Parker Says Strength in Aerospace & Improving International Margins Partially Offset U.S. Industrial Slump; Company Earns 77 Cents in Fiscal Q3

Apr 17, 2001, 01:00 ET from Parker Hannifin Corporation

    CLEVELAND, April 17 /PRNewswire/ -- Parker Hannifin Corporation (NYSE:   PH)
 today reported third-quarter net income for the period ended March 31, 2001 of
 $88.1 million, or 77 cents per diluted share, on sales of $1.53 billion. This
 compares with $106.7 million, or 97 cents per diluted share, earned last year,
 on sales of $1.39 billion.  Earnings in the current period include an
 extraordinary charge of three cents per share for the early retirement of debt
 completed in February. These results also reflect higher interest expense and
 an additional 4.6 million shares outstanding issued in connection with
 acquisitions completed since last year.
     (Photo:  http://www.newscom.com/cgi-bin/prnh/19990816/PHLOGO )
     "We're cutting back production and inventories in North America so we can
 retain the strong cash flows that keep us fit for growth," said Parker
 Chairman and CEO Duane Collins. "What really proves out our strategy is what
 we see in our other segments this quarter: We managed through a downturn last
 year in our aerospace business, and now it's performing at record levels."
     Among the operating results for the quarter, Parker Aerospace reported a
 10-percent increase in sales, 27-percent higher operating income and a return
 on sales of 19.7 percent.  The International Industrial operations posted an
 11-percent increase in sales (mostly acquisitions), with an 18-percent
 increase in operating income and a 9.3-percent operating margin.  This is the
 highest operating margin achieved in years by the company's international
 operations, the result of improving performance.  "Without the negative
 effects of currency and lower near-term profits from acquisitions, our
 international business actually reached our 10-percent near-term margin goal
 this period," noted Collins. "We're pleased to see some substantial
 improvement, and we're going to keep driving it."
     North American Industrial sales were up 10 percent, but without
 acquisitions, would have been down 12 percent year over year. Operating income
 was 20-percent lower, with a 10.9-percent return on sales, resulting from the
 downturn in demand.
 
     Nine-Months' Results
     Sales in the first nine months of fiscal 2001 were $4.47 billion, compared
 with $3.88 billion last year.  Year-to-date net income was $291.4 million, or
 $2.54 per diluted share, compared with $255.3 million, or $2.32 per diluted
 share, a year ago.
 
     Outlook
     Results for the fiscal year ending June 30 are expected to range from
 $3.00 to $3.25 per diluted share, excluding non-recurring items. The company
 said it plans to record further charges in the fourth quarter for previously
 announced operating realignments, the costs of which are expected to offset a
 good amount of the gain recorded on the sale of property in the first quarter.
     "Reaction times by manufacturers are accelerating, so as quickly as our
 domestic industrial markets have dropped off, we are well positioned with our
 own lean manufacturing initiatives for the possibility of a sharp upturn,"
 said Collins.  "Thanks to the excellent enterprise systems we have in place
 throughout the company, we're able to watch our inventory levels and order
 trends very closely, so we can adjust production right on pace with demand."
     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 .
 
     NOTICE OF CONFERENCE CALL: Parker Hannifin's conference call to discuss
 its fiscal quarterly results is available on the day of this release 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:
     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 its markets and
 ability to achieve anticipated benefits associated with announced inventory
 and workforce reductions. Among the other factors that may affect future
 performance are: 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 which cannot be recovered in product pricing;
 and global economic factors, including currency exchange rates and
 difficulties entering new markets and general economic conditions, including
 interest rate levels.  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 the earnings projections for any
 reason during the quarter, including the occurrence of material events.
 
 
     PARKER HANNIFIN CORPORATION - MARCH 31, 2001
     CONSOLIDATED STATEMENT OF INCOME
 
 
     (Unaudited)                Three Months Ended        Nine Months Ended
     (Dollars in thousands          March 31,                 March 31,
      except per share
      amounts)                   2001         2000         2001        2000
 
     Net sales               $1,534,202   $1,393,659   $4,471,644   $3,875,159
     Cost of sales            1,213,387    1,074,133    3,509,472    3,022,052
     Gross profit               320,815      319,526      962,172      853,107
     Selling, general and
      administrative
      expenses                  159,580      141,254      491,617      419,559
     Income from operations     161,235      178,272      470,555      433,548
     Other income
      (deductions):
        Interest expense        (24,243)     (14,571)     (71,018)     (43,142)
        Interest and other
         income, net              4,794         (796)      57,535         (696)
                                (19,449)     (15,367)     (13,483)     (43,838)
     Income before income
      taxes                     141,786      162,905      457,072      389,710
     Income taxes                50,334       56,202      162,260      134,450
     Income before
      extraordinary item         91,452      106,703      294,812      255,260
     Extraordinary item -
      extinguishment of
      debt                       (3,378)           -       (3,378)           -
     Net income                 $88,074     $106,703     $291,434     $255,260
 
     Earnings per share:
        Basic earnings per
         share before
         extraordinary item        $.80         $.98        $2.58        $2.34
        Extraordinary item
         - extinguishment
         of debt                   (.03)           -         (.03)           -
        Basic earnings per
         share                     $.77         $.98        $2.55        $2.34
        Diluted earnings
         per share before
         extraordinary item        $.80         $.97        $2.57        $2.32
        Extraordinary item
         - extinguishment
         of debt                   (.03)           -         (.03)           -
        Diluted earnings
         per share                 $.77         $.97        $2.54        $2.32
 
     Average shares
      outstanding during
      period - Basic        114,439,369  109,373,820  114,125,361  109,210,607
     Average shares
      outstanding during
      period - Diluted      115,249,470  110,200,880  114,880,863  110,165,777
 
     Cash dividends per
      common share                 $.18         $.17         $.52         $.51
 
 
     BUSINESS SEGMENT INFORMATION BY INDUSTRY
                                   Three Months Ended      Nine Months Ended
     (Unaudited)                        March 31,               March 31,
     (Dollars in thousands)         2001        2000        2001       2000
     Net sales
         Industrial:
            North America         $849,439     $774,353  $2,555,046 $2,100,564
            International          367,317      331,104   1,034,339    933,485
         Aerospace                 317,446      288,202     882,259    841,110
     Total                      $1,534,202   $1,393,659  $4,471,644 $3,875,159
     Segment operating income
 
         Industrial:
            North America          $92,602     $115,123    $311,405   $296,006
            International           34,342       29,015      81,660     62,014
         Aerospace                  62,490       49,126     157,863    121,113
     Total segment operating
      income                       189,434      193,264     550,928    479,133
     Corporate general and
      administrative expenses       18,038       13,935      55,768     42,135
     Income from operations
      before interest
       expense and other           171,396      179,329     495,160    436,998
     Interest expense               24,243       14,571      71,018     43,142
     Other                           5,367        1,853     (32,930)     4,146
     Income before income taxes   $141,786     $162,905    $457,072   $389,710
 
 
     CONSOLIDATED BALANCE SHEET
     (Unaudited)
     (Dollars in
      thousands)      March 31,      2001                     2000
     Assets
     Current assets:
     Cash and cash equivalents     $45,209                  $60,715
     Accounts receivable, net      888,760                  800,241
     Inventories                 1,006,037                  909,835
     Prepaid expenses               37,681                   18,029
     Deferred income taxes          93,671                   65,725
     Assets held for sale          215,533                        -
     Total current assets        2,286,891                1,854,545
     Plant and equipment, net    1,507,047                1,237,603
     Other assets                1,457,500                  810,173
     Total assets               $5,251,438               $3,902,321
 
     Liabilities and
      shareholders' equity
     Current liabilities:
     Notes payable                $613,328                  $83,351
     Accounts payable              333,212                  301,193
     Accrued liabilities           380,487                  322,869
     Accrued domestic and
      foreign taxes                 60,252                   65,721
     Total current liabilities   1,387,279                  773,134
     Long-term debt                865,456                  706,596
     Pensions and other
      postretirement benefits      305,186                  282,642
     Deferred income taxes         120,176                   30,244
     Other liabilities              82,997                   73,977
     Shareholders' equity        2,490,344                2,035,728
     Total liabilities and
      shareholders' equity      $5,251,438               $3,902,321
 
 
     CONSOLIDATED STATEMENT OF
      CASH FLOWS
     (Unaudited)                      Nine Months Ended March 31,
     (Dollars in thousands)         2001                     2000
 
     Cash flows from operating
      activities:
     Net income                   $291,434                 $255,260
     Depreciation and
      amortization                 200,785                  157,006
     Net effect of
      extraordinary loss             3,378                        -
     Net change in receivables,
      inventories, and trade
      payables                     (78,935)                 (47,294)
     Net change in other assets
      and liabilities              (78,909)                   7,224
     Other, net                    (29,461)                  (7,280)
     Net cash provided by
      operating activities         308,292                  364,916
     Cash flows from investing
      activities:
     Acquisitions (less cash
      acquired of $8,256 in
      2001 and $431 in 2000)      (512,716)                (121,474)
     Capital expenditures         (263,812)                (168,131)
     Other, net                    105,637                    2,437
     Net cash used in investing
      activities                  (670,891)                (287,168)
     Cash flows from financing
      activities:
     Net proceeds from
      (payments for) common
      share activity                 9,824                   (4,410)
     Net proceeds from debt        391,216                   13,974
     Dividends                     (59,298)                 (55,661)
     Net cash provided by (used
      in) financing activities     341,742                  (46,097)
     Effect of exchange rate
      changes on cash               (2,394)                  (4,213)
     Net (decrease) increase in
      cash and cash equivalents    (23,251)                  27,438
     Cash and cash equivalents
      at beginning of period        68,460                   33,277
     Cash and cash equivalents
      at end of period             $45,209                  $60,715
 
 

SOURCE Parker Hannifin Corporation
    CLEVELAND, April 17 /PRNewswire/ -- Parker Hannifin Corporation (NYSE:   PH)
 today reported third-quarter net income for the period ended March 31, 2001 of
 $88.1 million, or 77 cents per diluted share, on sales of $1.53 billion. This
 compares with $106.7 million, or 97 cents per diluted share, earned last year,
 on sales of $1.39 billion.  Earnings in the current period include an
 extraordinary charge of three cents per share for the early retirement of debt
 completed in February. These results also reflect higher interest expense and
 an additional 4.6 million shares outstanding issued in connection with
 acquisitions completed since last year.
     (Photo:  http://www.newscom.com/cgi-bin/prnh/19990816/PHLOGO )
     "We're cutting back production and inventories in North America so we can
 retain the strong cash flows that keep us fit for growth," said Parker
 Chairman and CEO Duane Collins. "What really proves out our strategy is what
 we see in our other segments this quarter: We managed through a downturn last
 year in our aerospace business, and now it's performing at record levels."
     Among the operating results for the quarter, Parker Aerospace reported a
 10-percent increase in sales, 27-percent higher operating income and a return
 on sales of 19.7 percent.  The International Industrial operations posted an
 11-percent increase in sales (mostly acquisitions), with an 18-percent
 increase in operating income and a 9.3-percent operating margin.  This is the
 highest operating margin achieved in years by the company's international
 operations, the result of improving performance.  "Without the negative
 effects of currency and lower near-term profits from acquisitions, our
 international business actually reached our 10-percent near-term margin goal
 this period," noted Collins. "We're pleased to see some substantial
 improvement, and we're going to keep driving it."
     North American Industrial sales were up 10 percent, but without
 acquisitions, would have been down 12 percent year over year. Operating income
 was 20-percent lower, with a 10.9-percent return on sales, resulting from the
 downturn in demand.
 
     Nine-Months' Results
     Sales in the first nine months of fiscal 2001 were $4.47 billion, compared
 with $3.88 billion last year.  Year-to-date net income was $291.4 million, or
 $2.54 per diluted share, compared with $255.3 million, or $2.32 per diluted
 share, a year ago.
 
     Outlook
     Results for the fiscal year ending June 30 are expected to range from
 $3.00 to $3.25 per diluted share, excluding non-recurring items. The company
 said it plans to record further charges in the fourth quarter for previously
 announced operating realignments, the costs of which are expected to offset a
 good amount of the gain recorded on the sale of property in the first quarter.
     "Reaction times by manufacturers are accelerating, so as quickly as our
 domestic industrial markets have dropped off, we are well positioned with our
 own lean manufacturing initiatives for the possibility of a sharp upturn,"
 said Collins.  "Thanks to the excellent enterprise systems we have in place
 throughout the company, we're able to watch our inventory levels and order
 trends very closely, so we can adjust production right on pace with demand."
     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 .
 
     NOTICE OF CONFERENCE CALL: Parker Hannifin's conference call to discuss
 its fiscal quarterly results is available on the day of this release 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:
     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 its markets and
 ability to achieve anticipated benefits associated with announced inventory
 and workforce reductions. Among the other factors that may affect future
 performance are: 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 which cannot be recovered in product pricing;
 and global economic factors, including currency exchange rates and
 difficulties entering new markets and general economic conditions, including
 interest rate levels.  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 the earnings projections for any
 reason during the quarter, including the occurrence of material events.
 
 
     PARKER HANNIFIN CORPORATION - MARCH 31, 2001
     CONSOLIDATED STATEMENT OF INCOME
 
 
     (Unaudited)                Three Months Ended        Nine Months Ended
     (Dollars in thousands          March 31,                 March 31,
      except per share
      amounts)                   2001         2000         2001        2000
 
     Net sales               $1,534,202   $1,393,659   $4,471,644   $3,875,159
     Cost of sales            1,213,387    1,074,133    3,509,472    3,022,052
     Gross profit               320,815      319,526      962,172      853,107
     Selling, general and
      administrative
      expenses                  159,580      141,254      491,617      419,559
     Income from operations     161,235      178,272      470,555      433,548
     Other income
      (deductions):
        Interest expense        (24,243)     (14,571)     (71,018)     (43,142)
        Interest and other
         income, net              4,794         (796)      57,535         (696)
                                (19,449)     (15,367)     (13,483)     (43,838)
     Income before income
      taxes                     141,786      162,905      457,072      389,710
     Income taxes                50,334       56,202      162,260      134,450
     Income before
      extraordinary item         91,452      106,703      294,812      255,260
     Extraordinary item -
      extinguishment of
      debt                       (3,378)           -       (3,378)           -
     Net income                 $88,074     $106,703     $291,434     $255,260
 
     Earnings per share:
        Basic earnings per
         share before
         extraordinary item        $.80         $.98        $2.58        $2.34
        Extraordinary item
         - extinguishment
         of debt                   (.03)           -         (.03)           -
        Basic earnings per
         share                     $.77         $.98        $2.55        $2.34
        Diluted earnings
         per share before
         extraordinary item        $.80         $.97        $2.57        $2.32
        Extraordinary item
         - extinguishment
         of debt                   (.03)           -         (.03)           -
        Diluted earnings
         per share                 $.77         $.97        $2.54        $2.32
 
     Average shares
      outstanding during
      period - Basic        114,439,369  109,373,820  114,125,361  109,210,607
     Average shares
      outstanding during
      period - Diluted      115,249,470  110,200,880  114,880,863  110,165,777
 
     Cash dividends per
      common share                 $.18         $.17         $.52         $.51
 
 
     BUSINESS SEGMENT INFORMATION BY INDUSTRY
                                   Three Months Ended      Nine Months Ended
     (Unaudited)                        March 31,               March 31,
     (Dollars in thousands)         2001        2000        2001       2000
     Net sales
         Industrial:
            North America         $849,439     $774,353  $2,555,046 $2,100,564
            International          367,317      331,104   1,034,339    933,485
         Aerospace                 317,446      288,202     882,259    841,110
     Total                      $1,534,202   $1,393,659  $4,471,644 $3,875,159
     Segment operating income
 
         Industrial:
            North America          $92,602     $115,123    $311,405   $296,006
            International           34,342       29,015      81,660     62,014
         Aerospace                  62,490       49,126     157,863    121,113
     Total segment operating
      income                       189,434      193,264     550,928    479,133
     Corporate general and
      administrative expenses       18,038       13,935      55,768     42,135
     Income from operations
      before interest
       expense and other           171,396      179,329     495,160    436,998
     Interest expense               24,243       14,571      71,018     43,142
     Other                           5,367        1,853     (32,930)     4,146
     Income before income taxes   $141,786     $162,905    $457,072   $389,710
 
 
     CONSOLIDATED BALANCE SHEET
     (Unaudited)
     (Dollars in
      thousands)      March 31,      2001                     2000
     Assets
     Current assets:
     Cash and cash equivalents     $45,209                  $60,715
     Accounts receivable, net      888,760                  800,241
     Inventories                 1,006,037                  909,835
     Prepaid expenses               37,681                   18,029
     Deferred income taxes          93,671                   65,725
     Assets held for sale          215,533                        -
     Total current assets        2,286,891                1,854,545
     Plant and equipment, net    1,507,047                1,237,603
     Other assets                1,457,500                  810,173
     Total assets               $5,251,438               $3,902,321
 
     Liabilities and
      shareholders' equity
     Current liabilities:
     Notes payable                $613,328                  $83,351
     Accounts payable              333,212                  301,193
     Accrued liabilities           380,487                  322,869
     Accrued domestic and
      foreign taxes                 60,252                   65,721
     Total current liabilities   1,387,279                  773,134
     Long-term debt                865,456                  706,596
     Pensions and other
      postretirement benefits      305,186                  282,642
     Deferred income taxes         120,176                   30,244
     Other liabilities              82,997                   73,977
     Shareholders' equity        2,490,344                2,035,728
     Total liabilities and
      shareholders' equity      $5,251,438               $3,902,321
 
 
     CONSOLIDATED STATEMENT OF
      CASH FLOWS
     (Unaudited)                      Nine Months Ended March 31,
     (Dollars in thousands)         2001                     2000
 
     Cash flows from operating
      activities:
     Net income                   $291,434                 $255,260
     Depreciation and
      amortization                 200,785                  157,006
     Net effect of
      extraordinary loss             3,378                        -
     Net change in receivables,
      inventories, and trade
      payables                     (78,935)                 (47,294)
     Net change in other assets
      and liabilities              (78,909)                   7,224
     Other, net                    (29,461)                  (7,280)
     Net cash provided by
      operating activities         308,292                  364,916
     Cash flows from investing
      activities:
     Acquisitions (less cash
      acquired of $8,256 in
      2001 and $431 in 2000)      (512,716)                (121,474)
     Capital expenditures         (263,812)                (168,131)
     Other, net                    105,637                    2,437
     Net cash used in investing
      activities                  (670,891)                (287,168)
     Cash flows from financing
      activities:
     Net proceeds from
      (payments for) common
      share activity                 9,824                   (4,410)
     Net proceeds from debt        391,216                   13,974
     Dividends                     (59,298)                 (55,661)
     Net cash provided by (used
      in) financing activities     341,742                  (46,097)
     Effect of exchange rate
      changes on cash               (2,394)                  (4,213)
     Net (decrease) increase in
      cash and cash equivalents    (23,251)                  27,438
     Cash and cash equivalents
      at beginning of period        68,460                   33,277
     Cash and cash equivalents
      at end of period             $45,209                  $60,715
 
 SOURCE  Parker Hannifin Corporation