Harmon Industries NASDAQ: HRMN For Immediate Release

Charles M. Foudree (816) 229-3345 [email protected]

Banner Fourth Quarter Leads to Record Year for Harmon

BLUE SPRINGS, MO. (Tuesday, February 10, 1998) -- Harmon Industries, Inc. announces record results for the year ended December 31, 1997. The company posted all-time record levels in sales, orders, and earnings for the year continuing the trends of recent years.

Exceptional fourth quarter sales of $73.8 million dollars represented an all-time record quarter for Harmon, 32% above the fourth quarter of 1996. Sales for the year were $213.5 million, making 1997 the sixth consecutive year of sales growth for the company. 1997 sales showed a 22% increase over those of 1996.

Net earnings were $3.9 million dollars for the fourth quarter compared with $2.1 million a year ago, an increase of 84%. Quarterly diluted earnings per share were 56 cents -- up from 31 cents for the fourth quarter of 1996. Net earnings for the year were $11 million dollars -- up 17% from 1996. Diluted earnings per share were $1.58 versus $1.36 for 1996. Both quarterly and yearly earnings set new all-time records for Harmon Industries. Though shipments in 1997 reached record levels, the company ended the year with a record year-end backlog of $74.5 million dollars, up 26% from 1996. Orders for the year were at a record $229 million dollars, an increase of 22% from 1996.

Harmon attributes its strong performance to continued technological leadership and to its complete service concept for the rail customers. The railroads have enjoyed good market conditions, including a healthy growth in business. Merger activities have also positively impacted the company's performance. A strong demand for Harmon products and services has come from the railroads as they consolidate their acquired track systems and at the same time, increase capacity to handle the additional traffic expected from merged operations.

The company made a significant breakthrough in the fourth quarter, through its licensing agreement with Hughes Aircraft Company giving Harmon manufacturing and exclusive marketing rights to a revolutionary new technology that will provide communication-based train control to rail systems worldwide. Following this licensing agreement, the Bay Area Rapid Transit (BART) district in San Francisco announced it had signed a letter of intent with the company for the completion and implementation of an Advanced Automatic Train Control (AATC) system utilizing this technology. This contract is expected to be signed within the month at a value in excess of $40 million.

Vaughan Harmon Systems, Ltd., the company's United Kingdom subsidiary, scored big gains in sales and earnings throughout the year. In the fourth quarter, Vaughan Harmon was awarded the first portion of a $10 million contract by Railtrack to replace the signaling system on its Cromer Branch Line in Norfolk, England. This is the first time that both Harmon and Vaughan Harmon products will be combined on a large contract in Europe.

"We are pleased with the company's performance in 1997", said Björn E. Olsson, president and chief executive officer. "We have built significant new bases in sales, orders, and earnings levels, reflecting our strong internal performance. We also recorded significant advances through our technology acquisition from Hughes Aircraft. The contribution Vaughan Harmon continues to make in our consolidated sales and earnings has advanced our progress into the international market. Finally, increases we have made in our manufacturing capacity provide us the capability to respond to anticipated increases in sales."

Last week, the company announced a three for two stock split affected in the form of a stock dividend. The new shares will be issued on February 27, 1998 to stockholders of record on February 13, 1998. In accordance with this split, the Board of Directors has increased the dividend pay rate by 10% making the new annual dividend rate 11 cents per share.

Harmon Industries, Inc., a leading supplier of signal and train control products to railroads and rail transit systems throughout North America and the world, is traded on the Nasdaq Stock Market under the symbol "HRMN." For further information, please contact Charles M. Foudree, executive vice president-finance and chief financial officer, Harmon Industries, Inc., 1300 Jefferson Court, Blue Springs, MO 64015. The telephone number is (816) 229-3345.

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