Eaton reports record sales, earnings and earnings per share
CLEVELAND, OHIO… Eaton Corporation (NYSE:ETN) today announced record sales, earnings and earnings per share for the second quarter of 2000. Sales were $2.34 billion, 2 percent above the second quarter of 1999. Operating earnings per share during the quarter were $1.95, 12 percent above one year earlier. Comparable cash earnings per share, at $2.25, were up 9 percent. Net income on a comparable basis was $145 million versus last year's $127 million.
During the quarter, the company realized a pretax gain on the sale of a corporate asset of $12 million and had restructuring charges of $10 million related to the continuing integration of Aeroquip-Vickers into Eaton. After non-recurring items, second quarter earnings were $1.96 per share, 15 percent above one year ago.
Sales and operating earnings per share for the first six months of 2000 were also at record levels. Net income before non-recurring items reached $274 million, or $3.70 per share, on sales of $4.66 billion. Comparable first half 1999 earnings were $211 million, or $2.91 per share, on sales of $3.96 billion.
Stephen R. Hardis, Chairman and Chief Executive Officer, said, "During the second quarter of 2000, Eaton's performance clearly demonstrated the benefits of the strategic and operating initiatives we have undertaken over the past several years. For the first time ever, operating margins in all of our business segments were in double digits. As would be expected of a premier diversified industrial corporation, operating issues in some businesses were offset by outstanding performance in others. Overall, we met our very high expectations for bottom line performance in the quarter.
"Last week's successful Initial Public Offering by Axcelis Technologies, Inc., which comprises Eaton's Semiconductor Equipment Operations, demonstrated the inherent worth of that business, as well as our determination to deliver value to Eaton's owners.
"We continue to make good progress integrating the acquired Aeroquip-Vickers business into Eaton's Fluid Power Segment; during the quarter, Aeroquip-Vickers added about $0.19 per share to Eaton's earnings before restructuring charges.
"For the first time ever, Eaton this year will deliver record earnings in a down North American heavy truck market.
"I have never been more confident that Eaton will complete its emergence as a premier diversified industrial enterprise. With Sandy Cutler, who succeeds me at the end of this month as Eaton's Chairman and Chief Executive Officer, our heritage of operating excellence and innovation will continue to deliver superior value to our customers and to our owners."
Sales and profits in the Automotive Components segment were flat with last year's record results during the second quarter, with a 3 percent increase in sales volume essentially offset by the impact of a weaker Euro exchange rate. This compares to a 4 percent increase in NAFTA auto production, a 2 percent rise in Europe and a 24 percent rise in South American output. Hardis pointed to last year's remarkable 10 percent jump in sales, and said that this year's relatively weak sales comparison represented a return to market trends. Hardis also noted that the company would begin an expansion of its Eaton Supercharger capacity in Brazil to serve automotive customers in that region beginning in 2002.
Second quarter sales of Fluid Power & Other Components were a record $681 million, 3 percent above year earlier results, with the lower Euro exchange rate reducing reported sales by about 3 percent. This 6 percent increase in sales volume compares to about a 7 percent rise in North American fluid power markets and a 1 percent decline in Aerospace markets. Segment profits before restructuring charges were $79 million, 25 percent above comparable profits last year.
Said Hardis, "We have been consistently cautious about the rebound in the North American hydraulics market and, after a sharp rise over the past six months, we are seeing a mid-year pause in industry activity, with Eaton's second quarter orders about 4 percent ahead of one year ago. On the other hand, it is increasingly clear we have seen the bottom on commercial and military aircraft shipments, and our Aeroquip fluid conveyance business is reporting steady gains. Most important, we are pleased with the continuing integration efforts. We remain comfortable that Aeroquip-Vickers will add 75 cents to Eaton's earnings over the course of this year."
Industrial & Commercial Controls segment sales were a record $604 million, 5 percent above last year while segment profits of $65 million were up 33 percent. Hardis noted that profits were at record levels and exceeded the long-time operating margin target of 10 percent. Said Hardis, "Our Cutler-Hammer business continues to enjoy good momentum, with both shipments and orders up an above-market 8 percent in the second quarter. We are particularly pleased with the second quarter profits and with the operating traction we are achieving."
Semiconductor Equipment turned in a record performance in the second quarter. Sales of $166 million were 69 percent above last year while operating profits of $33 million were triple one year ago. Said Hardis, "Assuming that we get a timely and favorable tax ruling on the disposition, Eaton intends to deliver its remaining 84 percent ownership in Axcelis to its shareholders via a spin- or split-off by year end."
Second quarter sales of Truck components were $405 million, off 1 percent from last year. This compares to a 12 percent decline in NAFTA production of Class 8 trucks, flat NAFTA production of medium duty trucks, an 8 percent rise in European commercial vehicle production and a 27 percent jump in South American truck output. Segment profits of $52 million were 15 percent below one year ago.
Said Hardis, "Truck Components operating results continue to be whipsawed by the extraordinary volatility of the NAFTA heavy truck market. Over the past year alone, factory sales have surged from an annual rate of 300,000 to 355,000 at the end of last year and back again to about 290,000 in the quarter just ended. Over that period, we have been incurring variances as we fulfilled our obligations as the market leader to our customers, and as a result our operating results have continued below expectations. We anticipate a more stable operating environment in the second half of this year at about a 240,000 annual rate of production, and we are sizing the business for that level of activity."
Eaton is a global manufacturer of highly engineered products that serve industrial, vehicle, construction, commercial, aerospace and semiconductor markets. Principal products include hydraulic products and fluid connectors, electrical power distribution and control equipment, truck drivetrain systems, engine components, ion implanters and a wide variety of controls. Headquartered in Cleveland, Ohio, the company has 64,000 employees and 200 manufacturing sites in 24 countries. Eaton's sales for 1999 were $8.4 billion.
This news release contains forward-looking statements concerning the North American industrial, commercial and off-highway mobile markets, the auto and truck markets, European markets, Asian and Latin American markets, earnings for this year, the expansion of Supercharger capacity in Brazil, commercial and military aircraft shipments, the contribution of Aeroquip-Vickers to earnings for this year and the annual rate of production in the second half of this year for the NAFTA heavy truck market. Those statements should be used with caution. They are subject to various risks and uncertainties, many of which are outside the control of the Company. Important factors which could cause actual results to differ materially from those in the forward-looking statements include our ability to implement successfully our profit plans, the continuing demand for Superchargers and our ability to adhere to the timetable for our expansion of Supercharger capacity, our ability to implement successfully the integration of Aeroquip-Vickers, continuity of business relationships with and purchases by major customers, competitive pressure on sales and pricing, increases in material and other production costs that cannot be recouped in product pricing and global economic and financial conditions.