Eaton reports record sales and earnings
CLEVELAND, OHIO…Eaton Corporation (NYSE:ETN) today announced record sales and earnings for the third quarter of 1999. Sales in the quarter were $2.23 billion, 37 percent above the third quarter of 1998. Earnings per share of $2.46 were well above last year’s $0.80 per share. Net income was $184 million compared to last year’s $58 million.
Excluding a gain from the sale of the company’s Engineered Fasteners Division and restructuring charges in both periods, Eaton earned $1.45 per share, 23 percent above one year earlier. Comparable net income was $108 million versus $85 million.
Net income for the first nine months of 1999 reached a record $393 million, or $5.35 per share, on record sales of $6.19 billion. Comparable year earlier earnings were $277 million or $3.79 per share, on sales of $5.02 billion. Excluding non-recurring items in both periods, net income was $319 million, or $4.35 per share, in the first nine months of 1999 compared to $304 million, or $4.16 per share, in 1998.
Stephen R. Hardis, Chairman and Chief Executive Officer, said, "Eaton continues to gain momentum toward our year 2000 earnings commitments. Compared to a year ago, operating profits before charges are up 80 percent to $238 million. We are taking far better advantage of generally robust conditions in Truck, Automotive, and Industrial markets, and the benefits of last year’s restructuring of Semiconductor Equipment are showing up in sharply improved performance this year.
"Conditions in the Fluid Power business, in contrast, remain very weak, but we are making excellent progress integrating the former Aeroquip-Vickers, Inc. into the family of Eaton businesses. During the quarter, Aeroquip-Vickers added about $0.03 to Eaton’s earnings per share before restructuring charges. The quality of Eaton’s performance can also be seen in our earnings before non-cash amortization charges. Our comparable ‘cash’ earnings per share were up 30 percent in the third quarter to $1.76 per share."
Looking at segment results, Hardis noted that sales and profits in Automotive Components were at record third quarter levels. Sales of $444 million were 8 percent above one year ago. This compares to a 15 percent increase in NAFTA light vehicle production, a 2 percent rise in Europe, and a 17 percent decline in South American output. Segment profits during the quarter were up 32 percent to $50 million.
Third quarter sales of Fluid Power & Other Components were $614 million, 265 percent above year earlier results. Segment profits, at $51 million before restructuring charges, were 96 percent ahead of one year earlier. Including Aeroquip-Vickers in 1998 results on a pro forma basis, sales were off 5 percent from one year ago while profits were off 9 percent. Said Hardis, "As recent announcements from our major customers suggest, conditions in fluid power markets remain very depressed, with North American industry shipments of both mobile and industrial hydraulics off about 10 percent compared to a year ago. The decline in Eaton shipments has been somewhat less pronounced because of steady activity in Aeroquip’s fluid conveyance business.
"Given industry conditions, we’re encouraged that Aeroquip-Vickers was accretive to Eaton’s earnings again this quarter. While we don’t anticipate an improvement in hydraulics markets before year-end, our progress in integrating these operations and building a world-leading Fluid Power business remains on track. To finance the Aeroquip-Vickers acquisition, we raised $147 million in equity at mid-year, and recently completed the sale of the Engineered Fasteners and Fluid Power divisions at very attractive prices, to pay down debt."
Sales of Industrial & Commercial Controls were a record $587 million, up 5 percent from year-earlier results. This compares to about a 2 percent increase in the North American market for electrical distribution equipment and industrial controls. Segment profits were 17 percent ahead of last year at $54 million. Hardis attributed above-industry growth to continued strength in residential and light commercial construction, to selected market share gains, and to building momentum in Cutler-Hammer’s Engineering Service and Systems business.
Third quarter sales of Semiconductor Equipment were $109 million, 127 percent above last year and more than double the pace of the industry rebound. Segment profits were $16 million compared to an operating loss of $29 million before charges in the prior year. Said Hardis, "After nearly three years of unprecedented volatility and the extraordinarily difficult conditions we faced last year, it is perhaps most noteworthy that this business is beginning to feel ‘normal’ again. The semiconductor equipment industry continues its rebound, with third quarter orders up over 100 percent and a book-to-bill ratio of about 1.15. We are realizing the benefits of last year’s restructuring, and expect to take full advantage of sustained industry recovery in the years immediately ahead."
Truck Components sales and profits were also at record levels in the third quarter. Sales of $414 million were 13 percent above last year. This compares with a 27 percent increase in NAFTA Class 8 production, a 3 percent drop in European commercial truck production, and a 36 percent decline in South American truck production. Segment profits were up 31 percent to $67 million. Said Hardis, "Although we are still operating well beyond our production ‘sweet spot’, we are becoming increasingly effective utilizing Eaton’s worldwide capacity to satisfy NAFTA heavy truck demand. As the NAFTA Class 8 market begins to stabilize at around 310 – 320 thousand units, and especially when our new Mexican plant comes on line, we expect to see continued improvements in operating performance."
Summing up, Hardis said, "We feel very good about these operational results. A year ago, at a time when we were hurt badly by the unexpected collapse in the global semiconductor equipment markets, we committed to a sharp improvement in company-wide performance. Tough restructuring measures were taken throughout Eaton in a concerted effort to regain a sharper focus on our earnings targets. These actions have paid off.
"We are now gaining further momentum from the continuing benefits of restructuring, the implementation of the Eaton Business System, the Aeroquip-Vickers acquisition consolidation savings and the payoff from our substantial new product commercialization programs. In short, we are making good progress toward sustained superior performance in the years ahead."
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, the company has 64,000 employees and 205 manufacturing sites in 25 countries around the world. Eaton’s sales for 1998 were $6.6 billion. On April 9, 1999, Eaton acquired Aeroquip-Vickers, Inc., which had sales of $2.1 billion in 1998.
The forward-looking statements in this news release concerning the hydraulics markets, recovery in the semiconductor industry, improvements in the Truck Components segment and sustained superior performance in the years ahead, 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 changes in global economic and financial conditions, market demand for hydraulics and semiconductor equipment, the ability to implement business plans and the ability to successfully implement the integration of Aeroquip-Vickers. We do not assume any obligation to update these forward-looking statements.