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Eaton earns $95 million on sales of $1.74 billion
CLEVELAND, OH...Eaton Corporation today announced first quarter sales of $1.74 billion compared to $1.73 billion in the first quarter of 1995. Net income in the first quarter was $95 million, down 12 percent from last year's record $108 million. Earnings per share for the first quarter were $1.23, compared with $1.39 in 1995.
Comparative Financial Summary Condensed Consolidated Balance Sheets Business Segment Information Statements of Consolidated Income Stephen R. Hardis, chairman and chief executive officer, said, "We knew we were facing a tough comparison with the extraordinary performance Eaton demonstrated in last year's first quarter. A year ago, all of our markets were surging, and Eaton took full advantage of the opportunity to achieve record performance. In this year's first quarter, activity in our markets around the world was much more mixed. Overall, however, Eaton's performance met our expectations based on the market conditions we experienced so far this year and the programs we have underway."
In Eaton's largest business segment, Electrical and Electronic Controls, Hardis said that activity remained strong and operating performance improved. Segment sales increased nearly 11 percent above year earlier levels to a record $965 million, while segment profits jumped nearly 18 percent to $82 million. Hardis noted, "While not yet at our targeted levels, the 8.6 percent operating margin we achieved is nearly a high for this economic cycle. It shows that we are beginning to make progress overcoming the operational difficulties we experienced in the second half of 1995 at our Cutler-Hammer and Automotive Controls business units."
Hardis pointed out that all of the business units of the Electrical and Electronic Controls Segment were experiencing record sales. "Sales of Industrial and Commercial Controls were up over 7 percent versus a year ago, aided by strong nonresidential construction and a modest revival in the housing market. In an environment where North American light vehicle production was off over 10 percent, sales of Automotive and Appliance Controls were up nearly 4 percent, due in large part to last year's acquisition of IKU, a leading supplier of electric mirror actuators for automotive manufacturers. Sales of Specialty Controls were particularly strong, up over 37 percent from a year ago, based on the continuing strength in worldwide demand for semiconductor capital equipment."
Turning to the Vehicle Components Segment, Hardis stated that performance was below expectations despite excellent performance in most of the segment's business units. Segment sales were $750 million, nearly 10 percent below last year's record levels, while segment profits were $88 million, nearly 29 percent below last year's record levels. Hardis noted, "Sales of Passenger Car Components were nearly 3 percent ahead of a year ago, a strong performance given the 18 percent decline in North American passenger car production during the first quarter and flat activity levels in Europe. We continue to enjoy the benefits of the worldwide migration to multivalve engines, and the increased penetration in Europe of our hydraulic lifters."
"The performance of Truck Components, however, was disappointing," Hardis said. Sales dropped 15 percent from last year's record levels, driven by the 19 percent decline in North American Factory Sales of Class 8 Trucks, and an even sharper 37 percent drop in activity in Latin American markets. Sales in Europe, in contrast, were up about 9 percent despite flat markets because of continuing gains of Eaton's new heavy-duty synchronized transmissions. Said Hardis, "We have not been satisfied with the profitability of our North American truck axle/brake business, and included in this year's first quarter results is a $4 million expense to begin restructuring that business. We expect to spend an additional $13 million this year, and to achieve $15 million of annual savings by 1997."
Hardis also pointed out that results in this year's first quarter include $6.5 million of increased spending on major programs designed to accelerate Eaton's sustainable growth in the years ahead. "We also continued our successful efforts to build on strength in our leadership businesses via acquisition and joint ventures." As reported two days earlier, Eaton completed the acquisition of CAPCO Automotive Products Corporation, a Brazilian light and medium duty transmission manufacturer with 1995 sales of $176 million.
"The CAPCO acquisition, coupled with Eaton's existing businesses in the region, provides an extraordinary foundation for profitable growth in Brazil and the rest of Latin America," said Hardis.
Last week, Eaton also announced the formation of a 75 percent-owned joint venture, Suzhou Cutler-Hammer Electric, Ltd., to manufacture and sell electrical circuit protection devices for the Chinese market. Said Hardis, "The products to be produced in this joint venture, which is expected to have first year sales of about $15 million, will directly support the development of China's infrastructure, and will benefit from the country's burgeoning economy."
"Overall, our performance demonstrates the better balance of today's Eaton Corporation," said Hardis. "We are making steady progress toward our commitment to achieve a sustainable 10 percent annual rate of growth over the economic cycle, while continuing to fund the restructuring of some of our lagging operations, and making investments in the future organic growth of the enterprise.
"At this point, 1996 still looks challenging. Our ability to report improved results this year will depend on our continuing to make progress in addressing some of our operational problems, achieving the benefits of our earlier restructuring efforts, and success in our new product introductions. Our goal remains to outperform expectations based on the cyclical levels of our traditional automotive markets." Eaton Corporation is a global manufacturer of highly engineered products which serve vehicle, industrial, construction, commercial and aerospace markets. Principal products include truck transmissions and axles, engine components, hydraulic products, electrical power distribution and control equipment, ion implanters and a wide variety of controls. Headquartered in Cleveland, the company has 54,000 employees and 150 manufacturing sites in 23 countries around the world. Sales for 1995 were $6.8 billion.