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Parker Reports Record Fiscal 2011 Third Quarter Sales, Net Income and Earnings per Share and Increases Dividend 16 Percent

April 27, 2011


- Net Income and Diluted Earnings Per Share of $1.68 were All-Time Quarterly Records
- Sales Increased 24% to a Third Quarter Record and Order Growth Remains Strong
- Company Maintains Strong Cash Flow and Balance Sheet and Increases Dividend 16%
- Earnings Guidance Increased for Fiscal Year 2011

CLEVELAND, April 27, 2011 /PRNewswire via COMTEX/ --

Parker Hannifin Corporation (NYSE: PH), the global leader in motion and control technologies, today reported record results for the fiscal 2011 third quarter ended March 31, 2011. Fiscal 2011 third quarter sales were $3.2 billion, a third quarter record representing an increase of 23.9 percent from $2.6 billion in the same quarter a year ago. Net income was an all-time quarterly record of $281.6 million, an increase of 82.4 percent from $154.4 million in the third quarter of fiscal 2010. Earnings per diluted share for the quarter were also an all-time quarterly record at $1.68, compared with $0.94 in last year's third quarter. Cash flow from operations for the first nine months of fiscal 2011 was $799.9 million, or 9.0 percent of sales, compared with cash flow from operations of $841.4 million, or 11.7 percent of sales in the prior year period.

 

(Logo: http://photos.prnewswire.com/prnh/19990816/PHLOGO )

"Our third quarter performance reflects the continued strength that we see across our end markets and regions and our ability to leverage that strength into higher operating margins and record quarterly earnings per share," said Chairman, CEO and President Don Washkewicz. "Customer orders also increased significantly in the quarter. All segments reported a double-digit increase in sales and order levels. Total organic sales increased 21 percent in the quarter with acquisitions contributing 1 percent and currency contributing 2 percent. Margin performance was also a positive as total segment operating margin was a third quarter record of 14.8 percent, led by Industrial North America segment margin of 16.1 percent and Industrial International segment margin of 15.5 percent. Further reflecting our continued strong balance sheet and cash flow, the Board of Directors today approved a 16 percent increase in our quarterly dividend from 32 cents to 37 cents per common share."

Segment Results

In the Industrial North America segment, third quarter sales increased 23.0 percent to $1.2 billion, and operating income was $189.5 million compared with $133.6 million in the same period a year ago.

In the Industrial International segment, third quarter sales increased 29.9 percent to $1.3 billion, and operating income was $199.8 million compared with $109.3 million in the same period a year ago.

In the Aerospace segment, third quarter sales increased 12.1 percent to $503.8 million, and operating income was $69.0 million compared with $49.8 million in the same period a year ago.

In the Climate and Industrial Controls segment, third quarter sales increased 24.9 percent to $264.5 million, and operating income was $22.6 million compared with $16.3 million in the same period a year ago.

Orders

Parker reported an increase of 24 percent in total orders for the quarter ended March 31, 2011, compared with the same quarter a year ago. The company reported the following orders by operating segment:

 

  • Orders increased 20 percent in the Industrial North America segment, compared with the same quarter a year ago.
  • Orders increased 22 percent in the Industrial International segment, compared with the same quarter a year ago.
  • Orders increased 44 percent in the Aerospace segment on a rolling 12-month average basis.
  • Orders increased 14 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 from the previous range of $5.80 to $6.20 per diluted share to a new range of $6.20 to $6.40 per diluted share.

Washkewicz added, "Our performance year-to-date reflects the ongoing economic recovery and the continued execution of our Win Strategy, now in its tenth year. Parker continues to position itself favorably for continued earnings growth by focusing on premier service to our customers, lean operations and ongoing investments in leading edge innovations across the company. Parker expects to deliver record earnings in fiscal 2011, with a strong order backlog going into fiscal year 2012."

NOTICE OF CONFERENCE CALL: Parker Hannifin's conference call and slide presentation to discuss its fiscal 2011 third 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 55 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, including its 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 performance. 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, changes in contract cost and revenue estimates for new development programs and changes in product mix; 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 - MARCH 31, 2011

CONSOLIDATED STATEMENT OF INCOME

(Unaudited)

 
 

Three Months Ended March 31,

 

Nine Months Ended March 31,

 

(Dollars in thousands except per share amounts)

2011

 

2010

 

2011

 

2010

 
                 

Net sales

$ 3,240,103

 

$ 2,614,823

 

$ 8,936,040

 

$ 7,206,696

 

Cost of sales

2,463,083

 

2,062,451

 

6,796,685

 

5,732,877

 

Gross profit

777,020

 

552,372

 

2,139,355

 

1,473,819

 

Selling, general and administrative expenses

375,069

 

316,069

 

1,054,332

 

927,752

 

Interest expense

24,619

 

25,951

 

74,883

 

76,703

 

Other (income) expense, net

(12,385)

 

3,959

 

(22,191)

 

6,707

 

Income before income taxes

389,717

 

206,393

 

1,032,331

 

462,657

 

Income taxes

108,069

 

52,013

 

269,835

 

129,344

 

Net income

281,648

 

154,380

 

762,496

 

333,313

 

Less: Noncontrolling interests

2,059

 

517

 

5,556

 

1,411

 

Net income attributable to common shareholders

$ 279,589

 

$ 153,863

 

$ 756,940

 

$ 331,902

 
                 

Earnings per share attributable to common shareholders:

               

Basic earnings per share

$ 1.72

 

$ .96

 

$ 4.68

 

$ 2.06

 

Diluted earnings per share

$ 1.68

 

$ .94

 

$ 4.58

 

$ 2.04

 
                 

Average shares outstanding during period - Basic

162,160,426

 

160,931,123

 

161,711,394

 

160,776,068

 

Average shares outstanding during period - Diluted

166,690,347

 

163,632,703

 

165,270,482

 

162,698,305

 
                 

Cash dividends per common share

$ .32

 

$ .25

 

$ .88

 

$ .75

 
                 
                 

BUSINESS SEGMENT INFORMATION BY INDUSTRY

               

(Unaudited)

Three Months Ended March 31,

 

Nine Months Ended March 31,

 

(Dollars in thousands)

2011

 

2010

 

2011

 

2010

 

Net sales

               

Industrial:

               

North America

$ 1,178,714

 

$ 958,594

 

$ 3,289,098

 

$ 2,588,887

 

International

1,293,047

 

995,186

 

3,533,259

 

2,777,493

 

Aerospace

503,806

 

449,247

 

1,400,116

 

1,266,654

 

Climate & Industrial Controls

264,536

 

211,796

 

713,567

 

573,662

 

Total

$ 3,240,103

 

$ 2,614,823

 

$ 8,936,040

 

$ 7,206,696

 

Segment operating income

               
                 

Industrial:

               

North America

$ 189,463

 

$ 133,598

 

$ 538,254

 

$ 324,204

 

International

199,798

 

109,335

 

551,374

 

253,794

 

Aerospace

68,984

 

49,778

 

176,404

 

143,950

 

Climate & Industrial Controls

22,577

 

16,298

 

53,630

 

32,939

 

Total segment operating income

480,822

 

309,009

 

1,319,662

 

754,887

 

Corporate general and administrative expenses

41,734

 

41,280

 

112,681

 

99,054

 

Income from operations before interest

               

expense and other

439,088

 

267,729

 

1,206,981

 

655,833

 

Interest expense

24,619

 

25,951

 

74,883

 

76,703

 

Other expense

24,752

 

35,385

 

99,767

 

116,473

 

Income before income taxes

$ 389,717

 

$ 206,393

 

$ 1,032,331

 

$ 462,657

 
                 
                 
                 

CONSOLIDATED BALANCE SHEET

               

(Unaudited)

March 31,

 

March 31,

 

June 30,

     

(Dollars in thousands)

2011

 

2010

 

2010

     

Assets

               

Current assets:

               

Cash and cash equivalents

$ 1,107,955

 

$ 380,561

 

$ 575,526

     

Accounts receivable, net

1,950,980

 

1,563,150

 

1,599,941

     

Inventories

1,390,862

 

1,196,558

 

1,171,655

     

Prepaid expenses

89,692

 

90,153

 

111,545

     

Deferred income taxes

151,840

 

123,906

 

130,129

     

Total current assets

4,691,329

 

3,354,328

 

3,588,796

     

Plant and equipment, net

1,788,377

 

1,782,426

 

1,697,881

     

Goodwill

2,976,232

 

2,882,709

 

2,786,334

     

Intangible assets, net

1,191,072

 

1,207,440

 

1,150,051

     

Other assets

729,852

 

631,345

 

687,320

     

Total assets

$ 11,376,862

 

$ 9,858,248

 

$ 9,910,382

     
                 

Liabilities and equity

               

Current liabilities:

               

Notes payable

$ 173,233

 

$ 366,684

 

$ 363,272

     

Accounts payable

1,085,126

 

785,244

 

888,743

     

Accrued liabilities

844,852

 

748,955

 

776,527

     

Accrued domestic and foreign taxes

237,209

 

171,092

 

176,349

     

Total current liabilities

2,340,420

 

2,071,975

 

2,204,891

     

Long-term debt

1,683,731

 

1,535,905

 

1,413,634

     

Pensions and other postretirement benefits

1,341,920

 

1,151,046

 

1,500,928

     

Deferred income taxes

159,777

 

177,512

 

135,321

     

Other liabilities

267,285

 

226,266

 

196,208

     

Shareholders' equity

5,481,908

 

4,609,629

 

4,367,965

     

Noncontrolling interests

101,821

 

85,915

 

91,435

     

Total liabilities and equity

$ 11,376,862

 

$ 9,858,248

 

$ 9,910,382

     
                 
                 

CONSOLIDATED STATEMENT OF CASH FLOWS

               

(Unaudited)

Nine Months Ended March 31,

         

(Dollars in thousands)

2011

 

2010

         
                 

Cash flows from operating activities:

               

Net income

$ 762,496

 

$ 333,313

         

Depreciation and amortization

254,125

 

278,015

         

Share incentive plan compensation

56,792

 

48,145

         

Net change in receivables, inventories, and trade payables

(239,968)

 

61,432

         

Net change in other assets and liabilities

(35,202)

 

117,870

         

Other, net

1,690

 

2,622

         

Net cash provided by operating activities

799,933

 

841,397

         

Cash flows from investing activities:

               

Acquisitions (net of cash of $385 in 2011)

(60,227)

 

(5,451)

         

Capital expenditures

(158,455)

 

(90,862)

         

Proceeds from sale of plant and equipment

23,818

 

4,054

         

Other, net

(8,251)

 

(12,184)

         

Net cash (used in) investing activities

(203,115)

 

(104,443)

         

Cash flows from financing activities:

               

Net proceeds from (payments for) common share activity

4,198

 

(4,178)

         

Net proceeds from (payments for) debt

15,035

 

(409,363)

         

Dividends

(142,906)

 

(120,786)

         

Net cash (used in) financing activities

(123,673)

 

(534,327)

         

Effect of exchange rate changes on cash

59,284

 

(9,677)

         

Net increase in cash and cash equivalents

532,429

 

192,950

         

Cash and cash equivalents at beginning of period

575,526

 

187,611

         

Cash and cash equivalents at end of period

$ 1,107,955

 

$ 380,561

         
                   

SOURCE Parker Hannifin Corporation

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