Document and Entity Information
Document and Entity Information | |
9 Months Ended
Mar. 31, 2010 | |
Document Type | 10-Q |
Amendment Flag | false |
Document Period End Date | 2010-03-31 |
Document Fiscal Year Focus | 2,010 |
Document Fiscal Period Focus | Q3 |
Trading Symbol | PH |
Entity Registrant Name | PARKER HANNIFIN CORP |
Entity Central Index Key | 0000076334 |
Current Fiscal Year End Date | --06-30 |
Entity Filer Category | Large Accelerated Filer |
Entity Common Stock, Shares Outstanding | 161,035,631 |
CONSOLIDATED STATEMENT OF INCOM
CONSOLIDATED STATEMENT OF INCOME (USD $) | ||||
In Thousands, except Per Share data | 3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 | 9 Months Ended
Mar. 31, 2010 | 9 Months Ended
Mar. 31, 2009 |
Net sales | $2,614,823 | $2,344,713 | $7,206,696 | $8,098,057 |
Cost of sales | 2,062,451 | 1,908,607 | 5,732,877 | 6,367,279 |
Gross profit | 552,372 | 436,106 | 1,473,819 | 1,730,778 |
Selling, general and administrative expenses | 316,069 | 317,992 | 927,752 | 987,858 |
Interest expense | 25,951 | 28,393 | 76,703 | 86,796 |
Other expense, net | 3,959 | 27,453 | 6,707 | 36,235 |
Income before income taxes | 206,393 | 62,268 | 462,657 | 619,889 |
Income taxes | 52,013 | 9,113 | 129,344 | 158,138 |
Net income | 154,380 | 53,155 | 333,313 | 461,751 |
Less: Noncontrolling interests | 517 | (267) | 1,411 | 2,752 |
Net income attributable to common shareholders | $153,863 | $53,422 | $331,902 | $458,999 |
Earnings per share attributable to common shareholders: | ||||
Basic | 0.96 | 0.33 | 2.06 | 2.83 |
Diluted | 0.94 | 0.33 | 2.04 | 2.81 |
Cash dividends per common share | 0.25 | 0.25 | 0.75 | 0.75 |
CONSOLIDATED BALANCE SHEET
CONSOLIDATED BALANCE SHEET (USD $) | ||
In Thousands | Mar. 31, 2010
| Jun. 30, 2009
|
Current assets: | ||
Cash and cash equivalents | $380,561 | $187,611 |
Accounts receivable, net | 1,563,150 | 1,417,305 |
Inventories: | ||
Finished products | 486,676 | 514,495 |
Work in process | 560,411 | 581,266 |
Raw materials | 149,471 | 158,789 |
Inventory, Net, Total | 1,196,558 | 1,254,550 |
Prepaid expenses | 90,153 | 142,335 |
Deferred income taxes | 123,906 | 121,980 |
Total current assets | 3,354,328 | 3,123,781 |
Plant and equipment | 4,698,152 | 4,705,060 |
Less accumulated depreciation | 2,915,726 | 2,824,506 |
Property, Plant and Equipment, Net, Total | 1,782,426 | 1,880,554 |
Goodwill | 2,882,709 | 2,903,077 |
Intangible assets, net | 1,207,440 | 1,273,862 |
Other assets | 631,345 | 674,628 |
Total assets | 9,858,248 | 9,855,902 |
Current liabilities: | ||
Notes payable | 366,684 | 481,467 |
Accounts payable, trade | 785,244 | 649,718 |
Accrued payrolls and other compensation | 334,588 | 356,776 |
Accrued domestic and foreign taxes | 171,092 | 113,107 |
Other accrued liabilities | 414,367 | 404,686 |
Total current liabilities | 2,071,975 | 2,005,754 |
Long-term debt | 1,535,905 | 1,839,705 |
Pensions and other postretirement benefits | 1,151,046 | 1,233,271 |
Deferred income taxes | 177,512 | 183,457 |
Other liabilities | 226,266 | 243,275 |
Total liabilities | 5,162,704 | 5,505,462 |
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 181,046,128 shares at March 31 and June 30 | 90,523 | 90,523 |
Additional capital | 633,876 | 588,201 |
Retained earnings | 5,917,136 | 5,722,038 |
Accumulated other comprehensive (loss) | (780,185) | (843,019) |
Treasury shares, at cost; 20,010,497 shares at March 31 and 20,557,537 shares at June 30 | (1,251,721) | (1,289,544) |
Total shareholders' equity | 4,609,629 | 4,268,199 |
Noncontrolling interests | 85,915 | 82,241 |
Total equity | 4,695,544 | 4,350,440 |
Total liabilities and equity | $9,858,248 | $9,855,902 |
CONSOLIDATED BALANCE SHEET (Par
CONSOLIDATED BALANCE SHEET (Parenthetical) (USD $) | ||
Mar. 31, 2010
| Jun. 30, 2009
| |
Serial preferred stock, par value | 0.5 | 0.5 |
Serial preferred stock, authorized | 3,000,000 | 3,000,000 |
Serial preferred stock, issued | 0 | 0 |
Common stock, par value | 0.5 | 0.5 |
Common stock, authorized | 600,000,000 | 600,000,000 |
Common stock, issued | 181,046,128 | 181,046,128 |
Treasury shares, shares | 20,010,497 | 20,557,537 |
CONSOLIDATED STATEMENT OF CASH
CONSOLIDATED STATEMENT OF CASH FLOWS (USD $) | ||
In Thousands | 9 Months Ended
Mar. 31, 2010 | 9 Months Ended
Mar. 31, 2009 |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net income | $333,313 | $461,751 |
Adjustments to reconcile net income to net cash provided by operations: | ||
Depreciation | 187,990 | 188,763 |
Amortization | 90,025 | 75,574 |
Stock-based compensation | 48,145 | 35,286 |
Deferred income taxes | (9,143) | (2,443) |
Foreign currency transaction loss | 2,914 | 696 |
Loss (gain) on sale of plant and equipment | 8,851 | (3,552) |
Changes in assets and liabilities, net of effect of acquisitions: | ||
Accounts receivable, net | (140,141) | 432,358 |
Inventories | 64,028 | 93,214 |
Prepaid expenses | 53,053 | (73,339) |
Other assets | 22,265 | 71,837 |
Accounts payable, trade | 137,545 | (280,084) |
Accrued payrolls and other compensation | (21,577) | (100,469) |
Accrued domestic and foreign taxes | 55,599 | (21,354) |
Other accrued liabilities | 43,730 | (110,193) |
Pensions and other postretirement benefits | (26,431) | 10,891 |
Other liabilities | (8,769) | (62,842) |
Net cash provided by operating activities | 841,397 | 716,094 |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Acquisitions (less cash acquired of $24,203 in 2009) | (5,451) | (720,553) |
Capital expenditures | (90,862) | (226,195) |
Proceeds from sale of plant and equipment | 4,054 | 25,899 |
Other | (12,184) | 2,686 |
Net cash (used in) investing activities | (104,443) | (918,163) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Proceeds from exercise of stock options | 7,718 | 2,182 |
(Payments for) common shares | (14,915) | (442,800) |
Tax benefit from share-based compensation | 3,019 | 3,500 |
(Payments for) proceeds from notes payable, net | (385,498) | 656,349 |
Proceeds from long-term borrowings | 3,070 | 4,197 |
(Payments for) long-term borrowings | (26,935) | (20,818) |
Dividends | (120,786) | (121,458) |
Net cash (used in) provided by financing activities | (534,327) | 81,152 |
Effect of exchange rate changes on cash | (9,677) | (38,583) |
Net increase (decrease) in cash and cash equivalents | 192,950 | (159,500) |
Cash and cash equivalents at beginning of year | 187,611 | 326,048 |
Cash and cash equivalents at end of period | $380,561 | $166,548 |
1_CONSOLIDATED STATEMENT OF CAS
CONSOLIDATED STATEMENT OF CASH FLOWS (Parenthetical) (USD $) | |
In Thousands | 9 Months Ended
Mar. 31, 2009 |
Acquisitions, cash acquired | $24,203 |
BUSINESS SEGMENT INFORMATION
BUSINESS SEGMENT INFORMATION | |
9 Months Ended
Mar. 31, 2010 | |
BUSINESS SEGMENT INFORMATION | BUSINESS SEGMENT INFORMATION (Dollars in thousands) (Unaudited) The Company operates in three reportable business segments: Industrial, Aerospace and Climate Industrial Controls. 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, 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, business jet, 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. Climate Industrial Controls - This segment manufactures motion-control systems and components for use primarily in the refrigeration and air conditioning and transportation industries. Three Months Ended March31, Nine Months Ended March31, 2010 2009 2010 2009 Net sales Industrial: North America $ 958,594 $ 857,032 $ 2,588,887 $ 2,957,149 International 995,186 836,778 2,777,493 3,102,711 Aerospace 449,247 480,024 1,266,654 1,432,164 Climate Industrial Controls 211,796 170,879 573,662 606,033 Total $ 2,614,823 $ 2,344,713 $ 7,206,696 $ 8,098,057 Segment operating income Industrial: North America $ 133,598 $ 73,089 $ 324,204 $ 341,190 International 109,335 38,281 253,794 356,355 Aerospace 49,778 65,664 143,950 203,470 Climate Industrial Controls 16,298 (7,369 ) 32,939 (4,684 ) Total segment operating income 309,009 169,665 754,887 896,331 Corporate general and administrative expenses 41,280 40,366 99,054 123,112 Income from operations before interest expense and other expense 267,729 129,299 655,833 773,219 Interest expense 25,951 28,393 76,703 86,796 Other expense 35,385 38,638 116,473 66,534 Income before income taxes $ 206,393 $ 62,268 $ 462,657 $ 619,889 |
Management representation
Management representation | |
9 Months Ended
Mar. 31, 2010 | |
Management representation | 1. Management representation In the opinion of the management 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 March31, 2010, the results of operations for the three and nine months ended March31, 2010 and 2009 and cash flows for the nine months then ended. These financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Companys 2009 Annual Report on Form 10-K. Interim period results are not necessarily indicative of the results to be expected for the full fiscal year. Certain prior period amounts have been reclassified to conform to the current year presentation. These include the adoption of new accounting rules regarding noncontrolling interests. The Company has evaluated subsequent events that have occurred through the date these financial statements were issued. No subsequent events occurred that required either adjustment to or disclosure in these financial statements. |
New accounting pronouncements
New accounting pronouncements | |
9 Months Ended
Mar. 31, 2010 | |
New accounting pronouncements | 2. New accounting pronouncements Effective July1, 2009, the Company adopted the Financial Accounting Standards Boards (FASB) new guidance regarding business combinations. This guidance changed the accounting for business combinations both during the period of acquisition and in subsequent periods. Acquisition costs will generally be expensed as incurred; noncontrolling interests will be valued at fair value at the acquisition date; in-process research and development will be recorded at fair value as an indefinite-lived asset at the acquisition date; restructuring costs associated with a business combination will generally be expensed subsequent to the acquisition date; and changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date generally will affect income tax expense. The adoption of this guidance did not have a material effect on the Companys financial position or results of operations during the nine months ended March31, 2010. In December 2008, the FASB issued new guidance requiring detailed disclosures regarding the investment strategies, fair value measurements and concentrations of risk of plan assets of a defined benefit pension or other postretirement plan. This guidance is effective for fiscal years ending after December31, 2009, and the Company has not yet determined the impact it will have on the Companys retirement benefits disclosures. |
Product warranty
Product warranty | |
9 Months Ended
Mar. 31, 2010 | |
Product warranty | 3. Product warranty In the ordinary course of business, the Company warrants its products against defects in design, materials and workmanship over various time periods. The warranty accrual as of March31, 2010 and June30, 2009 is immaterial to the financial position of the Company and the change in the accrual for the current and prior-year quarter and first nine months of fiscal 2010 and fiscal 2009 is immaterial to the Companys results of operations and cash flows. |
Earnings per share
Earnings per share | |
9 Months Ended
Mar. 31, 2010 | |
Earnings per share | 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 nine months ended March31, 2010 and 2009. Three Months Ended March31, Nine Months Ended March31, 2010 2009 2010 2009 Numerator: Net income attributable to common shareholders $ 153,863 $ 53,422 $ 331,902 $ 458,999 Denominator: Basic - weighted average common shares 160,931,123 160,529,032 160,776,068 161,927,857 Increase in weighted average common shares from dilutive effect of equity-based awards 2,701,580 482,124 1,922,237 1,175,539 Diluted - weighted average common shares, assuming exercise of equity-based awards 163,632,703 161,011,156 162,698,305 163,103,396 Basic earnings per share $ .96 $ .33 $ 2.06 $ 2.83 Diluted earnings per share $ .94 $ .33 $ 2.04 $ 2.81 For the three months ended March31, 2010 and 2009, 4,448,497 and 10,639,997 common shares subject to equity-based awards, respectively, were excluded from the computation of diluted earnings per share because the effect of their exercise would be anti-dilutive. For the nine months ended March31, 2010 and 2009, 9,347,826 and 5,830,350 common shares subject to equity-based awards, respectively, were excluded from the computation of diluted earnings per share because the effect of their exercise would be anti-dilutive. |
Share repurchase program
Share repurchase program | |
9 Months Ended
Mar. 31, 2010 | |
Share repurchase program | 5. Share repurchase program The Company has a program to repurchase its common shares. Under the program, the Company is authorized to repurchase an amount of common shares each fiscal year equal to the greater of 7.5million shares or five percent of the shares outstanding as of the end of the prior fiscal year. Repurchases are funded primarily from operating cash flows and commercial paper borrowings, and the shares are initially held as treasury stock. During the three-month period ended March31, 2010, the Company repurchased 83,300 shares at an average price of $59.00 per share. Fiscal year-to-date, the Company repurchased 281,132 shares at an average price of $53.05 per share. |
Business realignment charges
Business realignment charges | |
9 Months Ended
Mar. 31, 2010 | |
Business realignment charges | 6. Business realignment charges During the third quarter and first nine months of fiscal 2010, the Company recorded charges of $14.9 million and $41.3 million, respectively, for the costs to structure its businesses in light of current and anticipated customer demand. The charges primarily consist of severance costs related to plant closures as well as general work force reductions implemented by various operating units throughout the world. The Company believes the realignment actions will positively impact future results of operations but will have no material effect on liquidity and sources and uses of capital. The Industrial Segment recognized $14.4 million and $37.1 million of the total charge for the third quarter and first nine months of fiscal 2010, respectively, relating to approximately 260 and 1,275 employees, respectively. The Climate Industrial Controls Segment recognized $0.5 million and $3.7 million of the total charge for the third quarter and first nine months of fiscal 2010, respectively, relating to approximately 245 employees for the first nine months of fiscal 2010. The Aerospace Segment recognized $0.5 million of the total charge for the first nine months of fiscal 2010 relating to approximately 50 employees. The charge is presented primarily in the Cost of sales caption in the Consolidated Statement of Income for the three and nine months ended March31, 2010. As of March31, 2010, approximately $22.6 million in severance payments have been made with the majority of the remaining payments expected to be made by June30, 2010. During the third quarter and first nine months of fiscal 2009, the Company recorded charges of $25.2 million and $36.9 million, respectively, for the costs to structure its businesses in light of current and anticipated customer demand. The charges primarily consisted of severance costs related to plant closures as well as general work force reductions implemented by various operating units throughout the world. The Company believes the realignment actions will positively impact future results of operations but will have no material effect on liquidity and sources and uses of capital. The Industrial Segment recognized $15.3 million and $21.0 million of the total charge for the third quarter and first nine months of fiscal 2009, respectively, relating to approximately 1,650 and 2,725 employees, respectively. The Climate Industrial Controls Segment recognized $1.9 million and $7.9 million of the total charge for the third quarter and first nine months of fiscal 2009, respectively, relating to approximately 340 and 585 employees, respectively. The Aerospace Segment recognized $1.4 million of the total charge for the third quarter and first nine months of fiscal 2009 relating to approximately 145 employees. Approximately $6.6 million of the total charge for the third quarter and first nine months of fiscal 2009 was recorded below segment operating income. The charge is presented primarily in the Cost of sales caption in the Consolidated Statement of Income for the three and nine months ended March31, 2009. All severance payments have been made. Additional charges to be recognized in future periods |
Equity
Equity | |
9 Months Ended
Mar. 31, 2010 | |
Equity | 7. Equity Effective July1, 2009, the Company adopted the FASBs new guidance regarding the accounting for noncontrolling interests. The new rules require the recognition of a noncontrolling interest as equity in the consolidated financial statements and separate from the parents equity. The amount of net income attributable to the noncontrolling interest is included in Net income on the face of the Consolidated Statement of Income. Changes in equity for the three months ended March31, 2009 and March31, 2010 are as follows: Shareholders Equity Noncontrolling Interests Total Equity Balance December31, 2008 $ 4,564,109 $ 90,028 $ 4,654,137 Net income (loss) 53,422 (267 ) 53,155 Other comprehensive (loss) income: Foreign currency translation (125,483 ) (6,483 ) (131,966 ) Retirement benefits plan activity 6,489 6,489 Net unrealized (loss) (254 ) (254 ) Total comprehensive (loss) income (65,826 ) (6,750 ) (72,576 ) Dividends paid (40,127 ) (11 ) (40,138 ) Stock incentive plan activity 8,247 8,247 Shares purchased at cost (8,840 ) (8,840 ) Balance March31, 2009 $ 4,457,563 $ 83,267 $ 4,540,830 Balance December31, 2009 $ 4,552,027 $ 85,759 $ 4,637,786 Net income 153,863 517 154,380 Other comprehensive (loss) income: Foreign currency translation (86,815 ) (168 ) (86,983 ) Retirement benefits plan activity 12,304 12,304 Net unrealized (loss) (151 ) (151 ) Total comprehensive (loss) income 79,201 349 79,550 Dividends paid (40,224 ) (193 ) (40,417 ) Stock incentive plan activity 14,041 14,041 Shares purchased at cost (4,915 ) (4,915 ) Retirement benefits plan activity 9,499 9,499 Balance March31, 2010 $ 4,609,629 $ 85,915 $ 4,695,544 Changes in equity for the nine months ended March31, 2009 and March31, 2010 are as follows: Shareholders Equity Noncontrolling Interests Total Equity Balance June30, 2008 $ 5,251,553 $ 78,589 $ 5,330,142 Net income 458,999 2,752 461,751 Other comprehensive (loss) income: Foreign currency translation (765,633 ) 3,671 (761,962 ) Retirement benefits plan activity 19,525 19,525 Net unrealized (loss) (3,531 ) (3,531 ) Total comprehensive (loss) income (290,640 ) 6,423 (284,217 ) Dividends paid (121,458 ) (4,696 ) (126,154 ) Stock incentive plan activity 48,049 48,049 Shares purchased at cost (442,800 ) (442,800 ) Acquisition activity 3,77 |
Goodwill and intangible assets
Goodwill and intangible assets | |
9 Months Ended
Mar. 31, 2010 | |
Goodwill and intangible assets | 8. Goodwill and intangible assets The changes in the carrying amount of goodwill for the nine months ended March31, 2010 are as follows: Industrial Segment Aerospace Segment Climate Industrial Controls Segment Total Balance June30, 2009 $ 2,496,449 $ 98,709 $ 307,919 $ 2,903,077 Acquisitions 193 193 Foreign currency translation (20,725 ) (13 ) 804 (19,934 ) Goodwill adjustments (627 ) (627 ) Balance March31, 2010 $ 2,475,097 $ 98,889 $ 308,723 $ 2,882,709 Goodwill adjustments primarily represent final adjustments to the purchase price allocation during the twelve-month period subsequent to the acquisition date and primarily involved the valuation of income tax liabilities. Intangible assets are amortized on the straight-line method over their legal or estimated useful lives. The following summarizes the gross carrying value and accumulated amortization for each major category of intangible assets: March31, 2010 June30, 2009 Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization Patents $ 120,109 $ 48,427 $ 119,811 $ 42,188 Trademarks 298,687 81,374 287,691 62,926 Customer lists and other 1,154,577 236,132 1,154,713 183,239 Total $ 1,573,373 $ 365,933 $ 1,562,215 $ 288,353 Total intangible amortization expense for the nine months ended March31, 2010 was $88,114. The estimated amortization expense for the five years ending June30, 2010 through 2014 is $111,889, $107,379, $94,795, $86,469 and $84,885, respectively. |
Retirement benefits
Retirement benefits | |
9 Months Ended
Mar. 31, 2010 | |
Retirement benefits | 9. Retirement benefits Net periodic pension cost recognized included the following components: Three Months Ended March 31, Nine Months Ended March 31, 2010 2009 2010 2009 Service cost $ 18,256 $ 16,694 $ 54,557 $ 50,148 Interest cost 44,757 43,596 132,926 130,547 Expected return on plan assets (46,159 ) (46,920 ) (133,644 ) (140,693 ) Amortization of prior service cost 3,281 2,878 9,856 8,513 Amortization of net actuarial loss 16,222 7,666 48,754 23,191 Amortization of initial net (asset) (14 ) (14 ) (22 ) (44 ) Net periodic benefit cost $ 36,343 $ 23,900 $ 112,427 $ 71,662 Postretirement benefit cost recognized included the following components: ThreeMonthsEnded March 31, Nine Months Ended March 31, 2010 2009 2010 2009 Service cost $ 139 $ 380 $ 417 $ 1,139 Interest cost 981 1,425 2,945 4,275 Net amortization and deferral and other (114 ) (185 ) (343 ) (556 ) Net periodic benefit cost $ 1,006 $ 1,620 $ 3,019 $ 4,858 Historically, the Company has provided self-insured retiree medical plan benefits for non-union employees upon their retirement. The retiree was responsible for paying the premiums for the medical coverage but the Company paid the costs of administering the plans (i.e., claims processing costs). Absorbing the administration costs was considered a benefit under the postretirement benefit accounting rules because the employees who elected to enroll in the retiree medical plans paid a lower premium because the Company was paying the costs to administer the plan. In the third quarter of fiscal 2009, the Company discontinued its self-insured retiree medical plans for non-union employees and has therefore eliminated the cost associated with administering the plans. The Company recognized $22.4 million in income in the third quarter of fiscal 2009 as a result of eliminating the liability related to this benefit. During the first nine months of fiscal 2010, the Company made approximately $130 million in cash contributions to its qualified defined benefit plans and expects to contribute approximately $10 million in cash to its qualified defined benefit plans during the last three months of fiscal 2010. The majority of the cash contributions made in fiscal 2010 are discretionary. |
Income taxes
Income taxes | |
9 Months Ended
Mar. 31, 2010 | |
Income taxes | 10. Income taxes As of March31, 2010, the Company had gross unrecognized tax benefits of $118,895. The total amount of unrecognized benefits that, if recognized, would affect the effective tax rate was $107,192. The accrued interest related to the gross unrecognized tax benefits, excluded from the amounts above, was $9,450. The Company and its subsidiaries file income tax returns in the United States and various state and foreign jurisdictions. In the normal course of business, the Companys tax returns are subject to examination by taxing authorities throughout the world. During the third quarter of fiscal 2010, the Company reached a settlement with the Internal Revenue Service (IRS) on the examination of U.S. federal income tax returns for fiscal 2006 and fiscal 2007. As a result, the Company is no longer subject to examinations of its U.S. federal income tax returns by the IRS for fiscal years through 2007. All significant state, local and foreign tax returns have been examined for fiscal years through 2001. The Company anticipates that within the next 12 months the total amount of unrecognized tax benefits related to income inclusion items, loss deductions and loss carryforwards may be reduced by an amount of up to $59 million due to the settlement of examinations and the expiration of statutes of limitation. |
Fair value measurement
Fair value measurement | |
9 Months Ended
Mar. 31, 2010 | |
Fair value measurement | 11. Fair value measurement On July1, 2009, the Company adopted the FASBs new guidance relating to fair value measurements of nonfinancial assets and nonfinancial liabilities, which includes goodwill and long-lived assets. These items are recognized at fair value when an impairment exists. As of March31, 2010, no material fair value adjustments were made to the Companys nonfinancial assets and nonfinancial liabilities. The Companys financial instruments consist primarily of investments in cash, cash equivalents and long-term investments as well as obligations under notes payable and long-term debt. Due to their short-term nature, the carrying values of Cash and cash equivalents and Notes payable approximate fair value. The carrying value of Long-term debt (excluding leases) was $1,846,944 and $1,889,844 at March31, 2010 and June30, 2009, respectively, and was estimated to have a fair value of $1,937,609 and $1,899,246 at March31, 2010 and June30, 2009, respectively. The fair value of Long-term debt (excluding leases) was estimated using discounted cash flow analyses assuming current interest rates for similar types of borrowing arrangements and maturities. The fair value of financial assets and financial liabilities that were measured at fair value on a recurring basis at March31, 2010 follows: Total QuotedPrices In Active Markets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Assets: Available for sale equity securities $ 3,617 $ 3,617 $ $ Derivatives 714 714 Liabilities: Deferred compensation plans 114,554 114,554 Derivatives 4,002 4,002 Available for sale equity securities consist of an investment in an electronic and electrical equipment company, the fair value of which is measured using quoted market prices. Derivatives primarily consist of costless collar contracts, the fair value of which is calculated through a model that utilizes market observable inputs including both spot and forward prices for the same underlying currencies. The Company has established nonqualified deferred compensation programs which permit officers, directors and certain management employees to defer a portion of their compensation, on a pre-tax basis, until their termination of employment. Changes in the fair value of the compensation deferred under these programs are recognized based on quoted market prices for the participants investment elections. |
Contingencies
Contingencies | |
9 Months Ended
Mar. 31, 2010 | |
Contingencies | 12. Contingencies The Company is involved in various litigation matters arising in the normal course of business, including proceedings based on product liability claims, workers compensation claims and alleged violations of various environmental laws. The Company is self-insured in the United States for health care, workers compensation, general liability and product liability up to predetermined amounts, above which, subject to certain limitations, third-party insurance applies. Management regularly reviews the probable outcome of these proceedings, the expenses expected to be incurred, the availability and limits of the insurance coverage, and the established accruals for liabilities. While the outcome of pending proceedings cannot be predicted with certainty, management believes that any liabilities that may result from these proceedings will not have a material adverse effect on the Companys liquidity, financial condition or results of operations. Parker ITR S.r.l. (Parker ITR), a subsidiary acquired on January31, 2002, has been the subject of a number of lawsuits and regulatory investigations, which are more fully described in Part II, Item1 of this Quarterly Report on Form 10-Q. Each of these lawsuits and regulatory investigations was also described in the Companys Annual Report on Form 10-K for the fiscal year ended June30, 2009. With respect to the class action lawsuits, the Company recognized $20,000 in expense in fiscal 2008 and $2,322 in expense in fiscal 2009, all of which was recognized in the first nine months of fiscal 2009. No expenses related to the class action lawsuits were recognized during the first nine months of fiscal 2010. With respect to the regulatory investigations, the Company recognized $35,084 in expense in fiscal 2009, $32,794 of which was recognized during the first nine months of fiscal 2009, and recognized $654 in expense during the first nine months of fiscal 2010. The Company has made all required payments relating to the class action lawsuits and regulatory investigations. With respect to the class action lawsuits, the Company made payments of $22,322 in fiscal 2009, all of which were made during the first nine months of fiscal 2009, and made no payments in the first nine months of fiscal 2010. With respect to the regulatory investigations, the Company made payments of $32,794 in fiscal 2009, none of which were made during the first nine months of fiscal 2009, and made payments of $35 in the first nine months of fiscal 2010. As of March31, 2010, the Company had a remaining reserve of $2,909 related to the class action lawsuits and regulatory investigations. Legal expenses related to these matters are being expensed as incurred and totaled $250 and $749 for the third quarter of fiscal 2010 and fiscal 2009, respectively, and $1,331 and $2,553 during the first nine months of fiscal 2010 and fiscal 2009, respectively. |