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Parker Posts 18-Percent Increase in Fiscal Q2 Net Income; EPS of 68 Cents Strong Order Trends Continue for Favorable Full-Year Outlook

January 18, 2000

CLEVELAND, Jan. 18 /PRNewswire/ -- Parker Hannifin Corporation (NYSE: PH) today reported an 18-percent increase in second-quarter net income for the period ended December 31, 1999. The company earned $75.0 million, or 68 cents per diluted share, on sales of $1.24 billion, compared with net income of $63.5 million, or 58 cents per diluted share, earned on sales of $1.20 billion in the prior year.

(Photo: http://www.newscom.com/cgi-bin/prnh/19990816/PHLOGO )

The 3.4-percent increase in sales marks an overall upturn in the company's North American Industrial business, with the semiconductor and telecommunications markets leading the trend. Aerospace sales were relatively flat, which was better than expected in light of a downturn in the original-equipment market for large aircraft. In the International Industrial segment, the effect of foreign currency rates more than offset higher volume achieved by Parker's business units in the Asia-Pacific region.

The North American Industrial segment posted a 30-percent increase in operating income, driven by higher sales volume. Operating income in the International Industrial segment was up slightly, while Aerospace recorded a 12-percent decrease, reflecting the volume and the mix of original-equipment programs, as well as lower capacity utilization.

Parker Chairman and CEO Duane Collins said, "Industrial activity in North America is making a nice recovery, and we are pleased with the strong income improvement our businesses have achieved. Looking ahead at our order activity, we also are encouraged at the signs of life we're seeing in our international industrial markets."

"This quarter's results bode well for us to achieve our sales and earnings objectives for the year," Collins said. "Casting aside a negative currency effect, we are on plan, and looking forward to further growth opportunities in light of our announcement of our merger agreement with Commercial Intertech."

First-Half Results

Parker first-half sales for fiscal 2000 were $2.48 billion, compared with $2.42 billion in the prior year period. First-half net income was $148.6 million or $1.35 per diluted share compared with $141.6 million or $1.29 per share. The increase in the current year first-half results reflects the strong performance by the North American Industrial operations partially offset by realignment costs recorded in the first quarter in the International and Aerospace segments.

The company recorded $213 million in cash from operations in the first half, resulting in reduced debt and interest expense. For the same period last year, cash from operations was $123 million. As the company has said before, it is in an excellent position to invest that cash in product development and acquisition opportunities in its core markets.


"The second half is when we'll realize sales from the terrific momentum we've seen in orders," said Collins. "We're pleased to note North American industrials are leading the positive order trend, and also that European orders are showing steady improvement." Collins said that the long-term outlook for Aerospace remains positive. "Even as large aircraft builds decline, demand for regional and business jets is strong, and we've won some great system-business on these planes. And for Parker, that's a more profitable piece of the original-equipment market."

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.




                              Three Months Ended        Six Months Ended
    (Dollars in thousands        December 31,              December 31,
    except per share         1999         1998          1999          1998

    Net sales           $1,239,207    $1,199,021   $2,481,500    $2,417,745
    Cost of sales          971,298       943,167    1,947,919     1,890,474
    Gross profit           267,909       255,854      533,581       527,271
    Selling, general
      and administrative
      expenses             140,157       141,370      278,305       275,528

    Income from
      operations           127,752       114,484      255,276       251,743
    Other income
      Interest expense     (14,028)      (17,341)     (28,571)      (33,416)
      Interest and other
        income, net            724          (333)         100          (406)

                           (13,304)      (17,674)     (28,471)      (33,822)

    Income before
      income taxes         114,448        96,810      226,805       217,921
    Income taxes            39,485        33,278       78,248        76,272
    Net income             $74,963       $63,532     $148,557      $141,649

    Earnings per share:
      Basic earnings
        per share             $.69          $.59        $1.36         $1.30
      Diluted earnings
        per share             $.68          $.58        $1.35         $1.29

    Average shares
      outstanding during
      period - Basic   109,188,711   108,541,603  109,129,000   108,953,828
    Average shares
      outstanding during
      period - Diluted 110,205,954   109,422,212  110,150,338   109,775,114

    Cash dividends
      per common share        $.17          $.15         $.34          $.30


                              Three Months Ended        Six Months Ended
    (Dollars in thousands)        December 31,              December 31,
                             1999         1998          1999          1998
    Net sales
        North America     $658,542      $603,874   $1,326,211    $1,225,469
        International      303,918       316,902      602,381       632,132
      Aerospace            276,747       278,245      552,908       560,144
    Total               $1,239,207    $1,199,021   $2,481,500    $2,417,745

    Segment operating income

        North America      $87,200       $67,170     $180,883      $149,325
        International       21,787        21,315       32,999        48,137
      Aerospace             36,939        41,937       71,987        85,776
    Total segment
      operating income     145,926       130,422      285,869       283,238
    Corporate general
      and administrative
      expenses              14,087        15,337       28,200        27,632
    Income from operations
      before interest
      expense and other    131,839       115,085      257,669       255,606
    Interest expense        14,028        17,341       28,571        33,416
    Other                    3,363           934        2,293         4,269
    Income before
      income taxes        $114,448       $96,810     $226,805      $217,921

    (Dollars in thousands)            December 31,    1999         1998

    Current assets:
    Cash and cash equivalents                        $74,353     $39,940
    Accounts receivable, net                         692,357     661,261
    Inventories                                      915,037   1,011,723
    Prepaid expenses                                  19,021      20,628
    Deferred income taxes                             66,722      87,567
    Total current assets                           1,767,490   1,821,119
    Plant and equipment, net                       1,214,202   1,191,294
    Other assets                                     740,719     708,939
    Total assets                                  $3,722,411  $3,721,352

    Liabilities and shareholders' equity
    Current liabilities:
    Notes payable                                   $61,123     $350,604
    Accounts payable                                253,798      282,166
    Accrued liabilities                             299,742      290,818
    Accrued domestic and foreign taxes               39,130       26,266
    Total current liabilities                       653,793      949,854
    Long-term debt                                  713,592      634,203
    Pensions and other postretirement benefits      279,760      280,415
    Deferred income taxes                            31,247       38,055
    Other liabilities                                75,075       49,078
    Shareholders' equity                          1,968,944    1,769,747
    Total liabilities and shareholders' equity   $3,722,411   $3,721,352

    Unaudited                                  Six months ended December 31,
    (Dollars in thousands)                           1999         1998

    Cash flows from operating activities:
    Net income                                    $148,557      $141,649
    Depreciation and amortization                  106,962       104,782
    Net change in receivables, inventories,
      and trade payables                           (14,099)      (41,270)
    Net change in other assets and liabilities     (21,637)      (74,904)
    Other, net                                      (6,531)       (7,412)
    Net cash provided by operating activities      213,252       122,845
    Cash flows from investing activities:
    Acquisitions (less cash acquired of
      $2,609 in 1998)                               (5,711)      (89,865)
    Capital expenditures                          (114,114)     (114,650)
    Other, net                                      (9,897)        3,409
    Net cash used in investing activities         (129,722)     (201,106)
    Cash flows from financing activities:
    Net proceeds from (payments for) common
      share activity                                 3,649       (47,863)
    Net (payments for) proceeds from debt           (5,698)      166,295
    Dividends                                      (37,081)      (32,700)
    Net cash (used in) provided
      by financing activities                      (39,130)       85,732
    Effect of exchange rate changes on cash         (3,324)        1,981
    Net increase in cash and cash equivalents       41,076         9,452
    Cash and cash equivalents at
      beginning of period                           33,277        30,488
    Cash and cash equivalents at end of period     $74,353       $39,940

SOURCE  Parker Hannifin Corporation

CONTACT: Media, Lorrie Paul Crum, VP - Corp. Communications, 216-896-2750, or Financial Analysts, Timothy K. Pistell, VP & Treasurer, 216-896-2130, both of Parker Hannifin Corporation, /

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