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A Delaware Valley Success Story, With A Global Presence

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• Founded in 1942 by K.A. Swanstrom

• I.P.O. in 1966

• Kenneth A. Swanstrom elected Chairman and CEO in 1993.

Overview

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• Fasteners (56.0% of projected 2000 sales)

• Motors (17.5% of projected 2000 sales)

• Distribution (26.5% of projected 2000 sales)

Overview

Three operations:

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• Founded in 1942

• Operations: Full-time employees:– Danboro, PA 748

– Winston Salem, NC 298

– Suffolk, VA 128

– Willimantic, CT 25

– Tallmadge, OH 38

Fastener Division

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• Acquired in 1970

• Operations: Full-time employees:– Harleysville, PA 207

– Carson City, NV 10

Motor Division

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• Formed Arconix Group in January 2000.

• Operations: Full-time employees:– Oxnard, CA (1999) 49

– Doncaster, UK (1970) 45

– Singapore (1996) 21

Distribution Division

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Winston-Salem

Oxnard, CA

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Penn Engineering has a long termPenn Engineering has a long termtrack record of growth and profitability...track record of growth and profitability...

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$0

$50,000

$100,000

$150,000

$200,000

$250,000

1966

1970

1974

1978

1982

1986

1990

1994

1998

Sales history since IPO

CAGR: 12.3%

($000’s)

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$0$2,000

$4,000$6,000$8,000

$10,000$12,000$14,000

$16,000$18,000

1966

1969

1972

1975

1978

1981

1984

1987

1990

1993

1996

1999

Net income since IPOCAGR: 8.9%($000’s)

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121.5141.3

160.3 167.7179.7

198.1

020406080

100120140160180200

1994 1995 1996 1997 1998 1999

5-Year CAGR = 10.3%

Sales Growth ($millions)

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10.4

13.8 13.9 14.5

16.6 17

0

2

4

6

8

10

12

14

16

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1994 1995 1996 1997 1998 1999

5-Year CAGR = 10.3%

Net Income Growth ($millions)

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13.9

18.019.2

21.1

24.626.0

0

5

10

15

20

25

30

1994 1995 1996 1997 1998 1999

5-Year CAGR = 13.3%

Cash Flow

Net Income + depreciation ($ millions)

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Penn Engineering’s year 2000 is off to a great start…Penn Engineering’s year 2000 is off to a great start…

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Interim Results - Comparison to 1Q99

(000’s) Three Months Ended 3/31/00 3/31/99

Sales $ 65,137 $ 46,000

Gross Profit $ 21,077 $ 14,488Gross Margin 32.4% 31.5%

Operating Profit $ 8,811 $ 5,785Operating Margin 13.5% 12.6%

Net Income $ 5,645 $ 4,056Net Margin 8.7% 8.9%

EPS $ 0.66 $ 0.47 ROE (annualized) 14.4% 12.2%

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Interim Results - Comparison to 4Q99

(000’s) Three Months Ended 3/31/00 12/31/99

Sales $ 65,137 $ 56,659

Gross Profit $ 21,077 $ 17,540Gross Margin 32.4% 31.0%

Operating Profit $ 8,811 $ 6,312Operating Margin 13.5% 11.1%

Net Income $ 5,645 $ 4,300Net Margin 8.7% 7.6%

EPS $ 0.66 $ 0.50 ROE (annualized) 14.4% 11.9%

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Review of interim results:

• Sales, net income, and earnings per share increased 42%, 39%, and 40%, respectively, over 1999.

• Excellent growth from major markets including computers and telecommunications (fastener and distribution operation), and data storage and semiconductor equipment manufacturers (motor operation)

• Increases in unit sales volume contributed to plant utilization gains and consequently, higher margins.

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Penn Engineering sells to some of the fastest-Penn Engineering sells to some of the fastest-growing high-tech customers worldwide….growing high-tech customers worldwide….

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Top five customers - Fastener operation

Cisco TelecommCompaq ComputersLucent TelecommMotorola TelecommNortel Telecomm

Customer Industry

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Top five customers - Motor operation

AGFA Computer photo-settingExabyte Data Storage/Tape Libraries IBM Data Storage/Tape LibrariesStorageTek Data Storage/Tape Libraries Sunrise Medical Medical

Customer Industry

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Top five customers - Distribution operation

Cisco TelecommHewlett Packard ComputersIBM ComputersPower One Computer PeripheralsSun Micro Telecomm

Customer Industry

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Penn Engineering has always served the Penn Engineering has always served the high tech industry….high tech industry….

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The 1940’sRCAWestern ElectricGeneral Dynamics

The 1950’sGrumman XeroxAddressograph/ Multigraph

The 1960’sDigital EquipmentData GeneralTektronix

The 1970’sAlcatelFlukeGeneral Instrument

The 1980’sHewlett PackardIBMMotorola

The 1990’sCompaqHewlett PackardIBM

The 2000’sLucentEricssonCompaq

……although the definition of “high tech” hasalthough the definition of “high tech” has changed throughout the years.changed throughout the years.

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1. “Solutioneering”: Develop new applications and new customers.

- Continually call on design engineers at customer and prospect locations to find out what new projects are underway.

- Continually “create the market” for our products.

2. Develop new products

- Goal: 5% of each year’s sales from products introduced in the past three years.

3. Expand internationally by adding new representatives and distributors (presently 45 distributors in 36 countries).

Internal Growth Strategies

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Penn Engineering is growing through acquisitions...Penn Engineering is growing through acquisitions...

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Acquisitions completed in 1999 - 2000

Company Date Acquired Purchase PriceStickScrew June 1999 $1.7 million(new fastener product line)

Carson Technologies July 1999 $ 350,000(new motor product line)

R.C. Dudek & Co. October 1999 $36 million(expansion into direct distribution)

Atlas Engineering April 2000 $3.0 million(new fastener product line)

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Summary

• Penn Engineering & Manufacturing Corp. has been financially successful over an extended time period, and across all business cycles.

• Penn Engineering has grown and prospered by providing innovative products, unparalleled engineering support, and uncompromising quality to customers in the fastest-growing markets.

• The Company has the ability - from a management as well as a financial standpoint - to grow internally as well as through acquisitions.

• The Company is entering a high-growth phase in which ongoing new business development efforts are resulting in significant new opportunities.

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A Delaware Valley Success Story, With A Global Presence, Expanding into the Future