Parker Reports Record First Quarter Sales


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CLEVELAND, OH. October 16, 2008: Parker Hannifin , the world leader in motion and control technologies, today reported record first quarter sales, net income, earnings per diluted share and cash flow from operations for the quarter ending September 30, 2008.

Fiscal 2009 first quarter sales were $3.1 billion, an increase of 10.0 percent from $2.8 billion in the same quarter a year ago. Net income increased 9.0 percent to $250.2 million from $229.6 million in the first quarter of fiscal 2008. Earnings per diluted share increased 13.1 percent to $1.50 compared with $1.33 in last year's first quarter. Cash flow from operations was $307.3 million, or 10.0 percent of sales.

"Current quarter results reflect our ability to deliver record performance in the face of a rapidly changing economic climate," said Chairman, CEO and President Don Washkewicz. "We are particularly pleased that we delivered a four percent organic growth rate this quarter.

"The Win Strategy initiatives we have been implementing over the past seven years have better prepared us to weather this uncertainty in our markets. For example, today, we have exposure to a greater number of end markets, many of them less cyclical than before. We also have much better geographic balance with greater than 50 percent of our industrial segment revenues and profits generated from international markets. Additionally, our cost structure is much more flexible than in the past and our ongoing focus on lean enterprise is delivering continuing productivity improvements. While the economic outlook for the near future remains uncertain, Parker is better able to adapt to changing circumstances in our operations than in previous downturns.

"While we are currently implementing contingency plans for the short-term, we remain focused on managing our business for the long-term and utilizing our strong cash position. We recently completed four acquisitions, including three on the first day of our fiscal 2009 second quarter, which added just over $460 million in annualized revenues. These investments help us extend our geographic reach and further our exposure to growth markets such as life sciences. Additionally, we repurchased shares and increased our dividend for the 52nd consecutive year, reflecting our confidence in the future."

Segment Results

In the Industrial North America segment, first-quarter sales increased 10.1 percent to $1.1 billion, and operating income increased 3.4 percent to $160.5 million, compared with the same period a year ago.

In the Industrial International segment, first-quarter sales increased 11.1 percent to $1.2 billion, and operating income increased 10.6 percent to $203.0 million, as compared with the same period a year ago.

In the Aerospace segment, first-quarter sales increased 12.0 percent to $478.5 million, and operating income increased 18.7 percent to $68.1 million, as compared with the same period a year ago.

In the Climate & Industrial Controls segment, first-quarter sales increased 1.1 percent to $255.9 million, and operating income remained the same at $15.5 million, as compared with the same period a year ago.

Orders

In addition to financial results, Parker also reported an increase of 1 percent in total orders for the quarter ending September 30, 2008 compared with the same quarter a year ago. Parker reported the following orders by operating segment:

Orders increased 2 percent in the Industrial North America segment, compared with the same quarter a year ago.

Orders declined 4 percent in the Industrial International segment, compared with the same quarter a year ago.

Orders increased 9 percent in the Aerospace segment on a rolling 12 month average basis.

Orders increased 5 percent in the Climate and Industrial Controls segment, compared with the same quarter a year ago.

Outlook

For fiscal 2009, the company revised guidance for earnings from continuing operations to the range of $5.35 to $5.75 per diluted share. Previous guidance for earnings from continuing operations was $5.65 to $6.05 per diluted share.

"There is enough uncertainty in many of our end markets and sentiment among our customers to warrant a downward revision in our earnings expectations for the year," added Washkewicz. "While this ultimately may prove to be conservative, at this time we believe it is prudent. Having said that, our earnings guidance still assumes that operating margins will be significantly above the levels we achieved at the bottom of the last economic cycle, evidence that we have made significant progress in transforming Parker into a premier diversified company."

NOTICE OF CONFERENCE CALL: Parker Hannifin's conference call and slide presentation to discuss its fiscal first-quarter results is available to all interested parties via live webcast today at 10:00 a.m. ET, on the company's investor information web site, PHSTOCK. 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 $12 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 approximately 62,000 people in 48 countries around the world. Parker has increased its annual dividends paid to shareholders for 52 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 PARKER.

Notes on Orders

Orders provide near-term perspective on the company's outlook, particularly when viewed in the context of prior and future quarterly order rates. However, orders are not in themselves an indication of future performance. All comparisons are at constant currency exchange rates, with the prior year restated to the current-year rates. All exclude acquisitions until they can be reflected in both the numerator and denominator. Aerospace comparisons are rolling 12-month average computations. The Total Parker orders number is derived from a weighted average of the year-over-year quarterly percent change in orders for the Industrial North America, Industrial International, and Climate and Industrial Controls segments, and the year-over-year 12-month rolling average of orders in the Aerospace segment.

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 its mobile, industrial and aerospace markets, and the company's ability to maintain and achieve anticipated benefits associated with announced realignment activities, strategic initiatives to improve operating margins, and growth, innovation and global diversification 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 or significant changes in financial condition; uncertainties surrounding timing, successful completion or integration of acquisitions; threats associated with and efforts to combat terrorism; uncertainties surrounding the ultimate resolution of outstanding litigation; 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, interest rates and credit availability. The company makes these statements as of the date of this disclosure, and undertakes no obligation to update them.

  PARKER HANNIFIN CORPORATION - SEPTEMBER 30, 2008

  CONSOLIDATED STATEMENT OF INCOME

  (Unaudited)                              Three Months Ended September 30,
  (Dollars in thousands except per             2008                    2007
   share amounts)

  Net sales                              $3,064,688              $2,787,256
  Cost of sales                           2,337,222               2,122,297
  Gross profit                              727,466                 664,959
  Selling, general and administrative
   expenses                                 332,683                 324,961
  Interest expense                           28,096                  22,421
  Other expense (income), net                 9,958                    (165)
  Income before income taxes                356,729                 317,742
  Income taxes                              106,553                  88,145
  Net income                               $250,176                $229,597

  Earnings per share:
     Basic earnings per share                 $1.52                   $1.35
     Diluted earnings per share               $1.50                   $1.33

  Average shares outstanding during
   period - Basic                       164,415,418             169,782,809
  Average shares outstanding during
   period - Diluted                     166,913,216             173,221,492

  Cash dividends per common share              $.25                    $.21

  BUSINESS SEGMENT INFORMATION BY
   INDUSTRY
  (Unaudited)                              Three Months Ended September 30,
  (Dollars in thousands)                       2008                    2007
  Net sales
      Industrial:
         North America                   $1,107,077              $1,005,828
         International                    1,223,192               1,100,888
      Aerospace                             478,473                 427,290
      Climate & Industrial Controls         255,946                 253,250
  Total                                  $3,064,688              $2,787,256

  Segment operating income
      Industrial:
         North America                     $160,486                $155,182
         International                      202,952                 183,433
      Aerospace                              68,148                  57,436
      Climate & Industrial Controls          15,499                  15,506
  Total segment operating income           $447,085                $411,557
  Corporate general and administrative
   expenses                                  40,374                  45,309
  Income from operations before
   interest expense and other               406,711                 366,248
  Interest expense                           28,096                  22,421
  Other expense                              21,886                  26,085
  Income before income taxes               $356,729                $317,742

  CONSOLIDATED BALANCE SHEET
  (Unaudited)
  (Dollars in thousands)  September 30,        2008                    2007
  Assets
  Current assets:
  Cash and cash equivalents                $608,327                $187,917
  Accounts receivable, net                1,821,681               1,784,784
  Inventories                             1,506,793               1,353,774
  Prepaid expenses                           72,870                  69,148
  Deferred income taxes                     147,447                 128,801
  Total current assets                    4,157,118               3,524,424
  Plant and equipment, net                1,855,830               1,762,165
  Goodwill                                2,625,761               2,319,803
  Intangible assets, net                    986,759                 610,411
  Other assets                              507,088                 476,190
  Total assets                          $10,132,556              $8,692,993

  Liabilities and shareholders' equity
  Current liabilities:
  Notes payable                            $677,890                $580,542
  Accounts payable                          836,873                 779,274
  Accrued liabilities                       808,566                 703,136
  Accrued domestic and foreign taxes        219,298                 181,987
  Total current liabilities               2,542,627               2,244,939
  Long-term debt                          1,878,933               1,117,677
  Pensions and other postretirement
   benefits                                 482,895                 369,606
  Deferred income taxes                     165,136                 113,192
  Other liabilities                         319,097                 301,451
  Shareholders' equity                    4,743,868               4,546,128
  Total liabilities and shareholders'
   equity                               $10,132,556              $8,692,993

  CONSOLIDATED STATEMENT OF CASH FLOWS
  (Unaudited)                              Three Months Ended September 30,
  (Dollars in thousands)                       2008                    2007

  Cash flows from operating activities:
  Net income                               $250,176                $229,597
  Depreciation and amortization              86,166                  76,176
  Stock-based compensation                   20,655                  23,554
  Net change in receivables,
   inventories, and trade payables          (54,100)                (79,612)
  Net change in other assets and
   liabilities                               (5,096)                 28,159
  Other, net                                  9,546                  (7,629)
  Net cash provided by operating
   activities                               307,347                 270,245
  Cash flows from investing activities:
  Acquisitions (net of cash of $119 in
   2008 and $177 in 2007)                   (12,088)                (33,551)
  Capital expenditures                      (98,273)                (56,484)
  Proceeds from sale of plant and
   equipment                                  7,437                   1,544
  Other, net                                 (8,004)                 (8,188)
  Net cash (used in) investing
   activities                              (110,928)                (96,679)
  Cash flows from financing activities:
  Net (payments for) common share
   activity                                (410,590)               (497,386)
  Net proceeds from debt                    561,558                 374,021
  Dividends                                 (41,109)                (36,544)
  Net cash provided by (used in)
   financing activities                     109,859                (159,909)
  Effect of exchange rate changes on
   cash                                     (23,999)                  1,554
  Net increase in cash and cash
   equivalents                              282,279                  15,211
  Cash and cash equivalents at
   beginning of period                      326,048                 172,706
  Cash and cash equivalents at end of
   period                                  $608,327                $187,917
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