Like some other industrial companies, Parker Hannifin Corp. (NYSE:PH), the Cleveland manufacturer of motion and control technologies, has had success buying smaller manufacturers and bolting them onto its platforms in aerospace, climate control and other sectors. The company made four such deals in 2008, never disclosing terms but in one case (Vansco Electronics LP) getting a company with $180 million in sales. Deal Pipeline subscribers can find details
here.
But unlike some of its peers, Parker Hannifin doesn't think the time is yet right to stat buying again. In an analyst call on fiscal first-quarter earnings CEO Don Washkewicz (pictured) explained why.
It wasn't the fact that revenue and profits were both
off sharply from the year-earlier period. The comparison quarter was a record one, and there was, after all, a big recession in between. Quarterly profit of $73 million and revenue of $2.2 billion actually beat expectations, and the stock responded accordingly.
Instead, as you can see in the transcript on Seeking Alpha, Washkewicz's
caution stems from his desire to "manage for cash" (as he put it) and to pay down debt taken on for the last round of deals. Excerpts:
What we're really trying to do is to pay down as much debt as we can. As you know, at the beginning of last fiscal year, we acquired about a half a billion dollars' worth of sales and ran our short-term debt up, commercial paper and so forth. We're working that back down, trying to get that back into better shape.
We're going to be cautious at the early phases of the cycle. We're going to be looking. Basically, what we're doing now is trying to make sure that we have those contacts in sight, the ones that we want to pursue, and make sure that we're developing those relationships so that when we are ready to move forward we do so and take advantage of some of the opportunities out there.
But I would say don't expect anything this half of the year, OK, and let's look into next half and probably more in the tail end of the second half before we would really start getting serious about doing anything.
So let's see. That would be May or June he's talking about, right? -
Kenneth Klee
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