PARKER-HANNIFIN 
By CLEVELAND, Jan. 19 /PRNewswire-FirstCall/ -- Parker Hannifin Corporation (NYSE: PH), the global leader in motion and control technologies, today reported results for the fiscal 2010 second quarter ending December 31, 2009. Fiscal 2010 second quarter sales were $2.4 billion, an increase of 5.3 percent compared with the first quarter of fiscal 2010 and a decline of 12.4 percent from $2.7 billion in the second quarter a year ago. Fiscal 2010 second quarter net income was $104.6 million, an increase of 42.3 percent compared with the first quarter of fiscal 2010 and a decline of 32.7 percent compared with $155.4 million in the second quarter of fiscal 2009. Fiscal 2010 second quarter earnings per diluted share of $0.64, increased 41.6 percent from the first quarter of fiscal 2010 and declined 33.1 percent compared with $0.96 in the second quarter a year ago. Cash flow from operations for the first six months of fiscal 2010 was $606.3 million, or 13.2 percent of sales, compared with $444.5 million, or 7.7 percent of sales in the same prior year period.
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"This quarter's results largely reflect the execution of our Win Strategy including the benefits of actions we have taken to restructure our operations since the recession began," said Chairman, CEO and President Don Washkewicz. "Notably, our performance has improved significantly relative to the first quarter of the year. Considering that our second quarter is typically our weakest, our margin performance this quarter was most impressive with decremental margins at just 10.6 percent. Total segment operating margins exceeded 10 percent at this low point in the cycle and were equal to last year. These are strong indicators that we are managing through this unprecedented downturn very effectively.
"Although the effects of the global recession continue to linger, we are encouraged to see Parker's order trends improve sequentially for the second consecutive quarter. Organic sales declined approximately 16 percent in the quarter, while foreign currency translation positively impacted sales by approximately 4 percent. Operating cash flow year to date of 13.2 percent, another critical measure of our performance, was well above our targeted level of 10 percent. Our strong cash performance and balance sheet management throughout the recession has enabled us to pay down our outstanding debt by approximately $1 billion in the past twelve months, bringing our current debt-to-debt equity ratio below 30 percent and further strengthening our balance sheet."
Segment Results
In the Industrial North America segment, second quarter sales declined 14.7 percent to $847.2 million, and operating income increased 6.3 percent to $114.4 million, compared with the same period a year ago.
In the Industrial International segment, second quarter sales declined 10.6 percent to $932.1 million, and operating income declined 28.2 percent to $82.6 million, compared with the same period a year ago.
In the Aerospace segment, second quarter sales declined 15.4 percent to $400.6 million, and operating income declined 41.1 percent to $41.0 million, compared with the same period a year ago.
In the Climate & Industrial Controls segment, second quarter sales declined 2.4 percent to $174.9 million, and operating income increased 147.9 percent to $6.1 million, compared with the same period a year ago.
Orders
In addition to financial results, Parker also reported a decline of 7 percent in total orders for the quarter ending December 31, 2009, compared with the same quarter a year ago. Parker reported the following orders by operating segment:
-- Orders declined 3 percent in the Industrial North America segment,
compared with the same quarter a year ago.
-- Orders were unchanged in the Industrial International segment, compared
with the same quarter a year ago.
-- Orders declined 27 percent in the Aerospace segment on a rolling 12
month average basis.
-- Orders increased 6 percent in the Climate and Industrial Controls
segment, compared with the same quarter a year ago.
Outlook
For fiscal 2010, the company has increased its guidance for earnings from continuing operations by 44 percent to the range of $2.40 to $2.80 per diluted share.
Washkewicz added, "With our actions to drive strong margin and cash flow performance taking full effect, and what we believe to be the early signs of a recovery emerging, we are anticipating a strong second half to our fiscal year and have raised our guidance appropriately. Our priorities will remain unchanged as we progress through this fiscal year focused on executing the Win Strategy and managing for cash while simultaneously targeting strong margin performance. Parker's management remains proud of our worldwide team of employees who has made these results possible. As the recovery unfolds, Parker's leading market position, global scale and balance, end market breadth, and solid financial and operational fundamentals position us well for profitable growth."
NOTICE OF CONFERENCE CALL: Parker Hannifin's conference call and slide presentation to discuss its fiscal 2010 second 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, http://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 http://www.phstock.com for one year after the call.
With annual sales exceeding $10 billion in fiscal year 2009, 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 52,000 people in 48 countries around the world. Parker has increased its annual dividends paid to shareholders for 53 consecutive 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 http://www.parker.com, or its investor information web site at http://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 recession, 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 the 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; uncertainties surrounding timing, successful completion or integration of acquisitions; 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 employee retirement and health care benefits and insurance; 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.
PARKER HANNIFIN CORPORATION - DECEMBER 31, 2009
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
Three Months Ended
December 31,
(Dollars in thousands except per
share amounts) 2009 2008
-------------------------------- ---- ----
Net sales $2,354,708 $2,688,656
Cost of sales 1,869,481 2,121,450
------------- --------- ---------
Gross profit 485,227 567,206
Selling, general and
administrative expenses 309,840 337,183
Interest expense 25,029 30,307
Other expense, net 8,123 483
------------------ ----- ---
Income before income taxes 142,235 199,233
Income taxes 37,272 42,472
------------ ------ ------
Net income 104,963 156,761
Less: Noncontrolling interests 417 1,360
------------------------------- --- -----
Net income attributable to common
shareholders $104,546 $155,401
--------------------------------- -------- --------
Earnings per share attributable to
common shareholders:
----------------------------------
Basic earnings per share $.65 $.97
------------------------ ---- ----
Diluted earnings per share $.64 $.96
-------------------------- ---- ----
Average shares outstanding during
period -Basic 160,767,790 160,839,120
Average shares outstanding during
period -Diluted 162,744,788 161,755,586
Cash dividends per common share $.25 $.25
------------------------------- ---- ----
Six Months Ended
December 31,
(Dollars in thousands except per
share amounts) 2009 2008
-------------------------------- ---- ----
Net sales $4,591,873 $5,753,344
Cost of sales 3,670,426 4,458,672
------------- --------- ---------
Gross profit 921,447 1,294,672
Selling, general and
administrative expenses 611,683 669,866
Interest expense 50,752 58,403
Other expense, net 2,748 8,782
------------------ ----- -----
Income before income taxes 256,264 557,621
Income taxes 77,331 149,025
------------ ------ -------
Net income 178,933 408,596
Less: Noncontrolling interests 894 3,019
------------------------------- --- -----
Net income attributable to common
shareholders $178,039 $405,577
--------------------------------- -------- --------
Earnings per share attributable to
common shareholders:
----------------------------------
Basic earnings per share $1.11 $2.49
------------------------ ----- -----
Diluted earnings per share $1.10 $2.47
-------------------------- ----- -----
Average shares outstanding during
period -Basic 160,698,541 162,627,269
Average shares outstanding during
period -Diluted 162,378,082 164,272,066
Cash dividends per common share $.50 $.50
------------------------------- ---- ----
BUSINESS SEGMENT INFORMATION BY INDUSTRY
Three Months Ended
(Unaudited) December 31,
(Dollars in thousands) 2009 2008
---------------------- ---- ----
Net sales
Industrial:
North America $847,208 $993,040
International 932,057 1,042,741
Aerospace 400,551 473,667
Climate & Industrial Controls 174,892 179,208
----------------------------- ------- -------
Total $2,354,708 $2,688,656
----- ---------- ----------
Segment operating income
Industrial:
North America $114,435 $107,615
International 82,636 115,122
Aerospace 41,026 69,658
Climate & Industrial Controls 6,144 (12,814)
----------------------------- ----- -------
Total segment operating income 244,241 279,581
Corporate general and
administrative expenses 31,472 42,372
------------------------ ------ ------
Income from operations before
interest expense and other 212,769 237,209
Interest expense 25,029 30,307
Other expense 45,505 7,669
------------- ------ -----
Income before income taxes $142,235 $199,233
-------------------------- -------- --------
Six Months Ended
(Unaudited) December 31,
(Dollars in thousands) 2009 2008
---------------------- ---- ----
Net sales
Industrial:
North America $1,630,293 $2,100,117
International 1,782,307 2,265,933
Aerospace 817,407 952,140
Climate & Industrial Controls 361,866 435,154
----------------------------- ------- -------
Total $4,591,873 $5,753,344
----- ---------- ----------
Segment operating income
Industrial:
North America $190,606 $268,101
International 144,459 318,074
Aerospace 94,172 137,806
Climate & Industrial Controls 16,641 2,685
----------------------------- ------ -----
Total segment operating income 445,878 726,666
Corporate general and
administrative expenses 57,774 82,746
------------------------ ------ ------
Income from operations before
interest expense and other 388,104 643,920
Interest expense 50,752 58,403
Other expense 81,088 27,896
------------- ------ ------
Income before income taxes $256,264 $557,621
-------------------------- -------- --------
CONSOLIDATED BALANCE SHEET
(Unaudited)
December
(Dollars in thousands) 31, 2009 2008
---------------------- --------- ---- ----
Assets
------
Current assets:
Cash and cash equivalents $233,899 $261,990
Accounts receivable, net 1,368,449 1,682,338
Inventories 1,232,979 1,519,651
Prepaid expenses 98,989 69,498
Deferred income taxes 124,182 145,131
--------------------- ------- -------
Total current assets 3,058,498 3,678,608
Plant and equipment, net 1,842,750 1,888,023
Goodwill 2,948,304 2,884,187
Intangible assets, net 1,254,982 1,236,724
Other assets 689,655 427,649
------------ ------- -------
Total assets $9,794,189 $10,115,191
------------ ---------- -----------
Liabilities and shareholders' equity
------------------------------------
Current liabilities:
Notes payable $389,715 $1,022,112
Accounts payable 692,721 751,942
Accrued liabilities 680,450 777,462
Accrued domestic and foreign taxes 153,152 116,183
---------------------------------- ------- -------
Total current liabilities 1,916,038 2,667,699
Long-term debt 1,554,088 1,882,693
Pensions and other postretirement
benefits 1,258,258 480,561
Deferred income taxes 186,493 216,131
Other liabilities 241,526 213,970
Shareholders' equity 4,552,027 4,564,109
Noncontrolling interests 85,759 90,028
------------------------ ------ ------
Total liabilities and equity $9,794,189 $10,115,191
---------------------------- ---------- -----------
CONSOLIDATED STATEMENT OF CASH
FLOWS
(Unaudited) Six Months Ended December 31,
(Dollars in thousands) 2009 2008
---------------------- ---- ----
Cash flows from operating
activities:
Net income $178,933 $408,596
Depreciation and amortization 189,937 175,885
Share incentive plan
compensation 37,060 28,451
Net change in receivables,
inventories, and trade
payables 155,231 72,151
Net change in other assets and
liabilities 79,808 (250,577)
Other, net (34,719) 10,009
---------- ------- ------
Net cash provided by operating
activities 606,250 444,515
------------------------------ ------- -------
Cash flows from investing
activities:
Acquisitions (net of cash of
$24,191 in 2008) - (705,128)
Capital expenditures (61,232) (174,391)
Proceeds from sale of plant
and equipment 5,665 10,550
Other, net (14,310) (2,973)
---------- ------- ------
Net cash (used in) investing
activities (69,877) (871,942)
---------------------------- ------- --------
Cash flows from financing
activities:
Net (payments for) common
share activity (3,973) (430,080)
Net (payments for) proceeds
from debt (399,933) 911,428
Dividends (80,363) (81,331)
--------- ------- -------
Net cash (used in) provided by
financing activities (484,269) 400,017
------------------------------ -------- -------
Effect of exchange rate
changes on cash (5,816) (36,648)
----------------------- ------ -------
Net increase (decrease) in
cash and cash equivalents 46,288 (64,058)
Cash and cash equivalents at
beginning of period 187,611 326,048
---------------------------- ------- -------
Cash and cash equivalents at
end of period $233,899 $261,990
---------------------------- -------- --------
SOURCE Parker Hannifin Corporation
