Parker Reports Fiscal 2014 Second Quarter Sales, Net Income and Earnings per Share

- Orders increase 5 percent, sales increase 1.3 percent, 3.1 percent organically

- Earnings per diluted share reach $1.66, or $1.24 excluding non-recurring items

- Non-recurring items consist of a joint venture gain of $1.68 per diluted share and asset write downs of $1.26 per diluted share

- Company maintains full year adjusted earnings guidance at midpoint of $6.40 per diluted share

Jan 22, 2014, 07:30 ET from Parker Hannifin Corporation

CLEVELAND, Jan. 22, 2014 /PRNewswire/ -- Parker Hannifin Corporation (NYSE: PH), the global leader in motion and control technologies, today reported results for the fiscal 2014 second quarter ended December 31, 2013. Fiscal 2014 second quarter sales increased 1.3 percent to $3.11 billion, compared with $3.07 billion in the prior year quarter. Organic growth was 3.1 percent, which excludes an increase of 0.3 percent from acquisitions, a decrease of 0.7 percent from foreign currency translation, and a decrease of 1.4 percent from a joint venture agreement with GE Aviation. Fiscal 2014 second quarter as reported net income was $253.4 million, or $1.66 earnings per diluted share compared with $181.1 million or $1.19 earnings per diluted share in the prior year quarter. Adjusted net income for the fiscal 2014 second quarter was $189.9 million, or $1.24 earnings per diluted share. Fiscal 2014 second quarter adjusted net income and earnings per diluted share exclude asset write downs and a previously announced gain associated with a joint venture agreement between Parker Aerospace and GE Aviation. A reconciliation of as reported net income and earnings per diluted share to adjusted net income and earnings per diluted share is included with the financial tables attached to this news release.

(Logo: http://photos.prnewswire.com/prnh/19990816/PHLOGO )

Cash flow from operations was $540.1 million or 8.5 percent of sales for the first six months of fiscal 2014 compared with $347.3 million or 5.5 percent of sales in the prior year period. Excluding a discretionary contribution to the company's pension plan of $75 million for the first six months of fiscal 2014 cash flow from operations was 9.7 percent of sales.

"Earnings on an adjusted basis were ahead of what we expected for this quarter as we continue to perform well operationally," said Chairman, CEO and President, Don Washkewicz. "With continued positive order growth and modestly improved macro-economic trends, we remain optimistic about stronger operating performance in the second half of fiscal year 2014."

Segment Results

Diversified Industrial Segment: North American second quarter sales increased 0.6 percent to $1.33 billion, and operating income was $200.6 million compared with $190.4 million in the same period a year ago. International second quarter sales increased 4.7 percent to $1.28 billion, and operating income was $134.2 million compared with $125.0 million in the same period a year ago.

Aerospace Systems Segment: Second quarter sales decreased 4.7 percent to $503.8 million, reflecting the impact of the previously announced joint venture between Parker Aerospace and GE Aviation, and operating income was $45.0 million compared with $52.2 million in the same period a year ago.

Orders

Parker reported an increase of 5 percent in orders for the quarter ending December 31, 2013, compared with the same quarter a year ago. The company reported the following orders by business:

  • Orders increased 3 percent in the Diversified Industrial North America businesses compared with the same quarter a year ago.
  • Orders increased 6 percent in the Diversified Industrial International businesses compared with the same quarter a year ago.
  • Orders increased 7 percent in the Aerospace Systems segment on a rolling 12-month average basis.

Outlook

For the fiscal year ending June 30, 2014, the company has provided guidance for adjusted earnings per diluted share in the range of $6.20 to $6.60. Fiscal 2014 adjusted earnings guidance includes previously announced restructuring expenses of approximately $0.47 per diluted share, but does not include the following non-recurring items: a gain of $1.68 per diluted share associated with the previously announced joint venture agreement between Parker Aerospace and GE Aviation and asset write downs of $1.26 earnings per diluted share recorded in the quarter ended December 31, 2013. Restructuring expenses were $0.07 per diluted share in the second quarter of fiscal 2014 and $0.13 per diluted share year-to-date.

Washkewicz added, "Operationally, our outlook is essentially unchanged. We are optimistic that modestly improved macro-economic trends will continue and anticipate that we will deliver another strong year."

NOTICE OF CONFERENCE CALL: Parker Hannifin's conference call and slide presentation to discuss its fiscal 2014 second 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 of $13 billion in fiscal year 2013, 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 58,000 people in 49 countries around the world. Parker has increased its annual dividends paid to shareholders for 57 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 web site at www.parker.com, or its investor information web site 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) sales growth excluding the effects of acquisitions, divestitures and currency exchange rates, (b) net income without the effect of a gain associated with a joint venture agreement and asset write downs, (c) actual and forecasted earnings per diluted share without the effect of a gain associated with a joint venture agreement and asset write downs, and (d) cash flow excluding discretionary contributions to the company's pension plan. The effects of acquisitions, divestitures, currency exchange rates, gain associated with a joint venture agreement, asset write downs, 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 - DECEMBER 31, 2013

CONSOLIDATED STATEMENT OF INCOME

(Unaudited)

Three Months Ended December 31,

Six Months Ended December 31,

(Dollars in thousands except per share amounts)

2013

2012

2013

2012

Net sales

$ 3,106,006

$ 3,065,495

$ 6,332,150

$ 6,280,430

Cost of sales

2,419,971

2,421,972

4,896,380

4,899,419

Gross profit

686,035

643,523

1,435,770

1,381,011

Selling, general and administrative expenses

398,636

381,100

805,566

762,222

Goodwill and intangible asset impairment

188,870

-

188,870

-

Interest expense

20,851

24,216

41,809

47,725

Other (income), net

(417,638)

(24,422)

(419,881)

(27,623)

Income before income taxes

495,316

262,629

819,406

598,687

Income taxes

241,912

81,515

321,682

177,625

Net income

253,404

181,114

497,724

421,062

Less: Noncontrolling interests

116

152

120

359

Net income attributable to common shareholders

$ 253,288

$ 180,962

$ 497,604

$ 420,703

Earnings per share attributable to common shareholders:

Basic earnings per share

$ 1.70

$ 1.21

$ 3.34

$ 2.82

Diluted earnings per share

$ 1.66

$ 1.19

$ 3.28

$ 2.77

Average shares outstanding during period - Basic

149,153,599

149,001,273

149,195,452

149,143,561

Average shares outstanding during period - Diluted

152,151,024

152,198,704

151,743,389

152,018,025

Cash dividends per common share

$ .45

$ .41

$ .90

$ .82

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

Net income

$ 253,404

$ 181,114

$ 497,724

$ 421,062

Adjustments:

Asset writedowns

192,188

-

192,188

-

Gain related to joint venture agreement

(255,652)

-

(255,652)

-

Adjusted net income

$ 189,940

$ 181,114

$ 434,260

$ 421,062

Earnings per diluted share

$ 1.66

$ 1.19

$ 3.28

$ 2.77

Adjustments:

Asset writedowns

1.26

-

1.26

-

Gain related to joint venture agreement

(1.68)

-

(1.68)

-

Adjusted earnings per diluted share

$ 1.24

$ 1.19

$ 2.86

$ 2.77

BUSINESS SEGMENT INFORMATION BY INDUSTRY

(Unaudited)

Three Months Ended December 31,

Six Months Ended December 31,

(Dollars in thousands)

2013

2012

2013

2012

Net sales

Diversified Industrial:

North America

$ 1,325,402

$ 1,317,380

$ 2,713,277

$ 2,742,659

International

1,276,851

1,219,459

2,547,646

2,468,032

Aerospace Systems

503,753

528,656

1,071,227

1,069,739

Total

$ 3,106,006

$ 3,065,495

$ 6,332,150

$ 6,280,430

Segment operating income

Diversified Industrial:

North America

$ 200,628

$ 190,431

$ 434,826

$ 434,506

International

134,198

125,047

307,608

281,645

Aerospace Systems

45,034

52,172

102,332

114,070

Total segment operating income

379,860

367,650

844,766

830,221

Corporate general and administrative expenses

46,819

45,401

94,029

85,168

Income before interest and other

333,041

322,249

750,737

745,053

Interest expense

20,851

24,216

41,809

47,725

Other (income) expense

(183,126)

35,404

(110,478)

98,641

Income before income taxes

$ 495,316

$ 262,629

$ 819,406

$ 598,687

CONSOLIDATED BALANCE SHEET

(Unaudited)

December 31,

June 30,

December 31,

(Dollars in thousands)

2013

2013

2012

Assets

Current assets:

Cash and cash equivalents

$ 2,139,522

$ 1,781,412

$ 497,635

Accounts receivable, net

1,861,849

2,062,745

1,802,405

Inventories

1,448,628

1,377,405

1,515,325

Prepaid expenses

169,262

182,669

152,477

Deferred income taxes

125,612

126,955

127,905

Total current assets

5,744,873

5,531,186

4,095,747

Plant and equipment, net

1,820,312

1,808,240

1,844,643

Goodwill

3,161,699

3,223,515

3,295,141

Intangible assets, net

1,220,547

1,290,499

1,367,978

Other assets

916,505

687,458

857,852

Total assets

$ 12,863,936

$ 12,540,898

$ 11,461,361

Liabilities and equity

Current liabilities:

Notes payable

$ 1,217,292

$ 1,333,826

$ 510,006

Accounts payable

1,074,512

1,156,002

1,073,233

Accrued liabilities

839,095

894,296

810,546

Accrued domestic and foreign taxes

172,204

136,079

94,475

Total current liabilities

3,303,103

3,520,203

2,488,260

Long-term debt

1,507,019

1,495,960

1,509,238

Pensions and other postretirement benefits

1,303,527

1,372,437

1,704,349

Deferred income taxes

112,561

102,920

128,892

Other liabilities

339,440

307,897

301,633

Shareholders' equity

6,295,226

5,738,426

5,325,717

Noncontrolling interests

3,060

3,055

3,272

Total liabilities and equity

$ 12,863,936

$ 12,540,898

$ 11,461,361

CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)

Six Months Ended December 31,

(Dollars in thousands)

2013

2012

Cash flows from operating activities:

Net income

$ 497,724

$ 421,062

Depreciation and amortization

170,090

163,827

Stock incentive plan compensation

75,370

46,527

Goodwill and intangible asset impairment

188,870

-

Gain on deconsolidation of subsidiary

(412,612)

-

Gain on sale of businesses

-

(12,708)

Net change in receivables, inventories, and trade payables

53,841

102,612

Net change in other assets and liabilities

(80,362)

(408,895)

Other, net

47,188

34,913

Net cash provided by operating activities

540,109

347,338

Cash flows from investing activities:

Acquisitions (net of cash of $33,160 in 2012)

728

(621,716)

Capital expenditures

(111,847)

(140,221)

Proceeds from sale of plant and equipment

8,790

14,173

Proceeds from sale of businesses

-

68,569

Proceeds from deconsolidation of subsidiary

202,498

-

Other, net

(728)

(7,765)

Net cash provided by (used in) investing activities

99,441

(686,960)

Cash flows from financing activities:

Net payments for common stock activity

(81,784)

(101,160)

Acquisition of noncontrolling interests

-

(1,072)

Net (payments for) proceeds from debt

(116,834)

168,712

Dividends

(134,718)

(123,328)

Net cash (used in) financing activities

(333,336)

(56,848)

Effect of exchange rate changes on cash

51,896

55,788

Net increase (decrease) in cash and cash equivalents

358,110

(340,682)

Cash and cash equivalents at beginning of period

1,781,412

838,317

Cash and cash equivalents at end of period

$ 2,139,522

$ 497,635

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

(Unaudited)

(Amounts in dollars)

Fiscal Year

2014

Forecasted earnings per diluted share

$6.62 to $7.02

Adjustments:

Asset writedowns

$1.26

Gain related to joint venture agreement

$(1.68)

Adjusted forecasted earnings per diluted share

$6.20 to $6.60

SOURCE Parker Hannifin Corporation



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