Parker Hannifin
Corporation
Quarterly Earnings Release
4
th
Quarter FY 2006
August 1, 2006
Exhibit
99.2
| Parker Hannifin
Corporation Quarterly Earnings Release 4 th Quarter FY 2006 August 1, 2006 Exhibit 99.2 |
 Slide 2 Forward-Looking Statements Forward-Looking Statements: Forward-looking statements contained in this and other written and oral reports 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 future
performance and earnings projections of the company and individual segments
may differ materially from current expectations, depending on economic
conditions within both its industrial and aerospace markets, and the company's ability to achieve 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 results. Among the 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; 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 employee
retirement and health care benefits and insurance; and global economic factors, including manufacturing activity, air travel trends, currency exchange rates, difficulties
entering new markets and general economic conditions such as inflation and
interest rates. The company makes these statements as of the date of this
disclosure, and undertakes no obligation to update them. |
 Slide 3 Non-GAAP Financial Measure This presentation reconciles sales amounts reported in accordance with U.S. GAAP to sales amounts adjusted to remove the effects of acquisitions and divestitures made within the prior four quarters as well as the effects of currency exchange rates on sales. The effects of acquisitions and currency exchange rates are removed to allow investors and the company to meaningfully evaluate changes in sales on a comparable basis from period to period. This presentation contains references to earnings per share amounts excluding the effect of the adoption of FAS 123R, and a loss recognized on the sale of a division. The removal of these items allows investors and the company to meaningfully evaluate performance on a comparable basis with the prior period, which was not impacted by FAS 123R or the sale of a division. |
 Slide 4 Discussion Agenda CEO 4 th quarter and fiscal 2006 comments Key performance measures & outlook Questions & answers CEO closing comments |
 Slide 5 Fiscal Year Highlights Sales increased 16% to $9.4 billion for the year 8% organic growth Record year of acquisitions - nearly $1 billion in annual revenues Segment operating income margins improved from 12.5% last year to 13.4%, including the effects of acquisitions Record cash flow from operations of $955 million 10.2% of Sales |
 Slide 6 Financial Highlights EPS – 4th Quarter and Total Year FY2006 FY2005 FY2006 FY2005 EPS as reported 1.59 $ 1.34 $ 5.57 $ 5.02 $ Discontinued operations (.04) (.04) (.29) (.59) EPS from continuing operations as reported 1.55 1.30 5.28 4.43 Loss on sale of Thermoplastics .08 EPS from continuing operations excluding loss from Thermoplastics divestiture 5.36 4.43 FAS 123R expense .03 .18 EPS from continuing operations adjusted 1.58 $ 1.30 $ 5.54 $ 4.43 $ 4th Quarter Total Year |
 Slide 7 Influences on Earnings Increased volume Win Strategy Restructuring costs Increased effective tax rate Aerospace sales mix Aerospace product development costs |
 Slide 8 Sales 4th Quarter and Total Year Dollars in millions FY2006 FY2005 FY2006 FY2005 Sales 2,617 $ 2,172 $ 9,386 $ 8,069 $ % change 20% 16% Sales from acquisitions 199 699 Sales w/o acquisitions 2,418 2,172 8,687 8,069 % change 11% 8% Currency effects 28 (38) Sales without acquisitions & currency 2,390 $ 2,172 $ 8,725 $ 8,069 $ % change 10% 8% 4th Quarter Total Year |
 Slide 9 Influences on Sales Continued Industrial end market strength Distributors OEM Emerging markets Acquisitions Aerospace Commercial |
 Slide 10 Segment Reporting Industrial North America Dollars in millions FY2006 FY2005 FY2006 FY2005 Sales As reported 1,072 $ 940 $ 3,993 $ 3,517 $ % change 14 % 14 % Acquisitions 56 233 Without Acquisitions 1,016 940 3,760 3,517 % change 8 % 7 % Currency effects 5 18 Without Acquisitions & Currency 1,011 $ 940 $ 3,742 $ 3,517 $ % change 8 % 6 % Operating Margin As reported 165 $ 128 $ 597 $ 468 $ % of Sales 15.4 % 14.6 % 15.0 % 13.3 % 4th Quarter Total Year |
 Slide 11 Segment Reporting Industrial International Dollars in millions FY2006 FY2005 FY2006 FY2005 As reported 831 $ 643 $ 2,903 $ 2,398 $ % change 29 % 21 % Acquisitions 114 365 Without Acquisitions 717 643 2,538 2,398 % change 12 % 6 % Currency effects 20 (54) Without Acquisitions & Currency 697 $ 643 $ 2,592 $ 2,398 $ % change 8 % 8 % As reported 106 $ 76 $ 354 $ 267 $ % of Sales 12.8 % 11.8 % 12.2 % 11.1 % Sales Operating Margin 4th Quarter Total Year |
 Slide 12 Segment Reporting Aerospace Dollars in millions FY2006 FY2005 FY2006 FY2005 As reported 420 $ 364 $ 1,505 $ 1,359 $ % change 15 % 11 % Acquisitions 3 3 Without Acquisitions 417 364 1,502 1,359 % change 15 % 11 % Currency effects 0 (4) Without Acquisitions & Currency 417 $ 364 $ 1,506 $ 1,359 $ % change 15 % 11 % As reported 64 $ 54 $ 221 $ 199 $ % of Sales 15.2 % 14.8 % 14.7 % 14.6 % Sales Operating Margin 4th Quarter Total Year |
 Slide 13 Segment Reporting Climate & Industrial Controls Dollars in millions FY2006 FY2005 FY2006 FY2005 As reported 294 $ 226 $ 985 $ 794 $ % change 30 % 24 % Acquisitions 27 99 Without Acquisitions 267 226 886 794 % change 18 % 12 % Currency effects 2 2 Without Acquisitions & Currency 265 $ 226 $ 884 $ 794 $ % change 17 % 11 % As reported 31 $ 24 $ 83 $ 75 $ % of Sales 10.5 % 10.6 % 8.4 % 9.4 % Sales Operating Margin 4th Quarter Total Year |
 Slide 14 Parker New Order rates Excludes Acquisitions & Currency Year over year comparisons Aerospace is calculated using a 12-month moving average 2006 2005 2004 Industrial North America 7 % + 5 % + 24 % + Industrial International 8 % + 7 % + 21 % + Aerospace 15 % + 7 % + 15 % + Climate & Industrial Controls 30 % + 4 % - 2 % - June |
 Slide 15 Balance Sheet Summary Cash Working capital Inventory Accounts receivable Capital expenditures Shareholders equity |
 Slide 16 Strong Cash Flow – Cash From Operations Fiscal 2006 - $955 Dollars in millions 459 538 529 631 551 638 864 955 $0 $100 $200 $300 $400 $500 $600 $700 $800 $900 $1,000 4.0% 6.0% 8.0% 10.0% 12.0% |
 Slide 17 Financial Leverage Debt to Debt Equity 21.1% 16.0% 18.0% 20.0% 22.0% 24.0% 26.0% 28.0% 30.0% 32.0% 34.0% 36.0% 38.0% FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 Not to exceed 37% over the cycle |
 Slide 18 FY 2007 Earnings Outlook Assumptions Segment Sales & Operating Income FY 2007 Sales change versus FY 2006 Industrial North America 4.6 % -- 5.4 % Industrial International 17.7 % -- 18.6 % Aerospace 5.9 % -- 6.6 % Climate & Industrial Controls 5.3 % -- 6.2 % FY 2007 Operating margin percentages Industrial North America 14.8 % -- 15.6 % Industrial International 11.9 % -- 12.7 % Aerospace 14.3 % -- 15.2 % Climate & Industrial Controls 10.3 % -- 11.2 % |
 Slide 19 FY 2007 Earnings Outlook Assumptions below Operating Margin Corporate Admin + 4.0% to + 6.0% vs. FY 2006 Interest Expense - 10.0% to - 7.0% vs. FY 2006 Other Exp. (Income) - 4.0% to - 1.0% vs. FY 2006 Tax Rate 30.0% |
 Slide 20 Earnings Outlook – FY07 Low High Income from continuing operations 5.80 $ 6.30 $ |
 Slide 21 Questions & Answers... |
 Appendix Income Statements |
 Slide 23 Income Statement – 4 th Quarter Dollars in millions % of Sales % of Sales Net Sales 2,616.7 $ 100.0 % 2,172.5 $ 100.0 % Cost of sales 2,054.0 78.5 % 1,708.1 78.6 % Gross profit 562.7 21.5 % 464.4 21.4 % S, G & A 277.1 10.6 % 232.8 10.7 % Interest expense 18.7 .7 % 16.4 .8 % Other expense 1.7 .1 % .3 .0 % Income from cont'g operations before taxes 265.2 10.1 % 214.9 9.9 % Income taxes 77.4 3.0 % 58.8 2.7 % Income from cont'g operations 187.8 7.2 % 156.1 7.2 % Discontinued operations 6.0 .2 % 5.3 .2 % Net income 193.8 $ 7.4 % 161.4 $ 7.4 % FY 2006 FY 2005 |
 Slide 24 Income Statement – Total Year Dollars in millions % of Sales % of Sales Net Sales 9,385.9 $ 100.0 % 8,068.8 $ 100.0 % Cost of sales 7,367.6 78.5 % 6,391.5 79.2 % Gross profit 2,018.3 21.5 % 1,677.3 20.8 % S, G & A 1,036.6 11.0 % 860.3 10.7 % Interest expense 75.8 .8 % 66.9 .8 % Other expense 5.9 .1 % 11.9 .1 % Income from cont'g operations before taxes 900.0 9.6 % 738.2 9.1 % Income taxes 261.7 2.8 % 205.1 2.5 % Income from cont'g operations 638.3 6.8 % 533.1 6.6 % Discontinued operations 34.9 .4 % 71.5 .9 % Net income 673.2 $ 7.2 % 604.6 $ 7.5 % FY 2006 FY 2005 |