Parker Hannifin Pleased With the Record Performance

Cash flow from operations reached a first quarter record $217.0 million, or 10.3 percent of sales, surpassing $157.1 million in the same period last year, or 8.4 percent of sales.

Fully diluted earnings per share in the first quarter of fiscal 2006 were $1.43, which includes an expense of 10 cents per diluted share related to the adoption of FAS 123R, which requires the expensing of equity-based compensation. First quarter earnings also include income from discontinued operations of 24 cents per diluted share, or $28.9 million, primarily attributable to the gain on the divestiture of the Astron custom-engineered buildings business in addition to the profits of such business.

Income from continuing operations in the first quarter of fiscal 2006 was $1.19 per diluted share, up 13 percent over same period in the prior year. Income from continuing operations was $1.29 per diluted share, an increase of 23 percent, without the impact from the adoption of FAS 123R in the current quarter, which was not in effect during the same period in the prior year.

The company continues to expect a total FAS 123R expense for equity-based compensation in fiscal 2006 of approximately 15 to 20 cents per diluted share, which includes the 10 cents per diluted share expense already incurred in the current quarter.

One year ago, fully diluted earnings per share in the first quarter of fiscal 2005 were $1.11, which includes income from discontinued operations of 6 cents per diluted share, or $6.7 million, consisting of profit from the Astron business, and the Specialty Chemicals business that was divested in December 2004. Income from continuing operations in the first quarter of fiscal 2005 was $1.05 per diluted share.

"We are very pleased with the record performance in the first quarter. Our record cash flow from operations as a percentage of sales this quarter should keep us within the top tier of our peer group, which is one of the key goals we have set for ourselves. This is a great start to what we expect will be another record year at Parker," said Chairman and CEO Don Washkewicz. "We feel very good about how the company is executing and taking advantage of the growth opportunities in our global markets. Our Win Strategy continues to provide clarity across each of our divisions and business groups on what's important-including premiere customer service, top quartile return on invested capital, and profitable growth."

First Quarter Segment Results

• In the North American Industrial segment, first-quarter operating income improved 15 percent to $137.1 million, on sales of $929.2 million.
• The International Industrial segment first-quarter operating income increased 21 percent to $80.4 million, on sales of $620.8 million.
• In the company's Climate & Industrial Controls segment, first-quarter operating income increased 18 percent to $18.6 million, on sales of $214.7million.
• The Aerospace segment reported a first-quarter increase in operating income of 7 percent to $54.8 million, on sales of $348.8 million.
• The "Other" segment, comprised solely of the divested Astron business, has now been eliminated as a segment.
• The expense of 10 cents per diluted share in the current quarter related to the adoption of FAS 123R is included in "Other Expense" for segment reporting purposes, and is not included in the operating segment results.

Outlook

The company has increased its previous earnings guidance provided on July 28, 2005, when it announced fiscal 2005 year-end results. Including the impact of FAS 123R, the company's updated guidance now projects earnings from continuing operations for fiscal-year 2006 to range from $4.85 to $5.30 per diluted share.