Parker Hannifin Reports Record Sales And Earnings
30 July 1998
Parker Hannifin Reports Record Sales And Earnings For Its Fiscal Year 1998
Business Editors
CLEVELAND--July 30, 1998--Parker Hannifin
Corporation today reported record sales and earnings for
the fiscal year ended June 30.
Parker's sales for the year were a record $4.63 billion, up
13.2 percent from $4.09 billion last year. Income for the year was
$332.8 million, or $2.97 per diluted share, before special charges, an
increase of 21.5 percent over the $274.0 million or $2.44 per diluted
share reported for the prior year.
Record fourth quarter sales of $1.24 billion were up 11.1 percent
from $1.12 billion a year ago. Income for the quarter was a record
$94.8 million, or $.84 per diluted share, before special charges.
Several non-recurring charges were incurred during the year,
including two acquisition-related charges for in-process R&D purchased
from Computer Technology Corp., during the third quarter ($.05 per
share) and UCC Securities Ltd., during the fourth quarter ($.06 per
share). The fourth quarter was also impacted by a premium payment of
$.03 per share to early-retire the 10.375% $100 million debentures and
a credit of $.02 per share to interest income resulting from an IRS
settlement. After these charges net income was $319.6 million, or
$2.85 per diluted share for the year and $86.8 million or $.77 per
diluted share for the quarter.
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1998 Earnings per share 4th Quarter Year
Earnings before non-recurring charges $.84 $2.97
Acquisition-related R&D charges:
UCC Securities Ltd. (International) (.06) (.06)
Computer Tech. Corp. (North America) (.05)
Premium to early-retire debt (.03) (.03)
IRS settlement refund .02 .02
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Net income $.77 $2.85
Acquisitions contributed one-fifth of the increase in sales for
the year and one-third of the quarter-to-quarter increase. Backlog at
June 30 was $1.67 billion, compared with $1.47 billion a year ago.
President and Chief Executive Officer Duane E. Collins said,
"Parker's record performance is the result of the Company's commitment
to deliver premier service to its 400,000 customers around the world.
Our strong growth in sales and market share was notable in both the
industrial and aerospace segments, contributing to a five-year
compound sales growth rate of 13.2 percent.
"Among the markets driving Parker's increased sales were
commercial aircraft, construction, heavy duty trucks, energy, factory
automation, telecommunications and refrigeration. While our earnings
were affected by the Asian financial crisis, the depressed
semiconductor market and the previously noted non-recurring special
charges, Parker was still able to achieve its highest income ever," he
said.
Parker's North American Industrial sales were 10.4 percent higher
for the recent quarter, and up 15.0 percent for the year. One-third of
the quarter's increase and one-fifth of the year's increase were due
to acquisitions. Operating income was equal to last year's
exceptionally strong fourth quarter, and rose 13.2 percent for the
year, before special charges, notwithstanding the effect of the soft
semiconductor market, the Asian financial crisis, less favorable
product mix and the integration of recent acquisitions.
International Industrial sales rose 14.5 percent in the fourth
quarter, with two-thirds attributable to acquisitions. Without the
impact of changes in currency rates, volume for the quarter increased
almost 16 percent. For the year, revenues were 8.2 percent above the
prior year, with over half of this increase due to acquisitions.
Without the impact of changes in currency rates, revenues increased
over 17 percent for the year. Operating income before special charges
increased 8.5 percent for the quarter, and 27.1 percent for the year.
An improved European economy contributed to results, and Parker
continued to penetrate attractive markets in Asia Pacific and Latin
American regions.
Parker's Aerospace Segment had a record year, reflecting very
strong commercial transport, business jet and general aviation
markets. Sales increased 8.7 percent in the recent quarter compared to
a year ago, with total year sales 15.1 percent higher. Operating
income increased 18.8 percent for the fourth quarter and 45.3 percent
for the total year. Parker benefited from a favorable product mix in
both repair and spares, as the commercial aftermarket expanded
considerably. Commercial aircraft demand is expected to remain high
for some time, providing excellent opportunities for Parker.
During the quarter, Parker acquired the assets of Dynamic Valves,
Inc., of Palo Alto, California, a manufacturer of high-performance
servo valves and servo actuator systems; the equity of Extrudit Ltd.,
a tubing company located in Buxton, England; the equity of UCC
Securities Ltd. of Thetford, Norfolk, England, a manufacturer of
technology-based hydraulic filtration products; and the equity of
Sempress Pneumatics, a manufacturer of pneumatic cylinders and valves
located near Rotterdam, the Netherlands. In addition, in July, Parker
acquired the Veriflo Corporation of Richmond, California, a leading
manufacturer of high-purity regulators and valves.
Mr. Collins said, "As we look ahead to the new fiscal year, both
our industrial and aerospace markets will continue to expand, but at a
more moderate rate. The Asian financial crisis, the General Motors
strike and soft semiconductor markets are affecting some of our
customers, but the diversity of our end markets and our growing global
presence should serve us well.
"The new fiscal year will certainly offer a number of attractive
opportunities for Parker. Our competitive position in both the
industrial and aerospace markets is growing stronger due to our unique
breadth of product lines. We are attracting more customers worldwide,
and producing order rates higher than industry averages. Several
recent acquisitions will begin contributing to our results this year,
and Parker's strong cash flow will enable it to act on further
opportunities to enhance our product lines and penetrate global
markets, including the Asia Pacific region.
"In summary, the future prospects are positive, with Parker
solidly positioned to continue its record of sound financial growth.
We have the capacity, the products, the financial resources and, above
all, the dedication of our employees to deliver the premier customer
service that can create additional shareholder value in the future."
Parker Hannifin is a worldwide leader in the production of
motion, control, instrumentation and fluid flow components and systems
for hundreds of industrial and aerospace markets. For more information
about Parker, visit our Web site at www.parker.com.
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PARKER HANNIFIN CORPORATION - JUNE 30, 1998
CONSOLIDATED STATEMENT OF INCOME
Unaudited Three Months Ended June 30,
(Dollars in thousands 1998 1997
except per share amounts)
Net sales $ 1,238,358 $ 1,115,066
Cost of sales 949,322 836,589
Gross profit 289,036 278,477
Selling, general and
administrative expenses 135,440 125,446
Income from operations 153,596 153,031
Other income (deductions):
Interest expense (15,756) (10,584)
Interest and other income, net 2,356 818
(13,400) (9,766)
Income before income taxes 140,196 143,265
Income taxes 49,770 50,859
Income before extraordinary item 90,426 92,406
Extraordinary item -
extinguishment of debt (3,675)
Net income $ 86,751 $ 92,406
Earnings per share:
Basic earnings per share
before extraordinary item $ .81 $ .83
Extraordinary item -
extinguishment of debt (.03)
Basic earnings per share $ .78 $ .83
Diluted earnings per share
before extraordinary item $ .80 $ .82
Extraordinary item -
extinguishment of debt (.03)
Diluted earnings per share $ .77 $ .82
Average shares outstanding
during period - Basic 110,263,237 111,677,382
Average shares outstanding
during period - Diluted 111,393,902 112,733,393
Cash dividends per common share $ .15 $ .13
Cost of sales for 1998 includes a non-cash, non-recurring pretax
charge of $10.6 million for the quarter for in-process R&D purchased
as part of an Industrial International acquisition. In addition, Cost
of sales for the year includes a similar charge for $5.2 million for
an Industrial North American acquisition, making the total year charge
$15.8 million. After taxes these charges were $6.8 million, or $.06
per share, for the quarter and $12.0 million, or $.11 per share, for
the year.
PARKER HANNIFIN CORPORATION - JUNE 30, 1998
CONSOLIDATED STATEMENT OF INCOME
Year Ended June 30,
(Dollars in thousands 1998 1997
except per share amounts)
Net sales $ 4,633,023 $ 4,091,081
Cost of sales 3,550,992 3,152,988
Gross profit 1,082,031 938,093
Selling, general and
administrative expenses 532,134 475,180
Income from operations 549,897 462,913
Other income (deductions):
Interest expense (52,787) (46,659)
Interest and other income, net 6,878 8,613
(45,909) (38,046)
Income before income taxes 503,988 424,867
Income taxes 180,762 150,828
Income before extraordinary item 323,226 274,039
Extraordinary item -
extinguishment of debt (3,675)
Net income $ 319,551 $ 274,039
Earnings per share:
Basic earnings per share
before extraordinary item $ 2.91 $ 2.46
Extraordinary item -
extinguishment of debt (.03)
Basic earnings per share $ 2.88 $ 2.46
Diluted earnings per share
before extraordinary item $ 2.88 $ 2.44
Extraordinary item -
extinguishment of debt (.03)
Diluted earnings per share $ 2.85 $ 2.44
Average shares outstanding
during period - Basic 110,868,834 111,601,484
Average shares outstanding
during period - Diluted 111,959,271 112,518,053
Cash dividends per common share $ .60 $ .51
Cost of sales for 1998 includes a non-cash, non-recurring pretax
charge of $10.6 million for the quarter for in-process R&D purchased
as part of an Industrial International acquisition. In addition, Cost
of sales for the year includes a similar charge for $5.2 million for
an Industrial North American acquisition, making the total year charge
$15.8 million. After taxes these charges were $6.8 million, or $.06
per share, for the quarter and $12.0 million, or $.11 per share, for
the year.
BUSINESS SEGMENT INFORMATION BY INDUSTRY
Unaudited Three Months Ended June 30,
(Dollars in thousands) 1998 1997
Net sales, including intersegment sales
Industrial:
North America $ 653,551 $ 591,844
International 320,514 279,970
Aerospace 264,835 243,562
Intersegment sales (542) (310)
Total $ 1,238,358 $ 1,115,066
Income from operations before corporate
general and administrative expenses
Industrial:
North America $ 101,917 $ 102,774
International 20,864 28,996
Aerospace 41,667 35,084
Total 164,448 166,854
Corporate general and
administrative expenses 10,852 13,823
Income from operations $ 153,596 $ 153,031
BUSINESS SEGMENT INFORMATION BY INDUSTRY
Year Ended June 30,
(Dollars in thousands) 1998 1997
Net sales, including intersegment sales
Industrial:
North America $ 2,480,231 $ 2,156,043
International 1,161,530 1,073,201
Aerospace 992,994 862,659
Intersegment sales (1,732) (822)
Total $ 4,633,023 $ 4,091,081
Income from operations before corporate
general and administrative expenses
Industrial:
North America $ 368,314 $ 329,967
International 83,534 74,058
Aerospace 159,067 109,470
Total 610,915 513,495
Corporate general and
administrative expenses 61,018 50,582
Income from operations $ 549,897 $ 462,913
CONSOLIDATED BALANCE SHEET
(Dollars in thousands) June 30, 1998 1997
Assets
Current assets:
Cash and cash equivalents $ 30,488 $ 68,997
Accounts receivable, net 699,179 601,724
Inventories 944,271 727,847
Prepaid expenses 22,035 17,366
Deferred income taxes 84,102 83,627
Total current assets 1,780,075 1,499,561
Plant and equipment, net 1,135,225 1,020,743
Other assets 609,521 478,642
Total assets $ 3,524,821 $ 2,998,946
Liabilities and shareholders' equity
Current liabilities:
Notes payable $ 265,485 $ 69,738
Accounts payable 338,249 266,848
Accrued liabilities 350,662 328,051
Accrued domestic and foreign taxes 34,374 51,374
Total current liabilities 988,770 716,011
Long-term debt 512,943 432,885
Pensions and other postretirement
benefits 265,675 252,709
Deferred income taxes 29,739 26,007
Other liabilities 44,244 24,033
Shareholders' equity 1,683,450 1,547,301
Total liabilities and
shareholders' equity $ 3,524,821 $ 2,998,946
CONSOLIDATED STATEMENT OF CASH FLOWS
Year Ended June 30,
(Dollars in thousands) 1998 1997
Cash flows from operating activities:
Net income $ 319,551 $ 274,039
Depreciation and amortization 182,679 169,833
Net effect of extraordinary loss 3,675
Write-off of purchased in-process R&D 15,800
Net change in receivables, inventories,
and trade payables (203,656) (71,416)
Net change in other assets
and liabilities (9,118) 28,987
Other, net 11,668 (9,133)
Net cash provided by operating
activities 320,599 392,310
Cash flows from investing activities:
Acquisitions (less cash acquired of
$4,260 in 1998 and $1,394 in 1997) (232,953) (31,461)
Capital expenditures (236,945) (189,201)
Other, net 10,781 25,931
Net cash used in investing activities (459,117) (194,731)
Cash flows from financing activities:
Net payments for common shares purchased (96,887) (10,184)
Net proceeds (payments) of debt 264,896 (121,324)
Dividends (66,501) (56,570)
Net cash provided by (used in)
financing activities 101,508 (188,078)
Effect of exchange rate changes on cash (1,499) (4,457)
Net (decrease) increase in cash and
cash equivalents (38,509) 5,044
Cash and cash equivalents at
beginning of year 68,997 63,953
Cash and cash equivalents at end
of year $ 30,488 $ 68,997
Noncash Investing activities: In 1998 Treasury stock of $11,950
was issued for acquisitions.
*T