:00 a.m. ET, on the company's investor information web site at 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 www.phstock.com for one year after the call.

With annual sales of $10 billion in fiscal year 2010, 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 55,000 people in 46 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 www.parker.com, or its investor information web site at 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 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, and changes in contract cost and revenue estimates for new development programs; uncertainties surrounding timing, successful completion or integration of acquisitions; ability to realize anticipated costs savings from business realignment activities; 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.

PARKER HANNIFIN CORPORATION - SEPTEMBER 30, 2010

CONSOLIDATED STATEMENT OF INCOME

(Unaudited)

 
 

Three Months Ended September 30,

 

(Dollars in thousands except per share amounts)

2010

 

2009

 
         

Net sales

$ 2,829,273

 

$ 2,237,165

 

Cost of sales

2,137,874

 

1,800,945

 

Gross profit

691,399

 

436,220

 

Selling, general and administrative expenses

333,584

 

301,843

 

Interest expense

24,633

 

25,723

 

Other (income), net

(3,182)

 

(5,375)

 

Income before income taxes

336,364

 

114,029

 

Income taxes

87,334

 

40,059

 

Net income

249,030

 

73,970

 

Less: Noncontrolling interests

1,859

 

477

 

Net income attributable to common shareholders

$ 247,171

 

$ 73,493

 
         

Earnings per share attributable to common shareholders:

       

Basic earnings per share

$ 1.53

 

$ .46

 

Diluted earnings per share

$ 1.51

 

$ .45

 
         

Average shares outstanding during period - Basic

161,272,536

 

160,629,291

 

Average shares outstanding during period - Diluted

164,107,220

 

162,040,785

 
         

Cash dividends per common share

$ .27

 

$ .25

 
         
         

BUSINESS SEGMENT INFORMATION BY INDUSTRY

       

(Unaudited)

Three Months Ended September 30,

 

(Dollars in thousands)

2010

 

2009

 

Net sales

       

Industrial:

       

North America

$ 1,064,915

 

$ 783,085

 

International

1,092,981

 

850,250

 

Aerospace

436,680

 

416,856

 

Climate & Industrial Controls

234,697

 

186,974

 

Total

$ 2,829,273

 

$ 2,237,165

 

Segment operating income

       
         

Industrial:

       

North America

$ 189,362

 

$ 76,171

 

International

183,800

 

61,823

 

Aerospace

43,776

 

53,146

 

Climate & Industrial Controls

21,552

 

10,497

 

Total segment operating income

438,490

 

201,637

 

Corporate general and administrative expenses

33,354

 

26,302

 

Income from operations before interest

       

expense and other

405,136

 

175,335

 

Interest expense

24,633

 

25,723

 

Other expense

44,139

 

35,583

 

Income before income taxes

$ 336,364

 

$ 114,029

 
         

PARKER HANNIFIN CORPORATION - SEPTEMBER 30, 2010

CONSOLIDATED BALANCE SHEET

 

(Unaudited)

 

September 30,

 

June 30,

 

September 30,

 

(Dollars in thousands)

 

2010

 

2010

 

2009

 

Assets

             

Current assets:

             

Cash and cash equivalents

 

$ 923,836

 

$ 575,526

 

$ 189,849

 

Accounts receivable, net

 

1,694,313

 

1,599,941

 

1,452,494

 

Inventories

 

1,295,137

 

1,171,655

 

1,266,319

 

Prepaid expenses

 

104,216

 

111,545

 

100,189

 

Deferred income taxes

 

130,094

 

130,129

 

124,640

 

Total current assets

 

4,147,596

 

3,588,796

 

3,133,491

 

Plant and equipment, net

 

1,770,983

 

1,697,881

 

1,891,438

 

Goodwill

 

2,915,602

 

2,786,334

 

2,964,321

 

Intangible assets, net

 

1,180,021

 

1,150,051

 

1,276,049

 

Other assets

 

695,519

 

687,320

 

671,874

 

Total assets

 

$ 10,709,721

 

$ 9,910,382

 

$ 9,937,173

 
               

Liabilities and equity

             

Current liabilities:

             

Notes payable

 

$ 391,303

 

$ 363,272

 

$ 304,083

 

Accounts payable

 

953,259

 

888,743

 

659,764

 

Accrued liabilities

 

742,087

 

776,527

 

719,228

 

Accrued domestic and foreign taxes

 

195,455

 

176,349

 

152,262

 

Total current liabilities

 

2,282,104

 

2,204,891

 

1,835,337

 

Long-term debt

 

1,745,812

 

1,413,634

 

1,855,531

 

Pensions and other postretirement benefits

1,327,195

 

1,500,928

 

1,255,515

 

Deferred income taxes

 

149,701

 

135,321

 

187,907

 

Other liabilities

 

212,332

 

196,208

 

233,270

 

Shareholders' equity

 

4,894,945

 

4,367,965

 

4,481,984

 

Noncontrolling interests

 

97,632

 

91,435

 

87,629

 

Total liabilities and equity

 

$ 10,709,721

 

$ 9,910,382

 

$ 9,937,173

 
             

CONSOLIDATED STATEMENT OF CASH FLOWS

 

(Unaudited)

     

Three Months Ended September 30,

 

(Dollars in thousands)

   

2010

 

2009

 
                 

Cash flows from operating activities:

         

Net income

 

$ 249,030

 

$ 73,970

 

Depreciation and amortization

 

84,986

 

92,963

 

Share incentive plan compensation

 

29,242

 

26,436

 

Net change in receivables, inventories, and trade payables

(54,956)

 

15,291

 

Net change in other assets and liabilities

 

(224,180)

 

73,694

 

Other, net

 

38,758

 

(22,301)

 

Net cash provided by operating activities

 

122,880

 

260,053

 

Cash flows from investing activities:

         

Acquisitions (net of cash of $1 in 2010)

 

(8,129)

 

-

 

Capital expenditures

 

(52,690)

 

(30,099)

 

Proceeds from sale of plant and equipment

 

2,169

 

4,422

 

Other, net

 

(318)

 

(1,334)

 

Net cash (used in) investing activities

 

(58,968)

 

(27,011)

 

Cash flows from financing activities:

         

Net (payments for) common share activity

 

(3,305)

 

(1,246)

 

Net proceeds from (payments for) debt

 

293,952

 

(197,279)

 

Dividends

     

(43,648)

 

(40,171)

 

Net cash provided by (used in) financing activities

246,999

 

(238,696)

 

Effect of exchange rate changes on cash

 

37,399

 

7,892

 

Net increase in cash and cash equivalents

 

348,310

 

2,238

 

Cash and cash equivalents at beginning of period

 

575,526

 

187,611

 

Cash and cash equivalents at end of period

 

$ 923,836

 

$ 189,849

 
               

SOURCE Parker Hannifin Corporation

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