Parker Hannifin Posts Quarterly Records for Sales and Earnings Per Share from Continuing Operations; Strong Cash Flows

CLEVELAND, April 24 /PRNewswire-FirstCall/ -- Parker Hannifin Corporation (NYSE: PH), the global leader in motion and control technologies, today reported third quarter fiscal year 2007 results. The company set new quarterly records for sales and earnings per diluted share from continuing operations.

Sales for the third quarter of fiscal year 2007 were $2.8 billion, up 11.3 percent, as compared to sales of $2.5 billion from the same period last year. Earnings per diluted share from continuing operations in the third quarter of fiscal year 2007 was $1.78, an increase of 21.9 percent over the $1.46 posted in the same period a year ago. This quarter's earnings per diluted share included a gain of 5 cents from the sale of real estate.

"By executing our Win Strategy, our employees delivered another record quarter," said Chairman, CEO and President Don Washkewicz. "Their continued performance gives us confidence that fiscal year 2007 will end on a very positive note."

Third Quarter Segment Results

In the Industrial North American segment, third quarter operating income decreased 10.8 percent from the prior year to $146.8 million, on sales of $1.0 billion.

In the Industrial International segment, third quarter operating income increased 42.0 percent over the prior year to $140.5 million, on sales of $1.0 billion.

In the Aerospace segment, third quarter operating income increased 21.6 percent over the prior year to $66.2 million, on sales of $436.5 million.

In the Climate & Industrial Controls segment, third quarter operating income decreased 19.0 percent from the prior year to $19.2 million, on sales of $278.1 million.

Total operating margin across all segments in the third quarter was 13.4 percent versus 13.7 percent in the same period a year ago.

Fiscal Year to Date Results

For the first nine months of fiscal year 2007, sales were $7.8 billion, up 15.9 percent, as compared to sales of $6.8 billion from the same period last year. Earnings per diluted share from continuing operations for the first nine months of fiscal year 2007 was $5.17, up 38.6 percent from the $3.73 reported in the same period in the prior year. Cash flow from operations for fiscal year 2007 to date reached $536.9 million.

"Our ability to generate strong cash flows allows for great flexibility in optimizing shareholder returns," said Washkewicz. "For example, cash was used since the beginning of the third quarter to acquire Airtek, a strategic fit for our filtration business; SSD Drives India, which expands our global automation technology platform; Rectus AG, complementing our global fluid handling business; and Rayco Technologies, an Asian based producer of elastomer seals for precision markets. Together, these acquisitions have annual revenues of approximately $166 million. We also made an additional $50 million discretionary contribution to our North American retirement plan in the third quarter."


"This quarter's financial performance keeps us on track to once again exceed our annual profitable growth goal of 10 percent," said Washkewicz. "Just as importantly, we continue to grow the company in a very balanced way. Of the quarter's 11 percent sales growth, approximately 5 percent was derived organically, 4 percent came via acquisitions and 2 percent was due to the favorable impact of foreign currency."

Washkewicz added, "We're especially pleased at the results coming from our Industrial International segment. The hard work we've done on our European initiatives in recent years, including consolidation of inventory, synchronization of the sales force, and acceleration of low cost manufacturing, has led to sustained and measurable progress in our margins. The Win Strategy initiatives relating to pricing, lean and procurement also continue to drive our success. The clear outcome is that the size and mix of our Industrial International business is more diverse and more profitable than it was during previous business cycles. These factors should allow Parker's overall performance to remain strong despite potential near term slowing in some of our North American markets."

The quarter also saw the company highlight a number of its new products in an event for editors of the trade media. "It is gratifying to see the innovative products from our global Winovation program coming to market and gaining customer recognition," said Washkewicz. "Core Parker technologies like hydraulics, fluid handling, sealing and filtration are leading to the creation of products that will profitably address growing human needs in areas such as energy, safety and healthcare for years to come."


As a result of the continued strong results, the company increased and narrowed its guidance for fiscal year 2007 income from continuing operations from $6.35 to $6.75 per diluted share to $6.80 to $7.00 per diluted share.

In addition to this information, Parker advises shareholders to note order trends, for which the company makes a disclosure several business days after the conclusion of each month. This information is available on the company's investor information web site, Beginning in fiscal year 2008, Parker will begin reporting order trends quarterly instead of monthly.

NOTICE OF CONFERENCE CALL: Parker Hannifin's conference call and slide presentation to discuss its fiscal third-quarter results is available to all interested parties via live webcast today at 10:00 a.m. EDT, on the company's investor information web site, To access the call, click on the "Live Webcast" link. From this link, users also may complete a pre-call system test and register for e-mail notification of future events and information available from Parker.

With annual sales exceeding $9 billion, Parker Hannifin is the world's leading diversified manufacturer of motion and control technologies and systems, providing precision-engineered solutions for a wide variety of commercial, mobile, industrial and aerospace markets. The company employs more than 57,000 people in 43 countries around the world. Parker has increased its annual dividends paid to shareholders for 51 consecutive years, among the top five longest-running dividend-increase records in the S&P 500 index. For more information, visit the company's web site at, or its investor information web site at

Forward-Looking Statements: Forward-looking statements contained in this document and other written reports and oral statements are made based on known events and circumstances at the time of release, and as such, are subject in the future to unforeseen uncertainties and risks. All statements regarding future performance, earnings projections, events or developments are forward- looking statements. It is possible that the Company's future performance and earnings projections of the Company may differ materially from current expectations, depending on economic conditions within both its industrial and aerospace markets, and the Company's ability to achieve and maintain anticipated benefits associated with announced realignment activities, strategic initiatives to improve operating margins and growth and innovation initiatives. A change in economic conditions in individual markets may have a particularly volatile effect on segment performance. Among other factors which may affect future performance are: changes in business relationships with and purchases by or from major customers or suppliers, including delays or cancellations in shipments, or significant changes in financial condition, uncertainties surrounding timing, successful completion or integration of acquisitions, threats associated with and efforts to combat terrorism, competitive market conditions and resulting effects on sales and pricing, increases in raw material costs that cannot be recovered in product pricing, the Company's ability to manage costs related to insurance and employee retirement and health care benefits, and global economic factors, including manufacturing activity, air travel trends, currency exchange rates, difficulties entering new markets and general economic conditions such as interest rates. 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 news release.


                               Three Months Ended        Nine Months Ended
    (Unaudited)                    March 31,                  March 31,
    (Dollars in thousands      2007         2006         2007         2006
     except per share amounts)

    Net sales               $2,780,969   $2,498,068   $7,843,694   $6,769,156
    Cost of sales            2,163,828    1,952,191    6,049,193    5,313,627
    Gross profit               617,141      545,877    1,794,501    1,455,529
    Selling, general and
     administrative expenses   308,562      276,700      893,427      759,559
    Interest expense            22,403       21,038       61,879       57,096
    Other (income)
     expense, net               (8,750)      (6,929)     (22,153)       4,242
    Income from continuing
     operations before
     income taxes              294,926      255,068      861,348      634,632
    Income taxes                85,617       77,545      248,488      184,237
    Income from continuing
     operations                209,309      177,523      612,860      450,395
    Discontinued operations                                            28,884
    Net income                $209,309     $177,523     $612,860     $479,279

    Earnings per share:
       Basic earnings per
        share from continuing
        operations               $1.81        $1.49        $5.25        $3.78
       Discontinued operations                                            .25
       Basic earnings per
        share                    $1.81        $1.49        $5.25        $4.03
       Diluted earnings
        per share from continuing
        operations               $1.78        $1.46        $5.17        $3.73
       Discontinued operations                                            .24
       Diluted earnings
        per share                $1.78        $1.46        $5.17        $3.97

    Average shares
     outstanding during
     period - Basic        115,450,866  119,453,865  116,687,517  119,052,517
    Average shares
     outstanding during
     period - Diluted      117,473,774  121,180,698  118,552,883  120,647,547

    Cash dividends per
     common share                 $.26         $.23         $.78         $.69


                               Three Months Ended        Nine Months Ended
    (Unaudited)                     March 31,                 March 31,
    (Dollars in thousands)     2007         2006         2007         2006
    Net sales
           North America    $1,048,474   $1,062,686   $3,008,902   $2,921,651
           International     1,017,953      774,018    2,817,668    2,071,308
        Aerospace              436,476      390,966    1,240,873    1,085,047
        Climate & Industrial
         Controls              278,066      270,398      776,251      691,150
    Total                   $2,780,969   $2,498,068   $7,843,694   $6,769,156
    Segment operating income

           North America      $146,794     $164,659     $433,822     $432,019
           International       140,456       98,933      389,756      247,442
        Aerospace               66,219       54,470      202,622      156,575
       Climate & Industrial
        Controls                19,232       23,752       57,019       52,282
    Total segment
     operating income         $372,701     $341,814   $1,083,219     $888,318
    Corporate general and
     administrative expenses    40,538       36,159      121,168       93,475
    Income from continuing
     operations before interest
     expense and other         332,163      305,655      962,051      794,843
    Interest expense            22,403       21,038       61,879       57,096
    Other expense               14,834       29,549       38,824      103,115
    Income from continuing
     operations before
     income taxes             $294,926     $255,068     $861,348     $634,632

    (Dollars in
     thousands)      March 31,  2007         2006
    Current assets:
    Cash and cash
     equivalents              $183,727     $250,740
    Accounts receivable,
     net                     1,717,153    1,452,783
    Inventories              1,270,971    1,137,108
    Prepaid expenses            64,200       48,505
    Deferred income taxes      132,261      111,542
    Total current assets     3,368,312    3,000,678
    Plant and equipment,
     net                     1,709,239    1,638,492
    Goodwill                 2,169,631    2,000,264
    Intangible assets, net     491,383      442,413
    Other assets               969,972      890,670
    Total assets            $8,708,537   $7,972,517

    Liabilities and
     shareholders' equity
    Current liabilities:
    Notes payable             $293,456     $365,306
    Accounts payable           734,801      619,558
    Accrued liabilities        720,770      626,807
    Accrued domestic and
     foreign taxes             147,734      109,155
    Total current
     liabilities             1,896,761    1,720,826
    Long-term debt           1,115,987    1,054,498
    Pensions and other
     benefits                  833,123    1,066,414
    Deferred income taxes      122,942       98,791
    Other liabilities          219,282      211,867
    Shareholders' equity     4,520,442    3,820,121
    Total liabilities and
     shareholders' equity   $8,708,537   $7,972,517


    (Unaudited)             Nine Months Ended March 31,
    (Dollars in thousands)      2007         2006

    Cash flows from
     operating activities:
    Net income                $612,860     $479,279
    Net (income) from
     discontinued operations                (28,884)
    Depreciation and
     amortization              222,019      209,269
    Stock-based compensation    28,517       28,072
    Net change in receivables,
     inventories, and
     trade payables           (179,683)    (105,648)
    Net change in other
     assets and liabilities    (71,970)      38,926
    Other, net                 (74,864)      (1,714)
    Discontinued operations                  (9,266)
    Net cash provided by
     operating activities      536,879      610,034
    Cash flows from
     investing activities:
    Acquisitions (net of
     cash of $1,088 in
     2007 and $20,846 in
     2006)                    (188,340)    (809,566)
    Capital expenditures      (174,946)    (152,654)
    Proceeds from sale of
     businesses                 35,389       92,715
    Other, net                  (2,839)      10,642
    Discontinued operations                    (100)
    Net cash (used in)
     investing activities     (330,736)    (858,963)
    Cash flows from
     financing activities:
    Net (payments for)
     proceeds from common
     share activity           (361,651)      27,517
    Net proceeds from debt     254,196      217,380
    Dividends                  (91,187)     (82,101)
    Net cash (used in)
     provided by financing
     activities               (198,642)     162,796
    Effect of exchange
     rate changes on cash        4,673          793
    Net increase
     (decrease) in cash
     and cash equivalents       12,174      (85,340)
    Cash and cash
     equivalents at
     beginning of period       171,553      336,080
    Cash and cash
     equivalents at end of
     period                   $183,727     $250,740

SOURCE Parker Hannifin Corporation