Parker Hannifin Reports Record First Quarter Sales
15 October 1998
Parker Hannifin Reports Record First Quarter Sales and Higher Earnings Per Share
CLEVELAND--Oct. 15, 1998--Parker Hannifin Corporation today reported increased sales and earnings per share in its first quarter ended September 30.Record first quarter sales of $1.22 billion were 12.5 percent higher than the $1.08 billion in last year's record quarter. Acquisitions accounted for nearly one-half of the sales increase. Income for the recent period was $78.1 million, comparable to the $78.3 million reported last year. Operating income was up 5 percent over last year. Earnings for the first quarter of fiscal 1999 were $.71 per diluted share compared with $.70 per diluted share in the prior year period. While earnings per share increased, earnings were primarily flat due to higher interest expense associated with the issuance of debt principally related to acquisitions. Backlog on September 30 was $1.7 billion compared with $1.5 billion last year.
Parker President and Chief Executive Officer Duane E. Collins said, "Our first quarter sales were excellent compared with the record level of last year's quarter. The continuing high volume of commercial aviation business benefited Parker's Aerospace Segment during the period. Industrial markets were mixed. Among the strongest segments were construction equipment, telecommunications and automotive markets. Softer markets included semiconductor manufacturing and agricultural equipment.
"Among regional markets, our European businesses were slightly ahead of last year while Latin America was flat. The continued Asian financial crisis has affected some of our customers, however the Asia Pacific region represents a relatively small portion of Parker's total business. The diversity of our markets and expanding global presence continues to support our growth initiatives."
Parker's North American Industrial sales rose 7.1 percent, with acquisitions accounting for about two-thirds of the increase. Operating income was 11.3 percent lower than the prior year period due to lower volume in the semiconductor market, the less favorable product mix and the effects of integrating recent acquisitions.
International Industrial sales were up 17.4 percent, with over two-thirds of the increase due to acquisitions. Operating income was 27.8 percent above last year. Without the impact of currency rate changes, International sales volume would have increased 18.2 percent.
Parker Aerospace Segment sales were up 20.7 percent, with operating income 20.2 percent higher than last year. Increased sales and income continue to reflect the strong commercial aircraft business.
The Company made four acquisitions during the first quarter. In July, Parker Hannifin acquired the Veriflo Corporation of Richmond, California, a leading manufacturer of high-purity regulators and valves for precision gas delivery and sampling applications in the medical, analytical, petrochemical and semiconductor industries. In August, Parker acquired Fluid Power Systems (FPS) of Lincolnshire, Illinois, a leading maker of hydraulic valves and electro-hydraulic systems and controls for the construction, aerial reach and agricultural markets. Also in August, the Company acquired the assets of Pipelink Pty Ltd., trading as Cougar Valves and Fittings, a leading Australian maker of brass fittings. And, in September, the assets of Jinyoung Electric Machinery Company Ltd., of Seoul, South Korea, were acquired. Jinyoung is a manufacturer of automation components, including pneumatic valves and cylinders, speed controllers and silencers.
Mr. Collins commented that, "In the first quarter, while our overall volume was up and our orders were generally good, the rate of growth has moderated from the brisk level of a year ago. North American and European economies were generally healthy, and this provided Parker with attractive opportunities for further growth in a number of expanding markets. Our company continues to enjoy a beneficial balance between original equipment manufacturers and maintenance, repair and overhaul customers.
"For the remainder of this fiscal year, we are cautious about the overall prospects for Parker's continued growth due to the financial volatility around the world and adjustments in the outlooks of many of our customers. With the recent uncertainty in the markets our major focus is management of inventory, spending and employment levels."
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 on Parker, visit our Web site at www.parker.com.
PARKER HANNIFIN CORPORATION - SEPTEMBER 30, 1998
CONSOLIDATED STATEMENT OF INCOME
Unaudited
(Dollars in thousand Three Months Ended September 30,
except per share amounts) 1998 1997
Net sales $ 1,218,724 $ 1,083,169
Cost of sales 947,307 827,139
Gross profit 271,417 256,030
Selling, general and
administrative expenses 134,158 125,275
Income from operations 137,259 130,755
Other income (deductions):
Interest expense (16,075) (10,437)
Interest and other income, net (73) 1,017
(16,148) (9,420)
Income before income taxes 121,111 121,335
Income taxes 42,994 43,074
Net income $ 78,117 $ 78,261
Earnings per share:
Basic earnings per share $ .71 $ .70
Diluted earnings per share $ .71 $ .70
Average shares outstanding
during period - Basic 109,366,054 111,603,371
Average shares outstanding
during period - Diluted 110,128,017 112,455,333
Cash dividends per common share $ .15 $ .15
BUSINESS SEGMENT INFORMATION BY INDUSTRY
Unaudited Three Months Ended September 30,
(Dollars in thousands) 1998 1997
Net sales, including intersegment sales
Industrial:
North America $ 626,889 $ 585,499
International 310,370 264,398
Aerospace 281,978 233,554
Intersegment sales (513) (282)
Total $ 1,218,724 $ 1,083,169
Income from operations before corporate
general and administrative expenses
Industrial:
North America $ 79,588 $ 89,682
International 25,757 20,151
Aerospace 44,363 36,916
Total 149,708 146,749
Corporate general and
administrative expenses 12,449 15,994
Income from operations $ 137,259 $ 130,755
CONSOLIDATED BALANCE SHEET
Unaudited
(Dollars in thousands)
September 30, 1998 1997
Assets
Current assets:
Cash and cash equivalents $ 44,201 $ 39,456
Accounts receivable, net 714,364 629,476
Inventories 1,010,062 777,727
Prepaid expenses 20,583 16,353
Deferred income taxes 86,577 86,035
Total current assets 1,875,787 1,549,047
Plant and equipment, net 1,177,344 1,059,865
Other assets 706,939 588,789
Total assets $ 3,760,070 $ 3,197,701
Liabilities and shareholders' equity
Current liabilities:
Notes payable $ 355,218 $ 188,756
Accounts payable 285,642 256,804
Accrued liabilities 305,206 313,011
Accrued domestic and foreign taxes 64,753 85,640
Total current liabilities 1,010,819 844,211
Long-term debt 639,049 433,302
Pensions and other postretirement
benefits 277,122 257,911
Deferred income taxes 37,797 29,151
Other liabilities 54,189 37,556
Shareholders' equity 1,741,094 1,595,570
Total liabilities and
shareholders' equity $ 3,760,070 $ 3,197,701
CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Three Months Ended September 30,
(Dollars in thousands) 1998 1997
Cash flows from operating activities:
Net income $ 78,117 $ 78,261
Depreciation and amortization 49,579 45,628
Net change in receivables,
inventories, and trade payables (90,743) (60,298)
Net change in other assets
and liabilities (16,107) 12,072
Other, net (1,642) (2,367)
Net cash provided by operating
activities 19,204 73,296
Cash flows from investing activities:
Acquisitions (less cash acquired of
$2,609 in 1998 and $4,260 in 1997) (89,466) (143,603)
Capital expenditures (56,668) (60,424)
Other, net 5,230 8,811
Net cash used in investing activities (140,904) (195,216)
Cash flows from financing activities:
Net payments for common shares purchased (29,581) (10,337)
Net proceeds of debt 179,968 120,496
Dividends (16,429) (16,745)
Net cash provided by financing
activities 133,958 93,414
Effect of exchange rate changes on cash 1,455 (1,035)
Net increase (decrease) in cash and
cash equivalents 13,713 (29,541)
Cash and cash equivalents at
beginning of year 30,488 68,997
Cash and cash equivalents at
end of year $ 44,201 $ 39,456