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- Company Outlook Anticipates Another Record Year in Fiscal 2009
CLEVELAND, July 31 /PRNewswire-FirstCall/ -- Parker Hannifin Corporation (NYSE: PH), the global leader in motion and control technologies, today reported results for the fourth quarter and for the fiscal year ended June 30, 2008. These results mark all-time records for Parker in annual sales, earnings and cash flow from operating activities.
(Logo: http://www.newscom.com/cgi-bin/prnh/19990816/PHLOGO )
For the 2008 fiscal year, the company surpassed $12 billion in sales for the first time in its 90 year history. Sales reached a record $12.1 billion, an increase of 13.3 percent from the previous year, including 4.8 percent organic growth. Net Income increased 14.4 percent to $949.5 million, compared to $830.0 million a year ago, and earnings per diluted share increased 18.2 percent to $5.53, compared to $4.68 a year ago. Excluding a non-operating charge of 8 cents per diluted share, as a result of establishing a contingency reserve with respect to previously disclosed litigation, fiscal 2008 earnings per diluted share were $5.61, representing a 19.9 percent increase compared to the prior year.
For the fourth quarter of fiscal 2008, sales increased 16.4 percent to $3.3 billion, compared to $2.9 billion in the same period last year, including 6.4 percent organic growth. Fourth quarter net income increased 16.3 percent to $252.6 million, compared to $217.2 million a year ago, and fourth quarter earnings per diluted share increased 19.5 percent to $1.47 from $1.23 a year ago. Excluding the non-operating charge of 8 cents per diluted share, fiscal 2008 fourth quarter earnings per diluted share were $1.55, an increase of 26.0 percent compared to the prior year period.
"We are pleased that we have completed another record year of financial performance thanks to the dedication of Parker employees around the world," said Chairman, CEO and President Don Washkewicz. "Perhaps even more gratifying, as a company focused on long-term performance, we have been able to deliver strong performance year in and year out. Despite challenging economic conditions, our continued focus on the core goals of the Win Strategy has enabled us to consistently produce record results for our shareholders.
"Once again this year we achieved sales growth that exceeded our 10 percent annual goal, and reported record sales of more than $12 billion. Of the 13 percent growth this fiscal year, 5 percent was organic, 3 percent was from strategic acquisitions, and the remainder was from the effects of foreign currency exchange rates. Our sales growth also demonstrates the significant progress we have made in international operations, which helps mitigate the effects of regional economic cycles. In our Industrial International segment, fiscal 2008 revenues grew by 28 percent and operating income grew by 48 percent. Significantly, Industrial International operating margins exceeded margins in our Industrial North America segment and completed the year as our most profitable operating segment. This is primarily a result of executing our Win Strategy European initiatives when operating margins in the Industrial International segment were in the single digits.
"We also generated record annual cash flow from operating activities at more than $1.3 billion, or 10.8 percent of sales, which gives us the flexibility to invest for growth while simultaneously maintaining a strong balance sheet. Acquisitions continued to play a role in our growth strategy, as we strengthened our portfolio by adding 10 companies in fiscal 2008 with nearly $546 million in annualized revenues. We also invested $584 million to repurchase 7.9 million Parker common shares and we increased our dividend 21 percent, paying out approximately $142 million to shareholders, and extending our dividend increase record to 52 consecutive years, among the top five longest-running dividend-increase records in the S&P 500 index."
Segment Results
In the Industrial North America segment, fourth-quarter sales increased 10.5 percent to $1.2 billion, and operating income decreased 1.0 percent from the prior year to $162.9 million. For the full year, Industrial North America sales increased 4.6 percent to $4.2 billion, and operating income increased 1.6 percent from the prior year to $607.8 million.
In the Industrial International segment, fourth-quarter sales increased 27.6 percent to $1.4 billion, and operating income increased 48.6 percent from the prior year to $213.0 million. For the full year, Industrial International sales increased 28.3 percent to $5.0 billion, and operating income increased 48.0 percent from the prior year to $788.9 million.
In the Aerospace segment, fourth-quarter sales increased 14.7 percent to $509.8 million, and operating income increased 8.2 percent from the prior year to $72.8 million. For the full year, Aerospace sales increased 9.0 percent to $1.8 billion, and operating income declined 7.2 percent from the prior year to $250.5 million.
In the Climate & Industrial Controls segment, fourth-quarter sales decreased 0.8 percent to $289.5 million, and operating income decreased 19.8 percent from the prior year to $20.3 million. For the full year, Climate & Industrial Controls sales decreased 1.6 percent to $1.1 billion, and operating income decreased 27.7 percent from the prior year to $59.5 million.
Orders
In addition to financial results, Parker also reported an increase of 8 percent in total orders for the quarter ended June 30, 2008 compared to the same quarter a year ago. Parker reported the following orders by operating segment:
-- Orders increased 4 percent in the Industrial North America segment versus the same quarter a year ago.
-- Orders increased 8 percent in the Industrial International segment versus the same quarter a year ago.
-- Orders increased 23 percent in the Aerospace segment based upon a rolling 12-month average.
-- Orders decreased 7 percent in the Climate and Industrial Controls segment versus the same quarter a year ago.
Outlook
For fiscal 2009, the company issued guidance for earnings from continuing operations in the range of $5.65 to $6.05 per diluted share.
"We remain uniquely positioned to meet the needs of both the OEM and MRO segments in the markets we serve and expect to deliver another record year in fiscal 2009," added Washkewicz. "Our employees will continue to implement the Win Strategy to sustain our performance well into the future.
"Longer term, we are excited about the prospects for continued growth in our ever-expanding markets. The demand for infrastructure improvement in developing nations globally, combined with new approaches to harnessing the earth's natural resources in the search for alternative energy, are just a couple of examples of how demand in our markets is growing. Parker technologies are playing an important role in these areas as we advance the science of motion and control systems to serve our customers."
NOTICE OF CONFERENCE CALL: Parker Hannifin's conference call and slide presentation to discuss its fiscal fourth-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 $12 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 61,000 people in 48 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; uncertainties surrounding the ultimate resolution of outstanding litigation; 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 - JUNE 30, 2008
CONSOLIDATED STATEMENT OF INCOME
(Dollars in thousands Three Months Ended Year Ended
except per share June 30, June 30,
amounts) 2008 2007 2008 2007
Net sales $3,346,752 $2,874,365 $12,145,605 $10,718,059
Cost of sales 2,575,422 2,223,756 9,339,072 8,272,949
Gross profit 771,330 650,609 2,806,533 2,445,110
Selling, general and
administrative expenses 373,138 333,434 1,364,082 1,226,861
Interest expense 25,019 21,535 98,996 83,414
Other expense (income),
net 18,355 (2,294) 16,931 (24,447)
Income before income
taxes 354,818 297,934 1,326,524 1,159,282
Income taxes 102,253 80,748 377,058 329,236
Net income $252,565 $217,186 $949,466 $830,046
Earnings per share:
Basic earnings per
share $1.51 $1.25 $5.64 $4.75
Diluted earnings
per share $1.47 $1.23 $5.53 $4.68
Average shares
outstanding during
period - Basic 167,545,162 173,479,484 168,285,487 174,643,327
Average shares
outstanding during
period - Diluted 171,441,236 176,845,301 171,643,835 177,494,890
Cash dividends per
common share $.21 $.173 $.84 $.692
BUSINESS SEGMENT INFORMATION BY INDUSTRY
Three Months Ended Year Ended
June 30, June 30,
(Dollars in thousands) 2008 2007 2008 2007
Net sales
Industrial:
North America $1,165,685 $1,054,987 $4,249,918 $4,063,889
International 1,381,824 1,082,960 5,006,310 3,900,628
Aerospace 509,791 444,558 1,837,888 1,685,431
Climate & Industrial
Controls 289,452 291,860 1,051,489 1,068,111
Total $3,346,752 $2,874,365 $12,145,605 $10,718,059
Segment operating
income
Industrial:
North America $162,940 $164,583 $607,821 $598,405
International 213,022 143,380 788,925 533,136
Aerospace 72,847 67,309 250,523 269,931
Climate & Industrial
Controls 20,285 25,297 59,494 82,316
Total segment operating
income $469,094 $400,569 $1,706,763 $1,483,788
Corporate general and
administrative expenses 59,461 57,909 192,966 179,077
Income from operations
before interest expense
and other 409,633 342,660 1,513,797 1,304,711
Interest expense 25,019 21,535 98,996 83,414
Other expense 29,796 23,191 88,277 62,015
Income before income
taxes $354,818 $297,934 $1,326,524 $1,159,282
CONSOLIDATED BALANCE SHEET
(Dollars in thousands) June 30, 2008 2007
Assets
Current assets:
Cash and cash equivalents $326,048 $172,706
Accounts receivable, net 2,046,726 1,737,748
Inventories 1,494,694 1,265,802
Prepaid expenses 82,326 69,655
Deferred income taxes 145,831 140,264
Total current assets 4,095,625 3,386,175
Plant and equipment, net 1,926,522 1,736,372
Goodwill 2,798,092 2,254,069
Intangible assets, net 1,020,609 595,607
Other assets 546,006 469,190
Total assets $10,386,854 $8,441,413
Liabilities and shareholders' equity
Current liabilities:
Notes payable $118,864 $195,384
Accounts payable 961,886 788,560
Accrued liabilities 919,370 788,562
Accrued domestic and foreign taxes 183,136 152,739
Total current liabilities 2,183,256 1,925,245
Long-term debt 1,952,452 1,089,916
Pensions and other postretirement benefits 491,935 354,398
Deferred income taxes 162,678 114,219
Other liabilities 337,562 245,970
Shareholders' equity 5,258,971 4,711,665
Total liabilities and shareholders' equity $10,386,854 $8,441,413
CONSOLIDATED STATEMENT OF CASH FLOWS
Year Ended June 30,
(Dollars in thousands) 2008 2007
Cash flows from operating activities:
Net income $949,466 $830,046
Depreciation and amortization 326,724 294,566
Stock-based compensation 44,947 33,203
Net change in receivables, inventories, and
trade payables (93,136) (86,663)
Net change in other assets and liabilities 132,231 (49,687)
Other, net (43,622) (64,560)
Net cash provided by operating activities 1,316,610 956,905
Cash flows from investing activities:
Acquisitions (net of cash of $21,276 in
2008 and $15,591 in 2007) (921,014) (378,639)
Capital expenditures (280,327) (237,827)
Proceeds from sale of plant and equipment 29,997 45,826
Other, net 544 (9,121)
Net cash (used in) investing activities (1,170,800) (579,761)
Cash flows from financing activities:
Net (payments for) common share activity (523,557) (366,237)
Net proceeds from debt 667,039 107,073
Dividends (142,260) (121,263)
Net cash provided by (used in) financing
activities 1,222 (380,427)
Effect of exchange rate changes on cash 6,310 4,436
Net increase in cash and cash equivalents 153,342 1,153
Cash and cash equivalents at beginning of
period 172,706 171,553
Cash and cash equivalents at end of period $326,048 $172,706
SOURCE Parker Hannifin Corporation
07/31/2008
CONTACT: 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
Web site: http://www.phstock.com
(PH)
