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For the third quarter of fiscal year 2008, which ended on March 31, 2008, sales were $3.2 billion, an increase of 14.4 percent from $2.8 billion in the same quarter a year ago. Net income increased 22.0 percent to $255.4 million from $209.3 million in the same quarter a year ago. Earnings per diluted share increased 25.2 percent to $1.49 as compared to $1.19 in the same quarter a year ago. Cash flow from operations was $863.8 million, or 9.8 percent of sales.
"We are clearly headed to another record year for Parker, which will be the fifth record year in a row. The company continues to perform very well, showing strength during an economic cycle that has resulted in a challenging economic environment, particularly in North America. This is clearly the result of the dedication of our nearly 60,000 empowered employees who continue to stay focused on the Win Strategy, which is the clear roadmap that defines the goals, sets the strategies for achieving them, and identifies how progress will be measured," said Chairman, CEO and President Don Washkewicz. "First among those goals is one which serves Parker well independent of the economic cycle - to continually provide premier customer service. At Parker this means not just providing quality products on-time, but partnering with our customers all over the world to help them become more productive and profitable."
"Our consistent profitable growth also clearly demonstrates the power behind Parker's globally balanced assets and capabilities to serve customers in key regions of the world," Washkewicz continued. "This allows for more consistent financial performance, and coupled with our strong global distribution network, also allows Parker to serve its customers, and their customers, anywhere in the world. This is a distinctive business model that we believe separates Parker from others in our industry."
"Of the 14.4 percent sales growth this quarter, 4.3 percent was organic, 4.0 percent was the result of strategic acquisitions, and the remainder was from the movement of foreign currency exchange rates. Parker is benefiting today from the many strategic actions taken earlier in this decade. We have demonstrated our ability to profitably grow both organically and through strategic acquisitions of quality companies, and will continue to do so as further opportunities arise," continued Washkewicz.
"Particularly strong results were again delivered this quarter by the Industrial International segment, with robust organic growth and an increase in operating income by over 50 percent as compared to the same period a year ago," added Washkewicz.
"Adding high growth, advanced technologies and systems to our portfolio through acquisitions is an important part of the Win Strategy," said Washkewicz. "Strong cash flow is leveraged to selectively add to the portfolio. We made two recent strategic acquisitions, which added approximately $270 million in sales. These acquisitions included Vansco Electronics, a global leader in the design and manufacture of electronic controls, displays and terminals, communication and operator interfaces, and sensors. Vansco adds to our total systems capabilities to serve the mobile equipment market with applications for agricultural, construction, material handling, bus, RV, and specialty truck equipment. The other recent acquisition was HTR Holdings Corp., which provides Parker greater access to the life sciences market. It adds to our capability to provide precision elastomeric components for medical devices such as intravenous equipment, drug infusion pumps, masks, septums, respirator hoses, catheters and diaphragms sold directly to original equipment manufacturers."
Segment Results
In spite of a soft overall economy in the Industrial North America segment, third-quarter sales increased 3.7 percent to $1.1 billion, and operating income increased 0.8 percent to $148.0 million, as compared to the same period a year ago.
In the Industrial International segment, third-quarter sales increased 32.2 percent to $1.3 billion, and operating income increased 54.7 percent to $217.2 million, as compared to the same period a year ago.
In the Aerospace segment, third-quarter sales increased 7.7 percent to $470.1 million, and operating income increased 3.2 percent to $68.3 million, as compared to the same period a year ago. During the quarter, this segment was awarded a $2 billion long-term contract to supply the fuel package and hydraulic system for the new Airbus A350 XWB aircraft.
In the Climate & Industrial Controls segment, third-quarter sales increased 0.5 percent to $279.6 million, and operating income decreased 4.9 percent to $18.3 million, as compared to the same period a year ago. This segment continues to be impacted by the ongoing weakness in the automotive, residential construction, and heavy duty truck markets.
Orders
In addition to financial results, for the quarter ending March 31, 2008, Parker also reported an increase of 9 percent in total orders before the effect of foreign currency and acquisitions, as compared to the same quarter a year ago. Parker reported the following orders by operating segment:
- Orders increased 2 percent in the Industrial North America segment versus the same quarter a year ago.
- Orders increased 11 percent in the Industrial International segment versus the same quarter a year ago.
- Orders increased 28 percent in the Aerospace segment on a rolling 12 month average basis.
- Orders decreased 1 percent in the Climate and Industrial Controls segment versus the same quarter a year ago.
Outlook
For fiscal year 2008, the company increased its guidance for earnings to the range of $5.40 to $5.60 per diluted share. Previous guidance for earnings was $5.15 to $5.40 per diluted share.
"Since fiscal 2008 continues to be strong overall, we have again raised our earnings guidance," said Washkewicz. "Orders are growing in Europe, Asia, Latin America and North America. Many of our key markets, including Aerospace, continue to grow. For other markets, especially those in North America which have been in recession, we are positioned to benefit when they return to more normal growth levels."
"We will continue to invest to take advantage of the many growth opportunities we see," continued Washkewicz. "To further this investment, we are pleased to have had our syndicated credit facility, comprised of 18 creditors around the world, increased by nearly 50 percent over previous levels to $1.5 billion. Given today's tight credit markets, we believe it signals our creditors' trust in Parker's ability to deliver on the profitable growth and financial performance measures of the Win Strategy."
"We were also pleased to receive an important third-party recognition this quarter. Parker was honored with IR Magazine's "Most Progress in Investor Relations" award at its annual recognition dinner for publicly held companies in New York City. The awards dinner recognizes outstanding communications between companies and their shareholders based on independent research conducted among more than 2,600 buy-side analysts, sell-side analysts, and portfolio managers in the U.S."
Concluded Washkewicz, "Our financial results, along with our proven business model and the Win Strategy, give us confidence about the continuing growth potential we see in our future."
NOTICE OF CONFERENCE CALL: Parker Hannifin's conference call and slide presentation to discuss its fiscal third-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 $10 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 43 countries around the world. Parker has increased its annual dividends paid to shareholders for 52 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
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 in 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 both its 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, 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 or significant changes in financial condition; 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, interest rates and credit availability. The company makes these statements as of the date of this disclosure, and undertakes no obligation to update them.
PARKER HANNIFIN CORPORATION - MARCH 31, 2008
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
Three Months Ended Nine Months Ended
(Dollars in thousands March 31, March 31,
except per share
amounts) 2008 2007 2008 2007
Net sales $3,182,537 $2,780,969 $8,798,853 $7,843,694
Cost of sales 2,447,216 2,163,828 6,763,650 6,049,193
Gross profit 735,321 617,141 2,035,203 1,794,501
Selling, general and
administrative
expenses 347,022 308,562 990,944 893,427
Interest expense 25,540 22,403 73,977 61,879
Other expense
(income), net 4,965 (8,750) (1,424) (22,153)
Income before income
taxes 357,794 294,926 971,706 861,348
Income taxes 102,353 85,617 274,805 248,488
Net income $255,441 $209,309 $696,901 $612,860
Earnings per share:
Basic earnings per
share $1.52 $1.21 $4.14 $3.50
Diluted earnings
per share $1.49 $1.19 $4.05 $3.45
Average shares
outstanding during
period - Basic 167,750,603 173,176,299 168,532,262 175,031,276
Average shares
outstanding during
period - Diluted 170,892,454 176,210,661 171,878,223 177,829,325
Cash dividends per
common share $.21 $.173 $.63 $.52
BUSINESS SEGMENT INFORMATION BY INDUSTRY
(Unaudited) Three Months Ended Nine Months Ended
March 31, March 31,
(Dollars in thousands) 2008 2007 2008 2007
Net sales
Industrial:
North America $1,086,986 $1,048,474 $3,084,233 $3,008,902
International 1,345,849 1,017,953 3,624,486 2,817,668
Aerospace 470,109 436,476 1,328,097 1,240,873
Climate & Industrial
Controls 279,593 278,066 762,037 776,251
Total $3,182,537 $2,780,969 $8,798,853 $7,843,694
Segment operating income
Industrial:
North America $148,019 $146,794 $444,881 $433,822
International 217,243 140,456 575,903 389,756
Aerospace 68,323 66,219 177,676 202,622
Climate & Industrial
Controls 18,282 19,232 39,209 57,019
Total segment operating
income $451,867 $372,701 $1,237,669 $1,083,219
Corporate general and
administrative expenses 48,157 40,538 133,505 121,168
Income from operations
before interest expense
and other 403,710 332,163 1,104,164 962,051
Interest expense 25,540 22,403 73,977 61,879
Other expense 20,376 14,834 58,481 38,824
Income before income taxes $357,794 $294,926 $971,706 $861,348
CONSOLIDATED BALANCE SHEET
(Unaudited)
(Dollars in
thousands) March 31, 2008 2007
Assets
Current assets:
Cash and cash equivalents $182,134 $183,727
Accounts receivable, net 1,985,894 1,717,153
Inventories 1,488,799 1,270,971
Prepaid expenses 70,334 64,200
Deferred income taxes 145,013 132,261
Total current assets 3,872,174 3,368,312
Plant and equipment, net 1,861,893 1,709,239
Goodwill 2,652,727 2,169,631
Intangible assets, net 724,607 491,383
Other assets 497,776 969,972
Total assets $9,609,177 $8,708,537
Liabilities and shareholders' equity
Current liabilities:
Notes payable $621,168 $293,456
Accounts payable 879,169 734,801
Accrued liabilities 820,720 720,770
Accrued domestic and foreign taxes 166,229 147,734
Total current liabilities 2,487,286 1,896,761
Long-term debt 1,189,736 1,115,987
Pensions and other postretirement
benefits 362,865 833,123
Deferred income taxes 140,077 122,942
Other liabilities 310,220 219,282
Shareholders' equity 5,118,993 4,520,442
Total liabilities and shareholders'
equity $9,609,177 $8,708,537
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited) Nine Months Ended March 31,
(Dollars in thousands) 2008 2007
Cash flows from operating activities:
Net income $696,901 $612,860
Depreciation and amortization 231,680 222,019
Stock-based compensation 37,934 28,517
Net change in receivables,
inventories, and trade payables (163,824) (179,683)
Net change in other assets and
liabilities 87,582 (71,970)
Other, net (26,501) (74,864)
Net cash provided by operating
activities 863,772 536,879
Cash flows from investing activities:
Acquisitions (net of cash of $13,668
in 2008 and $1,088 in 2007) (467,686) (188,340)
Capital expenditures (188,172) (174,946)
Proceeds from sale of plant and
equipment 16,120 35,389
Other, net (3,554) (2,839)
Net cash (used in) investing
activities (643,292) (330,736)
Cash flows from financing activities:
Net (payments for) common share
activity (521,262) (361,651)
Net proceeds from debt 414,363 254,196
Dividends (107,077) (91,187)
Net cash (used in) financing
activities (213,976) (198,642)
Effect of exchange rate changes on
cash 2,924 4,673
Net increase in cash and cash
equivalents 9,428 12,174
Cash and cash equivalents at
beginning of period 172,706 171,553
Cash and cash equivalents at end of
period $182,134 $183,727
SOURCE Parker Hannifin Corporation
http://www.phstock.com/