Parker Reports Fiscal 2014 Fourth Quarter and Full Year Sales, Net Income and Earnings per Share

- Record fourth quarter sales, operating cash flow and full year sales

- Fourth quarter earnings per diluted share $1.98, or $2.06 adjusted for restructuring expenses

- Additional, one-time, fourth quarter restructuring related costs estimated at $0.10 per diluted share

- Company anticipates record year in fiscal 2015 with earnings guidance in the range of $7.00 to $7.80 per diluted share, or $7.25 to $8.05 adjusted for restructuring

Aug 06, 2014, 07:30 ET from Parker Hannifin Corporation

CLEVELAND, Aug. 6, 2014 /PRNewswire/ -- Parker Hannifin Corporation (NYSE: PH), the global leader in motion and control technologies, today reported results for the fiscal 2014 fourth quarter and full year ended June 30, 2014.  Fiscal 2014 sales were a record at $13.2 billion, compared with $13.0 billion in fiscal 2013.  Net income for fiscal 2014 was $1,041 million, or $6.87 per diluted share, compared with net income of $949 million, or $6.26 per diluted share in fiscal 2013.  Adjusted earnings per diluted share for fiscal 2014 were $6.94. A reconciliation of reported to adjusted sales, net income and earnings per diluted share is included with the financial tables accompanying this news release.  Cash flow from operations for fiscal 2014 was $1.4 billion or 10.5 percent of sales compared with $1.2 billion or 9.1 percent of sales in the prior year. Excluding a discretionary contribution to the company's pension plan of $75 million in fiscal 2014, cash flow from operations was 11.1 percent of sales.

"Fiscal 2014 was a transitional year as we worked through the most significant restructuring in our history." said Chairman, CEO and President, Don Washkewicz. "I am proud that our global team was able to stay focused and still deliver record sales and strong earnings and cash flow for the year, which included record fourth quarter operating cash flow. Overall, we are well positioned entering the new fiscal year."

Fiscal 2014 fourth quarter sales increased 3 percent to a record $3.53 billion, compared with $3.43 billion in the same period a year ago.  Fiscal 2014 fourth quarter net income was $301.2 million, or $1.98 earnings per diluted share, compared with $271.1 million, or $1.78 earnings per diluted share in the prior year quarter.  Fiscal 2014 fourth quarter earnings per diluted share were $2.06 adjusted for the impact of $0.08 in earnings per diluted share in restructuring expenses.

Fourth Quarter Segment Results Diversified Industrial Segment: North American fourth quarter sales increased 4.0 percent to $1.53 billion, and operating income was $268.7 million compared with $249.7 million in the same period a year ago.  International fourth quarter sales increased 3.1 percent to $1.38 billion, and operating income was $137.9 million compared with $162.6 million in the same period a year ago.

Aerospace Systems Segment: Fourth quarter sales were essentially flat at $617.6 million, reflecting the impact of the previously announced joint venture between Parker Aerospace and GE Aviation.  Operating income was $104.9 million compared with $86.1 million in the same period a year ago.

Orders Parker reported an increase of 4 percent in orders for the quarter ending June 30, 2014, compared with the same quarter a year ago.  This is the fourth consecutive quarter of year-over-year positive order growth. The company reported the following orders by business: 

  • Orders increased 6 percent in the Diversified Industrial North America businesses
  • Orders decreased 4 percent in the Diversified Industrial International businesses
  • Orders increased 17 percent in the Aerospace Systems segment on a rolling 12-month average basis.

Fiscal 2015 Outlook For the fiscal year ending June 30, 2015, the company has issued guidance for earnings per diluted share in the range of $7.00 to $7.80, or $7.25 to $8.05 on an adjusted basis.   Fiscal year 2015 guidance is adjusted for expected restructuring expenses of approximately $0.25 per diluted share.  

Washkewicz added, "In fiscal year 2015, we anticipate generally stable macroeconomic conditions. As always, we will stay the course by executing the Win Strategy, which has helped us deliver consistent results and are poised to deliver another year of record earnings performance for Parker."

NOTICE OF CONFERENCE CALL: Parker Hannifin's conference call and slide presentation to discuss its fiscal 2014 fourth quarter results are available to all interested parties via live webcast today at 11:00 a.m. ET, on the company's investor information web site at 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.  A replay of the conference call will also be available at www.phstock.com for one year after the call.

With annual sales exceeding $13 billion in fiscal year 2014, 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 mobile, industrial and aerospace markets. The company employs approximately 57,500 people in 50 countries around the world. Parker has increased its annual dividends paid to shareholders for 58 consecutive fiscal years, among the top five longest-running dividend-increase records in the S&P 500 index. For more information, visit the company's website at www.parker.com, or its investor information website at www.phstock.com.

Note 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 Diversified Industrial North America and Diversified Industrial International, and the year-over-year 12-month rolling average of orders for the Aerospace Systems segment.

Note on Non-GAAP Numbers This press release contains references to (a) net income without the effect of a gain associated with a joint venture agreement, asset write downs and restructuring expense, (b) earnings per diluted share without the effect of a gain associated with a joint venture, asset write downs and restructuring expense, (c) cash flow excluding discretionary contributions to the company's pension plan, and (d) the effect of restructuring expenses on forecasted earnings per diluted share. The effects of divestitures, a gain associated with a joint venture, asset write downs, restructuring expenses, and pension plan contributions are removed to allow investors and the company to meaningfully evaluate changes in sales, net income, earnings per diluted share, and cash flow on a comparable basis from period to period.

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, including its individual segments, may differ materially from current expectations, depending on economic conditions within its mobile, 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, actions taken to combat the effects of the current economic environment, and growth, innovation and global diversification initiatives. A change in the economic conditions in individual markets may have a particularly volatile effect on segment performance. Among other factors which may affect future performance are: changes in business relationships with and purchases by or from major customers, suppliers or distributors, including delays or cancellations in shipments, disputes regarding contract terms or significant changes in financial condition, changes in contract cost and revenue estimates for new development programs and changes in product mix; ability to identify acceptable strategic acquisition targets; uncertainties surrounding timing, successful completion or integration of acquisitions and similar transactions; the ability to successfully divest businesses planned for divestiture and realize the anticipated benefits of such divestitures; the determination to undertake business realignment activities and the expected costs thereof and, if undertaken, the ability to complete such activities and realize the anticipated cost savings from such activities; the ability to realize anticipated benefits of the consolidation of the Climate and Industrial Controls Group; threats associated with and efforts to combat terrorism; uncertainties surrounding the ultimate resolution of outstanding legal proceedings, including the outcome of any appeals; 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 insurance and employee retirement and health care benefits; and global economic factors, including manufacturing activity, air travel trends, currency exchange rates, difficulties entering new markets and general economic conditions such as inflation, deflation, interest rates and credit availability. The company makes these statements as of the date of this disclosure, and undertakes no obligation to update them unless otherwise required by law.

 

 

PARKER HANNIFIN CORPORATION - JUNE 30, 2014

CONSOLIDATED STATEMENT OF INCOME

 

Three Months Ended June 30, 

 

Year Ended June 30,

(Dollars in thousands except per share amounts)

2014

2013

2014

2013

Net sales

$        3,525,415

$             3,428,233

$     13,215,971

$     13,015,704

Cost of sales

2,685,954

2,618,067

10,188,227

10,086,675

Gross profit

839,461

810,166

3,027,744

2,929,029

Selling, general and administrative expenses

421,185

413,061

1,633,992

1,554,973

Goodwill and intangible asset impairment

-

-

188,870

-

Interest expense

20,163

20,777

82,566

91,552

Other (income) expense, net

(9,711)

2,565

(434,404)

(28,497)

Income before income taxes

407,824

373,763

1,556,720

1,311,001

Income taxes

106,648

102,633

515,302

362,217

Net income

301,176

271,130

1,041,418

948,784

Less:  Noncontrolling interests

138

(34)

370

357

Net income attributable to common shareholders

$           301,038

$                271,164

$       1,041,048

$          948,427

Earnings per share attributable to common shareholders:

   Basic earnings per share 

$                 2.02

$                      1.82

$                6.98

$                6.36

   Diluted earnings per share

$                 1.98

$                      1.78

$                6.87

$                6.26

Average shares outstanding during period - Basic

148,967,357

149,298,277

149,099,448

149,218,257

Average shares outstanding during period - Diluted

151,803,746

152,115,402

151,444,103

151,588,031

Cash dividends per common share

$                   .48

$                        .45

$                1.86

$                1.70

RECONCILIATION OF NET INCOME AND EARNINGS PER DILUTED SHARE TO ADJUSTED NET INCOME AND EARNINGS PER DILUTED SHARE

(Unaudited)

Three Months Ended June 30, 

Year Ended June 30,

2014

2013

2014

2013

Net income 

$           301,176

$                271,130

$       1,041,418

$          948,784

Adjustments:

  Restructuring charges

12,854

3,392

73,684

10,048

  Asset writedowns

-

-

192,188

-

  Gain related to joint venture agreement

-

-

(255,652)

-

Adjusted net income

$           314,030

$                274,522

$       1,051,638

$          958,832

Earnings per diluted share

$                 1.98

$                      1.78

$                6.87

$                6.26

Adjustments:

  Restructuring charges

0.08

0.02

0.49

0.07

  Asset writedowns

-

-

1.26

-

  Gain related to joint venture agreement

-

-

(1.68)

-

Adjusted earnings per diluted share

$                 2.06

$                      1.80

$                6.94

$                6.33

BUSINESS SEGMENT INFORMATION BY INDUSTRY

Three Months Ended June 30, 

Year Ended June 30,

(Dollars in thousands)

2014

2013

2014

2013

Net sales

    Diversified Industrial:

       North America

$        1,525,038

$             1,466,568

$       5,693,527

$       5,637,657

       International

1,382,757

1,341,715

5,287,916

5,110,332

    Aerospace Systems

617,620

619,950

2,234,528

2,267,715

Total

$        3,525,415

$             3,428,233

$     13,215,971

$     13,015,704

Segment operating income

    Diversified Industrial:

       North America

$           268,669

$                249,726

$          946,493

$          908,719

       International

137,935

162,641

572,476

602,480

    Aerospace Systems

104,932

86,136

271,238

280,286

Total segment operating income

511,536

498,503

1,790,207

1,791,485

Corporate general and administrative expenses

49,520

59,189

181,926

185,767

Income before interest and other 

462,016

439,314

1,608,281

1,605,718

Interest expense

20,163

20,777

82,566

91,552

Other expense (income)

34,029

44,774

(31,005)

203,165

Income before income taxes

$           407,824

$                373,763

$       1,556,720

$       1,311,001

RECONCILIATION OF NET SALES TO ADJUSTED NET SALES

(Unaudited)

Three Months Ended June 30, 

%

Year Ended June 30,

%

2014

2013

 Change 

2014

2013

 Change 

Total net sales 

$        3,525,415

$             3,428,233

2.8%

$     13,215,971

$     13,015,704

1.5%

Adjustments:

 Sales related to GE joint venture

-

51,247

49,510

175,306

Adjusted total net sales

$        3,525,415

$             3,376,986

4.4%

$     13,166,461

$     12,840,398

2.5%

Aerospace Systems net sales

$           617,620

$                619,950

(0.4%)

$       2,234,528

$       2,267,715

(1.5%)

Adjustments:

 Sales related to GE joint venture

-

51,247

49,510

175,306

Adjusted Aerospace Systems net sales

$           617,620

$                568,703

8.6%

$       2,185,018

$       2,092,409

4.4%

CONSOLIDATED BALANCE SHEET

 June 30, 

 June 30, 

(Dollars in thousands)

2014

2013

Assets

Current assets:

Cash and cash equivalents

$        1,613,555

$             1,781,412

Marketable securities 

573,701

-

Trade accounts receivable, net

1,858,176

1,840,820

Non-trade and notes receivable

388,437

221,925

Inventories

1,371,681

1,377,405

Prepaid expenses

129,837

182,669

Deferred income taxes

136,193

126,955

Total current assets

6,071,580

5,531,186

Plant and equipment, net

1,824,294

1,808,240

Goodwill

3,171,425

3,223,515

Intangible assets, net

1,188,282

1,290,499

Other assets

1,018,781

687,458

Total assets

$      13,274,362

$           12,540,898

Liabilities and equity

Current liabilities:

Notes payable

$           816,622

$             1,333,826

Accounts payable

1,252,040

1,156,002

Accrued liabilities

960,523

894,296

Accrued domestic and foreign taxes

223,611

136,079

Total current liabilities

3,252,796

3,520,203

Long-term debt

1,508,142

1,495,960

Pensions and other postretirement benefits

1,346,224

1,372,437

Deferred income taxes

94,819

102,920

Other liabilities

409,573

307,897

Shareholders' equity

6,659,428

5,738,426

Noncontrolling interests

3,380

3,055

Total liabilities and equity

$      13,274,362

$           12,540,898

CONSOLIDATED STATEMENT OF CASH FLOWS

Year Ended June 30,

(Dollars in thousands)

2014

2013

Cash flows from operating activities:

Net income

$        1,041,418

$                948,784

Depreciation and amortization

336,702

335,624

Stock incentive plan compensation

103,161

84,996

Goodwill and intangible asset impairment 

188,870

-

Gain on deconsolidation of subsidiary

(412,612)

-

Gain on sale of businesses

-

(14,637)

Net change in receivables, inventories, and trade payables

(10,033)

11,230

Net change in other assets and liabilities

206,131

(195,937)

Other, net

(65,744)

20,875

Net cash provided by operating activities

1,387,893

1,190,935

Cash flows from investing activities:

Acquisitions (net of cash of $1,780 in 2014 and $33,932 in 2013) 

(17,593)

(621,144)

Capital expenditures

(216,340)

(265,896)

Proceeds from sale of plant and equipment

14,368

25,047

Proceeds from sale of business

-

73,515

Proceeds from deconsolidation of subsidiary

202,498

-

Purchase of marketable securities and other investments

(624,880)

-

Other, net

(4,454)

(21,367)

Net cash (used in) investing activities

(646,401)

(809,845)

Cash flows from financing activities:

Net payments for common stock activity

(162,298)

(159,773)

Acquisition of noncontrolling interests

-

(1,091)

Net (payments for) proceeds from debt

(517,573)

992,047

Dividends

(278,244)

(255,009)

Net cash (used in) provided by financing activities

(958,115)

576,174

Effect of exchange rate changes on cash

48,766

(14,169)

Net (decrease) increase in cash and cash equivalents

(167,857)

943,095

Cash and cash equivalents at beginning of period

1,781,412

838,317

Cash and cash equivalents at end of period

$        1,613,555

$             1,781,412

RECONCILIATION OF FORECASTED EARNINGS PER DILUTED SHARE TO ADJUSTED FORECASTED EARNINGS PER DILUTED SHARE

(Unaudited)

(Amounts in dollars)

Fiscal Year

2015

Forecasted earnings per diluted share

 $7.00 to $7.80 

Adjustments:

  Restructuring charges

.25

Adjusted forecasted earnings per diluted share

 $7.25 to $8.05 

 

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SOURCE Parker Hannifin Corporation



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