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, 1996
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, 1996 74,318,378
<PAGE>
PARKER-HANNIFIN CORPORATION
INDEX
Page Nos.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statement of Income -
Three Months Ended September 30, 1996
and 1995 3
Consolidated Balance Sheet -
September 30, 1996 and June 30, 1996 4
Consolidated Statement of Cash Flows -
Three Months Ended September 30, 1996
and 1995 5
Business Segment Information by Industry -
Three Months Ended September 30, 1996
and 1995 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,
1996 1995
_________ _________
<S> <C> <C>
Net sales $ 959,328 $ 839,054
Cost of sales 754,498 645,609
_________ _________
Gross profit 204,830 193,445
Selling, general and
administrative expenses 114,444 97,719
_________ _________
Income from operations 90,386 95,726
Other income (deductions):
Interest expense (12,314) (7,988)
Interest and other income, net 1,780 3,333
_________ _________
(10,534) (4,655)
_________ _________
Income before income taxes 79,852 91,071
Income taxes 28,747 33,696
_________ _________
Net income $ 51,105 $ 57,375
========= =========
Earnings per share $ .69 $ .77
Cash dividends per common share $ .18 $ .18
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,
1996 1996
___________ ___________
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 67,123 $ 63,953
Accounts receivable, net 520,649 538,645
Inventories:
Finished products 334,213 332,213
Work in process 266,373 269,934
Raw materials 109,003 105,078
___________ ___________
709,589 707,225
Prepaid expenses 15,177 16,031
Deferred income taxes 79,848 76,270
___________ ___________
Total current assets 1,392,386 1,402,124
Plant and equipment 2,090,510 2,048,293
Less accumulated depreciation 1,089,749 1,056,516
___________ ___________
1,000,761 991,777
Other assets 504,230 493,223
___________ ___________
Total assets $ 2,897,377 $ 2,887,124
=========== ===========
LIABILITIES
Current liabilities:
Notes payable $ 162,437 $ 173,789
Accounts payable, trade 200,257 236,871
Accrued liabilities 298,411 306,504
Accrued domestic and foreign taxes 75,913 49,718
___________ ___________
Total current liabilities 737,018 766,882
Long-term debt 433,636 439,797
Pensions and other postretirement benefits 257,921 253,616
Deferred income taxes 26,401 24,683
Other liabilities 19,956 18,188
___________ ___________
Total liabilities 1,474,932 1,503,166
SHAREHOLDERS' EQUITY
Serial preferred stock, $.50 par value;
authorized 3,000,000 shares; none issued -- --
Common stock, $.50 par value; authorized
300,000,000 shares; issued 74,358,822 shares at
September 30 and 74,291,917 shares at June 30 37,179 37,146
Additional capital 167,425 165,259
Retained earnings 1,198,549 1,160,828
Currency translation adjustment 20,810 20,725
___________ ___________
1,423,963 1,383,958
Less treasury shares, at cost:
40,444 shares at September 30 (1,518) --
___________ ___________
Total shareholders' equity 1,422,445 1,383,958
___________ ___________
Total liabilities and shareholders' equity $ 2,897,377 $ 2,887,124
=========== ===========
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,
1996 1995
_________ _________
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 51,105 $ 57,375
Adjustments to reconcile net income to
net cash provided by operations:
Depreciation 37,882 31,979
Amortization 6,043 2,722
Deferred income taxes (4,606) (5,922)
Foreign currency transaction loss (gain) 45 (291)
Loss (gain) on sale of plant and equipment 263 (589)
Changes in assets and liabilities:
Accounts receivable 18,426 9,195
Inventories 4,466 (21,553)
Prepaid expenses 875 1,071
Other assets (2,780) (3,330)
Accounts payable, trade (36,909) (32,827)
Accrued payrolls and other compensation (18,245) (19,741)
Accrued domestic and foreign taxes 26,201 28,409
Other accrued liabilities 12,349 4,503
Pensions and other postretirement benefits 3,582 (7,738)
Other liabilities 1,838 (1,102)
_________ _________
Net cash provided by operating activities 100,535 42,161
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions (excluding cash of $68 in 1995) (17,224) (11,780)
Capital expenditures (42,962) (44,683)
Proceeds from sale of plant and equipment 1,288 4,323
Other (3,187) (5,670)
_________ _________
Net cash used in investing activities (62,085) (57,810)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments from common share activity (3,197) (144)
(Payments) proceeds from notes payable, net (14,400) 13,640
Proceeds from long-term borrowings 163 214
Payments of long-term borrowings (3,952) (1,355)
Dividends (13,384) (13,329)
_________ _________
Net cash used in financing activities (34,770) (974)
Effect of exchange rate changes on cash (510) (161)
_________ _________
Net increase (decrease) in cash and
cash equivalents 3,170 (16,784)
Cash and cash equivalents at beginning of year 63,953 63,830
_________ _________
Cash and cash equivalents at end of period $ 67,123 $ 47,046
========= =========
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 and fuel applications.
<TABLE>
<CAPTION>
Results by Business Segment:
Three Months Ended
September 30,
1996 1995
_________ _________
<S> <C> <C>
Net sales, including intersegment sales
Industrial:
North America $ 503,750 $ 474,073
International 259,760 229,763
Aerospace 195,936 135,331
Intersegment sales (118) (113)
_________ _________
Total $ 959,328 $ 839,054
========= =========
Income from operations before corporate
general and administrative expenses
Industrial:
North America $ 68,603 $ 66,562
International 12,929 22,184
Aerospace 20,924 18,379
_________ _________
Total 102,456 107,125
Corporate general and administrative
expenses 12,070 11,399
_________ _________
Income from operations $ 90,386 $ 95,726
========= =========
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, 1996, the results of operations for the three months
ended September 30, 1996 and 1995 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 September 5, 1996 the Company purchased the assets of the industrial
hydraulic product line of Hydraulik-Ring AG, of Nurtingen, Germany, for
approximately $17 million cash. Annual sales for this operation for the
most recent year prior to acquisition were approximately $31 million.
This acquisition was 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, 1996
AND COMPARABLE PERIOD ENDED SEPTEMBER 30, 1995
CONSOLIDATED STATEMENT OF INCOME
Net sales for the first quarter of fiscal 1997 increased 14.3 percent to
$959.3 million from $839.1 million for the first quarter of fiscal 1996.
Without the effect of acquisitions made within the past twelve months the
increase would have been 4.1 percent.
Income from operations decreased 5.6 percent to $90.4 million. As a percent of
sales the current-quarter operating income decreased to 9.4 percent from 11.4
percent the prior-year quarter. Cost of sales, as a percent of sales,
increased to 78.6 percent from 76.9 percent. These results reflect the
weakness experienced in the heavy-duty truck manufacturing, semiconductor
fabrication and European industrial markets, which resulted in a mix of
shipments producing lower margins. Selling, general and administrative
expenses, as a percent of sales, increased to 11.9 percent from 11.6 percent
due to recent acquisitions with higher costs and costs associated with the
Company's emphasis to provide a global presence of the sales force.
Interest expense for the current-year quarter increased $4.3 million due to
the increased borrowings incurred to complete recent acquisitions.
Net Income for the quarter decreased 10.9 percent to $51.1 million and
decreased to 5.3 percent of sales compared to 6.8 percent the prior-year
quarter.
Backlog increased to $1.4 billion at September 30, 1996 compared to $1.0
billion the prior year and $1.3 billion at June 30, 1996. The increase from
the prior year was primarily due to acquisitions.
RESULTS BY BUSINESS SEGMENT
INDUSTRIAL - Net sales of the Industrial Segment increased 8.5 percent to
$763.5 million compared to $703.8 million the prior year. Industrial North
America sales increased 6.3 percent while Industrial International sales
increased 13.1 percent. Without the effect of acquisitions, North American
sales would have increased 4.8 percent and International sales would have
remained relatively flat. Without the effects of currency rate changes
International sales (with acquisitions) would have increased nearly 17
percent. Industrial North America experienced a changed mix of products with
increases occurring in the instrumentation controls and refrigeration and air
conditioning markets, partially offset by declines in the heavy-duty truck
manufacturing and semiconductor fabrication markets.
Operating income for the Industrial Segment decreased 8.1 percent to $81.5
million. Industrial North America increased 3.1 percent while Industrial
International decreased 41.7 percent. North American operating income, as a
percent of sales, decreased to 13.6 percent from 14.0 percent as margins were
affected by the changed mix of products sold. International operating income,
as a percent of sales, decreased to 5.0 percent from 9.7 percent primarily due
to the stagnant industrial economy in Europe, a changed product mix and lower
margin returns from sales contributed by recent acquisitions.
Industrial Segment backlog increased 7.9 percent compared to a year ago, but
decreased slightly since June 30, 1996. The increase from the prior year was
primarily the result of acquisitions. Industrial North America results are
expected to continue to grow moderately, but there is little indication that
European results will improve before the second half of the fiscal year.
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<PAGE>
AEROSPACE - Net sales of the Aerospace Segment were up 44.8 percent for the
quarter. Without the effect of the Abex acquisition the increase would have
been 9.2 percent. This increase was primarily the result of higher volume in
spare parts, repairs and overhaul and commercial OEM business.
Income from operations increased 13.8 percent year to year, but Income from
operations as a percent of sales decreased to 10.7 percent from 13.6 percent.
The decrease in margin was primarily the result of lower margins of the
recently acquired Abex operations. The Company has announced plans to
consolidate these operations to strive for more cost-effective manufacturing
and administrative functions. The costs for this restructuring, part of the
purchase accounting of the Abex acquisition, will not impact future earnings.
Backlog for the Aerospace Segment increased 48.7 percent compared to a year
ago, primarily as a result of the Abex acquisition, and increased 3.1 percent
since June 30, 1996. The Aerospace Segment is expected to continue to grow
throughout the year, with margins remaining at current levels or improving as
volume efficiencies are achieved.
BALANCE SHEET
Working capital increased to $655.4 million at September 30, 1996 from $635.2
million at June 30, 1996, with the ratio of current assets to current
liabilities increasing slightly to 1.9 to 1. The increase was primarily due to
decreases in Accounts payable, trade and Notes payable, partially offset by a
decrease in Accounts receivable, net and an increase in Accrued domestic and
foreign taxes.
Accounts receivable, net decreased $18.0 since June 30, 1996 as collections
improved for both Industrial North America and Industrial International.
Overall days sales outstanding improved during the quarter.
Inventories increased slightly for the quarter, but would have decreased
without the addition of Inventories purchased through an acquisition. Months
supply decreased slightly during the quarter.
Accounts payable, trade decreased $36.6 million since June 30, 1996 with the
reduction occurring consistently throughout the operations.
Plant and equipment, net increased $9.0 million due to both acquisitions and
capital expenditures. An $11.0 million increase in Other assets was primarily
due to an increase in goodwill from acquisitions and an increase in deferred
tax assets.
The debt to debt-equity ratio decreased to 29.5 percent at September 30, 1996
compared to 30.7 percent as of June 30, 1996.
STATEMENT OF CASH FLOWS
Net cash provided by operating activities was $100.5 million in fiscal 1997
compared to $42.2 million for the three months ended September 30, 1995. The
additional net cash provided was primarily the result of activity within the
principal working capital items - Accounts receivable, Inventories, and
Accounts payable, trade - which used cash of $14.0 million in fiscal 1997,
compared to using cash of $45.2 million in fiscal 1996. In addition, cash was
provided by an increase in Other accrued liabilities and increases in the
Pensions and other postretirement benefits accrual and Other liabilities,
which had used cash in the prior year.
Financing activities used net cash of $34.8 million in fiscal 1997 as opposed
to $1.0 million for the three months ended September 30, 1995. Payments of
Notes payable used cash of $14.4 million in fiscal 1997 compared to proceeds
from Notes payable of $13.6 million in fiscal 1996.
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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 23, 1996.
(b) Not applicable.
(c) (i) The Shareholders elected five directors to the three-
year class whose term of office will expire in 1999
as follows:
Votes For Votes Withheld
Paul C. Ely, Jr. 67,677,888 453,600
Frank A. LePage 67,658,658 472,830
Peter W. Likins 67,690,629 440,859
Wolfgang R. Schmitt 67,674,243 457,245
Stephanie A. Streeter 67,633,814 477,674
No Shareholders abstained.
(ii) The Shareholders approved the appointment of Coopers
& Lybrand L.L.P. as auditors of the Corporation for
the fiscal year ending June 30, 1997 as follows:
For 67,799,223
Against 136,618
Abstain 195,646
(d) Not applicable.
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<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 and Chief
Financial Officer
Date: November 14, 1996
- 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,
1996 1995
___________ ___________
<S> <C> <C>
Net income applicable to common shares $ 51,105 $ 57,375
=========== ===========
Weighted average common shares outstanding
for the period 74,303,064 74,070,861
Increase in weighted average from dilutive
effect of exercise of stock options 581,226 811,722
___________ ___________
Weighted average common shares, assuming
issuance of the above securities 74,884,290 74,882,583
=========== ===========
Earnings per common share:
Primary $ .69 $ .77
Fully diluted (A) $ .68 $ .77
<FN>
(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.
</TABLE>
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<PAGE>
<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, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
<MULTIPLIER> 1,000
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> SEP-30-1996
<CASH> 67,123
<SECURITIES> 0
<RECEIVABLES> 478,942
<ALLOWANCES> 5,789
<INVENTORY> 709,589
<CURRENT-ASSETS> 1,392,386
<PP&E> 2,090,510
<DEPRECIATION> 1,089,749
<TOTAL-ASSETS> 2,897,377
<CURRENT-LIABILITIES> 737,018
<BONDS> 444,515
<COMMON> 37,179
0
0
<OTHER-SE> 1,385,266
<TOTAL-LIABILITY-AND-EQUITY> 2,897,377
<SALES> 959,328
<TOTAL-REVENUES> 959,328
<CGS> 754,498
<TOTAL-COSTS> 754,498
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 117
<INTEREST-EXPENSE> 12,314
<INCOME-PRETAX> 79,852
<INCOME-TAX> 28,747
<INCOME-CONTINUING> 51,105
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 51,105
<EPS-PRIMARY> .69
<EPS-DILUTED> .68
</TABLE>
