Exhibit 99.1
| For Release: | Immediately | |||||
| Contact: | Media— | |||||
| Lorrie Paul Crum, VP—Corp. Communications | 216/896-2750 |
After hours: 330/666-4196 | ||||
| lcrum@parker.com | ||||||
| Financial Analysts— | ||||||
| Pamela Huggins, VP & Treasurer | 216/896-2240 |
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| phuggins@parker.com | ||||||
| Stock Symbol: | PH—NYSE | |||||
PARKER EARNS 48 CENTS FOR THE QUARTER WITH IMPROVING TREND IN OPERATING MARGINS
Cleveland, Ohio: October 15, 2003—Parker Hannifin Corporation (NYSE: PH) today reported net income for the fiscal first quarter ended September 30, 2003 of $56.7 million, or 48 cents per diluted share, compared with last year’s quarterly net income of $61 million, or 52 cents per diluted share. Quarterly sales remained flat at $1.59 billion, reflecting a favorable currency effect which offset lower unit volume. Realignment costs reduced earnings by four cents per diluted share this year, and one cent per diluted share last year.
Operating Results
With no recovery in industrial, mobile and aerospace demand, few of the company’s operating units recorded year-over-year growth, yet all marked sequential improvements in operating margin.
“Our hard work is steadily paying off,” said Parker CEO Don Washkewicz. “We have yet to see a sustained positive trend in order rates. We’re implementing the Win Strategy throughout the company to build long-term earning power and enhanced cash flows from operations. Division by division, it is working. “
In the North American Industrial units, first-quarter operating income was $46.6 million on $685.3 million in sales, for an operating margin of 6.8 percent.
In the International Industrial businesses, first-quarter operating income was $31.3 million on sales of $422.1 million, for an operating margin of 7.4 percent.
In the company’s Climate & Industrial Controls unit (previously included in the “Other” category), first-quarter operating income was $17.5 million on sales of $156 million, for an operating margin of 11.2 percent.
Parker Aerospace generated first-quarter operating income of $34 million on sales of $266.8 million, for an operating margin of 12.7 percent.
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In the “Other” segment, comprised of Wynn Specialty Chemicals and Astron metal buildings, quarterly operating income was $5.7 million on $56.7 million in sales, for an operating margin of 10.1 percent.
The company posted another strong quarter of cash generated from operations. “We’re extremely focused on consistent margin improvement and sustaining robust cash flow to invest in growth. This year, we’re using new incentives to strengthen organic growth in high potential markets, which we believe will advance the quality of our earnings in the future,” said Washkewicz.
Outlook
Noting no change in its fiscal-year 2004 outlook, the company said it expects sales to grow marginally, while further improvement in year-over-year operating margins is expected for every segment except Aerospace. For the purpose of planning, Parker assumed no economic recovery during the year, but noted that the company’s international results were bolstered by increasing demand in Asia and Latin America.
In addition to the information provided herein, 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 exceeding $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 44 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.
NOTICE OF CONFERENCE CALL: Parker Hannifin’s conference call and slide presentation to discuss its fiscal first-quarter results is available to all interested parties via live webcast at 10 a.m. ET, on the company’s investor information web site, www.phstock.com. To access the call, click on the “Live Webcast” link. From this link, users may also complete a pre-call system test and register for e-mail notification of future events and information available from Parker.
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 achieve anticipated benefits associated with announced realignment activities, strategic initiatives to improve operating margins, and growth initiatives. A change in economic conditions in individual markets may have a particularly volatile effect on segment projections. 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; 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; and global economic factors, including currency exchange rates, difficulties entering new markets and general economic conditions such as interest rates. The company makes these statements as of the date of this disclosure, and undertakes no obligation to update them.
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PARKER HANNIFIN CORPORATION—SEPTEMBER 30, 2003
CONSOLIDATED STATEMENT OF INCOME
| Three Months Ended September 30, |
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| (Dollars in thousands except per share amounts) |
2003 |
2002 |
||||||
| Net sales |
$ | 1,586,918 | $ | 1,585,904 | ||||
| Cost of sales |
1,298,776 | 1,299,890 | ||||||
| Gross profit |
288,142 | 286,014 | ||||||
| Selling, general and administrative expenses |
180,204 | 176,255 | ||||||
| Other income (deductions): |
||||||||
| Interest expense |
(21,780 | ) | (19,694 | ) | ||||
| Interest and other (expense) income, net |
(1,545 | ) | 1,626 | |||||
| (23,325 | ) | (18,068 | ) | |||||
| Income before income taxes |
84,613 | 91,691 | ||||||
| Income taxes |
27,922 | 30,716 | ||||||
| Net income |
$ | 56,691 | $ | 60,975 | ||||
| Earnings per share: |
||||||||
| Basic earnings per share |
$ | .48 | $ | .52 | ||||
| Diluted earnings per share |
$ | .48 | $ | .52 | ||||
| Average shares outstanding during period—Basic |
116,903,693 | 116,232,630 | ||||||
| Average shares outstanding during period—Diluted |
117,769,743 | 116,607,735 | ||||||
| Cash dividends per common share |
$ | .19 | $ | .18 | ||||
| BUSINESS SEGMENT INFORMATION BY INDUSTRY | ||||||||
| Three Months Ended September 30, |
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| (Dollars in thousands) |
2003 |
2002 |
||||||
| Net sales |
||||||||
| Industrial: |
||||||||
| North America |
$ | 685,341 | $ | 727,577 | ||||
| International |
422,058 | 365,659 | ||||||
| Aerospace |
266,833 | 277,321 | ||||||
| Climate & Industrial Controls |
155,950 | 164,738 | ||||||
| Other |
56,736 | 50,609 | ||||||
| Total |
$ | 1,586,918 | $ | 1,585,904 | ||||
| Segment operating income |
||||||||
| Industrial: |
||||||||
| North America |
$ | 46,607 | $ | 51,045 | ||||
| International |
31,299 | 26,646 | ||||||
| Aerospace |
33,955 | 42,533 | ||||||
| Climate & Industrial Controls |
17,514 | 15,012 | ||||||
| Other |
5,734 | 3,832 | ||||||
| Total segment operating income |
$ | 135,109 | $ | 139,068 | ||||
| Corporate general and administrative expenses |
22,962 | 20,098 | ||||||
| Income from operations before interest expense and other |
112,147 | 118,970 | ||||||
| Interest expense |
21,780 | 19,694 | ||||||
| Other expense |
5,754 | 7,585 | ||||||
| Income before income taxes |
$ | 84,613 | $ | 91,691 | ||||
Note: Certain prior period amounts have been reclassified to conform to the current year presentation.
CONSOLIDATED BALANCE SHEET
| (Dollars in thousands) September 30, |
2003 |
2002 | ||||
| Assets |
||||||
| Current assets: |
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| Cash and cash equivalents |
$ | 205,409 | $ | 45,730 | ||
| Accounts receivable, net |
967,866 | 945,861 | ||||
| Inventories |
991,306 | 1,046,342 | ||||
| Prepaid expenses |
38,876 | 44,998 | ||||
| Deferred income taxes |
102,498 | 80,386 | ||||
| Total current assets |
2,305,955 | 2,163,317 | ||||
| Plant and equipment, net |
1,632,563 | 1,681,958 | ||||
| Goodwill |
1,113,603 | 1,063,925 | ||||
| Intangible assets, net |
57,765 | 58,487 | ||||
| Other assets |
772,706 | 658,730 | ||||
| Total assets |
$ | 5,882,592 | $ | 5,626,417 | ||
| Liabilities and shareholders’ equity |
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| Current liabilities: |
||||||
| Notes payable |
$ | 289,041 | $ | 453,130 | ||
| Accounts payable |
415,380 | 413,912 | ||||
| Accrued liabilities |
466,453 | 418,725 | ||||
| Accrued domestic and foreign taxes |
85,489 | 51,372 | ||||
| Total current liabilities |
1,256,363 | 1,337,139 | ||||
| Long-term debt |
956,356 | 955,312 | ||||
| Pensions and other postretirement benefits |
922,768 | 502,289 | ||||
| Deferred income taxes |
16,975 | 89,603 | ||||
| Other liabilities |
142,269 | 128,916 | ||||
| Shareholders’ equity |
2,587,861 | 2,613,158 | ||||
| Total liabilities and shareholders’ equity |
$ | 5,882,592 | $ | 5,626,417 | ||
CONSOLIDATED STATEMENT OF CASH FLOWS
| Three Months Ended September 30, |
||||||||
| (Dollars in thousands) |
2003 |
2002 |
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| Cash flows from operating activities: |
||||||||
| Net income |
$ | 56,691 | $ | 60,975 | ||||
| Depreciation and amortization |
63,379 | 64,073 | ||||||
| Net change in receivables, inventories, and trade payables |
26,469 | 26,822 | ||||||
| Net change in other assets and liabilities |
2,984 | (22,282 | ) | |||||
| Other, net |
(5,491 | ) | 15,565 | |||||
| Net cash provided by operating activities |
144,032 | 145,153 | ||||||
| Cash flows from investing activities: |
||||||||
| Acquisitions (less cash acquired of $8 in 2002) |
— | (1,987 | ) | |||||
| Capital expenditures |
(36,799 | ) | (38,614 | ) | ||||
| Other, net |
5,222 | 4,933 | ||||||
| Net cash (used in) investing activities |
(31,577 | ) | (35,668 | ) | ||||
| Cash flows from financing activities: |
||||||||
| Net proceeds from common share activity |
13,668 | 845 | ||||||
| Net (payments of) debt |
(145,647 | ) | (90,214 | ) | ||||
| Dividends |
(22,131 | ) | (20,842 | ) | ||||
| Net cash (used in) financing activities |
(154,110 | ) | (110,211 | ) | ||||
| Effect of exchange rate changes on cash |
1,214 | 72 | ||||||
| Net decrease in cash and cash equivalents |
(40,441 | ) | (654 | ) | ||||
| Cash and cash equivalents at beginning of period |
245,850 | 46,384 | ||||||
| Cash and cash equivalents at end of period |
$ | 205,409 | $ | 45,730 | ||||
BUSINESS SEGMENT INFORMATION BY INDUSTRY
Restated for New Segment Presentation
Fiscal Year 2003
| (Dollars in thousands) |
09/30/2002 |
12/31/2002 |
03/31/2003 |
06/30/2003 |
Total FY2003 | ||||||||||
| Net sales |
|||||||||||||||
| Industrial: |
|||||||||||||||
| North America |
$ | 727,577 | $ | 669,905 | $ | 727,060 | $ | 716,086 | $ | 2,840,628 | |||||
| International |
365,659 | 373,921 | 416,434 | 428,429 | 1,584,443 | ||||||||||
| Aerospace |
277,321 | 275,400 | 280,020 | 276,825 | 1,109,566 | ||||||||||
| Climate & Industrial Controls |
164,738 | 144,403 | 175,132 | 181,356 | 665,629 | ||||||||||
| Other |
50,609 | 53,572 | 48,198 | 57,965 | 210,344 | ||||||||||
| Total |
$ | 1,585,904 | $ | 1,517,201 | $ | 1,646,844 | $ | 1,660,661 | $ | 6,410,610 | |||||
| Segment operating income |
|||||||||||||||
| Industrial: |
|||||||||||||||
| North America |
$ | 51,045 | $ | 27,423 | $ | 42,166 | $ | 34,624 | $ | 155,258 | |||||
| International |
26,646 | 22,321 | 23,852 | 23,482 | 96,301 | ||||||||||
| Aerospace |
42,533 | 42,651 | 38,140 | 33,971 | 157,295 | ||||||||||
| Climate & Industrial Controls |
15,012 | 9,965 | 19,409 | 19,055 | 63,441 | ||||||||||
| Other |
3,832 | 2,480 | 630 | 4,642 | 11,584 | ||||||||||
| Total segment operating income |
139,068 | 104,840 | 124,197 | 115,774 | 483,879 | ||||||||||
| Corporate general and administrative expenses |
20,098 | 19,395 | 22,662 | 17,992 | 80,147 | ||||||||||
| Income from operations before interest expense and other |
118,970 | 85,445 | 101,535 | 97,782 | 403,732 | ||||||||||
| Interest expense |
19,694 | 19,356 | 20,349 | 22,162 | 81,561 | ||||||||||
| Other expense |
7,585 | 8,043 | 7,230 | 1,931 | 24,789 | ||||||||||
| Income before income taxes |
$ | 91,691 | $ | 58,046 | $ | 73,956 | $ | 73,689 | $ | 297,382 | |||||
The above schedule restates fiscal 2003 segment results to reflect the Climate & Industrial Controls business as a separate segment.
The Climate & Industrial Controls business was previsouly included in the Other Segment.