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Parker Earns 67 Cents in Q1 with Operating Alignment Completed as Planned

October 18, 1999

CLEVELAND, Oct. 18 /PRNewswire/ -- Parker Hannifin Corporation (NYSE: PH) today reported first-quarter net income for the period ended September 30, 1999 of $73.6 million, or 67 cents per diluted share, on record first-quarter sales of $1.24 billion. In the first quarter of fiscal 1999, the company earned $78.1 million in net income, or 71 cents per diluted share, on sales of $1.22 billion. The current period's results reflect costs associated with completion of the company's previously announced plan to realign operations in its International and Aerospace segments. These costs, which include a mix of asset impairment and severance expenses, were partially offset by gains on the sale of properties.

The modest sales increase is attributed to industrial acquisitions completed in the last fiscal year, coupled with growth in the telecommunications and filtration markets and a robust rebound in semiconductors. Internationally, real volume was flat, and the decline in sales reflects negative currency translation.

Parker's North American Industrial segment posted a 14-percent increase in operating income, accruing benefits from higher volume and a stabilized production environment. The International and Aerospace segments recorded lower operating income in the quarter as a result of consolidation costs incurred as planned. In the International segment, the company noted encouraging growth in the Asia-Pacific region, as acquisitions continued to perform ahead of expectations.

President and CEO Duane Collins said, "We did what we said we would in the quarter: We completed operating adjustments to improve profitability in our international units and we realigned aerospace in anticipation of slower original-equipment demand for large aircraft. The implementation costs for these actions are fully absorbed in this quarter's income statement."

Cash from operations in the quarter was $118 million, compared with $19 million last year. The proactive effort to manage inventories and accounts payable fueled the increase, and the company said it is positioned for acquisition opportunities in its core markets.


The company maintains a positive outlook for fiscal 2000, noting a substantive increase across the board in September's industrial orders, which have yet to be realized in sales. The North American sector, which is the most profitable, leads the upward order trend evidenced in recent months, while it appears that European orders may be beginning to follow suit. In Aerospace, the company is seeing slowing orders for large-airframe equipment as expected. Prospects for other original-equipment markets and for higher-margin maintenance, repair and overhaul work remain favorable.

"The next quarter will be telling," said Collins. "We should finally begin to see margin improvement in our international units, and we expect our adjustments in aerospace to moderate the downturn. By the second half, we'll be well positioned for what is traditionally our strongest sales and earnings period."

"Having finished one quarter, we like where we are, but we've still got ground to cover to meet our growth objectives in the international segment. We have confidence in our people and the good work they're doing to keep us on plan for sales and earnings growth this year," Collins said.

With nearly $5 billion in annual sales, Parker Hannifin Corporation is the world's leading diversified manufacturer of motion and control technologies, providing systematic, precision-engineered solutions for a wide variety of commercial, industrial and aerospace markets. For more information, visit the company's web site at www.parker.com .

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, events or developments are forward-looking statements. It is possible that the company's future performance may differ materially from current expectations expressed in these forward-looking statements, due to a variety of factors such as changes in: business relationships with and purchases by or from major customers or suppliers; competitive market conditions and resulting effects on sales and pricing; increases in raw-material costs which cannot be recovered in product pricing; and global economic factors, including currency exchange rates and difficulties entering new markets.



    Unaudited                         Three Months Ended September 30,
    (Dollars in thousands                  1999            1998
      except per share amounts)

    Net sales                           $1,242,293      $1,218,724
    Cost of sales                          976,621         947,307
    Gross profit                           265,672         271,417
    Selling, general and
      administrative expenses              138,148         134,158
    Income from operations                 127,524         137,259
    Other income (deductions):
      Interest expense                     (14,543)        (16,075)
      Interest and other income, net          (624)            (73)
        Total                              (15,167)        (16,148)
    Income before income taxes             112,357         121,111
    Income taxes                            38,763          42,994
    Net income                             $73,594         $78,117

    Earnings per share:
    Basic earnings per share                  $.67            $.71
    Diluted earnings per share                $.67            $.71

    Average shares outstanding
      during period - Basic            109,069,288     109,366,054
    Average shares outstanding
      during period - Diluted          110,094,722     110,128,017

    Cash dividends per common share           $.17            $.15

    Unaudited                          Three Months Ended September 30,
    (Dollars in thousands)                 1999            1998
    Net sales
        North America                   $667,669         $621,595
        International                    298,463          315,230
      Aerospace                          276,161          281,899
    Total                             $1,242,293       $1,218,724
    Segment operating income
        North America                    $93,683          $82,155
        International                     11,212           26,822
      Aerospace                           35,048           43,839
    Total segment operating income       139,943          152,816
    Corporate general and
      administrative expenses             14,113           12,295
    Income from operations before
      interest expense and other         125,830          140,521
    Interest expense                      14,543           16,075
    Other                                 (1,070)           3,335
    Income before income taxes          $112,357         $121,111

    Unaudited                                 September 30,
    (Dollars in thousands)                 1999           1998
    Current assets:
    Cash and cash equivalents            $64,421         $44,201
    Accounts receivable, net             739,682         714,364
    Inventories                          920,843       1,010,062
    Prepaid expenses                      21,141          20,583
    Deferred income taxes                 65,907          86,577
    Total current assets               1,811,994       1,875,787
    Plant and equipment, net           1,207,012       1,177,344
    Other assets                         751,356         706,939
    Total assets                      $3,770,362      $3,760,070

    Liabilities and shareholders' equity
    Current liabilities:
    Notes payable                        $59,462        $355,218
    Accounts payable                     288,521         285,642
    Accrued liabilities                  308,951         305,206
    Accrued domestic and foreign taxes    84,159          64,753
    Total current liabilities            741,093       1,010,819
    Long-term debt                       717,599         639,049
    Pensions and other
      postretirement benefits            280,101         277,122
    Deferred income taxes                 32,813          37,797
    Other liabilities                     68,582          54,189
    Shareholders' equity               1,930,174       1,741,094
    Total liabilities and
      shareholders' equity            $3,770,362      $3,760,070

    Unaudited                         Three Months Ended September 30,
    (Dollars in thousands)                 1999           1998

    Cash flows from
      operating activities:
    Net income                            $73,594       $78,117
    Depreciation and amortization          53,203        49,579
    Net change in receivables,
      inventories, and trade payables     (19,438)      (90,743)
    Net change in other assets
      and liabilities                      16,542       (16,107)
    Other, net                             (6,115)       (1,642)
    Net cash provided by
      operating activities                117,786        19,204
    Cash flows from investing activities:
    Acquisitions (less cash acquired
      of $2,609 in 1998)                   (3,007)      (89,466)
    Capital expenditures                  (50,124)      (56,668)
    Other, net                            (11,980)        5,230
    Net cash used in investing activities (65,111)     (140,904)
    Cash flows from financing activities:
    Net proceeds from (payments for)
      common share activity                 1,871       (29,581)
    Net (payments for) proceeds from debt  (3,526)      179,968
    Dividends                             (18,521)      (16,429)
    Net cash (used in) provided by
      financing activities                (20,176)      133,958
    Effect of exchange rate
      changes on cash                      (1,355)        1,455
    Net increase in cash and
      cash equivalents                     31,144        13,713
    Cash and cash equivalents at
      beginning of period                  33,277        30,488
    Cash and cash equivalents at
      end of period                       $64,421       $44,201

SOURCE  Parker Hannifin Corporation

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