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, 1995
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, 1995 74,152,078
<PAGE>
PARKER-HANNIFIN CORPORATION
INDEX
Page Nos.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statement of Income -
Three Months Ended September 30, 1995
and 1994 3
Consolidated Balance Sheet -
September 30, 1995 and June 30, 1995 4
Consolidated Statement of Cash Flows -
Three Months Ended September 30, 1995
and 1994 5
Business Segment Information by Industry -
Three Months Ended September 30, 1995
and 1994 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 8-9
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a 10
Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K 11
EXHIBIT 11* - Computation of Earnings per Common Share 13
EXHIBIT 27* - Financial Data Schedule 14
*Numbered in accordance with Item 601 of Regulation S-K.
- 2 -
<PAGE>
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PARKER-HANNIFIN CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(Dollars in thousands, except per share amounts)
(Unaudited)
Three Months Ended
September 30,
1995 1994
<S> <C> <C>
Net sales $ 839,054 $ 712,457
Cost of sales 645,609 550,527
___________ ___________
Gross profit 193,445 161,930
Selling, general and administrative expenses 97,719 81,535
___________ ___________
Income from operations 95,726 80,395
Other income (deductions):
Interest expense (7,988) (7,224)
Interest and other income, net 3,333 188
___________ ___________
(4,655) (7,036)
___________ ___________
Income before income taxes 91,071 73,359
Income taxes 33,696 29,710
___________ ___________
Net income $ 57,375 $ 43,649
=========== ===========
Earnings per share (A) $ .77 $ .59
Cash dividends per common share (A) $ .180 $ .167
<FN>
(A) Fiscal 1995 per share amounts have been adjusted for the
3-shares-for-2 common stock split paid June 2, 1995.
See accompanying notes to consolidated financial statements.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
PARKER-HANNIFIN CORPORATION
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
September 30, June 30,
1995 1995
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 47,046 $ 63,830
Accounts receivable, net 473,904 484,962
Inventories:
Finished products 319,165 314,180
Work in process 219,274 201,386
Raw materials 111,088 110,340
___________ ___________
649,527 625,906
Prepaid expenses 13,795 14,994
Deferred income taxes 65,685 56,690
___________ _________
Total current assets 1,249,957 1,246,382
Plant and equipment 1,836,881 1,812,667
Less accumulated depreciation 1,014,507 996,896
___________ ___________
822,374 815,771
Other assets 244,730 240,056
___________ ___________
Total assets $ 2,317,061 $ 2,302,209
=========== ===========
LIABILITIES
Current liabilities:
Notes payable $ 108,852 $ 97,372
Accounts payable, trade 194,649 227,482
Accrued liabilities 260,951 280,891
Accrued domestic and foreign taxes 75,116 46,876
___________ ___________
Total current liabilities 639,568 652,621
Long-term debt 236,784 237,157
Pensions and other postretirement benefits 179,146 188,292
Deferred income taxes 20,101 23,512
Other liabilities 7,914 9,113
___________ ___________
Total liabilities 1,083,513 1,110,695
SHAREHOLDERS' EQUITY
Serial preferred stock, $.50 par value;
authorized 3,000,000 shares; none issued -- --
Common stock, $.50 per value; authorized
150,000,000 shares; issued 74,152,078 shares
at September 30 and 74,002,402 shares at
June 30 37,076 37,001
Additional capital 160,146 158,454
Retained earnings 1,018,532 974,486
Deferred compensation related to guarantee
of ESOP debt (13,468) (13,468)
Currency translation adjustment 31,262 35,041
___________ ___________
Total shareholders' equity 1,233,548 1,191,514
Total liabilities and
shareholders' equity $ 2,317,061 $ 2,302,209
=========== ===========
See accompanying notes to consolidated financial statements.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
PARKER-HANNIFIN CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Three Months Ended
September 30,
1995 1994
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 57,375 $ 43,649
Adjustments to reconcile net income to net
cash provided by operations:
Depreciation 31,979 27,621
Amortization 2,722 1,806
Deferred income taxes (5,922) 1,225
Foreign currency translation loss (291) (847)
Loss on sale of plant and equipment (589) 79
Changes in assets and liabilities:
Accounts receivable 9,195 (14,423)
Inventories (21,553) (4,282)
Prepaid expenses 1,071 1,824
Other assets (3,330) (2,903)
Accounts payable, trade (32,827) (22,793)
Accrued payrolls and other compensation (19,741) (9,544)
Accrued domestic and foreign taxes 28,409 17,655
Other accrued liabilities 4,503 (3,851)
Pensions and other postretirement benefits (7,738) 3,964
Other liabilities (1,102) (1,229)
_________ _________
Net cash provided by operating activities 42,161 37,951
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions (excluding cash of $68 in 1995
and $4,825 in 1994) (11,780) (72,192)
Capital expenditures (44,683) (27,565)
Proceeds from sale of plant and equipment 4,323 1,640
Other (5,670) 4,691
_________ _________
Net cash used in investing activities (57,810) (93,426)
CASH FLOWS FROM FINANCING ACTIVITIES
(Payments) proceeds from common share activity (144) 728
Proceeds from notes payable, net 13,640 23,735
Proceeds from long-term borrowings 214 10,044
Payments of long-term borrowings (1,355) (15,151)
Dividends (13,329) (12,244)
_________ _________
Net cash (used in) provided by
financing activities (974) 7,112
Effect of exchange rate changes on cash (161) 678
_________ _________
Net decrease in cash and cash equivalents (16,784) (47,685)
Cash and cash equivalents at beginning of year 63,830 81,590
_________ _________
Cash and cash equivalents at end of period $ 47,046 $ 33,905
========= =========
See accompanying notes to consolidated financial statements.
</TABLE>
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<PAGE>
PARKER-HANNIFIN CORPORATION
BUSINESS SEGMENT INFORMATION BY INDUSTRY
(Dollars in thousands)
(Unaudited)
Parker operates in two industry segments: Industrial and Aerospace. The
Industrial Segment is the largest and includes the 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, 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.
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.
<TABLE>
<CAPTION>
Results by Business Segment:
Three Months Ended
September 30,
1995 1994
<S> <C> <C>
Net sales, including intersegment sales
Industrial:
North America $ 474,073 $ 411,021
International 229,763 170,151
Aerospace 135,331 131,381
Intersegment sales (113) (96)
__________ ___________
Total $ 839,054 $ 712,457
========== ===========
Income from operations before corporate
general and administrative expenses
Industrial:
North America $ 66,562 $ 61,273
International 22,184 12,920
Aerospace 18,379 15,932
__________ __________
Total 107,125 90,125
Corporate general and administrative expenses 11,399 9,730
__________ __________
Income from operations $ 95,726 $ 80,395
========== ==========
See accompanying notes to consolidated financial statements.
</TABLE>
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<PAGE>
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, 1995, the results of operations for the three months
ended September 30, 1995 and 1994 and cash flows for the three months then
ended.
2. Earnings per share
Fiscal 1995 per share amounts have been adjusted for the 3-shares-for-2
common stock split paid June 2, 1995.
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 July 31, 1995 the Company purchased the General Valve Corp. of
Fairfield, New Jersey, a leading producer of miniature solenoid valves for
high-technology applications for approximately 152,000 shares of common
stock. Also on August 4, 1995 the Company purchased inventory and
machinery from Teledyne Fluid Systems consisting of the Republic Valve
product line, the Sprague double-diaphragm pump line and the Sprague
airborne accumulator product line for approximately $5.2 million in cash.
Sales by these operations for their most recent fiscal year prior to
acquisition approximated $16.8 million. These acquisitions were accounted
for by the purchase method.
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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, 1995
AND COMPARABLE PERIOD ENDED SEPTEMBER 30, 1994
CONSOLIDATED STATEMENT OF INCOME
Net sales for the first quarter of fiscal 1996 increased 17.8 percent to
$839.1 million from $712.5 million for the first quarter of fiscal 1995.
Without the effect of acquisitions made within the past twelve months the
increase would have been 10.3 percent. International Industrial business
continued to grow substantially while the growth within North American
Industrial markets began to ease somewhat.
Income from operations increased 19.1 percent to $95.7 million and as a
percent of sales increased to 11.4 percent from 11.3 percent compared to the
prior-year quarter. Cost of sales, as a percent of sales, decreased to 76.9
percent from 77.3 percent as a result of the continuing benefits from prior
years' restructuring activities and the positive effects of higher production
levels in relation to fixed costs. Selling, general and administrative
expenses, as a percent of sales, increased slightly to 11.6 percent from
11.4 percent as a result of increased sales and marketing efforts primarily
within International markets.
The effective income tax rate for the first quarter of fiscal 1996 was
37.0 percent compared to a rate of 40.5 percent for the first quarter of
fiscal 1995. The lower rate in fiscal 1996 is due to the continuing benefit
realized from the use of net operating loss carry-forwards and a change in the
anticipated geographic mix of earnings.
Net Income increased 31.4 percent to $57.4 million compared to the prior year,
and increased to 6.8 percent of sales compared to 6.1 percent for the prior-
year quarter.
Backlog increased to $1,029.9 million at September 30, 1995 compared to
$869.9 million the prior year, and $1,025.7 million at June 30, 1995. The
Aerospace Segment has experienced a steady increase in backlog while the
Industrial Segment increased throughout fiscal 1995 but experienced a slight
decrease in the first quarter of fiscal 1996.
RESULTS BY BUSINESS SEGMENT
INDUSTRIAL - Net sales of the Industrial Segment increased 21.1 percent to
$703.8 million compared to $581.2 million the prior year. Industrial North
America sales increased 15.3 percent while Industrial International sales
increased 35.0 percent. Without the effect of acquisitions, North America
sales would have increased 8.6 percent and International sales would have
increased 19.3 percent. Without the effects of currency rate changes
International sales would have increased 27.4 percent. The increased sales
are the result of continuing growth in the industrial, farm and construction
equipment markets as well as gains made in market share. Some Industrial
North America markets are beginning to slow, while International markets
continue to grow. Industrial North America volume is expected to modestly
exceed prior year volume (excluding the effect of acquisitions) while
Industrial International volume is expected to continue to grow.
Operating income for the Industrial Segment increased 19.6 percent to
$88.7 million. Industrial North America increased 8.6 percent while
Industrial International increased 71.7 percent. North America operating
income, as a percent of sales, decreased to 14.0 percent from 14.9 percent
primarily due to accruals recorded in the current period for incentive
compensation that had not been anticipated, and therefore not recorded, during
the first quarter of fiscal 1995. International operating income, as a
percent of sales, improved to 9.7 percent from 7.6 percent as a result of
acquisitions, increased volume and benefits achieved from previous
restructuring efforts.
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<PAGE>
Industrial Segment backlog increased 24.6 percent compared to a year ago, but
decreased 2.7 percent since June 30, 1995. The decrease since June occurred
within North America, while International backlog remained steady.
AEROSPACE - Net sales of the Aerospace Segment were up 3.0 percent for the
quarter as a result of higher volume in commercial spares and the MRO
business. These increases were partially offset by continuing declines in
the military business.
Income from operations increased 15.4 percent and Income from operations as a
percent of sales increased to 13.6 percent from 12.1 percent. This margin
improvement is due to the product mix moving increasingly toward the
commercial product lines and increased repair and overhaul activity, in
addition to the continuing benefits being realized from prior years'
restructuring activities.
Management expects the Aerospace Segment to continue the trend of increasing
volume and higher margins. Backlog for the Aerospace Segment increased 14.4
percent compared to a year ago, and 2.8 percent since June 30, 1995.
BALANCE SHEET
Working capital increased to $610.4 million at September 30, 1995 from
$593.8 million at June 30, 1995, with the ratio of current assets to current
liabilities increasing slightly to 2.0 to 1 from 1.9 to 1. An increase of
$23.6 million in Inventories and decreases in Accounts payable, trade of
$32.8 million and Accrued liabilities of $19.9 million were the primary cause
of the increase. Acquisitions contributed $4.9 million of the increase in
Inventories, but months supply also increased due to planned replenishments of
inventory levels. The decreases in Accounts payable, trade and Accrued
liabilities were primarily due to heavy purchases of raw material at year end
and liabilities accrued throughout the year which were paid shortly after the
year end.
These increases in working capital were partially offset by decreases in Cash
and cash equivalents of $16.8 million and Accounts receivable, net of
$11.1 million and increases in Accrued domestic and foreign taxes of
$28.2 million and Notes payable of $11.5 million. Days sales outstanding
increased slightly despite the decrease in Accounts receivable.
Acquisitions had only a minor effect on the $6.6 million increase in Plant and
equipment, net. The increase in Other assets is primarily due to an increase
in goodwill from acquisitions.
The debt to debt-equity ratio, excluding the effect of the ESOP loan guarantee
on both Long-term debt and Shareholders' equity, remained at 21.0 percent at
September 30, 1995.
STATEMENT OF CASH FLOWS
Net cash provided by operating activities was $42.2 million and $38.0 million
for the three months ended September 30, 1995 and 1994, respectively. Net
income, adjusted for non-cash items included therein, provided $85.3 million
net cash in fiscal 1996 compared to $73.5 million in the same three months of
fiscal 1995. This additional net cash provided more than offset changes in
the principal working capital items - Accounts receivable, Inventories, and
Accounts payable, trade - which used net cash of $45.2 million in fiscal 1996
compared to $41.5 million in the same three months of fiscal 1995.
Net cash used in investing activities was $57.8 million in fiscal 1996
compared to $93.4 million in fiscal 1995. Fiscal 1996 used $44.7 million for
capital expenditures and $11.8 million for acquisitions, compared to $27.6
million cash used for capital expenditures and $72.2 million used for
acquisitions in fiscal 1995.
Financing activities used net cash of $1.0 million as opposed to providing net
cash of $7.1 million for the three months ended September 30, 1995 and 1994,
respectively.
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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 25, 1995.
(b) Not applicable.
(c) (i) The Shareholders elected four directors to the three-
year class whose term of office will expire in 1998 as
follows:
Votes For Votes Withheld
John G. Breen 66,545,116 325,540
Patrick S. Parker 66,533,911 336,745
Walter Seipp 66,537,550 333,106
Dennis W. Sullivan 66,539,645 331,011
325,540 shares abstained.
(ii) The Shareholders approved an amendment to the
Corporation's Amended Articles of Incorporation to
increase the authorized number of Common Shares from
150,000,000 to 300,000,000 as follows:
For 49,815,686
Against 16,608,954
Abstain 446,016
(iii) The Shareholders approved the Corporation's Non-Employee
Directors' Stock Plan as follows:
For 61,946,332
Against 1,676,056
Abstain 3,248,268
(iv) The Shareholders approved the appointment of Coopers &
Lybrand L.L.P. as auditors of the Corporation for the
fiscal year ending June 30, 1996 as follows:
For 66,283,544
Against 167,325
Abstain 419,787
(d) Not applicable.
- 10 -
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) The following documents are furnished as exhibits and
numbered pursuant to Item 601 of Regulation S-K:
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.
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 10, 1995
- 11 -
<PAGE>
EXHIBIT INDEX
Sequential
Exhibit No. Description of Exhibit Page
11 Computation of Earnings
Per Common Share 13
27 Financial Data Schedule 14
- 12 -
<PAGE>
EXHIBIT 11
<TABLE>
<CAPTION>
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,
1995 1994 (A)
<S> <C> <C>
Net income applicable to common shares $ 57,375 $ 43,649
============ ============
Weighted average common shares outstanding
for the period 74,070,861 73,453,255
Increase in weighted average from dilutive
effect of exercise of stock options 811,722 505,053
____________ ____________
Weighted average common shares, assuming
issuance of the above securities 74,882,583 73,958,308
============ ============
Earnings per common share:
Primary $ .77 $ .59
Fully diluted (B) $ .77 $ .59
<FN>
(A) Weighted average shares and earnings per share have been restated for the
3-shares-for-2 common stock split paid June 2, 1995.
(B) 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.
</TABLE>
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<TABLE> <S> <C>
<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, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> SEP-30-1995
<CASH> 47,046
<SECURITIES> 0
<RECEIVABLES> 431,525
<ALLOWANCES> 6,879
<INVENTORY> 649,527
<CURRENT-ASSETS> 1,249,957
<PP&E> 1,836,881
<DEPRECIATION> 1,014,507
<TOTAL-ASSETS> 2,317,061
<CURRENT-LIABILITIES> 639,568
<BONDS> 258,259
<COMMON> 37,076
0
0
<OTHER-SE> 1,196,472
<TOTAL-LIABILITY-AND-EQUITY> 2,317,061
<SALES> 839,054
<TOTAL-REVENUES> 839,054
<CGS> 645,609
<TOTAL-COSTS> 645,609
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 268
<INTEREST-EXPENSE> 7,988
<INCOME-PRETAX> 91,071
<INCOME-TAX> 33,696
<INCOME-CONTINUING> 57,375
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 57,375
<EPS-PRIMARY> .77
<EPS-DILUTED> .77
</TABLE>
