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
For the quarterly period ended September 30, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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 (IRS Employer
jurisdiction of Identification No.)
incorporation)
17325 Euclid Avenue, Cleveland, Ohio 44112
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (216) 531-3000
Indicate by check mark whether 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, and (2) has been subject to such
filing requirements for the past 90 days.
Yes X . No .
Number of Common Shares outstanding at September 30, 1994 48,981,132
The Exhibit Index appears on sequential page 13.
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PARKER-HANNIFIN CORPORATION
INDEX
Page Nos.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statement of Income -
Three Months Ended September 30, 1994
and 1993 3
Consolidated Balance Sheet -
September 30, 1994 and June 30, 1994 4
Consolidated Statement of Cash Flows -
Three Months Ended September 30, 1994
and 1993 5
Business Segment Information by Industry -
Three Months Ended September 30, 1994
and 1993 6
Notes to Consolidated Financial Statements 7-8
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 9-10
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a 11
Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K 11
EXHIBIT 10* - Material Contract: Volume Incentive Plan
for Fiscal Year 1995 14
EXHIBIT 11* - Computation of Earnings per Common Share 15
EXHIBIT 27* - Financial Data Schedule 16-17
*Numbered in accordance with Item 601 of Regulation S-K.
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PART I - FINANCIAL INFORMATION
PARKER-HANNIFIN CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(Dollars in thousands, except per share amounts)
(Unaudited)
Three Months Ended
September 30,
1994 1993
Net sales $ 712,457 $ 607,411
Cost of sales 550,527 494,054
Gross profit 161,930 113,357
Selling, general and administrative expenses 81,535 72,770
Provision for business restructuring activities 1,661
Income from operations 80,395 38,926
Other income (deductions):
Interest expense (7,224) (11,611)
Interest and other income, net 188 1,949
(7,036) (9,662)
Income before income taxes 73,359 29,264
Income taxes 29,710 13,199
Net income $ 43,649 $ 16,065
Earnings per share $ .89 $ .33
Cash dividends per common share $ .25 $ .24
See accompanying notes to consolidated financial statements.
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PARKER-HANNIFIN CORPORATION
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
September 30, June 30,
1994 1994
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $ 33,905 $ 81,590
Accounts receivable, net 422,441 388,515
Inventories:
Finished products 259,016 245,068
Work in process 171,606 171,114
Raw materials 83,659 76,748
514,281 492,930
Prepaid expenses 13,247 14,263
Deferred income taxes 40,217 41,056
Total current assets 1,024,091 1,018,354
Plant and equipment 1,681,756 1,621,828
Less accumulated depreciation 930,824 904,528
750,932 717,300
Other assets 201,151 177,136
Total assets $ 1,976,174 $ 1,912,790
LIABILITIES
Current liabilities:
Notes payable $ 53,984 $ 26,973
Accounts payable, trade 166,626 181,148
Accrued liabilities 228,432 238,682
Accrued domestic and foreign taxes 76,177 57,641
Total current liabilities 525,219 504,444
Long-term debt 252,880 257,259
Pensions and other postretirement benefits 173,874 169,081
Deferred income taxes 8,578 8,052
Other liabilities 7,454 7,603
Total liabilities 968,005 946,439
SHAREHOLDERS' EQUITY
Serial preferred stock, $.50 par value;
authorized 3,000,000 shares; none issued -- --
Common stock, $.50 par value; authorized
150,000,000 shares; issued 49,267,533 shares at
September 30 and 49,265,074 shares at June 30 24,634 24,633
Additional capital 166,603 165,942
Retained earnings 837,645 806,240
Deferred compensation related to guarantee
of ESOP debt (25,697) (25,697)
Currency translation adjustment 11,689 2,538
1,014,874 973,656
Less treasury shares, at cost: 286,401 shares
at September 30 and 325,371 shares at June 30 (6,705) (7,305)
Total shareholders' equity 1,008,169 966,351
Total liabilities and shareholders' equity $ 1,976,174 $ 1,912,790
See accompanying notes to consolidated financial statements.
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PARKER-HANNIFIN CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Three Months Ended
September 30,
1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 43,649 $ 16,065
Adjustments to reconcile net income to
net cash provided by operations:
Depreciation 27,621 27,151
Amortization 1,806 1,272
Deferred income taxes 1,225 (3,576)
Foreign currency transaction (gain) loss (847) 1,917
Loss (gain) on sale of plant and equipment 79 (135)
Provision for restructuring (1,418) (6,192)
Changes in assets and liabilities:
Accounts receivable (14,423) 3,070
Inventories (4,282) 6,796
Prepaid expenses 1,824 352
Other assets (2,903) (2,523)
Accounts payable, trade (22,793) 2,684
Accrued payrolls and other compensation (9,544) (13,204)
Accrued domestic and foreign taxes 17,655 5,980
Other accrued liabilities (2,433) 9,127
Pensions and other postretirement benefits 3,964 6,485
Other liabilities (1,229) (375)
Net cash provided by operating activities 37,951 54,894
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions (excluding cash of $4,825 in 1994) (72,192)
Capital expenditures (27,565) (20,353)
Proceeds from sale of plant and equipment 1,640 679
Other 4,691 916
Net cash used in investing activities (93,426) (18,758)
CASH FLOWS FROM FINANCING ACTIVITIES
Exercise of stock options 728 651
Proceeds from notes payable, net 23,735 9,829
Proceeds from long-term borrowings 10,044 282
Payments of long-term borrowings (15,151) (2,348)
Dividends (12,244) (11,667)
Net cash provided by (used in)
financing activities 7,112 (3,253)
Effect of exchange rate changes on cash 678 (386)
Net (decrease) increase in cash and
cash equivalents (47,685) 32,497
Cash and cash equivalents at beginning of year 81,590 159,985
Cash and cash equivalents at end of period $ 33,905 $ 192,482
See accompanying notes to consolidated financial statements.
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PARKER-HANNIFIN CORPORATION
BUSINESS SEGMENT INFORMATION BY INDUSTRY
(Dollars in thousands)
(Unaudited)
Parker operates in two industry segments: Industrial and Aerospace.
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, and
agricultural and military machinery and equipment. Sales are direct to
major original equipment manufacturers (OEMs) and through a broad
distribution network to smaller OEMs and the aftermarket. This segment has
manufacturing facilities located in North America and numerous
International countries.
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, cryogenic
and fuel applications. This segment has manufacturing facilities located
in North America.
Results by Business Segment:
Three Months Ended
September 30,
1994 1993
Net sales, including intersegment sales:
Industrial:
North America $ 411,021 $ 346,350
International 170,151 118,428
Aerospace 131,381 142,723
Intersegment sales (96) (90)
Total $ 712,457 $ 607,411
Income (loss) from operations before corporate
general and administrative expenses:
Industrial:
North America $ 61,273 $ 41,674
International 12,920 (5,591)
Aerospace 15,932 12,644
Total 90,125 48,727
Corporate general and administrative expenses 9,730 9,801
Income from operations $ 80,395 $ 38,926
See accompanying notes to consolidated financial statements.
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PARKER-HANNIFIN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Dollars in thousands, except per share amounts
_______________________
1. Management Representation
In the opinion of the Company, the accompanying unaudited
consolidated financial statements contain all adjustments
(consisting of only normal recurring accruals) necessary to present
fairly the financial position as of September 30, 1994, the results
of operations for the three months ended September 30, 1994 and 1993
and cash flows for the three months then ended.
2. Earnings per share
Primary earnings per share are computed using the weighted average
number of shares of common stock and common stock equivalents
outstanding during the period. Fully diluted earnings per share are
not presented because such dilution is not material.
3. Acquisitions
On August 1, 1994, the Company acquired the Automation Division of
Atlas Copco AB, a Swedish manufacturer of pneumatic components for a
variety of automation markets for $37 million in cash.
On September 30, 1994, the Company acquired Chomerics Inc., a
leading producer of electromagnetic interference-shielding materials
and thermal interface products for commercial-electronics and
defense-electronics applications for approximately $40 million in
cash. Chomerics has manufacturing facilities in the U.S. and the U.K.
On October 31, 1994, the Company acquired Symetrics, Inc., a
manufacturer of aerospace quick-disconnect valved couplings, for
108,680 shares of Parker-Hannifin Common Stock. Symetrics is
located in California.
These acquisitions were accounted for by the purchase method, and
the accompanying statements include their results of operations
since the respective dates of acquisition. Sales for these
operations for their most recent fiscal year prior to acquisition
exceeded $98 million.
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<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
4. Business Segment Information by Industry
The Business Segment Information by Industry did not previously
disclose the breakdown of the Industrial Segment between North
America and International. A comparable breakdown of the fiscal
1994 quarterly information follows:
<TABLE>
<S> <C> <C> <C> <C> <C>
First Second Third Fourth Total
Fiscal 1994 - Industrial Segment Quarter Quarter Quarter Quarter Year
Net sales, including intersegment sales:
North America $ 346,350 $ 342,068 $ 399,954 $ 410,240 $ 1,498,612
International 118,428 115,919 140,650 154,894 529,891
Income from operations before corporate
general and administrative expenses:
North America $ 41,674 $ 41,491 $ 51,524 $ 70,089 $ 204,778
International (5,591) (10,042) (6,324) 4,455 (17,502)
</TABLE>
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<PAGE>
PARKER-HANNIFIN CORPORATION
FORM 10-Q
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1994
AND COMPARABLE PERIOD ENDED SEPTEMBER 30, 1993
CONSOLIDATED STATEMENT OF INCOME
Net sales for the first quarter of fiscal 1995 increased 17.3 percent
to $712.5 million from $607.4 million for the first quarter of fiscal
1994. Without the effect of acquisitions or divestitures the increase
would have been 15.9 percent. Strongly improved industrial sales in
North America and the beginning of an industrial recovery in Europe
provided increased sales worldwide in the industrial, farm and
construction equipment, and heavy-duty truck markets.
Income from operations increased 106.5 percent to $80.4 million and as
a percent of sales increased to 11.3 percent from 6.4 percent compared
to the prior-year quarter. Cost of sales, as a percent of sales,
decreased to 77.3 percent from 81.3 percent. Selling, general and
administrative expenses, as a percent of sales, decreased to 11.4
percent from 12.0 percent. These improvements are the result of the
benefits achieved from prior years' restructuring activities and the
positive effects of higher production levels in relation to fixed
costs.
The fiscal 1994 first quarter results included a Provision for
business restructuring activities amounting to $1.7 million. This
provision was for employment reductions, plant closings and
relocations, and write-offs of related capital assets primarily for
the European Industrial operations. The Company incurred no material
restructuring charges in the first quarter of the current year.
The effective income tax rate for the first quarter of fiscal 1995 is
40.5 percent. This compares to a rate of 39.6 percent for fiscal
1994, computed after eliminating the effect of a one-time charge of
$1.6 million for tax law changes in Germany and the United States.
Net Income increased 171.7 percent to $43.6 million compared to the
prior year, and increased to 6.1 percent of sales compared to 2.6
percent for the prior-year quarter.
Backlog increased to $869.9 million at September 30, 1994 compared to
$810.2 million the prior year, and $852.5 million at June 30, 1994.
The increases occurred within the Industrial Segment, while Aerospace
backlog remained steady.
RESULTS BY BUSINESS SEGMENT
Net sales of the Industrial Segment increased 25.0 percent to $581.2
million compared to $464.8 million the prior year. North America
sales increased 18.7 percent while International sales increased 43.7
percent. Without the effects of currency rate changes, International
sales would have increased approximately 36 percent. The increased
sales are the result of increased shipments in the industrial, farm
and construction equipment, and heavy-duty truck markets as well as
gains made in market share. The sales levels achieved in the first
quarter are expected to continue throughout the fiscal year.
Operating income for the Industrial Segment increased 105.6 percent to
$74.2 million. North America increased 47.0 percent while
International moved from a loss to income of $12.9 million. Operating
income for the quarter, as a percent of sales, improved to 12.8
percent from 7.8 percent compared to the prior year. The higher
margins are the result of increased volume and the benefits from
previous restructuring efforts. No further restructuring charges are
anticipated and the improved margin levels are expected to continue.
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<PAGE>
Industrial Segment backlog increased 32.0 percent compared to a year
ago, and 4.7 percent since June 30, 1994. North America backlog
increased 26.2 percent and International backlog increased 56.0
percent from the prior year. International backlog increased 15.0
percent since June 30, 1994, further reflecting the recovery occurring
in International markets.
Net sales of the Aerospace Segment were down 7.9 percent for the
quarter. A portion of the decrease in sales is the result of
divesting the Metal Bellows operations in the fourth quarter of fiscal
1994. The remaining decrease is the result of reduced original
equipment shipments compared to the prior year quarter.
In spite of the decreased sales, Income from operations increased 26.0
percent and Income from operations as a percent of sales increased to
12.1 percent from 8.9 percent. The Aerospace Segment has carried out
a substantial downsizing over the past several years to adjust to the
changing markets. These actions have helped the Segment to achieve
improved margin levels which are expected to continue. No further
restructuring charges are anticipated.
Backlog for the Aerospace Segment decreased 4.3 percent compared to a
year ago, but increased slightly since June 30, 1994. The order-entry
rate for the Aerospace Segment has been growing in recent months,
although a substantial portion of the resulting sales will occur
beyond fiscal 1995.
BALANCE SHEET
Working capital decreased to $498.9 million at September 30, 1994 from
$513.9 million at June 30, 1994, with the ratio of current assets to
current liabilities decreasing slightly to 1.9 to 1. This decrease is
primarily the result of a $47.7 million decrease in Cash and cash
equivalents and a $27.0 million increase in Notes payable, offset by
increases in Accounts receivable, net and Inventories. Accounts
receivable, net increased $33.9 million from June 30, 1994, $15.6
million of which was due to acquisitions, with the remainder due to
increased volume and a slight increase in days sales outstanding.
Inventories increased $21.4 million since June 30, 1994, of which
$13.1 million is the result of acquisitions. Increases in Plant and
equipment and Other assets since June 30, 1994 are also the result of
acquisitions.
The debt to debt-equity ratio, excluding the effect of the ESOP loan
guarantee on both Long-term debt and Shareholders' equity, increased
to 21.4 percent at September 30, 1994 from 20.7 percent at June 30,
1994, principally due to the increase in Notes payable.
STATEMENT OF CASH FLOWS
Net cash provided by operating activities was $38.0 million and $54.9
million for the three months ended September 30, 1994 and 1993,
respectively. Net income, adjusted for non-cash items included
therein, provided $72.1 million net cash in fiscal 1995 compared to
$36.5 million in the same three months of fiscal 1994. This
additional net cash provided was more than offset by changes in the
principal working capital items - Accounts receivable, Inventories,
and Accounts payable, trade - which used net cash of $41.5 million in
fiscal 1995 compared to providing cash of $12.6 million in the same
three months of fiscal 1994.
Net cash used in investing activities increased to $93.4 million in
fiscal 1995 compared to $18.8 million in fiscal 1994, as Acquisitions
used net cash of $72.2 million. Also, net cash used for Capital
expenditures increased $7.2 million in fiscal 1995.
Financing activities provided net cash of $7.1 million and used net
cash of $3.3 million for the three months ended September 30, 1994 and
1993, respectively. The net cash provided was due to an increase in
notes payable which provided $23.7 million cash in fiscal 1995
compared to $9.8 million in fiscal 1994. Payments of long-term
borrowings, net of proceeds from long-term borrowings, used an
additional $3.0 million net cash in fiscal 1995 compared to the same
three months of fiscal 1994.
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<PAGE>
PARKER-HANNIFIN CORPORATION
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
(a) The Annual Meeting of the Shareholders of the Registrant was
held on October 26, 1994.
(b) Not applicable.
(c) (i) The Shareholders elected four directors to the three-
year class whose term of office will expire in 1997 as
follows:
Votes For Votes Withheld
Duane E. Collins 43,103,774 234,338
Allen H. Ford 43,102,627 235,485
Allan L. Rayfield 43,105,376 232,736
Paul G. Schloemer 43,078,537 259,575
(ii) The Shareholders approved the appointment of Coopers &
Lybrand as auditors of the Corporation for the fiscal
year ending June 30, 1995 as follows:
For 43,016,771
Against 157,226
Abstain 164,115
(d) Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) The following document is furnished as an exhibit and
numbered pursuant to Item 601 of Regulation S-K:
Exhibit 10 - Volume Incentive Plan for Fiscal Year 1995
Exhibit 11 - Statement regarding computation of per share earnings.
Exhibit 27 - Financial Data Schedule
(b) No reports on Form 8-K have been filed during the quarter for
which this Report is filed.
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<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PARKER-HANNIFIN CORPORATION
(Registrant)
Michael J. Hiemstra
Michael J. Hiemstra
Vice President - Finance and Administration
Date: November 11, 1994
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<PAGE>
EXHIBIT INDEX
Sequential
Exhibit No. Description of Exhibit Page
10 Volume Incentive Plan for
Fiscal Year 1995 * 14
11 Computation of Earnings
Per Common Share 15
27 Financial Data Schedule 16
* A management compensation plan.
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<PAGE>
EXHIBIT 10
PARKER-HANNIFIN CORPORATION
FORM 10-Q
FOR FISCAL QUARTER ENDED
SEPTEMBER 30, 1994
VOLUME INCENTIVE PLAN
FOR FISCAL YEAR 1995
Participants: All Group Presidents, Trading Subsidiary Presidents and
Group Operating Vice Presidents
Terms: Participants will receive a bonus of 5 percent of base pay for
each 1 percent increase, in excess of a 7.5 percent increase,
in fiscal year 1995 customer sales for their respective operations
over fiscal year 1994 customer sales. Acquisitions may only
account for up to 5 percent of the increase in customer sales.
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<PAGE>
EXHIBIT 11
PARKER-HANNIFIN CORPORATION
FORM 10-Q
COMPUTATION OF EARNINGS PER COMMON SHARE
(Dollars in thousands, except per share amounts)
(Unaudited)
Three Months Ended
September 30,
1994 1993
Net income (loss) applicable to common shares $ 43,649 $ 16,065
Weighted average common shares outstanding
for the period 48,968,837 48,616,195
Increase in weighted average from dilutive
effect of exercise of stock options 336,702 204,623
Weighted average common shares, assuming
issuance of the above securities 49,305,539 48,820,818
Earnings per common share:
Primary $ .89 $ .33
Fully diluted (A) $ .89 $ .33
(A) This calculation is submitted in accordance with Regulation S-K
Item 601(b)(11) although not required for income statement
presentation because it results in dilution of less than 3 percent.
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<PAGE>
EXHIBIT 27
PARKER-HANNIFIN CORPORATION
FORM 10-Q
FINANCIAL DATA SCHEDULE
(Dollars in thousands, except per share amounts)
(Unaudited)
[ARTICLE] 5
[LEGEND]
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
PARKER-HANNIFIN CORPORATION'S REPORT ON FORM 10-Q FOR ITS QUARTERLY PERIOD
ENDED SEPTEMBER 30, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
[MULTIPLIER] 1,000
<TABLE>
<S> <C>
[PERIOD-TYPE] QTR-1
[FISCAL-YEAR-END] JUN-30-1995
[PERIOD-END] SEP-30-1994
[CASH] 33,905
[SECURITIES] 0
[RECEIVABLES] 376,975
[ALLOWANCES] 5,130
[INVENTORY] 514,281
[CURRENT-ASSETS] 1,024,091
[PP&E] 1,681,756
[DEPRECIATION] 930,824
[TOTAL-ASSETS] 1,976,174
[CURRENT-LIABILITIES] 525,219
[BONDS] 273,097
[COMMON] 24,634
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[OTHER-SE] 983,535<F1>
[TOTAL-LIABILITY-AND-EQUITY] 1,976,174
[SALES] 712,457
[TOTAL-REVENUES] 712,457
[CGS] 550,527
[TOTAL-COSTS] 550,527
[OTHER-EXPENSES] 0
[LOSS-PROVISION] 483
[INTEREST-EXPENSE] 7,224
[INCOME-PRETAX] 73,359
[INCOME-TAX] 29,710
[INCOME-CONTINUING] 43,649
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<PAGE>
FINANCIAL DATA SCHEDULE (continued)
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] 43,649
[EPS-PRIMARY] .89
[EPS-DILUTED] .89
<FN>
<F1>Other Stockholders' Equity includes:
Additional capital 166,603
Retained earnings 837,645
Deferred compensation related to
guarantee of ESOP debt (25,697)
Foreign currency translation adjustment 11,689
Common stock in treasury at cost (6,705)
Total 983,535
</FN>
</TABLE>
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