Parker Hannifin Reports Record Year-End Sales, Earnings, and Cash Flow From Operations; Announces Q4 EPS up 31 Percent to $1.34
CLEVELAND, July 28 -- Parker Hannifin Corporation today reported new records in sales, earnings and cash flow from operations for fiscal-year 2005. Sales topped $8 billion for the first time in the company's 87-year history; diluted earnings per share for the year were also at an all-time high; and cash flow from operations reached a record $871.8 million, or 10.6 percent of sales, surpassing last year's record of $649.5 million, or 9.3 percent of sales.
For the full year, Parker posted a 63-percent increase in income from continuing operations, at $548.0 million, or a 61-percent increase in earnings per diluted share of $4.55. Revenues reached a record $8.22 billion, up 17 percent. Last year, the company earned $336.2 million from continuing operations, or $2.82 per diluted share, on sales of $7.0 billion. Income from discontinued operations for fiscal 2005 was $56.7 million, or 47 cents per diluted share, which includes profit from operations and the gain on the divestiture of the Wynn Oil specialty chemicals business.
Fourth-quarter income from continuing operations increased 32 percent to $161.4 million, or a 31-percent increase in earnings per diluted share of $1.34 on sales of $2.21 billion for the period ended June 30, 2005, compared to income from continuing operations of $122.6 million, or $1.02 cents per diluted share on sales of $1.96 billion in the same period last year.
"We have just completed an exceptional year, driving significant shareholder value as evidenced by our Return on Invested Capital (ROIC), which should rank us among the upper tier of our peer group. We demonstrated that Parker can achieve significant growth, and produce the cash to invest in yet another year of strong results in fiscal 2006," said Chairman and CEO Don Washkewicz. "Parker employees made an incredible effort to execute our Win Strategy, and we have a solid foundation in place to build the future of our company. This will be seen as another great period in Parker's rich history of profitable growth."
Segment Results
In the North American Industrial segment, fourth-quarter operating income improved 16 percent to $128.4 million on sales of $940.1 million. For the full year, North American Industrial operating income was up 61 percent to $468.2 million on sales of $3.52 billion.
The International Industrial segment fourth-quarter operating income increased 36 percent to $76.0 million on sales of $642.9 million. For the full year, International Industrial operating income was up 67 percent to $267.2 million on sales of $2.40 billion.
In the company's Climate & Industrial Controls segment, fourth-quarter operating income increased six percent to $23.6 million on sales of $225.5 million. For the full year, the Climate & Industrial Controls segment recorded operating income up four percent to $74.8 million on sales of $794.3 million.
Aerospace reported a fourth-quarter increase in operating income of 24 percent to $54.4 million on sales of $364.0 million. For the full year, Aerospace reported operating income up 26 percent to $199.2 million on sales of $1.36 billion.
In the "Other" segment, comprised of Astron metal buildings, fourth- quarter operating income was $4.6 million on sales of $38.0 million. Full year operating income was up 127 percent to $18.5 million on sales of $146.3 million.
Outlook
In fiscal year 2006, Parker for the first time will be expensing equity based compensation as required by FAS 123R. Without the impact of this accounting change, the fiscal-year 2006 earnings from continuing operations are projected to range from $5.00 to $5.40 per diluted share. With the impact of the accounting change, the company projects earnings from continuing operations for fiscal-year 2006 to range from $4.80 to $5.25 per diluted share, including an expense of approximately 15 to 20 cents per diluted share related to FAS 123R. Removal of the FAS 123R accounting change allows investors and the company to meaningfully evaluate future projected performance on a comparable basis with prior periods which were not impacted by the accounting change.
"Nearly all of our major end markets are performing very well and we are particularly pleased with the strong demand we're seeing in Aerospace. The performance of our traditional markets, plus the potential of our new growth platforms, lead us to project another year of solid sales and earnings in fiscal 2006," added Washkewicz.
"Going forward, we will continue to drive our Win Strategy goals of premier customer service and financial performance; with an even greater emphasis on profitable growth.
"Our focus for fiscal 2006 is on growth through innovation. We have the financial capacity to expand our business through strategic acquisitions and we plan to increase our investment in new product development, all in an effort to best serve our customers."
In addition to the information provided herein, Parker advises shareholders to note order trends, for which the company makes a disclosure several business days after the conclusion of each month. This information is available on the company's investor information web site, at http://www.phstock.com/.
With annual sales exceeding $8 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 50,000 people in 46 countries around the world. Parker has increased its annual dividends paid to shareholders for 49 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 site at http://www.phstock.com/.
PARKER HANNIFIN CORPORATION - JUNE 30, 2005
CONSOLIDATED STATEMENT OF INCOME
(Dollars in thousands except per share amounts)
Three Months Ended June 30, Year ended June 30,
2005 2004 2005 2004
Net sales $2,210,532 $1,964,259 $8,215,095 $6,998,761
Cost of sales 1,738,471 1,549,313 6,508,111 5,672,294
Gross profit 472,061 414,946 1,706,984 1,326,467
Selling, general and
administrative expenses 235,926 222,642 872,113 776,535
Other income
(deductions):
Interest expense (16,410) (16,972) (67,030) (73,219)
Other (expense)
income, net (267) 6,601 (11,368) 3,413
(16,677) (10,371) (78,398) (69,806)
Income from continuing
operations before
income taxes 219,458 181,933 756,473 480,126
Income taxes 58,046 59,381 208,500 143,953
Income from continuing
operations 161,412 122,552 547,973 336,173
Discontinued operations 2,921 56,719 9,610
Net income $161,412 $125,473 $604,692 $345,783
Earnings per share:
Basic earnings per
share from continuing
operations $1.36 $1.04 $4.61 $2.86
Discontinued operations .02 .48 .08
Basic earnings per share $1.36 $1.06 $5.09 $2.94
Diluted earnings per
share from continuing
operations $1.34 $1.02 $4.55 $2.82
Discontinued operations .03 .47 .09
Diluted earnings
per share $1.34 $1.05 $5.02 $2.91
Average shares
outstanding during
period - Basic 118,816,542 118,194,932 118,794,564 117,707,772
Average shares
outstanding during
period - Diluted 120,191,274 119,614,996 120,449,006 119,006,468
Cash dividends per
common share $.20 $.19 $.78 $.76
Note: Certain prior period amounts have been reclassified to conform to
the current year presentation.
BUSINESS SEGMENT INFORMATION BY INDUSTRY
(Dollars in thousands)
Three Months Ended June 30, Year ended June 30,
2005 2004 2005 2004
Net sales
Industrial:
North America $940,071 $848,392 $3,516,627 $3,016,820
International 642,902 564,824 2,398,439 1,969,727
Aerospace 364,022 326,846 1,359,431 1,215,920
Climate & Industrial
Controls 225,501 189,337 794,308 671,157
Other 38,036 34,860 146,290 125,137
Total $2,210,532 $1,964,259 $8,215,095 $6,998,761
Segment operating income
Industrial:
North America $128,409 $110,296 $468,213 $290,783
International 76,040 55,833 267,207 159,641
Aerospace 54,408 43,986 199,187 157,946
Climate & Industrial
Controls 23,602 22,364 74,843 71,769
Other 4,556 5,389 18,452 8,138
Total segment operating
income $287,015 $237,868 $1,027,902 $688,277
Corporate general and
administrative expenses 32,414 32,840 111,832 106,281
Income from continuing
operations before interest
expense and other 254,601 205,028 916,070 581,996
Interest expense 16,410 16,972 67,030 73,219
Other expense 18,733 6,123 92,567 28,651
Income from continuing
operations before income
taxes $219,458 $181,933 $756,473 $480,126
Note: Certain prior period amounts have been reclassified to conform to
the current year presentation.
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
June 30, 2005 2004
Assets
Current assets:
Cash and cash equivalents $336,080 $183,847
Accounts receivable, net 1,241,029 1,174,601
Inventories 1,030,962 976,258
Prepaid expenses 49,956 43,907
Deferred income taxes 127,845 112,828
Total current assets 2,785,872 2,491,441
Plant and equipment, net 1,591,917 1,585,989
Goodwill 1,443,811 1,177,532
Intangible assets, net 239,891 102,085
Other assets 837,470 826,262
Net assets of discontinued operations 51,924
Total assets $6,898,961 $6,235,233
Liabilities and shareholders' equity
Current liabilities:
Notes payable $31,962 $35,198
Accounts payable 584,253 525,113
Accrued liabilities 613,881 555,303
Accrued domestic and foreign taxes 105,831 123,030
Total current liabilities 1,335,927 1,238,644
Long-term debt 938,424 953,796
Pensions and other postretirement benefits 1,058,814 813,635
Deferred income taxes 35,911 79,028
Other liabilities 189,738 167,676
Shareholders' equity 3,340,147 2,982,454
Total liabilities and shareholders' equity $6,898,961 $6,235,233
Note: Certain prior period amounts have been reclassified to conform to
the current year presentation.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
Year ended June 30,
2005 2004
Cash flows from operating activities:
Net income $604,692 $345,783
Net (income) from discontinued operations (56,719) (9,610)
Depreciation and amortization 264,699 251,753
Net change in receivables, inventories,
and trade payables 36,028 14,246
Net change in other assets and liabilities 5,965 53,810
Other, net 17,150 (6,498)
Net cash provided by operating activities 871,815 649,484
Cash flows from investing activities:
Acquisitions (net of cash of $21,720
in 2005 and $63,691 in 2004) (558,569) (200,314)
Capital expenditures (156,567) (140,138)
Proceeds from sale of business 120,000 33,213
Other, net 30,576 36,978
Net cash (used in) investing activities (564,560) (270,261)
Cash flows from financing activities:
Net (payments for) proceeds from
common share activity (23,724) 56,223
Net (payments of) debt (21,202) (415,428)
Dividends (92,612) (89,286)
Net cash (used in) financing activities (137,538) (448,491)
Net cash (used in) provided by
discontinued operations (19,004) 12,969
Effect of exchange rate changes on cash 1,520 (5,704)
Net increase (decrease) in cash and
cash equivalents 152,233 (62,003)
Cash and cash equivalents at
beginning of period 183,847 245,850
Cash and cash equivalents at end of period $336,080 $183,847