Todd M. Leombruno
Executive Vice President and Chief Financial Officer at Parker-Hannifin
Okay. Thank you, Tom. I'll ask you to go to Slide 11. I know Tom mentioned a number of these numbers, so I'll try to move quick. The quarter was fantastic, right? seven records. Sales are up almost 17% versus prior year. We finished at $3.8 billion in sales. Organic sales are roughly 16%. It's almost all of the total, and currency had a small favorable impact of less than 1%. The growth this quarter was really driven across the board, strong broad-based demand across all of our industrial businesses and really a rebound in the commercial aerospace market, so we were happy to see that. And as Tom mentioned, we continue to benefit from strong growth from those recent portfolio additions we did in CLARCOR and LORD and Exotic. Both segment operating margins and adjusted EBITDA margins expanded by 210 basis points from prior year. We're really proud of that number. That adjusted segment operating margin came in at 22% and really just another strong quarter of margin performance.
Really proud of our teams, not only responding to the increased demand, but also executing through a number of various well-documented supply chain challenges. And I want to give them credit, there was a great effort to maintain costs in the quarter, and you can see that in our results. Incrementals are 35% year-over-year, which is really impressive. But even more impressive considering last year we had $125 million of discretionary savings really based on the actions we took during the pandemic. So if you account for that, the difference in incrementals would be 58%. So we're very proud of those results. If you look at net income, adjusted net income and adjusted EPS, both of those numbers increased by 40% versus prior year. Adjusted net income is $557 million, that's a 14.8% return on sales. And adjusted EPS were $4.26, that's a $1.21 increase from prior year where we finished at $3.05.
If you jump to Slide 12, this is really just that breakdown of the $1.21 increase in adjusted EPS. And really, the story here is just very strong, solid operating performance across every segment. Adjusted segment operating income increased by $184 million or almost 30% from prior year. That really is the first leg in this bridge that's $1.10 or 91% of the increase in earnings per share. All the other items netted to another $0.11 of favorable items and interest expense. Other expense and tax were all favorable and that helped us to offset just a slightly higher corporate G&A that was really based off of some of those temporary savings we took action with last year.
If you go to Slide 13, just looking at the segment, really, the takeaway on this page is every segment generated record margins in the quarter. The other big thing I want to note is we were able -- we've always talked about trying to maintain our neutral price cost position. We were able to do that in the quarter across all the segments. And I already mentioned incrementals already, but I think it really highlights our efforts on covering inflation costs and really managing through the supply chain inefficiencies. So 35% is the MROS, but 58% if you exclude those discretionary savings. And demand continues to be very robust. Orders for the total company are up 26% from prior year. Just diving into the segments really quickly. Diversified Industrial North America, sales were $1.8 billion, that's up 17% from prior year. Adjusted operating margins did improve by 30 basis points from prior year and finished at 21.3%, really sound performance in that segment, considering it's pretty clear that the supply chain challenges are more difficult in the North American region. Order rates also very healthy at 32% positive, and it's really just continuing to show a strong rebound off of those prior year comps.
If I look at our international businesses and Diversified Industrial International, great quarter here for that team. even higher organic growth, 21% organic growth. Their sales came in just under $1.4 billion, and adjusted operating margins, significant expansion, 360 basis points improvement from prior year, and they did reach 22.8%. Very proud of that team. Volume obviously was a big driver here. But also, we've talked about this before, our focus on international distribution that helped our mix. That continues to expand and really some disciplined price/cost management across that segment, very important drivers for the quarter. And order rates also very strong at 25% plus prior year. If we move to Aerospace Systems, fantastic quarter from that team, sales were almost $600 million. Organic sales did turn positive for the segment, 3.4%, but it did turn positive. And we were very pleased to see that commercial markets are trending up. And notably, commercial aftermarket came in very strong at 33% over prior year. So it's glad to see some rebound in those markets.
Operating margin is a great story here, 400 basis points improvement. That segment came in at 22.1%. And I just want to note, it's really nice to see that level of performance. We are still well below pre-COVID volume level, so there is room to grow here as that volume returns. So we're looking forward to see that as well. And order rates turned positive, plus 16%, that is on a 12-month rolling basis. But if you remember last quarter, it was minus 7%, so we did see an inflection to positive orders in the Aerospace segment. And that's really just further proof of a slow but steady recovery in that segment. So really thanks to all of our global team, very great execution and really just continuing to live up to our purpose and perform extremely well.
If I ask you to go to Slide 14, this is just -- I'll touch on cash flow. Cash flow from operations was $424 million or 11.3% of sales. Free cash flow was $376 million or 10% of sales, and our conversion for the quarter was 83%. So I just want everyone to know, working capital management continues to be a very strong story here. We continue to tightly manage this. And really, we're just responding to the inflection in growth here. That increased level of demand, coupled with really our efforts to provide continuity of supply for our customers drove working capital to be a use of cash in the quarter. It accounted to be a 3.6% use of cash in the quarter. And if you just look at that compared to prior year. Prior year, we were in the second quarter of a significant downturn. Today, we're in the second quarter of a significant upturn. Last year, working capital was 6.1% source of cash last year. But just importantly, I want to be clear on this, for the full year, we are forecasting mid-teens cash flow from operations and our free cash flow will be well over 100%. So you'll see that strong cash flow performance for us as we go throughout the year.
On Slide 15, just really a quick update on capital deployment. I think everyone saw this, but last week, our Board approved a dividend payout of $1.03 per share. That is our 286th consecutive quarterly dividend. And that payout is in line with our announced target of 30% to 35% of five-year average net income. And on share repurchases, we did purchase $50 million in the quarter through our 10b5-1 program but we also deployed an additional $180 million to purchase shares on a discretionary basis. And essentially, what that does is that discretionary purchase makes up for the three quarters that we paused the 10b5-1 program, from FY '20 Q4 through FY '21 Q2. And our goal there is to eliminate dilution in FY '22. And then I just want to give a final update on the Meggitt financing.
In the quarter, we did secure a $2 billion deferred draw term loan. That, together with a $215 million cash deposit into escrow positioned us to take down our initial bridge facility. So that was successful. And then I want to be clear here, in October, after the quarter end, we also deposited another $2.3 billion into escrow from a combination of proceeds from commercial paper issuance and also some cash on hand, and that really allowed us to further reduce that bridge to GBP3.2 billion. Lastly, on Meggitt financing, we did complete a deal contingent forward hedge contract in the amount of $6.4 billion, and that really was just to lock in our pound to dollar rate as we continue to work through financing on the Meggitt acquisition. So great work by the team there.
If I go to Slide 16, just looking at guidance, obviously, you saw we increased our guidance this morning. As usual, we're going to give this to you on an as-reported and an adjusted basis. The sales range now for the year is approximately 6% to 9% or just under 8% at the midpoint. The breakdown of that is really all organic. It's 8.4% organic growth. We do expect currency to turn on us in Q3 through Q4, and that will create just a minimal drag, about 0.5 point to top line sales. And obviously, that's going to impact the international segment. There is no impact from acquisitions. We still do not expect Meggitt in our fiscal year. We're targeting Q3 of calendar year 2022, but we have no impact from Meggitt acquisition sales or segment operating income. And the split on sales is 48% first half, 52% second half. If you move down to segment operating margins, we did increase our adjusted segment operating margin forecast for the full year by 30 basis points from our prior guide, and that full year now gets us to 21.9% at the midpoint.
There is a range of 20 basis points on either side of that. And segment operating margin is split 47% first half, 53% in the second half. No change to adjustments at a pretax level, so you see all those numbers, those are exactly the same that we guided last quarter. And in corporate G&A and other expense, we expect that to now be $513 million on an as-reported basis and $461 million on an adjusted basis. Really, the only difference there is some transaction-related costs with the Meggitt acquisition. And just a reminder, we will continue to adjust transactional-related expenses as they are incurred until we get through all of those transactions. No change to the tax rate. We expect that to be 23%. And our EPS guidance on an adjusted basis is now $17.30 at the midpoint. We did narrow the range a little bit, $0.35 on either side of that. And the first half, second half split is 46% first half, 52% -- or excuse me, 54%, second half. And then finally, I'll just say for Q2 we are expecting adjusted EPS to be $3.74 at the midpoint. So that's just a real brief summary of the quarter.
With that, I will turn it back over to you, Tom.