Exhibit 99.1
------------
Parker Reports Annual Sales Up 11 Percent, Earnings Affected by U.S. Industrial
Slump
CLEVELAND, July 30, 2001 -- As the manufacturing recession continues, Parker
Hannifin Corporation (NYSE: PH - news) today said the fourth quarter, which
usually is a strong one, weighed on the company's full-year results. Quarterly
net income excluding costs associated with operating realignments and other
corporate accruals was $66.8 million, or 57 cents per diluted share, compared
with last year's fourth-quarter income of $113 million, or 99 cents per diluted
share. For the full year, the company earned $340.8 million, or $2.96 per
diluted share, compared with $368.2 million, or $3.31 per diluted share, in the
prior year. The current-year results reflect a net benefit of five cents per
diluted share from non-recurring items, including a gain on the sale of real
estate, offset by the previously noted operating-realignment actions and
accruals; and the early retirement of debt. These results also reflect higher
interest expense and nearly 4 million additional shares outstanding issued for
acquisitions.
Acquisitions contributed much of the increase in annual revenues, which reached
$5.98 billion, up 11 percent from last year's sales record. "The acquisitions
we've made bring tremendous potential, not only contributing to the top line,
but strategically and operationally," said Parker CEO Don Washkewicz.
Noting that American industry is experiencing its first major setback since the
early 90s, Washkewicz said, "We've had to be fast and decisive in our response
to this downturn. Our manufacturing facilities were quick to adjust to depressed
market conditions, by consolidating operations, accelerating acquisition
integration and implementing spending cuts in all areas. These immediate moves
are painful and costly, but the flexibility to align ourselves with demand keeps
us strong and focused."
Operating Results & Supply Chain Initiatives
For the quarter and the year, Parker Aerospace led the company's operating
performance with higher income and margins attributed to operating realignments
and lean initiatives made throughout the business during fiscal year 2000, when
its major markets were down. Operating income in the Aerospace segment was up
more than 20 percent for the year, with an annual operating margin of 18.2
percent.
Conditions and comparisons were tougher for both the company's North American
and International industrial markets, particularly in the fourth quarter. In the
International Industrial business, operating income without operating
realignment costs was 17.3-percent lower in the quarterly comparison, but 5.5-
percent higher annually, at a 7.7-percent return on sales. Quarterly operating
income without realignment items in the North American Industrial business was
down 57.5 percent, while the annual income comparison was 11.4-percent lower.
For the year, the North American Industrial margin was 11.4 percent.
The company noted that with this report, further detail is provided with the
addition of an "Other" segment, which includes businesses outside of the
Industrial and Aerospace segments.
This new classification includes the company's climate controls and Astron
businesses, for which combined annual revenue is $556.8 million.
Operating income without realignment items for this segment was down 16.7
percent for the quarter and 9.3 percent for the year, with an annual return on
sales of 7.7 percent.
"Beyond actions we've taken for the current climate, we're also taking
aggressive steps across our supply chain to improve operating margins for the
long term," said Washkewicz. "Specifically, we're securing company-wide
procurement contracts. We are expanding lean initiatives worldwide; implementing
those that have proven so effective at Aerospace everywhere else in the company.
The fastest-paying rewards are in customer service, inventory management and
better asset utilization."
"And we continue to build on our greatest growth assets -- our people, our
products and our ability to provide engineered systems and solutions that yield
greater returns for us and our customers."
Outlook
The company noted it remains cautious in its outlook for the next quarter and
the fiscal year. Going forward, with its early adoption of FAS 142 provisions,
the company will not amortize goodwill, accounting for 44 cents in the new
fiscal year. After this effect, Parker said it expects first-quarter earnings to
be between 50 and 65 cents per share, and, with the beginnings of an economic
recovery anticipated in the second half, fiscal year 2002 earnings are expected
to range from $2.90 to $3.35 per share.
In addition to providing earnings estimates, Parker advises shareholders to note
order trends, for which the company makes a disclosure several business days
after the conclusion of each month. This information is available on the
company's investor information web site, at www.phstock.com.
With annual sales of $6 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 45,000
people in 46 countries around the world. For more information, visit the
company's web site at www.parker.com, or its investor information site at
www.phstock.com.
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 company's
future performance and earnings projections may differ materially from current
expectations, depending on economic conditions in North American industrial
markets and the company's ability to achieve anticipated benefits associated
with announced inventory
reductions and restructuring and acquisition-integration activities. 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; competitive market conditions
and resulting effects on sales and pricing; increases in raw-material costs that
cannot be recovered in product pricing; and global economic factors, including
currency exchange rates, difficulties entering new markets and general economic
conditions such as interest rates. In each quarterly earnings report, the
company intends to provide a range stating expected earnings per share for the
succeeding quarter and full fiscal year, reflecting these ranges as estimates of
diluted earnings per share before unusual items. The company makes these
statements as of the date of this disclosure, and while it undertakes no
obligation to update them, reserves the right to update its earnings projections
for any reason during the quarter, including the occurrence of material events.
PARKER HANNIFIN CORPORATION - JUNE 30, 2001
CONSOLIDATED STATEMENT OF INCOME
(Dollars in thousands except per share amounts)
Three Months Ended Year Ended
June 30, June 30,
2001 2000 2001 2000
Net sales $1,484,796 $1,488,702 $5,979,604 $5,385,618
Cost of sales 1,195,520 1,143,041 4,728,156 4,186,850
Gross profit 289,276 345,661 1,251,448 1,198,768
Selling, general and
administrative
expenses 188,346 156,347 679,963 575,906
Other income
(deductions):
Interest expense (19,344) (16,041) (90,362) (59,183)
Interest and other
income, net (5,062) (796) 52,473 (1,492)
(24,406) (16,837) (37,889) (60,675)
Income before income
taxes 76,524 172,477 533,596 562,187
Income taxes 27,166 59,505 189,426 193,955
Income before
extraordinary item 49,358 112,972 344,170 368,232
Extraordinary item -
extinguishment of
debt (3,378)
Net income $ 49,358 $ 112,972 $ 340,792 $ 368,232
Earnings per share:
Basic earnings per
share before
extraordinary item $.43 $1.00 $3.01 $3.34
Extraordinary item
- extinguishment
of debt - - (.03) -
Basic earnings per
share $.43 $1.00 $2.98 $3.34
Diluted earnings
per share before
extraordinary item $.42 $ .99 $2.99 $3.31
Extraordinary item
- extinguishment
of debt - - (.03) -
Diluted earnings
per share $.42 $ .99 $2.96 $3.31
Average shares
outstanding during
period - Basic 114,843,825 113,691,025 114,304,977 110,330,711
Average shares
outstanding during
period - Diluted 115,615,197 114,481,201 115,064,447 111,244,632
Cash dividends per
common share $.18 $ .17 $ .70 $ .68
BUSINESS SEGMENT INFORMATION BY INDUSTRY
(Dollars in thousands)
Three Months Ended Year Ended
June 30, June 30,
2001 2000 2001 2000
Net sales
Industrial:
North America $ 691,119 $ 716,886 $2,941,697 $2,486,372
International 311,117 316,933 1,275,516 1,175,880
Aerospace 323,365 297,218 1,205,624 1,138,328
Other 159,195 157,665 556,767 585,038
Total $1,484,796 $1,488,702 $5,979,604 $5,385,618
Segment operating income
Industrial:
North America $ 37,990 $ 116,100 $ 322,786 $ 379,251
International 14,755 22,086 92,561 84,317
Aerospace 60,988 54,597 218,851 175,710
Other 10,988 14,446 41,451 47,084
Total segment operating
income $ 124,721 $ 207,229 $ 675,649 $ 686,362
Corporate general and
administrative expenses 29,970 16,075 85,738 58,210
Income from operations
before interest
expense and other 94,751 191,154 589,911 628,152
Interest expense 19,344 16,041 90,362 59,183
Other (1,117) 2,636 (34,047) 6,782
Income before income taxes $ 76,524 $ 172,477 $ 533,596 $ 562,187
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
June 30,
2001 2000
Assets
Current assets:
Cash and cash equivalents $ 23,565 $ 68,460
Accounts receivable, net 922,325 840,040
Inventories 1,008,864 974,196
Prepaid expenses 39,486 32,706
Deferred income taxes 91,439 73,711
Assets held for sale 110,683 164,000
Total current assets 2,196,362 2,153,113
Plant and equipment, net 1,548,688 1,340,915
Other assets 1,592,611 1,152,271
Total assets $5,337,661 $4,646,299
Liabilities and
shareholders' equity
Current liabilities:
Notes payable $ 546,502 $ 335,298
Accounts payable 367,806 372,666
Accrued liabilities 436,947 394,131
Accrued domestic and
foreign taxes 61,874 84,208
Total current liabilities 1,413,129 1,186,303
Long-term debt 857,078 701,762
Pensions and other
postretirement benefits 318,527 299,741
Deferred income taxes 131,708 77,939
Other liabilities 88,304 71,096
Shareholders' equity 2,528,915 2,309,458
Total liabilities and
shareholders' equity $5,337,661 $4,646,299
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
Year Ended June 30,
2001 2000
Cash flows from operating
activities:
Net income $ 340,792 $ 368,232
Depreciation and
amortization 264,527 206,408
Net effect of
extraordinary loss 3,378 -
Net change in receivables,
inventories, and trade
payables (42,557) (3,346)
Net change in other assets
and liabilities (14,729) (21,181)
Other, net (19,246) (12,073)
Net cash provided by
operating activities 532,165 538,040
Cash flows from investing
activities:
Acquisitions (less cash
acquired of $10,143 in
2001 and $1,158 in 2000) (583,254) (351,011)
Capital expenditures (334,748) (230,482)
Other, net 98,174 1,784
Net cash used in investing
activities (819,828) (579,709)
Cash flows from financing
activities:
Net proceeds from common
share activity 15,971 1,202
Net proceeds from debt 308,087 154,621
Dividends (79,921) (74,963)
Net cash provided by
financing activities 244,137 80,860
Effect of exchange rate
changes on cash (1,369) (4,008)
Net (decrease) increase in
cash and cash equivalents (44,895) 35,183
Cash and cash equivalents
at beginning of period 68,460 33,277
Cash and cash equivalents
at end of period $ 23,565 $ 68,460