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Parker-Hannifin Corp Annual Report, Year Ended Jun 30, 1994

Filing Date
Filed September 28, 1994
Period End
June 30, 1994
Security
PH
In the record · 2016–202610-K1110-Q328-K110

PH filed 11 annual reports (10-K), 32 quarterly reports (10-Q) and 110 current reports (8-K) between 2016 and 2026.

  1. Leadership change8-K · Jun ’17Jun ’17
  2. Deal closed8-K · Oct ’19Oct ’19
  3. Material agreement8-K · Aug ’21Aug ’21
  4. Material agreement8-K · Nov ’25Nov ’25

01—Abstract

Summary

Summary of the 10-K filed September 28, 1994. Cited figures are marked; the original filing is the authoritative source.

Parker-Hannifin's fiscal 1994 10-K (year ended June 30, 1994) shows a company whose top line grew but whose earnings fell sharply under the weight of restructuring and asset write-downs.

Net sales rose 3.5% to $2.58 billiona (5.7% excluding the extra International month included in fiscal 1993), driven by record North American Industrial volume in heavy-duty truck, construction/farm equipment and machine-tool markets. Net income, however, fell 26.8% to $47.7 million ($0.98 per share, versus $1.34 in 1993), because of $56.5 million in special charges: a $35.5 million impairment of long-term operating assets (mainly goodwill in the Aerospace heat-transfer product line), $18.8 million of business restructuring costs, and a $19.6 million loss on disposal of assets, largely idle properties. The effective tax rate jumped to 53.6%, and a $4.5 million extraordinary charge came from early retirement of $100 million of 9.45% debentures.

The underlying picture is mixed. The Industrial segment's operating income rose 38.8%b and its margin improved to 9.2%, while the Aerospace segment's operating income fell 66.1% and its sales dropped 12.1% as defense and commercial aircraft markets contracted. International (European and Latin American) industrial operations remained loss-making, although losses narrowed.

Management expects aerospace markets to decline into 1995 with recovery in 1996, while signaling that International markets may be recovering. The balance sheet strengthened. Debt fell by roughly $181 millionc (total debt of about $284 million versus $465 million), the debt-to-debt-plus-equity ratio improved to 22.7% from 33.3%, cash declined to $81.6 million, and the current ratio eased to 2.0 from 2.3.

Operating cash flow rose to $259 milliond, and capital expenditures were $99.9 million. The company has paid dividends for 176 consecutive quarters, with the annual rate at $1.00 per share.

Share repurchases were ongoing, and management plans no new borrowing in fiscal 1995 except possibly for acquisitions. Recent acquisitions included Telemecanique's electro-pneumatic division and Atlas Copco's automation division, and the company divested its Metal Bellows operations.

02—Key points

Key Highlights

  1. Net sales up 3.5% to $2.58 billion; North American Industrial sales up 15.5% to a record level
  2. Net income down 26.8% to $47.7 million ($0.98/share) after $56.5 million in special charges (asset impairment, restructuring, and disposal losses)
  3. Aerospace segment operating income fell 66.1% and sales fell 12.1%; management expects declines to continue into 1995 with recovery in 1996
  4. Industrial segment operating income rose 38.8%, with operating margin improving to 9.2% from 7.2%
  5. Effective tax rate rose to 53.6% from 39.8%, mainly because the goodwill write-down received no tax benefit
  6. Total debt cut to roughly $284 million (from $465 million), lowering the debt-to-capitalization ratio to 22.7% from 33.3%
  7. Dividends paid for 176 consecutive quarters; annual rate of $1.00 per share and 38 consecutive years of annual increases

03—Questions

Frequently Asked Questions

  1. Why did net income fall in fiscal 1994 even though sales grew?

    Net income fell to $47.7 million from $65.1 million. The decline came from $56.5 million in special charges: a $35.5 million impairment of long-term assets, mainly goodwill in the Aerospace heat-transfer business; $18.8 million of restructuring costs; and a $19.6 million loss on disposal of assets, mostly idle properties. A $4.5 million extraordinary charge for early debt retirement and a 53.6% effective tax rate also reduced earnings.

  2. How healthy is the Aerospace business, and what is the outlook?

    Aerospace is under pressure. Sales fell 12.1%, operating income fell 66.1%, and segment margin dropped to 3.3% from 8.5%. Backlog declined to $533.7 million from $611.1 million. Management expects aerospace markets to keep declining into 1995, with recovery anticipated in 1996, and says Parker's broad program presence should benefit once markets improve.

  3. Is the company's balance sheet and debt position sound?

    Yes, and it improved during the year. Debt fell by about $181 million, mainly through retiring $100 million of 9.45% debentures and $35.1 million of foreign bonds. The debt-to-debt-plus-equity ratio fell to 22.7% from 33.3%, and the company says it aims to keep at least an 'A' senior debt rating. Cash fell to $81.6 million, and the current ratio was 2.0. Management does not expect new borrowing in fiscal 1995 except possibly for acquisitions.

  4. Are the International operations and European restructuring still a drag?

    International Industrial operations still posted operating losses of $17.5 million in 1994, though the losses narrowed and management sees early signs of recovery in Europe and Latin America in late fiscal 1994. Restructuring in these markets continues, with the aim of cutting overhead and consolidating underused facilities. Savings were expected to grow in fiscal 1995 and 1996.

04—Continue

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