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 March 31, 1999
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)
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 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 March 31, 1999 108,520,856
<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 Nine Months Ended
March 31, March 31,
______________________ _______________________
1999 1998 1999 1998
__________ __________ __________ __________
<S> <C> <C> <C> <C>
Net sales $1,255,789 $1,196,548 $3,673,534 $3,394,665
Cost of sales 989,137 912,322 2,879,611 2,601,670
_________ __________ __________ _________
Gross profit 266,652 284,226 793,923 792,995
Selling, general and
administrative expenses 136,278 138,458 411,806 396,694
__________ __________ __________ _________
Income from operations 130,374 145,768 382,117 396,301
Other income (deductions):
Interest expense (15,634) (13,512) (49,050) (37,031)
Interest and other income,
net 2,970 (363) 2,564 4,522
__________ _________ _________ _________
(12,664) (13,875) (46,486) (32,509)
__________ _________ _________ _________
Income before income taxes 117,710 131,893 335,631 363,792
Income taxes 41,199 48,668 117,471 130,992
__________ _________ _________ _________
Net income $ 76,511 $ 83,225 $ 218,160 $ 232,800
========== ========== ========== =========
Earnings per share - Basic $ .71 $ .76 $ 2.01 $ 2.10
Earnings per share - Diluted $ .70 $ .75 $ 1.99 $ 2.08
Cash dividends per
common share $ .17 $ .15 $ .47 $ .45
See accompanying notes to consolidated financial statements.
</TABLE>
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<TABLE>
<CAPTION>
PARKER-HANNIFIN CORPORATION
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
(Unaudited)
March 31, June 30,
1999 1998
__________ __________
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 41,077 $ 30,488
Accounts receivable, net 718,711 699,179
Inventories:
Finished products 460,960 416,034
Work in process 343,645 392,880
Raw materials 134,436 135,357
__________ __________
939,041 944,271
Prepaid expenses 19,554 22,035
Deferred income taxes 80,828 84,102
__________ __________
Total current assets 1,799,211 1,780,075
Plant and equipment 2,487,054 2,345,109
Less accumulated depreciation 1,300,282 1,209,884
__________ __________
1,186,772 1,135,225
Other assets 705,344 609,521
__________ __________
Total assets $3,691,327 $3,524,821
========== ==========
LIABILITIES
Current liabilities:
Notes payable $ 172,752 $ 265,485
Accounts payable, trade 268,193 338,249
Accrued liabilities 312,903 350,662
Accrued domestic and foreign taxes 46,142 34,374
__________ __________
Total current liabilities 799,990 988,770
Long-term debt 733,504 512,943
Pensions and other postretirement benefits 280,840 265,675
Deferred income taxes 37,004 29,739
Other liabilities 56,359 44,244
__________ __________
Total liabilities 1,907,697 1,841,371
SHAREHOLDERS' EQUITY
Serial preferred stock, $.50 par value;
authorized 3,000,000 shares; none issued - -
Common stock, $.50 par value; authorized
600,000,000 shares; issued 111,812,025
shares at March 31 and June 30 55,906 55,906
Deferred compensation related to guarantee
of ESOP debt (112,000) -
Additional capital 130,416 139,726
Retained earnings 1,798,332 1,631,316
Accumulated other comprehensive income (79,972) (60,026)
__________ __________
1,792,682 1,766,922
Common stock in treasury at cost;
235,756 shares at March 31 and
1,938,762 shares at June 30 (9,052) (83,472)
__________ __________
Total shareholders' equity 1,783,630 1,683,450
__________ __________
Total liabilities and shareholders' equity $3,691,327 $3,524,821
========== ==========
See accompanying notes to consolidated financial statements.
</TABLE>
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<TABLE>
<CAPTION>
PARKER-HANNIFIN CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Nine Months Ended
March 31,
_____________________
1999 1998
________ ________
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $218,160 $232,800
Adjustments to reconcile net income to net cash
provided by operations:
Depreciation 125,599 117,928
Amortization 28,419 20,168
Deferred income taxes 3,279 (17,858)
Foreign currency transaction (gain) loss (2,415) 2,294
Loss (gain) on sale of plant and equipment 542 (850)
Write-off of purchased in-process R&D - 5,200
Changes in assets and liabilities:
Accounts receivable, net (5,581) (61,196)
Inventories 12,194 (128,150)
Prepaid expenses 5,707 240
Other assets (25,346) (24,123)
Accounts payable, trade (79,415) 5,636
Accrued payrolls and other compensation (32,359) 14,062
Accrued domestic and foreign taxes 15,045 16,819
Other accrued liabilities (11,274) (2,313)
Pensions and other postretirement benefits 15,243 10,386
Other liabilities 11,635 7,034
________ ________
Net cash provided by operating activities 279,433 198,077
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions (excluding cash of $2,609 and
$2,320 in 1999 and 1998) (89,865) (172,859)
Capital expenditures (166,835) (162,940)
Proceeds from sale of plant and equipment 4,582 4,195
Other (1,926) 3,118
________ ________
Net cash used in investing activities (254,044) (328,486)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from (payments for) common
share activity 64,599 (70,969)
(Payments of) proceeds from notes payable, net (112,248) 187,031
Proceeds from long-term borrowings 205,960 52,097
Payments of long-term borrowings (122,584) (12,580)
Dividends (51,144) (49,943)
________ ________
Net cash (used in) provided by
financing activities (15,417) 105,636
Effect of exchange rate changes on cash 617 (1,779)
________ ________
Net increase (decrease) in cash and cash equivalents 10,589 (26,552)
Cash and cash equivalents at beginning of year 30,488 68,997
________ ________
Cash and cash equivalents at end of period $ 41,077 $ 42,445
======== ========
Noncash activities: In 1999 assumption of ESOP debt guarantee for $112,000
and capital lease obligations of $7,346. In 1998 Treasury stock of $9,750
was issued for an acquisition.
See accompanying notes to consolidated financial statements.
</TABLE>
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<TABLE>
<CAPTION>
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 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, and 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.
Results by Business Segment:
Three Months Ended Nine Months Ended
March 31, March 31,
_______________________ ______________________
1999 1998 1999 1998
__________ __________ _________ __________
<S> <C> <C> <C> <C>
Net sales, including
intersegment sales
Industrial:
North America $ 664,260 $ 645,739 $1,900,223 $1,826,680
International 308,753 295,692 931,267 841,016
Aerospace 283,291 255,534 843,501 728,159
Intersegment sales (515) (417) (1,457) (1,190)
__________ __________ _________ __________
Total $1,255,789 $1,196,548 $3,673,534 $3,394,665
========== ========== ========== ==========
Income from operations before
corporate general and
administrative expenses
Industrial:
North America $ 88,058 $ 93,934 $ 232,956 $ 266,397
International 14,320 23,828 62,255 62,670
Aerospace 43,116 45,079 129,301 117,400
__________ __________ _________ __________
Total 145,494 162,841 424,512 446,467
Corporate general and
administrative expenses 15,120 17,073 42,395 50,166
__________ __________ _________ __________
Income from operations $ 130,374 $ 145,768 $ 382,117 $ 396,301
========== ========== ========== ==========
See accompanying notes to consolidated financial statements.
</TABLE>
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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 March 31, 1999, the results
of operations for the three and nine months ended March 31, 1999
and 1998 and cash flows for the nine months then ended.
2. Employee Stock Ownership Plan (ESOP)
In March 1999 the Company's ESOP was releveraged when the ESOP Trust
borrowed $112 million and used the proceeds to purchase 3,055,413 shares
of the Company's common stock from the Company's treasury. The Company
used the proceeds from the sale to pay down debt. The loan is
unconditionally guaranteed by the Company and therefore the unpaid balance
of the borrowing is reflected in the Consolidated Balance sheet as Long-term
debt. An equivalent amount representing Deferred compensation is recorded
as a deduction from Shareholders' equity.
3. Non-recurring charge
During the three-month period ended March 31, 1998 the Company incurred an
acquisition-related charge of $5.2 million or $0.5 per share. An independent
appraisal of Computer Technology Corporation, a February 1998 acquisition,
attributed a portion of the purchase price to in-process research and
development. Generally accepted accounting principles require research and
development to be expensed. The charge was recorded to Cost of sales within
the North American Industrial segment.
- 6 -
<PAGE>
4. Earnings per share
The following table presents a reconciliation of the numerator and
denominator of basic and diluted earnings per share for the three
and six months ended March 31, 1999 and 1998.
Three Months Ended Nine Months Ended
March 31, March 31,
_______________________ ________________________
1999 1998 1999 1998
__________ ___________ ___________ __________
Numerator:
Net income applicable
to common shares $76,511 $83,225 $218,160 $232,800
Denominator:
Basic - weighted average
common shares 108,503,957 110,480,290 108,803,871 111,070,700
Increase in weighted
average from dilutive
effect of exercise of
stock options 832,510 1,326,400 825,027 1,076,954
__________ ___________ ___________ __________
Diluted - weighted average
common shares, assuming
exercise of stock
options 109,336,467 111,806,690 109,628,898 112,147,654
=========== =========== =========== ===========
Basic earnings per share $ .71 $ .76 $ 2.01 $ 2.10
Diluted earnings per share $ .70 $ .75 $ 1.99 $ 2.08
5. Stock repurchase program
The Board of Directors has approved a program to repurchase the
Company's common stock on the open market, at prevailing prices.
The repurchase will primarily be funded from operating cash flows
and the shares will initially be held as treasury stock. The Company
did not purchase any shares of its common stock during the
three-month period ended March 31, 1999. Year-to-date the Company
has purchased 1,500,000 shares at an average price of $32.459 per share.
6. Comprehensive income
On July 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income". SFAS No. 130 establishes new standards for
reporting comprehensive income and its components. The Company's
only item of other comprehensive income is foreign currency
translation adjustments recorded in shareholders' equity.
Comprehensive income for the three and nine months ended March 31,
1999 and 1998 is as follows:
Three Months Ended Nine Months Ended
March 31, March 31,
__________________ _____________________
1999 1998 1999 1998
________ ________ _________ _________
Net income $ 76,511 $ 83,225 $ 218,160 $ 232,800
Foreign currency
Translation adjustments (44,637) (10,849) (19,946) (33,685)
________ ________ _________ _________
Comprehensive income $ 31,874 $ 72,376 $ 198,214 $ 199,115
======== ======== ========= =========
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<PAGE>
7. Acquisitions
In July 1998 the Company acquired the stock of B.A.G. Acquisition
Ltd., the parent company of Veriflo Corporation, located in
Richmond, California and Carson City, Nevada. Veriflo, with
calendar year 1997 revenues of $65 million, manufactures high-purity
regulators and valves for precision gas delivery.
In August 1998 the Company acquired Fluid Power Systems of
Lincolnshire, Illinois, a manufacturer of hydraulic valves and
electrohydrualic systems and controls. Fluid Power Systems, with
estimated calendar year 1998 revenues of $42 million, serves the
construction, aerial reach and agricultural markets.
Total purchase price for these businesses was approximately $85.2
million in cash. Both acquisitions are being 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 AND NINE MONTHS ENDED MARCH 31, 1999
AND COMPARABLE PERIODS ENDED MARCH 31, 1998
CONSOLIDATED STATEMENT OF INCOME
Net sales increased 5.0 percent for the third quarter of fiscal 1999 and 8.2
percent for the nine-month period ended March 31, 1999. Without
acquisitions, the increases would have been 1.4 percent and 4.1 percent,
respectively. Excluding acquisitions, the growth occurred primarily in the
Aerospace segment.
Income from operations was $130.4 million for the current third quarter and
$382.1 million for the current nine months, a decrease of 10.6 percent for
the quarter and 3.6 percent for the nine months. The prior year quarter and
nine-month results include an acquisition-related charge of $5.2 million for
in-process research and development. As a percent of sales, Income from
operations declined to 10.4 percent from 12.2 percent for the quarter and to
10.4 percent from 11.7 percent for the nine months. Cost of sales as a
percent of sales increased to 78.8 percent from 76.2 percent for the quarter
and to 78.4 percent from 76.6 percent for the nine months. The declining
margins are primarily the result of the underabsorption of overhead costs and
the effects of pricing pressure in the Industrial segment. Selling, general
and administrative expenses, as a percent of sales, declined to 10.9 percent
of sales from 11.6 percent for the quarter and to 11.2 percent from 11.7
percent for the nine months. The improvement in selling, general and
administrative expenses is primarily the result of lower incentive
compensation.
Interest expense increased $2.1 million for the quarter ended March 31, 1999
and $12.0 million for the nine-month period ended March 31, 1999 due
primarily to increased borrowings related to acquisitions completed in the
last 12 months.
Interest and other income for both the current year quarter and nine months
included $1.7 million in interest income related to an IRS refund. Interest
and other income for both the prior year quarter and nine months included
$3.3 million in income related to the relocation of the corporate
headquarters.
The effective tax rate for year-to-date 1999 is 35.0 percent, compared to a
rate of 36.0 percent in fiscal 1998. The decrease in rate results from
having received no tax benefit for the acquisition-related $5.2 million
charge for in-process R&D recorded in fiscal 1998.
Net income declined 8.1 percent for the quarter and 6.3 percent for the nine
months, as compared to the prior year. As a percent of sales, Net income
declined to 6.1 percent from 7.0 percent for the quarter and to 5.9 percent
from 6.9 percent for the nine months.
Backlog was $1.69 billion at March 31, 1999 compared to $1.67 billion in the
prior year and $1.65 billion at June 30, 1998. The slight increase in
backlog reflects an improvement in order rates experienced in the latter part
of the third quarter of fiscal 1999.
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<PAGE>
RESULTS BY BUSINESS SEGMENT
INDUSTRIAL - The Industrial Segment operations achieved the following Net
sales increases in the current year when compared to the equivalent prior-
year period:
Period ending March 31,
Three Months Nine Months
Industrial North America 2.9% 4.0%
Industrial International 4.4% 10.7%
Total Industrial 3.4% 6.1%
Without the effect of currency-rate changes, International sales would have
increased 5.4 percent for the quarter and 11.1 percent for the nine months.
Without the effect of acquisitions completed within the past 12 months, the
changes in Net sales would have been:
Period ending March 31,
Three Months Nine Months
Industrial North America (.4)% .3%
Industrial International (2.9)% 2.0%
Total Industrial (1.2)% .9 %
Operating income for the Industrial segment was down 13.1 percent for the
quarter and 10.3 percent for the nine months. Industrial North American
Operating income decreased 6.3 percent for the quarter and 12.6 percent for
the nine months while Industrial International results decreased 39.9 percent
for the quarter and .7 percent for the nine months. As a percent of sales,
Industrial North American Operating income decreased to 13.3 percent from
14.5 percent for the quarter and to 12.3 percent from 14.6 percent for the
nine months. Industrial International Operating income decreased to 4.6
percent from 8.1 percent for the quarter and to 6.7 percent from 7.5 percent
for the nine months.
Industrial segment margins for the third quarter and first nine months of
fiscal 1999 continue to be adversely affected by the underabsorption of
overhead costs (particularly in the current quarter as operations focused on
reducing inventories) and pricing pressure.
Order demand for much of the current fiscal year has been declining for many
of the Industrial operations, particularly in the agricultural,
petrochemical, construction and machine tool markets. A slight improvement
in the trend of order rates was seen late in the third quarter of fiscal
1999; however, it is unclear whether this upward trend will be sustainable
for the balance of the current fiscal year and into fiscal 2000. The
strength in the European operations experienced earlier in the fiscal year
has moderated while the results in the Asia-Pacific region have improved.
Total Industrial Segment backlog decreased 3.3 percent compared to March 31,
1998 and .6 percent since June 30, 1998. Without acquisitions, backlog would
have decreased 7.6 percent compared to March 31, 1998 and 5.1 percent since
June 30, 1998. The decline in backlog is due to the decline in order rates
that has been experienced for much of the fiscal year in a number of the
Industrial Segment markets.
Management anticipates the North American Industrial operations to experience
slight revenue growth for the balance of the fiscal year with margins
remaining at the current quarter level. Current business conditions in
Europe are expected to continue into the fourth quarter of 1999 while
continued improvement in the Asia Pacific region should be seen. Uncertainty
continues to surround the business conditions for the balance of the fiscal
year in Latin America.
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<PAGE>
AEROSPACE - Aerospace Net sales were up 10.9 percent for the quarter and 15.8
percent for the nine months. The continuing high level of activity reflects
the increase in commercial aircraft build rates.
Operating income for the Aerospace Segment decreased 4.4 percent for the
quarter and increased 10.1 percent for the nine-month period. As a percent
of sales, Operating income decreased to 15.2 percent from 17.6 percent for
the quarter and to 15.3 percent from 16.1 percent for the nine-month period.
The decline in margins reflects a change in mix of OEM and aftermarket sales
between the current quarter and prior year quarter as well as the effect of a
reduction in inventory.
Backlog for the Aerospace Segment increased 4.0 percent from March 31, 1998
and 4.5 percent since June 30, 1998. The increase in backlog reflects the
recent upward trend in order rates; however, the level of order rates for OEM
business is expected to decline in fiscal 2000.
BALANCE SHEET
Working capital increased to $999.2 million at March 31, 1999 from $791.3
million at June 30, 1998 with the ratio of current assets to current
liabilities increasing to 2.2 to 1. The increase was primarily due to
decreases in Notes payable, Accounts payable, trade and Accrued liabilities.
Accounts receivable were higher on March 31, 1999 than on June 30, 1998
although days sales outstanding remained at 46 days.
Inventories decreased since June 30, 1998 despite the addition of inventory
from current year acquisitions as the result of a focused effort to reduce
inventory levels to reflect current market conditions. Months supply of
inventory was 3.6 at March 31, 1999 compared to 3.7 at June 30, 1998.
Accounts payable, trade decreased $70.1 million since June 30, 1998 with the
reduction occurring consistently throughout the operations. The decrease
reflects the result of lower production levels.
Accrued liabilities decreased $37.8 million since June 30, 1998 primarily as
a result of lower incentive compensation accruals occurring throughout most
of the operations.
Notes payable decreased $92.7 million since June 30, 1998 primarily due to
using the proceeds from the sale of treasury shares to the ESOP Trust to pay
down commercial paper.
The debt to debt-equity ratio increased to 33.7 percent at March 31, 1999
from 31.6 percent at June 30, 1998 as a result of an increase in Long-term
debt which was utilized to finance recent acquisitions.
STATEMENT OF CASH FLOWS
Net cash provided by operating activities was $279.4 million for the nine
months ended March 31, 1999, as compared to $198.1 million for the same nine
months of 1998. Activity within the working capital items - Accounts
receivable, Inventories, Accounts payable, Accrued payrolls and Other accrued
liabilities - used cash of $116.4 million in fiscal 1999 compared to using
cash of $172.0 million in fiscal 1998. Deferred income taxes provided cash
of $3.3 million in fiscal 1999 versus using cash of $17.9 million in fiscal
1998.
Net cash used in investing activities declined to $254.0 million for fiscal
1999 compared to $328.5 million for fiscal 1998 primarily due to a reduction
in the amount spent on acquisitions.
Financing activities used cash of $15.4 million for the nine months ended
March 31, 1999 compared to providing cash of $105.6 million for the same
period in 1998. The change resulted primarily from common share activity
providing cash of $64.6 million in fiscal 1999 compared to using cash of
$71.0 million in fiscal 1998 as well as net debt activity using cash of $28.9
million in fiscal 1999 compared to providing cash of $226.5 million in the
prior year. The fluctuation between fiscal 1999 and fiscal 1998 cash flow
from common share activity is the result of the Company selling treasury
shares to the ESOP Trust in fiscal 1999.
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<PAGE>
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company enters into forward exchange contracts and cross-currency swap
agreements to reduce its exposure to fluctuations in related foreign
currencies. These contracts are with major financial institutions and the
risk of loss is considered remote. The Company does not hold or issue
derivative financial instruments for trading purposes. In addition, the
Company's foreign locations, in the ordinary course of business, enter into
financial guarantees through financial institutions which enable customers to
be reimbursed in the event of nonperformance by the Company. The total value
of open contracts and any risk to the Company as a result of these
arrangements is not material to the Company's financial position, liquidity
or results of operations.
YEAR 2000 CONSIDERATONS
The Company has taken action to assure that its computerized products and
systems and all external interfaces are Year 2000 compliant. These actions
are part of a formal information technology initiative which the Company
began several years ago. As a result, none of the Company's significant
information technology projects have been delayed due to the year 2000 issue.
The Company expects to have all internal standard application systems,
including all information systems plus any equipment or embedded systems
which may be impacted, compliant by July 1999 by modifying present systems,
installing new systems and monitoring third-party interfaces. The cost for
these actions is not material to the Company's results of operations. The
Company will continue to reassess the need for alternative actions based on
its progress towards being year 2000 compliant by July 1999 but at this time
anticipates that no such actions will be required.
In addition, the Company contacted its key suppliers, customers, distributors
and financial service providers regarding their Year 2000 status. Follow-up
inquiries and audits with such key third parties will be conducted as
warranted. The Company expects assurance that key third parties are year
2000 compliant by July 1999. If it is determined that any key third party
may not be year 2000 compliant on a timely basis, the Company will execute a
contingency plan that has been developed to ensure its operations are not
affected by such key third party's year 2000 noncompliance.
While management does not expect that the consequences of any failure of the
Company or any key third party to be fully compliant by 2000 would
significantly affect the financial position, liquidity, or results of
operations of the Company, there can be no assurance that any such failure to
be fully compliant by 2000 would not have an adverse impact on the Company.
EURO PREPARATIONS
The Company has completed an upgrade of its systems to accommodate the Euro
currency. The cost of this upgrade was immaterial to the Company's financial
results. Although difficult to predict, any competitive implications and any
impact on existing financial instruments of using the Euro currency are
expected to be immaterial to the Company's results of operations, financial
position or liquidity.
FORWARD-LOOKING STATEMENTS
This Report on Form 10-Q and other written reports and oral statements made
from time to time by the Company may contain "forward-looking statements",
all of which are subject to risks and uncertainties. All statements which
address operating performance, events or developments that the Company
expects or anticipates will occur in the future, including statements
relating to growth, operating margin performance, earnings per share or
statements expressing general opinions about future operating results, are
forward-looking statements.
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<PAGE>
These forward-looking statements rely on a number of assumptions concerning
future events, and are subject to a number of uncertainties and other
factors, many of which are outside the Company's control, that could cause
actual results to differ materially from such statements. Such factors
include:
* continuity of business relationships with and purchases by major customers,
including among others, orders and delivery schedules for aircraft
components,
* ability of suppliers to provide materials as needed,
* uncertainties surrounding timing, successful completion or integration of
acquisitions,
* competitive pressure on sales and pricing,
* increases in material and other production costs which cannot be recovered in
product pricing,
* uncertainties surrounding the year 2000 issues and the new Euro currency,
* difficulties in introducing new products and entering new markets, and
* uncertainties surrounding the global economy and global market conditions,
including among others, the economy of the Asia Pacific and Latin America
regions and the potential devaluation of currencies.
Any forward-looking statements are based on known events and circumstances at
the time. The Company undertakes no obligation to update or publicly revise
these forward-looking statements to reflect events or circumstances that
arise after the date of the filing of this Form 10-Q.
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<PAGE>
PARKER-HANNIFIN CORPORATION
PART II - OTHER INFORMATION
Item 2. Change in Securities and Use of Proceeds.
_______ _________________________________________
During the quarter ended March 31, 1999, in reliance
upon Section 4(2) of the Securities Act of 1933, as
amended, the Registrant issued 3,055,413 shares to the
Parker Retirement Savings Plan Trust at a price of
$35.66 per share.
Item 6. Exhibits and Reports on Form 8-K.
______ _________________________________
(a) The following documents are furnished as exhibits and are
numbered pursuant to Item 601 of Regulation S-K:
Exhibit 27 - Financial Data Schedule
(b) The Registrant file a report on Form 8-K on March 15, 1999
for the purpose of filing the press release issued by the
Registrant in connection with the issuance and sale by the
Parker Retirement Savings Plan Trust of $112,000,000 aggregate
principal amount of 6.34% Amortizing Notes due July 15, 2008
and the use by such Trust of the proceeds of such sale to
purchase common shares from the Registrant.
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)
/s/Michael J. Hiemstra
Michael J. Hiemstra
Vice President - Finance and Administration
and Chief Financial Officer
Date: May 10, 1999
- 14 -
<PAGE>
EXHIBIT INDEX
Exhibit No. Description of Exhibit
___________ ______________________
27 Financial Data Schedule
- 15 -
<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 MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> MAR-31-1999
<CASH> 41,077
<SECURITIES> 0
<RECEIVABLES> 673,138
<ALLOWANCES> 10,194
<INVENTORY> 939,041
<CURRENT-ASSETS> 1,799,211
<PP&E> 2,487,054
<DEPRECIATION> 1,300,282
<TOTAL-ASSETS> 3,691,327
<CURRENT-LIABILITIES> 799,990
<BONDS> 751,406
<COMMON> 55,906
0
0
<OTHER-SE> 1,727,724
<TOTAL-LIABILITY-AND-EQUITY> 3,691,327
<SALES> 3,673,534
<TOTAL-REVENUES> 3,673,534
<CGS> 2,879,611
<TOTAL-COSTS> 2,879,611
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 483
<INTEREST-EXPENSE> 49,050
<INCOME-PRETAX> 335,631
<INCOME-TAX> 117,471
<INCOME-CONTINUING> 218,160
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 218,160
<EPS-PRIMARY> 2.01
<EPS-DILUTED> 1.99
</TABLE>
