Eaton reports record sales and earnings
CLEVELAND, OHIO… Eaton Corporation (NYSE:ETN) today announced record sales, earnings and earnings per share for the first quarter of 2000. Sales were $2.33 billion, 40 percent above the first quarter of 1999. Operating earnings per share during the quarter were $1.75, 50 percent above one year earlier. Comparable cash earnings per share, at $2.04, were up 51 percent. Net income on a comparable basis was $129 million versus last year's $84 million.
During the quarter, the company realized a pre-tax gain of $10 million from the disposal of corporate assets and had restructuring charges of $8 million related to the continuing integration of Aeroquip-Vickers into Eaton. After non-recurring items, first quarter earnings were a record $1.77 per share, 51 percent above one year ago.
Stephen R. Hardis, Chairman and Chief Executive Officer, said, "Eaton has entered 2000 with considerable momentum. We took full advantage of favorable conditions in the global auto industry. We are seeing an acceleration of activity in Industrial & Commercial Controls markets. The worldwide rebound in Semiconductor Equipment continues at a remarkable pace. And, while orders weakened, North American heavy truck production continued at record levels and we were again challenged to meet customer demands. "One year ago, we announced the acquisition of Aeroquip-Vickers, Inc., moving Eaton into a position of worldwide leadership in Fluid Power. Today, we are #2 worldwide and the integration of this business into Eaton is well advanced. During the quarter, Aeroquip-Vickers added about $0.17 per share to Eaton's earnings before restructuring charges. The industry recovery just now beginning will enable us to further leverage and extend the increasing strengths of this combined franchise in the quarters and years immediately ahead."
"Historically, Eaton has never achieved higher annual earnings in a down heavy-truck market. This year, we will establish a new tradition befitting Eaton's emergence as a premier diversified industrial enterprise. With a strong quarter in hand, we look forward to a year of record performance, and to the challenge of continuing to exceed market expectations."
Looking at Eaton's business segment results, Hardis noted that Automotive Components continued its consistent pattern of record performance. First quarter sales were $497 million, 4 percent above last year's record. Excluding the impact of the weak Euro, sales volume was up nearly 8 percent. This compares to an 7 percent increase in NAFTA light vehicle production, a 4 percent rise in Europe, and a nearly 30 percent rise in South American output. Segment profits during the quarter were up 19 percent to a record $74 million.
First quarter sales of Fluid Power & Other Components, Eaton's largest segment, were $665 million, nearly 320 percent above year earlier results. Segment profits before restructuring charges were $75 million, 240 percent ahead of last year. Including Aeroquip-Vickers in 1999 results on a pro forma basis, sales were off less than 1 percent while profits were about 39 percent higher than one year ago.
Said Hardis, "Once again, the net contribution of Aeroquip-Vickers to first quarter earnings exceeded our expectations. We still have a long way to go to realize the full potential of our integration efforts, and we are pleased with progress to date. We are also anticipating stronger industry conditions. Commercial aircraft shipments seem to have bottomed and Aeroquip's fluid conveyance business continues modestly higher. The incipient rebound in Fluid Power markets is also encouraging: Industry orders were up over 10 percent in the first quarter, while Eaton's orders were up 18 percent."
During the quarter, Eaton announced that its Aeroquip business unit acquired the Ocala, Florida-based clamps, flanges, seals and flexible joint business of Honeywell International, Inc., for an undisclosed amount.
Eaton's Industrial & Commercial Controls segment also turned in a record first quarter performance. Sales of $579 million were 13 percent above last year while operating profits of $49 million were up 81 percent. Hardis noted that sales growth continued to far exceed the 8 percent rise in the North American market for electrical distribution equipment and industrial controls. Said Hardis, "Our Cutler-Hammer business achieved 12 percent year-to-year growth. We are seeing market share gains in our traditional business as well as a 20 percent rise in sales of Cutler-Hammer's Engineering Services and Systems business. In addition, sales of our Navy Controls business were 70 percent above last year."
Semiconductor Equipment continued its resurgence in the first quarter, with sales up 147 percent to $141 million. Operating profits, at $27 million, compare to a loss of $12 million in last year's first quarter. Said Hardis, "We are now seeing the full benefits of the fundamental restructuring this business undertook during 1998 and early 1999. Current industry forecasts are now calling for a worldwide rise in semiconductor capital equipment purchases this year of over 40 percent, and Eaton is fully participating in what we believe will be a multi-year industry rebound.
"We are making excellent progress in our study of whether to sell to the public up to 20 percent of our Semiconductor Equipment business in an Initial Public Offering. We anticipate bringing a recommendation to our Board of Directors later this month."
First quarter sales of Truck Components were a record $443 million, 16 percent above one year earlier. This compares with an 8 percent rise in NAFTA Class 8 factory sales, a 5 percent rise in European commercial truck production, and a 4 percent drop in South American truck output. Said Hardis, "First quarter activity was even stronger than in last year's fourth quarter, and our successful new product initiatives have enabled Eaton to measurably outpace the market. But, we also struggled to meet surging demand, and profits were reduced by about $14 million in extraordinary premium freight costs to keep customer lines running.
"We are now confident that these extraordinary expenses are behind us. With industry orders down, it is clear we are now past the peak in shipments for this year, and we will be able to move back into Eaton's production 'sweet spot.' Given the mixed signals of strong U.S. industry fundamentals and weak industry orders, our best current guess is that NAFTA Class 8 factory sales will be down 10 percent - 15 percent this year to about 290,000 units. Next year, with the truck industry adjustment completed and U.S. industry remaining strong, we would anticipate factory sales back to about 300,000 units."
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 195 manufacturing sites in 23 countries around the world. Eaton's sales for 1999 were $8.4 billion. The Internet address for Eaton is: http://www.eaton.com
This news release contains forward-looking statements concerning the Aeroquip-Vickers acquisition, industry conditions pertaining to Aeroquip-Vickers, corporate performance during the year 2000, semiconductor capital equipment purchases, and Class 8 truck factory sales. 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 the integration of Aeroquip-Vickers, market conditions pertaining to the Fluid Power, semiconductor equipment, and Class 8 truck industries, continuity of business relationships with and purchases by major customers, competitive pressure on sales and pricing, increases in material and other production costs which cannot be recouped in product pricing and global economic and financial conditions.