Parker Hannifin Reports Increased Second Quarter Sales
19 January 1999
Parker Hannifin Reports Increased Second Quarter Sales
CLEVELAND--Jan. 19, 1999--Parker Hannifin Corporation reported second quarter sales of $1.20 billion, 7.5 percent higher than the $1.11 billion in last year's record period ending Dec. 31. Almost half of the increase was due to acquisitions completed within the past 12 months. Net income for the recent quarter was $63.5 million or $.58 per diluted share, 10.9 percent lower than the $71.3 million or $.63 per diluted share reported a year ago. In addition to less favorable operating performance, especially in Industrial North America, a rise in interest expense associated with higher debt levels contributed to the decline in net income.President and CEO Duane E. Collins said, "Parker's businesses are experiencing a mix of varying market conditions. While our aerospace business and some industrial markets such as heavy duty trucks and telecommunications equipment remained steady, softness was evident in several areas. Among these were agricultural equipment, semiconductor fabrication and automation, with continuing uncertainties in Asia and Latin America, especially Brazil."
Parker first-half sales for fiscal 1999 were $2.42 billion, compared with $2.20 billion in the prior year period, an increase of 10.0 percent. Acquisitions accounted for nearly half of the increase. First-half net income was $141.6 million or $1.29 per diluted share compared with $149.6 million or $1.33 per diluted share, a decline of 5.3 percent from the year earlier period.
Backlog at December 31 was $1.61 billion versus $1.64 billion a year earlier. The flat level of backlog reflects the slowing of orders as many customers are making adjustments to the current economic environment.
Commenting on the Segment results, Collins said, North American Industrial sales increased 2.3 percent for the second quarter and 4.7 percent for the first half. Acquisitions accounted for all of the increase in the quarter and four-fifths of the increase in the first six months. Operating income declined 21.1 percent in the quarter, and 16.0 percent for the half, compared with the previous year's periods. The decline in operating income is attributed to the effect of lower volume in several markets particularly in the agricultural market, where customer order rates have declined the most, and the semiconductor fabrications market. Also contributing to the decline was a less favorable product mix with a greater percentage of sales being made in some of our lower margin businesses, and the operating impact of integrating recent acquisitions. It is not unusual for the operating income contribution from recent acquisitions to be minimal during the integration phase.
"International Industrial sales rose 11.1 percent in the second quarter and 14.2 percent for the first half, with over two-thirds of the increases due to acquisitions. Operating income was 18.7 percent above the previous year's quarter, and 23.4 percent higher for the first six months. The favorable results reflect higher volume in Europe as well as a more favorable product mix.
"Aerospace Segment reported second quarter sales were 16.4 percent higher than the prior year, while first-half sales were 18.5 percent ahead of the previous year. Aerospace operating income was 18.1 percent higher than last year's second quarter, and 19.2 percent above the prior year's first half. Continuing strong commercial aircraft deliveries accounted for much of the sales and operating income growth.
Collins said, "Our outlook for the remainder of the year is cautious. The present swings in financial markets, declining order rates and changing customer expectations make it difficult to speculate as to the rest of the year.
"In the meantime, Parker will continue to emphasize customer service, reduce costs, tighten inventories and reduce employment levels where appropriate."
Parker Hannifin is a leading diversified global manufacturer of motion, control, instrumentation and fluid flow components and systems for thousands of industrial and aerospace markets. For more information about Parker, visit the Company Web site at www.parker.com.
PARKER HANNIFIN CORPORATION - DECEMBER 31, 1998
CONSOLIDATED STATEMENT OF INCOME
Unaudited
(Dollars in thousands Three Months Ended December 31,
except per share amounts) 1998 1997
Net sales $ 1,199,021 $ 1,114,948
Cost of sales 943,167 862,209
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Gross profit 255,854 252,739
Selling, general and
administrative expenses 141,370 132,961
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Income from operations 114,484 119,778
Other income (deductions):
Interest expense (17,341) (13,082)
Interest and other income, net (333) 3,868
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(17,674) (9,214)
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Income before income taxes 96,810 110,564
Income taxes 33,278 39,250
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Net income $ 63,532 $ 71,314
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Earnings per share:
Basic earnings per share $ .59 $ .64
Diluted earnings per share $ .58 $ .63
Average shares outstanding
during period - Basic 108,541,603 111,128,438
Average shares outstanding
during period - Diluted 109,422,212 112,180,937
Cash dividends per common share $ .15 $ .15
PARKER HANNIFIN CORPORATION - DECEMBER 31, 1998
CONSOLIDATED STATEMENT OF INCOME
Unaudited
(Dollars in thousands Six Months Ended December 31,
except per share amounts) 1998 1997
Net sales $ 2,417,745 $ 2,198,117
Cost of sales 1,890,474 1,689,348
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Gross profit 527,271 508,769
Selling, general and
administrative expenses 275,528 258,236
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Income from operations 251,743 250,533
Other income (deductions):
Interest expense (33,416) (23,519)
Interest and other income, net (406) 4,885
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(33,822) (18,634)
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Income before income taxes 217,921 231,899
Income taxes 76,272 82,324
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Net income $ 141,649 $ 149,575
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Earnings per share:
Basic earnings per share $ 1.30 $ 1.34
Diluted earnings per share $ 1.29 $ 1.33
Average shares outstanding
during period - Basic 108,953,828 111,365,904
Average shares outstanding
during period - Diluted 109,775,114 112,318,134
Cash dividends per common share $ .30 $ .30
BUSINESS SEGMENT INFORMATION BY INDUSTRY
Unaudited Three Months Ended December 31,
(Dollars in thousands) 1998 1997
Net sales, including intersegment sales
Industrial:
North America $ 609,074 595,442
International 312,144 280,926
Aerospace 278,232 239,071
Intersegment sales (429) (491)
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Total $ 1,199,021 $ 1,114,948
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Income from operations before corporate
general and administrative expenses
Industrial:
North America $ 65,310 $ 82,781
International 22,178 18,691
Aerospace 41,822 35,405
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Total 129,310 136,877
Corporate general and
administrative expenses 14,826 17,099
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Income from operations $ 114,484 $ 119,778
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BUSINESS SEGMENT INFORMATION BY INDUSTRY
Unaudited Six Months Ended December 31,
(Dollars in thousands) 1998 1997
Net sales, including intersegment sales
Industrial:
North America $ 1,235,963 $ 1,180,941
International 622,514 545,324
Aerospace 560,210 472,625
Intersegment sales (942) (773)
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Total $ 2,417,745 $ 2,198,117
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Income from operations before corporate
general and administrative expenses
Industrial:
North America $ 144,898 $ 172,463
International 47,935 38,842
Aerospace 86,185 72,321
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Total 279,018 283,626
Corporate general and
administrative expenses 27,275 33,093
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Income from operations $ 251,743 $ 250,533
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CONSOLIDATED BALANCE SHEET
Unaudited
(Dollars in thousands)
December 31, 1998 1997
Assets
Current assets:
Cash and cash equivalents $ 39,940 $ 36,681
Accounts receivable, net 661,261 578,433
Inventories 1,011,723 825,042
Prepaid expenses 20,628 15,383
Deferred income taxes 87,567 93,801
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Total current assets 1,821,119 1,549,340
Plant and equipment, net 1,191,294 1,057,168
Other assets 708,939 591,083
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Total assets $ 3,721,352 $ 3,197,591
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Liabilities and shareholders' equity
Current liabilities:
Notes payable $ 350,604 $ 205,733
Accounts payable 282,166 249,975
Accrued liabilities 290,818 302,294
Accrued domestic and foreign taxes 26,266 44,385
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Total current liabilities 949,854 802,387
Long-term debt 634,203 474,436
Pensions and other postretirement
benefits 280,415 256,755
Deferred income taxes 38,055 27,443
Other liabilities 49,078 39,363
Shareholders' equity 1,769,747 1,597,207
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Total liabilities and
shareholders' equity $ 3,721,352 $ 3,197,591
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CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Six Months Ended December 31,
(Dollars in thousands) 1998 1997
Cash flows from operating activities:
Net income $ 141,649 $ 149,575
Depreciation and amortization 104,782 92,985
Net change in receivables,
inventories, and trade payables (41,270) (74,008)
Net change in other assets
and liabilities (74,904) (25,908)
Other, net (7,412) (15,706)
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Net cash provided by
operating activities 122,845 126,938
Cash flows from investing activities:
Acquisitions (less cash acquired of
$2,609 in 1998) (89,865) (143,546)
Capital expenditures (114,650) (112,000)
Other, net 3,409 (70)
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Net cash used in investing activities (201,106) (255,616)
Cash flows from financing activities:
Net payments for common shares
purchased (47,863) (44,732)
Net proceeds of debt 166,295 175,894
Dividends (32,700) (33,407)
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Net cash provided by
financing activities 85,732 97,755
Effect of exchange rate
changes on cash 1,981 (1,393)
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Net increase (decrease) in cash
and cash equivalents 9,452 (32,316)
Cash and cash equivalents at
beginning of period 30,488 68,997
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Cash and cash equivalents at end
of period $ 39,940 $ 36,681
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