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Parker Surpasses $12 Billion in Sales and Delivers All-Time Records for Sales, Earnings and Operating Cash Flow

July 31, 2008

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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.


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.


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.


    (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


                               Three Months Ended           Year Ended
                                    June 30,                 June 30,
    (Dollars in thousands)      2008        2007         2008         2007
    Net sales
          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
          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


    (Dollars in thousands)        June 30,          2008              2007
    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

                                                        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

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

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