Eaton reports record sales and earnings for quarter and year

Mon Jan 24, 2000 -

CLEVELAND, OHIO…Eaton Corporation (NYSE:ETN) today announced record sales and earnings for the fourth quarter and the full year 1999. Sales in the quarter were $2.21 billion, 38 percent above the fourth quarter of 1998. Excluding a gain from the sale of the company’s Fluid Power Division and restructuring charges in both periods, Eaton earned $1.59 per share in the fourth quarter, 25 percent above one year earlier. Comparable net income was $119 million versus last year’s $91 million. After non-recurring items in both periods, fourth quarter earnings per share were $2.98, nearly triple last year’s $1.01 per share. Net income was $224 million compared to last year’s $72 million.

Income for the full year reached $439 million before all unusual items, or $5.95 per share, on sales of $8.40 billion. Comparable 1998 earnings were $393 million, or $5.41 per share, on sales of $6.63 billion. After non-recurring items in both periods, earnings reached $8.36 per share in 1999 compared to $4.80 in 1998.

The company's comparative financial results:

Comparative Financial Summary Condensed Consolidated Balance Sheets Statements of Consolidated Income Stephen R. Hardis, Chairman and Chief Executive Officer, said, "Eaton had a strong finish to a very eventful 1999. While the big jump in fourth quarter sales was largely due to the addition of Aeroquip-Vickers, operating profits before charges were up a much larger 76 percent from last year, with contributions from all of our businesses. We took good advantage of boom conditions in North American truck markets, and gathering strength in Industrial & Commercial Controls markets, while Semiconductor Equipment began an extraordinary worldwide rebound. "If anything, the Truck Components market was too strong, and we were challenged to meet surging North American demand. In contrast, the Fluid Power business was very weak. But we continued to make excellent progress integrating Aeroquip-Vickers into the family of Eaton businesses. During the quarter, Aeroquip-Vickers added about $0.11 to Eaton’s earnings per share before restructuring charges, bringing the full year contribution before charges to $0.27 per share. Our successful execution of a multi-faceted financing strategy, and continued excellent control over working capital, reduced debt leverage from a peak of 64% early in the year to about 50% by year end.

"With the strength of the balance sheet restored and operating momentum building in our businesses, we look forward to the challenge of beating market expectations for performance in 2000."

Looking at Eaton’s business segment results, Hardis noted that sales and profits for Automotive Components were at fourth quarter record levels. Sales of $455 million were about 1 percent above one year ago. Adjusting for the foreign exchange impact of a stronger dollar, sales volume was up about 5 percent. This compares to a 3 percent increase in NAFTA light vehicle production, a 1 percent rise in Europe, and a 20 percent increase in South American output. Segment profits during the quarter, at $59 million, were 5 percent higher than comparable profits in 1998.

Fourth quarter sales of Fluid Power & Other Components were $602 million, nearly 300 percent above year earlier results. Segment profits before restructuring charges were $62 million, 170 percent ahead of last year. Including Aeroquip-Vickers in 1998 results on a pro forma basis, sales were off 6 percent while profits were about 59 percent above one year earlier. Said Hardis, "We are pleased with the progress of our integration efforts, which continue to exceed our acquisition plan despite very weak hydraulics markets. Aeroquip’s fluid conveyance business also finished a record year on a strong note.

"We may be seeing the first tentative signs since mid-1998 of an improvement in industry conditions. In the fourth quarter, our orders for mobile and industrial hydraulics were up about 17 percent compared to last year. While we are not counting on an early or brisk rebound this year, we are confident we will achieve the $0.50 per share of synergies originally anticipated from the combination of Eaton and Aeroquip-Vickers."

Sales and profits of the Industrial & Commercial Controls segment were also at fourth quarter record levels. Sales of $597 million were 14 percent above last year while comparable operating profits of $51 million were up 24 percent. Hardis noted that the surge in Eaton’s sales far exceeded the 6 percent rise in the North American market for electrical distribution equipment and industrial controls. Said Hardis, "We enjoyed an increase in shipments of our Navy Controls business that we think will be sustained this year. Our Cutler-Hammer business also showed good year-to-year growth of 8 percent, boosted by the 85 percent rise in sales of its Engineered Service and Systems business."

Semiconductor Equipment sales surged $86 million, or 183 percent, from the fourth quarter of last year while comparable operating profits improved by $45 million to $17 million. Said Hardis, "We’re extremely pleased with the turnaround of this business. During 1999, sales jumped nearly 50 percent to almost $400 million while operating profits improved by $111 million. Current industry forecasts suggest that worldwide semiconductor equipment purchases should rise about 30 percent this year, and that the industry is just beginning at least a three-year up cycle. With the business restructuring completed and our operation healthy again, we believe Eaton is very well positioned to take full advantage of this multi-year growth trend."

Fourth quarter sales of Truck Components jumped 19 percent to a record $427 million. This compares with a 19 percent rise in NAFTA Class 8 factory sales, a 3 percent rise in European commercial truck production, and a 3 percent drop in South American truck output. Before restructuring charges in both periods, segment profits rose 17 percent to $54 million. Said Hardis, "In the face of remarkable fourth quarter strength in the NAFTA heavy truck market, we went to extraordinary lengths to meet urgent customer needs. Inevitably, those actions to keep our customers’ plants running were very costly, and affected fourth quarter margins. As the market returns to a more stable annual rate of about 300 thousand units, we certainly expect those outsized costs to dissipate." Hardis also noted that the $7 million restructuring charge in this year’s fourth quarter was related to the announced closure of the Aycliffe, United Kingdom medium-duty transmission plant that was part of the corporation’s original 1998 $150 million cost-out program.

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 63,000 employees and 195 manufacturing sites in 23 countries.

This news release contains forward-looking statements concerning synergies anticipated from the combination of Eaton and Aeroquip-Vickers, the recovery of the worldwide semiconductor market for this year and the next three-year period and the dissipation of costs in the Truck Components segment. 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 changes in global economic and financial conditions, market demand for hydraulics equipment, our ability to implement successfully the integration of Aeroquip-Vickers and our ability to manage costs in the Truck Components segment. We do not assume any obligation to update these forward-looking statements.

See accompanying notes.



Contact Information

Renald Romain


William Hartman, vice president, Investor Relations