Parker(US:PH)2022-11-04 12:12Financial Performance - Net sales for the three months ended September 30, 2022, were $4,233 million, an increase of 12.5% compared to $3,763 million for the same period in 2021[91]. - Gross profit margin improved to 34.0% in the current year from 33.4% in the prior year, primarily due to higher sales volume and cost management[91]. - Selling, general and administrative expenses rose to $836 million, representing 19.7% of sales, up from 16.7% in the prior year[91]. - Net income decreased to $388 million, or 9.2% of sales, compared to $451 million, or 12.0% of sales, in the prior year[91]. - The Diversified Industrial North America segment reported net sales of $2,132 million, an increase of 18.8% year-over-year, while the International segment saw a slight decline of 1.6%[104][106]. - Aerospace Systems Segment net sales for the current-year quarter reached $746 million, up from $593 million in the prior-year period, with Meggitt contributing $115 million in sales[117][118]. Expenses and Margins - The operating margin for the Aerospace Systems Segment decreased to 12.4% from 20.0% year-over-year, attributed to higher commercial OEM volume and acquisition-related expenses[117][119]. - The effective tax rate for the current quarter was 22.9%, higher than the 21.0% in the comparable prior-year period[91]. - The company experienced a foreign currency transaction loss of $36 million in the current quarter, compared to a gain of $9 million in the prior year[98]. Backlog and Future Expectations - The backlog for the Diversified Industrial Segment increased to $4,901 million, up from $3,583 million in the prior year[104]. - As of September 30, 2022, the backlog for the Diversified Industrial Segment increased to $4.5 billion, primarily due to orders exceeding shipments and the addition of Meggitt backlog[114]. - The company anticipates incurring approximately $40 million in additional business realignment and acquisition integration charges for the remainder of fiscal 2023[112]. - The company expects to incur approximately $46 million in additional business realignment and acquisition integration charges in the remainder of fiscal 2023[120]. - The company anticipates that changes in economic conditions, including the impacts of the Russia-Ukraine war and COVID-19, may materially affect future performance[154]. Cash Flow and Financing - Cash provided by operating activities increased to $457 million for the first three months of fiscal 2023, compared to $424 million in the same period of fiscal 2022[129]. - Cash flows from investing activities were significantly impacted by strategic acquisitions and capital expenditures of $84 million in fiscal 2023[131]. - The company has a line of credit totaling $3.0 billion, with $1.7 billion available as of September 30, 2022[138]. - The debt to debt-shareholders' equity ratio was 0.62 to 1.0 as of September 30, 2022, indicating compliance with financial covenants[140]. Acquisitions and Divestitures - The company completed the acquisition of Meggitt for an aggregate cash purchase price of $7.2 billion, including debt assumption, at a price of 800 pence per share[145]. - The company sold its aircraft wheel and brake business for proceeds of $441 million as part of commitments made to the European Commission regarding the Meggitt acquisition[147]. - Acquisitions and divestitures impacted sales by approximately $143 million and $3 million, respectively, during the current-year quarter[94]. Debt and Interest Rates - A 100 basis point increase in near-term interest rates would increase annual interest expense on variable rate debt by approximately $37 million[153]. - The company has a debt portfolio that includes $2 billion of variable rate debt, aiming for a 60/40 mix between fixed and variable rate debt[153]. - The company fully drew against a $2.0 billion Term Loan Facility in September 2022 to finance part of the acquisition, which matures in September 2025[144]. Currency Risk Management - The company expects to manage foreign currency transaction and translation risk using existing processes, especially after the acquisition of Meggitt[150]. - The company has deal-contingent forward contracts with an aggregate notional amount of £6.4 billion to mitigate currency risk related to the acquisition[146]. - The company does not believe that changes in the availability of supply chain financing will significantly impact its liquidity[142].