UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
| x |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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| For the quarterly period ended March 31, 2004
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| OR
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| ¨ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
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| For the transition period from to |
Commission File number 1-4982
PARKER-HANNIFIN CORPORATION
(Exact name of registrant as specified in its charter)
| OHIO | 34-0451060 | |
| (State or other jurisdiction of | (IRS Employer | |
| incorporation or organization) | Identification No.) |
| 6035 Parkland Blvd., Cleveland, Ohio | 44124-4141 | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code:
(216) 896-3000
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨
Number of Common Shares outstanding at March 31, 2004 119,556,112
PART I—FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PARKER-HANNIFIN CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(Dollars in thousands, except per share amounts)
(Unaudited)
| Three Months Ended March 31, |
Nine Months Ended March 31, | |||||||||||
| 2004 |
2003 |
2004 |
2003 | |||||||||
| Net sales |
$ | 1,906,041 | $ | 1,646,844 | $ | 5,113,980 | $ | 4,749,949 | ||||
| Cost of sales |
1,544,150 | 1,368,430 | 4,174,570 | 3,927,147 | ||||||||
| Gross profit |
361,891 | 278,414 | 939,410 | 822,802 | ||||||||
| Selling, general and |
201,464 | 182,378 | 571,758 | 535,775 | ||||||||
| Interest expense |
17,262 | 20,349 | 56,384 | 59,399 | ||||||||
| Other expense, net |
690 | 1,731 | 2,809 | 3,935 | ||||||||
| Income before income taxes |
142,475 | 73,956 | 308,459 | 223,693 | ||||||||
| Income taxes |
34,627 | 25,293 | 88,149 | 76,503 | ||||||||
| Net income |
$ | 107,848 | $ | 48,663 | $ | 220,310 | $ | 147,190 | ||||
| Earnings per share—Basic |
$ | .91 | $ | .42 | $ | 1.87 | $ | 1.27 | ||||
| Earnings per share—Diluted |
$ | .90 | $ | .42 | $ | 1.85 | $ | 1.26 | ||||
| Cash dividends per common share |
$ | .19 | $ | .19 | $ | .57 | $ | .55 | ||||
See accompanying notes to consolidated financial statements.
2
PARKER-HANNIFIN CORPORATION
CONSOLIDATED BALANCE SHEET
(Dollars in thousands, except per share amounts)
(Unaudited)
| March 31, 2004 |
June 30, 2003 |
|||||||
| ASSETS |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 169,956 | $ | 245,850 | ||||
| Accounts receivable, net |
1,190,598 | 1,002,060 | ||||||
| Inventories: |
||||||||
| Finished products |
469,315 | 475,057 | ||||||
| Work in process |
387,985 | 399,574 | ||||||
| Raw materials |
127,600 | 122,536 | ||||||
| 984,900 | 997,167 | |||||||
| Prepaid expenses |
39,192 | 51,949 | ||||||
| Deferred income taxes |
108,409 | 99,781 | ||||||
| Total current assets |
2,493,055 | 2,396,807 | ||||||
| Plant and equipment |
3,673,042 | 3,536,783 | ||||||
| Less accumulated depreciation |
2,044,334 | 1,879,358 | ||||||
| 1,628,708 | 1,657,425 | |||||||
| Goodwill |
1,240,269 | 1,108,610 | ||||||
| Intangible assets, net |
58,474 | 59,444 | ||||||
| Other assets |
810,295 | 763,347 | ||||||
| Total assets |
$ | 6,230,801 | $ | 5,985,633 | ||||
| LIABILITIES |
||||||||
| Current liabilities: |
||||||||
| Notes payable |
$ | 165,448 | $ | 424,235 | ||||
| Accounts payable, trade |
501,899 | 437,103 | ||||||
| Accrued liabilities |
525,060 | 497,295 | ||||||
| Accrued domestic and foreign taxes |
139,009 | 65,094 | ||||||
| Total current liabilities |
1,331,416 | 1,423,727 | ||||||
| Long-term debt |
968,326 | 966,332 | ||||||
| Pensions and other postretirement benefits |
955,201 | 920,420 | ||||||
| Deferred income taxes |
21,643 | 20,780 | ||||||
| Other liabilities |
163,551 | 133,463 | ||||||
| Total liabilities |
3,440,137 | 3,464,722 | ||||||
| SHAREHOLDERS’ EQUITY |
||||||||
| Serial preferred stock, $.50 par value; |
— | — | ||||||
| Common stock, $.50 par value; authorized |
59,853 | 59,143 | ||||||
| Additional capital |
432,776 | 389,021 | ||||||
| Retained earnings |
2,737,733 | 2,584,268 | ||||||
| Unearned compensation related to guarantee of ESOP debt |
(51,736 | ) | (63,418 | ) | ||||
| Deferred compensation related to stock options |
2,347 | 2,347 | ||||||
| Accumulated other comprehensive (loss) |
(383,820 | ) | (445,982 | ) | ||||
| 2,797,153 | 2,525,379 | |||||||
| Less treasury shares, at cost: |
(6,489 | ) | (4,468 | ) | ||||
| Total shareholders’ equity |
2,790,664 | 2,520,911 | ||||||
| Total liabilities and shareholders’ equity |
$ | 6,230,801 | $ | 5,985,633 | ||||
See accompanying notes to consolidated financial statements.
3
PARKER-HANNIFIN CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
| Nine Months Ended March 31, |
||||||||
| 2004 |
2003 |
|||||||
| CASH FLOWS FROM OPERATING ACTIVITIES |
||||||||
| Net income |
$ | 220,310 | $ | 147,190 | ||||
| Adjustments to reconcile net income to net cash provided by operations: |
||||||||
| Depreciation |
183,195 | 182,334 | ||||||
| Amortization |
6,464 | 8,684 | ||||||
| Deferred income taxes |
(32,858 | ) | 46,472 | |||||
| Foreign currency transaction (gain) loss |
754 | 4,309 | ||||||
| Loss on sale of plant and equipment |
1,990 | 3,457 | ||||||
| Changes in assets and liabilities: |
||||||||
| Accounts receivable, net |
(109,093 | ) | 41,989 | |||||
| Inventories |
90,669 | 49,911 | ||||||
| Prepaid expenses |
16,640 | 6,436 | ||||||
| Other assets |
(41,468 | ) | (73,682 | ) | ||||
| Accounts payable, trade |
42,994 | (59,703 | ) | |||||
| Accrued payrolls and other compensation |
(438 | ) | (13,156 | ) | ||||
| Accrued domestic and foreign taxes |
89,573 | (5,585 | ) | |||||
| Other accrued liabilities |
(4,004 | ) | 4,546 | |||||
| Pensions and other postretirement benefits |
7,664 | 1,638 | ||||||
| Other liabilities |
32,094 | (18,672 | ) | |||||
| Net cash provided by operating activities |
504,486 | 326,168 | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES |
||||||||
| Acquisitions (less cash acquired of $63,054 in 2004 and $7 in 2003) |
(201,101 | ) | (1,999 | ) | ||||
| Capital expenditures |
(102,735 | ) | (112,863 | ) | ||||
| Proceeds from sale of plant and equipment |
16,103 | 10,595 | ||||||
| Other |
10,997 | 3,127 | ||||||
| Net cash (used in) investing activities |
(276,736 | ) | (101,140 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES |
||||||||
| Net proceeds from common share activity |
42,443 | 3,091 | ||||||
| Proceeds from (payments of) notes payable, net |
114,857 | (384,535 | ) | |||||
| Proceeds from long-term borrowings |
19,148 | 258,981 | ||||||
| Payments of long-term borrowings |
(411,870 | ) | (34,494 | ) | ||||
| Dividends |
(66,845 | ) | (63,739 | ) | ||||
| Net cash (used in) financing activities |
(302,267 | ) | (220,696 | ) | ||||
| Effect of exchange rate changes on cash |
(1,377 | ) | 1,980 | |||||
| Net (decrease) increase in cash and cash equivalents |
(75,894 | ) | 6,312 | |||||
| Cash and cash equivalents at beginning of year |
245,850 | 46,384 | ||||||
| Cash and cash equivalents at end of period |
$ | 169,956 | $ | 52,696 | ||||
See accompanying notes to consolidated financial statements.
4
PARKER-HANNIFIN CORPORATION
BUSINESS SEGMENT INFORMATION BY INDUSTRY
(Dollars in thousands)
(Unaudited)
The Company operates in two principal business segments: Industrial and Aerospace. The Industrial Segment is the largest and includes a significant portion of International operations.
Industrial—This segment produces a broad range of motion control and fluid systems and components used in all kinds of manufacturing, packaging, processing, transportation, mobile construction, agricultural and military machinery and equipment. Sales are made directly to major original equipment manufacturers (OEMs) and through a broad distribution network to smaller OEMs and the aftermarket.
Aerospace—This segment designs and manufactures products and provides aftermarket support for commercial, military and general aviation aircraft, missile and spacecraft markets. The Aerospace Segment provides a full range of systems and components for hydraulic, pneumatic and fuel applications.
The Company also reports a Climate & Industrial Controls Segment and an Other Segment. The Climate & Industrial Controls Segment manufactures motion-control systems and components for use primarily in the refrigeration and air conditioning and transportation industries. The Other Segment consists of a business unit which designs and manufactures custom-engineered buildings and a business unit which develops and manufactures chemical car care and industrial products.
Certain prior period amounts have been reclassified to conform to the current year presentation.
Business Segment Results by Industry
| Three Months Ended March 31, |
Nine Months Ended March 31, | |||||||||||
| 2004 |
2003 |
2004 |
2003 | |||||||||
| Net sales |
||||||||||||
| Industrial: |
||||||||||||
| North America |
$ | 836,136 | $ | 727,060 | $ | 2,224,548 | $ | 2,124,542 | ||||
| International |
541,670 | 416,434 | 1,405,333 | 1,156,014 | ||||||||
| Aerospace |
293,718 | 280,020 | 832,524 | 832,741 | ||||||||
| Climate & Industrial Controls |
181,173 | 175,132 | 481,820 | 484,273 | ||||||||
| Other |
53,344 | 48,198 | 169,755 | 152,379 | ||||||||
| Total |
$ | 1,906,041 | $ | 1,646,844 | $ | 5,113,980 | $ | 4,749,949 | ||||
| Segment operating income |
||||||||||||
| Industrial: |
||||||||||||
| North America |
$ | 93,154 | $ | 42,166 | $ | 192,630 | $ | 120,634 | ||||
| International |
42,869 | 23,852 | 103,770 | 72,819 | ||||||||
| Aerospace |
37,077 | 38,140 | 101,855 | 123,324 | ||||||||
| Climate & Industrial Controls |
21,432 | 19,409 | 49,405 | 44,386 | ||||||||
| Other |
2,708 | 630 | 12,604 | 6,942 | ||||||||