1
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 December 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
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(Exact name of registrant as specified in its charter)
OHIO 34-0451060
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(State or other (IRS Employer
jurisdiction of Identification No.)
incorporation)
6035 Parkland Blvd., Cleveland, Ohio 44124-4141
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (216) 896-3000
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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
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Number of Common Shares outstanding at December 31, 1999 112,086,749
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PART I - FINANCIAL INFORMATION
PARKER-HANNIFIN CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(Dollars in thousands, except per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
December 31, December 31,
--------------------------- -----------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
Net sales $ 1,239,207 $ 1,199,021 $ 2,481,500 $ 2,417,745
Cost of sales 971,298 943,167 1,947,919 1,890,474
----------- ----------- ----------- -----------
Gross profit 267,909 255,854 533,581 527,271
Selling, general and
administrative expenses 140,157 141,370 278,305 275,528
Interest expense 14,028 17,341 28,571 33,416
Interest and other (income)
expense, net (724) 333 (100) 406
----------- ----------- ----------- -----------
Income before income taxes 114,448 96,810 226,805 217,921
Income taxes 39,485 33,278 78,248 76,272
----------- ----------- ----------- -----------
Net income $ 74,963 $ 63,532 $ 148,557 $ 141,649
=========== =========== =========== ===========
Earnings per share - Basic $ .69 $ .59 $ 1.36 $ 1.30
Earnings per share - Diluted $ .68 $ .58 $ 1.35 $ 1.29
Cash dividends per common share $ .17 $ .15 $ .34 $ .30
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See accompanying notes to consolidated financial statements.
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PARKER-HANNIFIN CORPORATION
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
(Unaudited)
December 31, June 30,
ASSETS 1999 1999
- ------------------ ----------- -----------
Current assets:
Cash and cash equivalents $ 74,353 $ 33,277
Accounts receivable, net 692,357 738,773
Inventories:
Finished products 488,875 442,361
Work in process 302,534 347,376
Raw materials 123,628 125,393
----------- -----------
915,037 915,130
Prepaid expenses 19,021 22,928
Deferred income taxes 66,722 64,576
----------- -----------
Total current assets 1,767,490 1,774,684
Plant and equipment 2,572,878 2,506,812
Less accumulated depreciation 1,358,676 1,305,943
----------- -----------
1,214,202 1,200,869
Other assets 740,719 730,335
----------- -----------
Total assets $ 3,722,411 $ 3,705,888
=========== ===========
LIABILITIES
- ---------------------
Current liabilities:
Notes payable $ 61,123 $ 60,609
Accounts payable, trade 253,798 313,173
Accrued liabilities 299,742 328,147
Accrued domestic and foreign taxes 39,130 52,584
----------- -----------
Total current liabilities 653,793 754,513
Long-term debt 713,592 724,757
Pensions and other postretirement benefits 279,760 276,637
Deferred income taxes 31,247 30,800
Other liabilities 75,075 65,319
----------- -----------
Total liabilities 1,753,467 1,852,026
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 112,130,445 shares at
December 31 and 111,945,179 shares at June 30 56,065 55,973
Additional capital 134,536 132,227
Retained earnings 1,983,832 1,872,356
Unearned compensation related to guarantee of ESOP debt (105,035) (112,000)
Deferred compensation related to stock options 1,304
Accumulated other comprehensive income (99,865) (92,858)
----------- -----------
1,970,837 1,855,698
Common stock in treasury at cost;
43,696 shares at December 31 and
43,836 shares at June 30 (1,893) (1,836)
----------- -----------
Total shareholders' equity 1,968,944 1,853,862
----------- -----------
Total liabilities and shareholders' equity $ 3,722,411 $ 3,705,888
=========== ===========
See accompanying notes to consolidated financial statements.
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PARKER-HANNIFIN CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Six Months Ended
December 31,
-------------------------
CASH FLOWS FROM OPERATING ACTIVITIES 1999 1998
- ------------------------------------ --------- ---------
Net income $ 148,557 $ 141,649
Adjustments to reconcile net income to net cash
provided by operations:
Depreciation 88,019 85,636
Amortization 18,943 19,146
Deferred income taxes (3,019) (4,454)
Foreign currency transaction loss (gain) 3,443 (3,752)
(Gain) loss on sale of plant and equipment (6,955) 794
Changes in assets and liabilities:
Accounts receivable, net 44,321 68,054
Inventories 657 (39,916)
Prepaid expenses 3,904 5,430
Other assets 2,541 (15,381)
Accounts payable, trade (59,077) (69,408)
Accrued payrolls and other compensation (34,371) (58,234)
Accrued domestic and foreign taxes (12,640) (5,990)
Other accrued liabilities 4,978 (15,494)
Pensions and other postretirement benefits 4,245 10,116
Other liabilities 9,706 4,649
--------- ---------
Net cash provided by operating activities 213,252 122,845
CASH FLOWS FROM INVESTING ACTIVITIES
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Acquisitions (less cash acquired of $2,609 in 1998) (5,711) (89,865)
Capital expenditures (114,114) (114,650)
Proceeds from sale of plant and equipment 20,203 2,364
Other (30,100) 1,045
--------- ---------
Net cash used in investing activities (129,722) (201,106)
CASH FLOWS FROM FINANCING ACTIVITIES
- ------------------------------------
Net proceeds from (payments for) common share activity 3,649 (47,863)
(Payments for) proceeds from notes payable, net (523) 75,569
Proceeds from long-term borrowings 3,692 206,621
Payments of long-term borrowings (8,867) (115,895)
Dividends (37,081) (32,700)
--------- ---------
Net cash (used in) provided by
financing activities (39,130) 85,732
Effect of exchange rate changes on cash (3,324) 1,981
--------- ---------
Net increase in cash and cash equivalents 41,076 9,452
Cash and cash equivalents at beginning of year 33,277 30,488
--------- ---------
Cash and cash equivalents at end of period $ 74,353 $ 39,940
========= =========
See accompanying notes to consolidated financial statements.
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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, 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 Six Months Ended
December 31, December 31,
-------------------------- --------------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
Net sales
Industrial:
North America $ 658,542 $ 603,874 $1,326,211 $1,225,469
International 303,918 316,902 602,381 632,132
Aerospace 276,747 278,245 552,908 560,144
---------- ---------- ---------- ----------
Total $1,239,207 $1,199,021 $2,481,500 $2,417,745
========== ========== ========== ==========
Segment operating income
Industrial:
North America $ 87,200 $ 67,170 $ 180,883 $ 149,325
International 21,787 21,315 32,999 48,137
Aerospace 36,939 41,937 71,987 85,776
---------- ---------- ---------- ----------
Total segment operating income 145,926 130,422 285,869 283,238
Corporate general and
administrative expenses 14,087 15,337 28,200 27,632
---------- ---------- ---------- ----------
Income before interest expense
and other 131,839 115,085 257,669 255,606
Interest expense 14,028 17,341 28,571 33,416
Other 3,363 934 2,293 4,269
---------- ---------- ---------- ----------
Income before income taxes $ 114,448 $ 96,810 $ 226,805 $ 217,921
========== ========== ========== ==========
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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 except as discussed in Note 2) necessary to present
fairly the financial position as of December 31, 1999, the results of
operations for the three and six months ended December 31, 1999 and
1998 and cash flows for the six months then ended.
2. Charges related to business realignment
During the first quarter of fiscal 2000 the Company recorded a $8,555
charge ($5,560 after-tax or $.05 per share) related to the costs of
appropriately structuring its businesses to operate in their current
economic environment. The charge primarily relates to severance costs
attributable to approximately 260 employees principally associated with
the Industrial International operations. As of December 31, 1999, the
Company had made severance payments of $2,035 to approximately 130
employees. The remaining severance payments are expected to be made by
the end of fiscal 2000.
A change in the future utilization of long-lived assets at certain
locations triggered an impairment review of these long-lived assets
during the first quarter of fiscal 2000. The Company evaluated the
recoverability of the long-lived assets and determined that the
estimated future undiscounted cash flows were below the carrying value
of these assets. Accordingly, the Company recorded a non-cash
impairment loss of $4,875 ($3,169 after-tax or $.03 per share). Of the
pre-tax amount, $3,499 relates to the Aerospace segment and $1,376
relates to the Industrial segment.
The severance costs and impairment loss are presented in the Income
statement for the six months ended December 31, 1999 in the following
captions: $2,552 in Cost of sales; $2,476 in Selling, general and
administrative expenses; and $8,402 in Interest and other (income)
expense, net.
Also recorded in the first quarter of fiscal 2000, was a gain of $6,423
($4,175 after-tax or $.04 per share) realized primarily on the sale of
real property. The gain is reflected in the Income statement for the
six months ended December 31, 1999 in the Interest and other (income)
expense, net caption.
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3. 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 December 31, 1999 and 1998.
Three Months Ended Six Months Ended
December 31, December 31,
------------------------------ ------------------------------
NUMERATOR: 1999 1998 1999 1998.
------------ ------------ ------------ ------------
Net income applicable
to common shares $ 74,963 $ 63,532 $ 148,557 $ 141,649
DENOMINATOR:
Basic - weighted average
common shares 109,188,711 108,541,603 109,129,000 108,953,828
Increase in weighted average
from dilutive effect of
exercise of stock options 1,017,243 880,609 1,021,338 821,286
------------------------------------------------------------------
Diluted - weighted average
common shares, assuming
exercise of stock options 110,205,954 109,422,212 110,150,338 109,775,114
==================================================================
Basic earnings per share $ .69 $ .59 $ 1.36 $ 1.30
Diluted earnings per share $ .68 $ .58 $ 1.35 $ 1.29
4. 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 is primarily funded from operating cash flows and the shares
are initially held as treasury stock. The Company did not purchase any
shares of its common stock during the three-month and six-month periods
ended December 31, 1999.
5. Comprehensive income
The Company's only item of other comprehensive income is foreign
currency translation adjustments recorded in shareholders' equity.
Comprehensive income for the three and six months ended December 31,
1999 and 1998 is as follows:
Three Months Ended Six Months Ended
December 31, December 31,
-------------------------- --------------------------
1999 1998 1999 1998
--------- --------- --------- ---------
Net income $ 74,963 $ 63,532 $ 148,557 $ 141,649
Foreign currency
translation adjustments (20,753) (508) (7,007) 24,691
---------------------------------------------------------
Comprehensive income $ 54,210 $ 63,024 $ 141,550 $ 166,340
==========================================================
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6. Subsequent events
On January 17, 2000, the Company and Commercial Intertech Corp.
announced that their Boards of Directors had unanimously approved a
definitive agreement pursuant to which Commercial Intertech will merge
into the Company, with the Company as the surviving corporation, in a
cash and stock transaction with an equity value of approximately $366
million. In addition, the Company will assume approximately $107
million of Commercial Intertech debt.
Under the terms of the merger agreement, the Company will acquire all
outstanding common stock of Commercial Intertech for $20.00 per share
in exchange for Company common stock, subject to a collar. Commercial
Intertech shareholders will receive the Company's common stock based
on an exchange ratio that will be determined based on the average
closing price of Company common stock for the 20 trading-day period
ending five trading days immediately preceding the closing date of the
merger. Commercial Intertech shareholders may elect to receive $20.00
per share in cash, subject to the limitation that no more than 49
percent of the total merger consideration is paid in cash.
The merger is anticipated to close during the Company's quarter ending
June 30, 2000. The Company plans to account for the transaction using
the purchase method of accounting.
On February 3, 2000, the Company announced their agreement to acquire
the assets of Dana Corporation's Gresen Hydraulic business for
approximately $112 million cash. Gresen manufactures a wide range of
hydraulic pumps, motors, cylinders, control valves, filters and
electronic controls for on- and off-highway vehicles and had prior-year
annual sales of approximately $128 million.
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9
PARKER-HANNIFIN CORPORATION
FORM 10-Q
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31, 1999
AND COMPARABLE PERIODS ENDED DECEMBER 31, 1998
CONSOLIDATED STATEMENT OF INCOME
Net sales increased 3.4 percent for the second quarter of fiscal 2000 and 2.6
percent for the six-month period ended December 31, 1999. Without acquisitions,
the increases would have been 3.2 percent and 2.0 percent, respectively.
Excluding acquisitions, these increases primarily result from higher volume in
the North American Industrial operations.
Income from operations was $127.8 million for the current second quarter and
$255.3 million for the current six months, an increase of 11.6 percent and 1.4
percent, respectively. As a percent of sales, Income from operations increased
to 10.3 percent from 9.5 percent for the quarter and declined to 10.3 percent
from 10.4 percent for the six months. Cost of sales as a percent of sales
declined to 78.4 percent from 78.7 percent for the quarter and increased to
78.5 percent from 78.2 percent for the six months. The increased margins in the
second quarter are primarily the result of higher volume experienced in the
North American Industrial operations, partially offset by lower volume and mix
of original-equipment programs in the Aerospace operations. The declining
margins for the six months reflect the weakness experienced in the
International Industrial and Aerospace operations as well as the effect of
business realignment charges recorded in fiscal 2000 (as discussed in more
detail below). Selling, general and administrative expenses, as a percent of
sales, decreased to 11.3 percent of sales from 11.8 percent for the quarter and
to 11.2 percent from 11.4 percent for the six months.
Interest expense decreased $3.3 million for the quarter ended December 31, 1999
and $4.8 million for the six-month period ended December 31, 1999 due to lower
average debt outstanding in both the current year quarter and six months.
Interest and other (income) expense, net for six months includes $6.4 million in
gains primarily from the sale of real property and $8.4 million of asset
impairment losses and other plant closure costs.
Net income increased 18.0 percent for the quarter, and 4.9 percent for the six
months, as compared to the prior year. As a percent of sales, Net income
increased to 6.0 percent from 5.3 percent for the quarter and to 6.0 percent
from 5.9 percent for the six months.
Backlog was $1.65 billion at December 31, 1999 compared to $1.61 billion in the
prior year and $1.63 billion at June 30, 1999. The increase in the level of
backlog reflects an improvement in orders in the North American Industrial
operations.
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10
RESULTS BY BUSINESS SEGMENT
INDUSTRIAL - The Industrial Segment operations had the following changes in Net
sales in the current year when compared to the equivalent prior-year period:
Period ending December 31,
--------------------------
Three Months Six Months
------------ ----------
Industrial North America 9.1 % 8.2 %
Industrial International (4.1) % (4.7) %
Total Industrial 4.5 % 3.8 %
Without the effect of currency-rate changes, International sales would have
increased 6.2 percent for the quarter and 3.3 percent for the six months.
Without the effect of acquisitions completed within the past 12 months, the
changes in Net sales would have been:
Period ending December 31,
--------------------------
Three Months Six Months
------------ ----------
Industrial North America 9.1 % 7.3 %
Industrial International (4.7) % (5.5) %
Total Industrial 4.3 % 2.9 %
The increase in Industrial North American sales is attributed to higher volume,
particularly in the semiconductor manufacturing and telecommunications markets.
International Industrial sales were affected by the struggling industrial
economy in Europe and Latin America while Asia Pacific sales were higher.
Operating income for the Industrial segment increased 23.2 percent for the
quarter and 8.3 percent for the six months. Industrial North American operating
income increased 29.8 percent for the quarter and 21.1 percent for the six
months. Industrial North American operating income, as a percent of sales,
increased to 13.2 percent from 11.1 percent for the quarter and to 13.6 percent
from 12.2 percent for the six months as margins benefited from the higher sales
volume.
Industrial International operating income increased 2.2 percent for the quarter
and decreased 31.4 percent for the six months. Included in the International
Industrial operating income for the current year six-month period was $9.0
million in business realignment charges. These charges were made as a result of
actions the Company took to appropriately structure the European operations to
operate in their current environment. Without the business realignment charges,
International Industrial operating income decreased 12.8 percent for the current
year first six months compared to the prior year six months. Excluding the
business realignment charges, Industrial International operating income, as a
percent of sales, increased to 7.2 percent from 6.7 percent for the quarter and
decreased to 7.0 percent from 7.6 percent for the six months. The increase in
margins for the current quarter is a result of the higher sales volume
(excluding currency) while the six month margins reflect the weakness in the
European operations.
Total Industrial Segment backlog increased 4.4 percent compared to December 31,
1998 and 11.0 percent since June 30, 1999 driven primarily from an increase in
order rates in the North American Industrial operations.
Order demand for much of fiscal 2000 has been improving across virtually all of
the Industrial operations. While this upward trend is expected to continue
generally, a slight downward trend in order rates in the heavy-duty truck market
is expected for the balance of fiscal 2000. The weakness in the European
operations experienced in the first half of fiscal 2000 has moderated and are
expected to continue to improve over the balance of fiscal 2000.
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AEROSPACE - Aerospace Net sales declined slightly for the quarter and 1.3
percent for the six months due to lower volume in the large aircraft business.
Operating income for the Aerospace Segment declined 11.9 percent for the quarter
and 16.1 percent for the six-month period. Included in the Aerospace operating
income for current year six-month period was $4.4 million in business
realignment charges. These charges were a result of the actions the Company took
to resize the business in response to a decline in OEM orders. Excluding the
business realignment charges, operating income, as a percent of sales, decreased
to 13.3 percent from 15.1 percent for the quarter and to 13.8 percent from 15.3
percent for the six-month period reflecting the lower volume, a mix of
original-equipment programs, as well as lower capacity utilization.
Backlog for the Aerospace Segment remained essentially the same from December
31, 1998 and decreased 3.6 percent since June 30, 1999. The decline in backlog
compared to June 30, 1999 reflects the expected slowdown in OEM order rates. The
Company anticipates further inventory reductions for the balance of the fiscal
year in anticipation of softer commercial aviation sales.
Corporate general and administrative expenses decreased to $14.1 million from
$15.3 million for the quarter and increased to $28.2 million from $27.6 million
for the six months. The lower expense in the quarter is a result of reduced
expenses associated with non-qualified benefit plans.
Other (in the Results by Business Segment) increased $2.4 million for the
quarter as a result of currency transaction losses and decreased $2.0 million
for the six months primarily as a result of gains from the sale of real property
as discussed in the Consolidated Statement of Income section, partially offset
by currency transaction losses.
BALANCE SHEET
Working capital increased to $1,113.7 million at December 31, 1999 from $1,020.2
million at June 30, 1999 with the ratio of current assets to current liabilities
increasing to 2.7 to 1. The increase was primarily due to an increase in Cash
and decreases in Accounts payable and Accrued liabilities, partially offset by a
decrease in Accounts receivable.
Accounts receivable were lower by $46.4 million on December 31, 1999 compared to
June 30, 1999 primarily due to the holiday induced lower level of sales in
December. Days sales outstanding have increased to 49 days at December 31, 1999
from 47 days at June 30, 1999. Inventories remained flat since June 30, 1999
while months supply declined slightly.
Accounts payable, trade decreased $59.4 million since June 30, 1999 with the
reduction occurring consistently throughout the operations. A portion of the
decrease was the result of lower production during the holidays.
Accrued liabilities decreased $28.4 million since June 30, 1999 primarily as a
result of lower incentive compensation and payroll accruals occurring throughout
most of the operations.
The debt to debt-equity ratio decreased to 28.2 percent at December 31, 1999
from 29.8 percent at June 30, 1999 primarily due to a decrease in Long-term
debt.
Due to the strength of the dollar, foreign currency translation adjustments
resulted in a decrease in net assets of $7.0 million during the first half of
fiscal 2000. The translation adjustments primarily affected Accounts receivable,
Inventories and Notes payable.
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STATEMENT OF CASH FLOWS
Net cash provided by operating activities was $213.3 million for the six months
ended December 31, 1999, as compared to $122.8 million for the same six months
of 1998. The increase in net cash provided was primarily the result of activity
within the working capital items - Inventories, Accounts receivable, Accrued
payrolls and Other accrued liabilities - which provided cash of $15.6 million in
fiscal 2000 compared to using cash of $45.6 million in fiscal 1999. In addition,
activity in Other assets provided cash of $2.5 million in the current year
compared to using cash of $15.4 million in the prior year.
Net cash used in investing activities declined to $129.7 million for fiscal 2000
compared to $201.1 million for fiscal 1999 primarily due to a reduction in the
amount spent on acquisitions and an increase in the proceeds received from the
sale of plant and equipment. Included in Other is an increase in cash used for
equity investments in fiscal 2000.
Financing activities used cash of $39.1 million for the six months ended
December 31, 1999 compared to providing cash of $85.7 million for the same
period in 1998. The change resulted primarily from net debt borrowings using
cash of $5.7 million in fiscal 2000 compared to providing cash of $166.3 million
in the prior year, partially offset by common stock activity providing cash of
$3.6 million in the current year versus using cash of $47.9 million, primarily
for the repurchase of shares, in the prior year.
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 took action to assure that its computerized products and systems and
all external interfaces were Year 2000 compliant. These actions were part of a
formal information technology initiative which the Company began several years
ago. The Company has not experienced any business interruptions as a result of
the Year 2000.
In addition, the Company contacted its key suppliers, customers, distributors
and financial service providers regarding their Year 2000 status. Follow-up
inquiries and audits indicated that substantially all key third parties would be
year 2000 compliant on a timely basis. The Company is unaware of any key
suppliers, customers, distributors or financial service providers who have
experienced problems regarding their Year 2000 compliance.
While there have been no known adverse consequences of any unsuccessful
modifications significantly affecting the financial position, liquidity, or
results of operations of the Company, there can be no assurance that any unknown
unsuccessful modifications would not have an adverse impact on the Company.
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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 we expect or anticipate will
occur in the future, including statements relating to growth, operating margin
performance or earnings per share or statements expressing general opinions
about future operating results, are forward-looking statements.
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,
- difficulties in introducing new products and entering new markets, and
- uncertainties surrounding the global economy and global market
conditions, including among others, 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 this Report.
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PARKER-HANNIFIN CORPORATION
PART II - OTHER INFORMATION
ITEM 2. CHANGE IN SECURITIES AND USE OF PROCEEDS.
During the quarter ended December 31, 1999, in reliance upon Section
4(2) of the Securities Act of 1933, as amended, the Registrant issued the
following shares of Common Stock, $.50 par value:
(a) 6,012 shares valued at $44.90625 per share pursuant to the
Registrant's Non-Employee Directors Stock Plan in lieu of fees; and
(b) 1,054 shares upon exercise of stock options granted under the
Registrant's Non-Employee Directors Stock Option Plan in exchange for an
average option exercise price of $30.952. The option price was paid by
previously owned shares as permitted under the Non-Employee Directors Stock
Option Plan.
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 10(a) - Exchange Agreement entered into as of October 29, 1999
between the Registrant and Michael J. Hiemstra
including an Executive Estate Protection Plan
comprised of the Executive Estate Protection
Agreement among the Registrant, Michael J. Hiemstra,
and the Irrevocable Trust Creating Vested Trusts for
Children of Michael J. Hiemstra dated August 16, 1999
(the "Trust") and the Collateral Assignment between
the Trust and the Registrant.
Exhibit 27 - Financial Data Schedule
(b) The Registrant filed a report on Form 8-K on January 19, 2000 to
file the press release issued by the Registrant announcing that the Registrant
entered into an Agreement and Plan of Merger with Commercial Intertech Corp.
whereby Commercial Intertech Corp. will be merged with and into the Registrant,
with the Registrant as the surviving corporation and to file the Agreement and
Plan of Merger.
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: February 4, 2000
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15
EXHIBIT INDEX
Exhibit No. Description of Exhibit
----------- ----------------------
10(a) Exchange Agreement entered into as of
October 29, 1999 between the Registrant and
Michael J. Hiemstra including an Executive
Estate Protection Plan comprised of the
Executive Estate Protection Agreement among
the Registrant, Michael J. Hiemstra, and the
Irrevocable Trust Creating Vested Trusts for
Children of Michael J. Hiemstra dated August
16, 1999 (the "Trust") and the Collateral
Assignment between the Trust and the
Registrant.
27 Financial Data Schedule
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