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Parker Says Strength in Aerospace & Improving International Margins Partially Offset U.S. Industrial Slump; Company Earns 77 Cents in Fiscal Q3

April 17, 2001

CLEVELAND, April 17 /PRNewswire/ -- Parker Hannifin Corporation (NYSE: PH) today reported third-quarter net income for the period ended March 31, 2001 of $88.1 million, or 77 cents per diluted share, on sales of $1.53 billion. This compares with $106.7 million, or 97 cents per diluted share, earned last year, on sales of $1.39 billion. Earnings in the current period include an extraordinary charge of three cents per share for the early retirement of debt completed in February. These results also reflect higher interest expense and an additional 4.6 million shares outstanding issued in connection with acquisitions completed since last year.

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

"We're cutting back production and inventories in North America so we can retain the strong cash flows that keep us fit for growth," said Parker Chairman and CEO Duane Collins. "What really proves out our strategy is what we see in our other segments this quarter: We managed through a downturn last year in our aerospace business, and now it's performing at record levels."

Among the operating results for the quarter, Parker Aerospace reported a 10-percent increase in sales, 27-percent higher operating income and a return on sales of 19.7 percent. The International Industrial operations posted an 11-percent increase in sales (mostly acquisitions), with an 18-percent increase in operating income and a 9.3-percent operating margin. This is the highest operating margin achieved in years by the company's international operations, the result of improving performance. "Without the negative effects of currency and lower near-term profits from acquisitions, our international business actually reached our 10-percent near-term margin goal this period," noted Collins. "We're pleased to see some substantial improvement, and we're going to keep driving it."

North American Industrial sales were up 10 percent, but without acquisitions, would have been down 12 percent year over year. Operating income was 20-percent lower, with a 10.9-percent return on sales, resulting from the downturn in demand.

Nine-Months' Results

Sales in the first nine months of fiscal 2001 were $4.47 billion, compared with $3.88 billion last year. Year-to-date net income was $291.4 million, or $2.54 per diluted share, compared with $255.3 million, or $2.32 per diluted share, a year ago.


Results for the fiscal year ending June 30 are expected to range from $3.00 to $3.25 per diluted share, excluding non-recurring items. The company said it plans to record further charges in the fourth quarter for previously announced operating realignments, the costs of which are expected to offset a good amount of the gain recorded on the sale of property in the first quarter.

"Reaction times by manufacturers are accelerating, so as quickly as our domestic industrial markets have dropped off, we are well positioned with our own lean manufacturing initiatives for the possibility of a sharp upturn," said Collins. "Thanks to the excellent enterprise systems we have in place throughout the company, we're able to watch our inventory levels and order trends very closely, so we can adjust production right on pace with demand."

With annual sales of $6 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 more than 45,000 people in 46 countries around the world. For more information, visit the company's web site at www.parker.com , or its investor information site at www.phstock.com .

NOTICE OF CONFERENCE CALL: Parker Hannifin's conference call to discuss its fiscal quarterly results is available on the day of this release to all interested parties via live webcast at 10 a.m. ET, on the company's investor information web site, www.phstock.com . To access the call, click on the "Live Webcast" link. From this link, users may also complete a pre-call system test and register for e-mail notification of future events and information available from Parker.

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 company's future performance and earnings projections may differ materially from current expectations, depending on economic conditions in its markets and ability to achieve anticipated benefits associated with announced inventory and workforce reductions. Among the other factors that may affect future performance are: business relationships with and purchases by or from major customers or suppliers, including delays or cancellations in shipments; 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 and general economic conditions, including interest rate levels. In each quarterly earnings report, the company intends to provide a range stating expected earnings per share for the succeeding quarter and full fiscal year, reflecting these ranges as estimates of diluted earnings per share before unusual items. The company makes these statements as of the date of this disclosure, and while it undertakes no obligation to update them, reserves the right to update the earnings projections for any reason during the quarter, including the occurrence of material events.



    (Unaudited)                Three Months Ended        Nine Months Ended
    (Dollars in thousands          March 31,                 March 31,
     except per share
     amounts)                   2001         2000         2001        2000

    Net sales               $1,534,202   $1,393,659   $4,471,644   $3,875,159
    Cost of sales            1,213,387    1,074,133    3,509,472    3,022,052
    Gross profit               320,815      319,526      962,172      853,107
    Selling, general and
     expenses                  159,580      141,254      491,617      419,559
    Income from operations     161,235      178,272      470,555      433,548
    Other income
       Interest expense        (24,243)     (14,571)     (71,018)     (43,142)
       Interest and other
        income, net              4,794         (796)      57,535         (696)
                               (19,449)     (15,367)     (13,483)     (43,838)
    Income before income
     taxes                     141,786      162,905      457,072      389,710
    Income taxes                50,334       56,202      162,260      134,450
    Income before
     extraordinary item         91,452      106,703      294,812      255,260
    Extraordinary item -
     extinguishment of
     debt                       (3,378)           -       (3,378)           -
    Net income                 $88,074     $106,703     $291,434     $255,260

    Earnings per share:
       Basic earnings per
        share before
        extraordinary item        $.80         $.98        $2.58        $2.34
       Extraordinary item
        - extinguishment
        of debt                   (.03)           -         (.03)           -
       Basic earnings per
        share                     $.77         $.98        $2.55        $2.34
       Diluted earnings
        per share before
        extraordinary item        $.80         $.97        $2.57        $2.32
       Extraordinary item
        - extinguishment
        of debt                   (.03)           -         (.03)           -
       Diluted earnings
        per share                 $.77         $.97        $2.54        $2.32

    Average shares
     outstanding during
     period - Basic        114,439,369  109,373,820  114,125,361  109,210,607
    Average shares
     outstanding during
     period - Diluted      115,249,470  110,200,880  114,880,863  110,165,777

    Cash dividends per
     common share                 $.18         $.17         $.52         $.51

                                  Three Months Ended      Nine Months Ended
    (Unaudited)                        March 31,               March 31,
    (Dollars in thousands)         2001        2000        2001       2000
    Net sales
           North America         $849,439     $774,353  $2,555,046 $2,100,564
           International          367,317      331,104   1,034,339    933,485
        Aerospace                 317,446      288,202     882,259    841,110
    Total                      $1,534,202   $1,393,659  $4,471,644 $3,875,159

    Segment operating income

           North America          $92,602     $115,123    $311,405   $296,006
           International           34,342       29,015      81,660     62,014
        Aerospace                  62,490       49,126     157,863    121,113
    Total segment operating
     income                       189,434      193,264     550,928    479,133
    Corporate general and
     administrative expenses       18,038       13,935      55,768     42,135
    Income from operations
     before interest
      expense and other           171,396      179,329     495,160    436,998
    Interest expense               24,243       14,571      71,018     43,142
    Other                           5,367        1,853     (32,930)     4,146
    Income before income taxes   $141,786     $162,905    $457,072   $389,710

    (Dollars in
     thousands)      March 31,      2001                     2000
    Current assets:
    Cash and cash equivalents     $45,209                  $60,715
    Accounts receivable, net      888,760                  800,241
    Inventories                 1,006,037                  909,835
    Prepaid expenses               37,681                   18,029
    Deferred income taxes          93,671                   65,725
    Assets held for sale          215,533                        -
    Total current assets        2,286,891                1,854,545
    Plant and equipment, net    1,507,047                1,237,603
    Other assets                1,457,500                  810,173
    Total assets               $5,251,438               $3,902,321

    Liabilities and
     shareholders' equity
    Current liabilities:
    Notes payable                $613,328                  $83,351
    Accounts payable              333,212                  301,193
    Accrued liabilities           380,487                  322,869
    Accrued domestic and
     foreign taxes                 60,252                   65,721
    Total current liabilities   1,387,279                  773,134
    Long-term debt                865,456                  706,596
    Pensions and other
     postretirement benefits      305,186                  282,642
    Deferred income taxes         120,176                   30,244
    Other liabilities              82,997                   73,977
    Shareholders' equity        2,490,344                2,035,728
    Total liabilities and
     shareholders' equity      $5,251,438               $3,902,321

    (Unaudited)                      Nine Months Ended March 31,
    (Dollars in thousands)         2001                     2000

    Cash flows from operating
    Net income                   $291,434                 $255,260
    Depreciation and
     amortization                 200,785                  157,006
    Net effect of
     extraordinary loss             3,378                        -
    Net change in receivables,
     inventories, and trade
     payables                     (78,935)                 (47,294)
    Net change in other assets
     and liabilities              (78,909)                   7,224
    Other, net                    (29,461)                  (7,280)
    Net cash provided by
     operating activities         308,292                  364,916
    Cash flows from investing
    Acquisitions (less cash
     acquired of $8,256 in
     2001 and $431 in 2000)      (512,716)                (121,474)
    Capital expenditures         (263,812)                (168,131)
    Other, net                    105,637                    2,437
    Net cash used in investing
     activities                  (670,891)                (287,168)
    Cash flows from financing
    Net proceeds from
     (payments for) common
     share activity                 9,824                   (4,410)
    Net proceeds from debt        391,216                   13,974
    Dividends                     (59,298)                 (55,661)
    Net cash provided by (used
     in) financing activities     341,742                  (46,097)
    Effect of exchange rate
     changes on cash               (2,394)                  (4,213)
    Net (decrease) increase in
     cash and cash equivalents    (23,251)                  27,438
    Cash and cash equivalents
     at beginning of period        68,460                   33,277
    Cash and cash equivalents
     at end of period             $45,209                  $60,715

SOURCE Parker Hannifin Corporation

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

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