Parker Reports Fiscal 2011 First Quarter Sales, Net Income, and Record Quarterly Earnings per Share

Oct 19, 2010, 07:30 ET from Parker Hannifin Corporation

CLEVELAND, Oct. 19 /PRNewswire-FirstCall/ --

  • Net Income More Than Triples
  • Company Increases Guidance for Fiscal 2011
  • Cash Flow Remains Strong
  • Order Rates Continue To Show Significant Increases

Parker Hannifin Corporation (NYSE: PH), the global leader in motion and control technologies, today reported results for the fiscal 2011 first quarter ending September 30, 2010.  

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

(Logo: http://www.newscom.com/cgi-bin/prnh/19990816/PHLOGO )

Fiscal 2011 first quarter sales were $2.8 billion, an increase of 26.5 percent from $2.2 billion in the same quarter a year ago.  Net income was $249.0 million compared with $74.0 million in the first quarter of fiscal 2010.  Earnings per diluted share for the quarter were $1.51, which is a quarterly record and compares with $0.45 in last year's first quarter.   Cash flow from operations for the first quarter of fiscal 2011 was $122.9 million, or 4.3 percent of sales, compared with cash flow from operations of $260.1 million, or 11.6 percent of sales in the prior year period.   Fiscal 2011 first quarter cash flow from operations included a $200 million discretionary contribution to the company's pension plan. Excluding this discretionary contribution, cash flow from operations as a percent of sales was 11.4 percent for the first quarter of fiscal 2011.

"Demand levels continued to improve across many markets as reflected in a significant increase in sales for the first quarter," said Chairman, CEO and President Don Washkewicz.   "Sales improved in every segment, with total sales increasing 27 percent organically, while foreign currency translation negatively impacted sales by 1 percent.  Order rates also increased in all segments.

"We are particularly pleased with our ability to leverage improved top line performance into record level operating margins and earnings.  Our total segment operating margin performance was at an all-time record level of 15.5 percent, led by record Industrial North America segment margins of 17.8 percent and record Industrial International segment margins of 16.8 percent.  We also continued to deliver strong operating cash flow, which gave us the flexibility to make a discretionary contribution to our pension plan."

Segment Results

In the Industrial North America segment, first-quarter sales increased 36.0 percent to $1.1 billion, and operating income was $189.4 million compared with $76.2 million in the same period a year ago.  

In the Industrial International segment, first-quarter sales increased 28.5 percent to $1.1 billion, and operating income was $183.8 million compared with $61.8 million in the same period a year ago.  

In the Aerospace segment, first-quarter sales increased 4.8 percent to $436.7 million, and operating income was $43.8 million compared with $53.1 million in the same period a year ago.

In the Climate and Industrial Controls segment, first-quarter sales increased 25.5 percent to $234.7 million, and operating income was $21.6 million compared with $10.5 million in the same period a year ago.    

Orders

Parker reported an increase of 29 percent in total orders for the quarter ending September 30, 2010, compared with the same quarter a year ago.  The company reported the following orders by operating segment:  

  • Orders increased 31 percent in the Industrial North America segment, compared with the same quarter a year ago.
  • Orders increased 34 percent in the Industrial International segment, compared with the same quarter a year ago.
  • Orders increased 16 percent in the Aerospace segment on a rolling 12-month average basis.
  • Orders increased 23 percent in the Climate and Industrial Controls segment, compared with the same quarter a year ago.

Outlook

For fiscal 2011, the company has increased guidance for earnings from continuing operations to the range of $5.20 to $5.80 per diluted share.

Washkewicz added, "First quarter performance has clearly demonstrated the company's ability to generate strong operating cash flow and strong incremental returns on increased revenues.  This gives us confidence in our ability to deliver earnings per share in a higher range for fiscal year 2011. The focus of our employees will continue to be on executing the Win Strategy and our cash flow position affords us the flexibility to drive growth through investments in innovation, international expansion, acquisitions, as well as expansion of our global distribution and industrial retail channels.  Thanks to the efforts of Parker's employees in all regions who are pursuing a consistent strategy, we are building momentum from a position of great strength."  

NOTICE OF CONFERENCE CALL: Parker Hannifin's conference call and slide presentation to discuss its fiscal 2011 first quarter results are available to all interested parties via live webcast today at 10:00 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 $10 billion in fiscal year 2010, 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 55,000 people in 46 countries around the world. Parker has increased its annual dividends paid to shareholders for 54 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.

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 for 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 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 economic conditions in individual markets may have a particularly volatile effect on segment results. 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, and changes in contract cost and revenue estimates for new development programs; uncertainties surrounding timing, successful completion or integration of acquisitions; ability to realize anticipated costs savings from business realignment activities; 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 - SEPTEMBER 30, 2010

CONSOLIDATED STATEMENT OF INCOME

(Unaudited)

Three Months Ended September 30,

(Dollars in thousands except per share amounts)

2010

2009

Net sales

$        2,829,273

$   2,237,165

Cost of sales

2,137,874

1,800,945

Gross profit

691,399

436,220

Selling, general and administrative expenses

333,584

301,843

Interest expense

24,633

25,723

Other (income), net 

(3,182)

(5,375)

Income before income taxes

336,364

114,029

Income taxes 

87,334

40,059

Net income

249,030

73,970

Less:  Noncontrolling interests 

1,859

477

Net income attributable to common shareholders

$           247,171

$        73,493

Earnings per share attributable to common shareholders:

  Basic earnings per share  

$                 1.53

$              .46

  Diluted earnings per share 

$                 1.51

$              .45

Average shares outstanding during period - Basic

161,272,536

160,629,291

Average shares outstanding during period - Diluted

164,107,220

162,040,785

Cash dividends per common share 

$                   .27

$              .25

BUSINESS SEGMENT INFORMATION BY INDUSTRY

(Unaudited)

Three Months Ended September 30,

(Dollars in thousands)

2010

2009

Net sales

   Industrial:

      North America

$        1,064,915

$      783,085

      International

1,092,981

850,250

   Aerospace

436,680

416,856

   Climate & Industrial Controls

234,697

186,974

Total 

$        2,829,273

$   2,237,165

Segment operating income

   Industrial:

      North America

$           189,362

$        76,171

      International

183,800

61,823

   Aerospace

43,776

53,146

  Climate & Industrial Controls

21,552

10,497

Total segment operating income 

438,490

201,637

Corporate general and administrative expenses 

33,354

26,302

Income from operations before interest

 expense and other

405,136

175,335

Interest expense

24,633

25,723

Other expense  

44,139

35,583

Income before income taxes  

$           336,364

$      114,029

PARKER HANNIFIN CORPORATION - SEPTEMBER 30, 2010

CONSOLIDATED BALANCE SHEET

(Unaudited)

September 30,

June 30,

September 30,

(Dollars in thousands)

2010

2010

2009

Assets

Current assets:

Cash and cash equivalents

$           923,836

$                575,526

$          189,849

Accounts receivable, net

1,694,313

1,599,941

1,452,494

Inventories

1,295,137

1,171,655

1,266,319

Prepaid expenses

104,216

111,545

100,189

Deferred income taxes

130,094

130,129

124,640

Total current assets

4,147,596

3,588,796

3,133,491

Plant and equipment, net

1,770,983

1,697,881

1,891,438

Goodwill

2,915,602

2,786,334

2,964,321

Intangible assets, net

1,180,021

1,150,051

1,276,049

Other assets

695,519

687,320

671,874

Total assets

$      10,709,721

$             9,910,382

$       9,937,173

Liabilities and equity

Current liabilities:

Notes payable

$           391,303

$                363,272

$          304,083

Accounts payable

953,259

888,743

659,764

Accrued liabilities

742,087

776,527

719,228

Accrued domestic and foreign taxes

195,455

176,349

152,262

Total current liabilities

2,282,104

2,204,891

1,835,337

Long-term debt

1,745,812

1,413,634

1,855,531

Pensions and other postretirement benefits

1,327,195

1,500,928

1,255,515

Deferred income taxes

149,701

135,321

187,907

Other liabilities

212,332

196,208

233,270

Shareholders' equity

4,894,945

4,367,965

4,481,984

Noncontrolling interests

97,632

91,435

87,629

Total liabilities and equity

$      10,709,721

$             9,910,382

$       9,937,173

CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)

Three Months Ended September 30,

(Dollars in thousands)

2010

2009

Cash flows from operating activities:

Net income

$           249,030

$   73,970

Depreciation and amortization

84,986

92,963

Share incentive plan compensation

29,242

26,436

Net change in receivables, inventories, and trade payables

(54,956)

15,291

Net change in other assets and liabilities

(224,180)

73,694

Other, net

38,758

(22,301)

Net cash provided by operating activities

122,880

260,053

Cash flows from investing activities:

Acquisitions (net of cash of $1 in 2010)

(8,129)

-

Capital expenditures

(52,690)

(30,099)

Proceeds from sale of plant and equipment

2,169

4,422

Other, net

(318)

(1,334)

Net cash (used in) investing activities

(58,968)

(27,011)

Cash flows from financing activities:

Net (payments for) common share activity

(3,305)

(1,246)

Net proceeds from (payments for) debt

293,952

(197,279)

Dividends

(43,648)

(40,171)

Net cash provided by (used in) financing activities

246,999

(238,696)

Effect of exchange rate changes on cash

37,399

7,892

Net increase in cash and cash equivalents

348,310

2,238

Cash and cash equivalents at beginning of period

575,526

187,611

Cash and cash equivalents at end of period

$           923,836

$   189,849

SOURCE Parker Hannifin Corporation



RELATED LINKS

http://www.phstock.com