10-QPeriod: Q1 FY2009

Parker-Hannifin Corp Quarterly Report for Q1 Ended Sep 30, 2008

Filed November 6, 2008For Securities:PH

Summary

Parker-Hannifin Corporation reported a solid fiscal first quarter for 2009, with net sales increasing by 10.0% to $3.06 billion compared to the prior year. This growth was driven by higher volumes across its Industrial and Aerospace segments, with acquisitions contributing approximately 45% of the sales increase and currency fluctuations adding another 18%. Despite the strong top-line performance, gross profit margin saw a slight decline due to increased raw material costs and an unfavorable product mix, which were not fully offset by higher sales volumes. The company's net income grew to $250.2 million, or $1.50 per diluted share, up from $229.6 million, or $1.33 per diluted share, in the same period last year. Financially, Parker-Hannifin demonstrated continued strength in cash flow generation, with operating activities providing $307.3 million. The balance sheet shows an increase in cash and cash equivalents to $608.3 million, partly due to increased commercial paper borrowings made in anticipation of significant acquisitions. Management highlighted a strong liquidity position and commitment to maintaining an "A" rating on its senior debt, signaling resilience even amidst a challenging credit environment. The company also made significant progress on strategic initiatives, including the completion of several acquisitions subsequent to the quarter-end, which are expected to add substantial annual revenues.

Financial Highlights

29 data points
Beta

Revenue

$3.06B

23.7% Gross Margin

Net Income

$250.18M

8.2% Net Margin

EPS (Diluted)

$1.50

Cash & Equivalents

$608.33M

Free Cash Flow

$209.07M

Financial Statements
Beta
Revenue$3.06B
Cost of Revenue$2.34B
Gross Profit$727.47M
SG&A Expenses$332.68M
Interest Expense$28.10M
Net Income$250.18M
EPS (Basic)$1.52
EPS (Diluted)$1.50

Key Highlights

  • 1Net sales increased by 10.0% to $3.06 billion year-over-year, driven by volume and acquisitions.
  • 2Net income rose to $250.2 million ($1.50 EPS) from $229.6 million ($1.33 EPS) in the prior year's quarter.
  • 3Acquisitions contributed approximately 45% of the net sales increase.
  • 4Operating cash flow remained strong at $307.3 million.
  • 5The company's cash and cash equivalents significantly increased to $608.3 million.
  • 6Despite higher sales, gross profit margin slightly decreased due to increased raw material costs and unfavorable product mix.
  • 7The company completed seven significant acquisitions post-quarter end, adding approximately $503 million in aggregate annual revenues.

Frequently Asked Questions

Parker-Hannifin reported a 10.0% increase in net sales to $3.06 billion, driven by volume growth in its Industrial and Aerospace segments, as well as contributions from acquisitions. Net income also grew to $250.2 million, or $1.50 per diluted share, compared to $229.6 million, or $1.33 per diluted share, in the prior year's quarter.

The gross profit margin experienced a slight decrease to 23.7% from 23.9% year-over-year. This was primarily due to higher raw material costs and an unfavorable product mix, which were not fully offset by the increase in sales volume.

Parker-Hannifin's cash and cash equivalents increased significantly to $608.3 million. The company generated strong operating cash flow of $307.3 million and highlighted its robust liquidity position, supported by a substantial revolving credit facility. They also made increased use of commercial paper borrowings in anticipation of acquisitions.

Acquisitions were a significant driver of sales growth, contributing about 45% of the increase. Beyond the quarter, Parker-Hannifin completed seven acquisitions with aggregate annual revenues of approximately $503 million. The company continues to seek strategic acquisitions while maintaining its strong financial position.

Parker-Hannifin monitors indicators like the ISM and PMI for manufacturing activity, aircraft miles flown for aerospace, and housing starts. The report notes that the ISM and Eurozone PMI were below 50 in September 2008, indicating manufacturing contraction, and housing starts were significantly down, suggesting a challenging economic environment.