Eaton reports record sales, earnings and earnings per share for the second quarter and first half of 1997
CLEVELAND, OH.... Eaton Corporation today announced record sales, earnings and earnings per share for the second quarter and first half of 1997. Sales were $1.91 billion in the second quarter of 1997 compared to $1.78 billion in the second quarter of 1996. Net income reached $126 million, up 22 percent from last year's $103 million. Earnings per share were $1.64, compared to $1.32 per share in 1996.
Net income for the first six months of 1997 reached $227 million, or $2.94 per share, on sales of $3.70 billion. Comparable first half earnings in 1996 were $198 million, or $2.55 per share, on sales of $3.52 billion.
The company's comparative financial results:
Comparative Financial Summary Condensed Consolidated Balance Sheets Business Segment Information Statements of Consolidated Income Stephen R. Hardis, Chairman and Chief Executive Officer, said, "Our 1997 year-to-date performance clearly indicates that our operating results are, again, consistent with our objectives; and we have taken some meaningful steps to start the implementation of our long-term growth strategy." In Eaton's largest business segment, Electrical and Electronic Controls, Hardis said that activity remained firm, outside of the depressed semiconductor equipment market, and that Eaton achieved record segment sales and earnings. Segment sales in the second quarter of 1997 were $1.02 billion, 4 percent above last year's $984 million. Segment profits reached $88 million, $2 million ahead of last year's second quarter.
Noted Hardis, "We continue to see particular strength in sales of our Industrial and Commercial Controls, which were up 10 percent in the second quarter to a record $568 million." Hardis attributed the strong performance to continued gains in Cutler-Hammer's market position, strong nonresidential construction markets that more than offset modestly lower residential construction, and a sharp rise in the demand for commercial and aerospace controls.
Sales of Eaton's Automotive and Appliance Controls in the quarter also reached a new high of $296 million, about 1 percent above last year. Hardis pointed out that a higher exchange value of the U.S. dollar reduced this year's sales by about $13 million. Adjusting for exchange, Eaton's sales were up about 5 percent compared to a gain of about 1 percent in the North American and European production of these products. During the quarter, Eaton announced it had signed a joint venture agreement with Weihai Measuring Tools Factory to manufacture washing machine controls for the Chinese market.
Specialty Controls sales, which includes Eaton's Semiconductor Equipment Operations, were off 8 percent from one year ago at $158 million, while profits were down $13 million because of lower sales and higher R&D spending. Said Hardis, "Although sales are still below last year's levels, we have seen a steady rise in semiconductor equipment orders from last fall's trough. Second quarter shipments were up from the first quarter and, based on our backlog, we continue to expect that sales will exceed year ago levels beginning with the third quarter of this year."
During the quarter, Eaton announced it had entered into a definitive merger agreement to acquire Fusion Systems Corporation, a leading supplier of front-end process equipment to the semiconductor industry with strong market positions in photoresist ash, post-ash residue removal and photostabilization. Last year, Fusion Systems had sales of $85 million, more than half of which were in Europe and Pacific Rim countries.
Turning to the Vehicle Components segment, Hardis noted that both segment sales and profits reached all-time highs. Second quarter 1997 sales reached $861 million, 12 percent ahead of one year ago, while segment profits were up 35 percent to $120 million. Said Hardis, "We are continuing to reap the benefit of all of the hard work and restructuring actions taken over the past two years. The operating results of CAPCO, the Brazilian transmission manufacturer which we acquired last year, have continued to improve markedly, and were a significant factor in our year over year profit improvement."
Truck Components sales were $512 million, 13 percent above last year's levels. This compares to industry volumes that were off 10 percent in Europe, up 20 percent in Latin America, and up about 4 percent in North America. Said Hardis, "Heavy truck orders in North America continue to climb commensurate with the robust growth of U.S. manufacturing. At this point, we expect Class 8 North American factory sales in 1997 to be about 5 percent above 1996's level of 192,000 units."
Sales of Passenger Car Components were a record $210 million, 8 percent ahead of one year ago, despite about an $8 million, or 4 percent, reduction in sales due to exchange rates. This compares with about a flat level of passenger car production in North America and Europe and a 20 percent rise in Latin America.
During the quarter, Eaton established a manufacturing plant in the town of Bielsko Biala, near Krakow, Poland, to begin supplying engine valves to Fiat and other customers who will be locating in Eastern Europe. The company also announced that by October, 1997, it will open a plant near Seoul, Korea, to build limited slip differentials for Korean automakers Hyundai and Kia. On Wednesday of last week, Eaton announced that it had reached agreements with Dana Corporation to purchase that company's worldwide clutch business and sell to Dana Eaton's worldwide axle and brake business.
Sales of Off-Highway Vehicle Components reached an all-time high of $139 million, 12 percent ahead of last year. Explained Hardis, "The success of new hydraulics products introduced over the past year has allowed us to better serve our worldwide agricultural and construction equipment customers. As a result, we continue to enjoy above industry growth." Hydraulics industry shipments in the second quarter were about 9 percent above year earlier levels.
Summing up, Hardis said, "We have made significant progress during the first half of this year toward building an enterprise capable of both operational excellence and higher sustainable growth. We are gaining the full benefit of the restructuring investments made during 1996. We continue to build upon the strengths of this company via new product introductions, increased international expansion and strategic acquisitions.
"This year is far from over, but we remain committed to taking the actions needed to achieve superior performance in 1997 and beyond."
Eaton Corporation is a global manufacturer of highly engineered products which serve industrial, vehicle, construction, commercial and aerospace markets. Principal products include electrical power distribution and control equipment, truck transmissions and axles, engine components, hydraulic products, ion implanters and a wide variety of controls. Headquartered in Cleveland, the company has 54,000 employees and 155 manufacturing sites in 26 countries around the world. Sales for 1996 were $7 billion.