Eaton announces eighth consecutive quarter of record sales, earnings and earnings per share
Eaton Corporation today announced record sales, earnings and earnings per share for the fourth quarter and the full year of 1995. Net income for the full year reached $399 million, or $5.13 per share, on sales of $6.8 billion. These results compare with 1994 net income of $333 million, or $4.40 per share, on sales of $6.1 billion.
Net income for the fourth quarter of 1995 reached $90 million, or $1.16 per share, on sales of $1.7 billion. Comparable results for the fourth quarter of 1994 were $89 million, or $1.15 per share, on sales of $1.6 billion.
Comparative Financial Summary Condensed Consolidated Balance Sheets Business Segment Information Statements of Consolidated Income Eaton Chairman Stephen R. Hardis said, "We are pleased to report record fourth quarter and full year results for the company. Clearly, momentum in many of our markets changed markedly over the course of 1995, with booming activity across the board giving way to more mixed conditions as we ended the year. Despite that, and despite some continuing operating difficulties in our Controls segment, we were able to achieve record results again in the fourth quarter.
"This performance under demanding conditions is a real testimony to the hard work and dedication of all of our employees," Hardis said, "and a great way to conclude Bill Butler's extraordinary tenure as Chairman." As announced earlier, Hardis succeeded Butler as Chairman upon Butler's retirement at year-end, 1995.
Reviewing the company's segment results, Hardis pointed out that the North American heavy truck market set industry records again in 1995, with Class 8 truck factory sales reaching 242,000 units, 7 percent above the previous record set in 1994. Eaton's sales of Truck Components rose 9 percent during 1995 to a record $2.0 billion. In the fourth quarter, heavy truck production declined about 6 percent in response to a sharp drop in orders earlier in the year. Eaton's fourth quarter Truck Components sales were off 6 percent, hurt in part by a steep decline in the Brazilian market, but partially offset by continued penetration gains in Europe by Eaton's new heavy duty synchronized transmission. Hardis said, "Market reception of our new heavy synchro has been very good. Despite the heavy costs of bringing this new product to market, it is now in the black."
Sales of Eaton's Passenger Car Components rose nearly 9 percent, to a record $669 million in 1995, despite a 2 percent annual decline in North American industry production and a modest 4 percent rise in Europe. "Sales benefited from the continued trend to multivalve engines and particular strength in Europe," Hardis said. "During the fourth quarter, Eaton Passenger Car Components sales were 4 percent above a year ago while industry production was off about 8 percent in North America and down 4 percent in Europe. Additionally, Eaton's hydraulics business had another record year, with sales of Off-Highway Vehicle Components up nearly 11 percent to $458 million." During the fourth quarter, sales reached $110 million, a 3 percent increase over the previous year, as production of agricultural and construction equipment plateaued in the second half of 1995.
Commenting on the Electrical and Electronic Controls segment, Hardis said, "Performance remained mixed in the fourth quarter, and below expectations. At Cutler-Hammer, we continued to experience plant integration problems, which reduced profits by about $5 million. In addition, industrial controls shipments were unexpectedly weak, reducing profits by about $3 million." During the fourth quarter, sales of Industrial and Commercial Controls were about 2 percent ahead of a year ago, reaching $489 million. For the year, sales reached nearly $2 billion, 9 percent above 1994 results.
"Sales of Automotive and Appliance Controls during the fourth quarter were up 18 percent", observed Hardis, "boosted in part by the recent Lectron and IKU acquisitions, but also by increased penetration on several new automotive platforms. The unanticipated costs of launching these new programs fell in the fourth quarter but still hurt quarterly profits by about $3 million." Spurred by surging worldwide demand, sales of Eaton's semiconductor capital equipment jumped 80 percent in 1995, including a 67 percent year-to-year increase in the fourth quarter. Hardis said, "This half-billion dollar business is enjoying the combined benefits of an extraordinarily strong market and continued penetration gains. Current industry capital spending plans suggest that this business will rise another 40 percent in 1996. During the fourth quarter, we made investments in systems and infrastructure which reduced segment profits by about $5 million, but which will help Eaton to take advantage of the remarkable growth in this very profitable business. In addition, we spent about $2 million to launch a new R&D program which, if successful, could add another $100 million to the sales of this dynamic growth business by the turn of the century.
"We also continued to invest in future growth via increased participation in the burgeoning markets for Eaton products around the world," Hardis noted. Earlier in the year, Eaton acquired Emwest, an electrical switchgear and controls manufacturer serving Australia and Southeast Asia; IKU, the world's largest automotive mirror actuator manufacturer, which is headquartered in Holland; and Rubberon, a leading golf grip manufacturer located in Thailand which serves the growing Asian market. In November, Eaton acquired the remaining minority interest in Mallory Controles Ltda., a leading appliance and automotive controls company in Brazil; and, in December, Eaton increased its majority ownership of Eaton Manufacturera S.A., a Mexican producer of truck axles and components for the domestic and export markets.
"We continued to demonstrate Eaton's commitment to building an enterprise capable of achieving sustainable, profitable growth through the economic cycle," Hardis said. "During 1995, Eaton invested a record $400 million in new capital to increase productivity, reduce costs and, selectively, to add capacity. The company also spent nearly a quarter billion dollars, a record amount, in R&D to enhance the value to our customers of Eaton's existing portfolio of products--often by adding electronic content--as well as to develop the products of tomorrow for current and new customers around the world. We are pleased to have been able to achieve record results in 1995 while continuing to invest in the products and markets of the future."
Looking ahead, Hardis concluded, "If we are to achieve record results in 1996, it will clearly depend on the global economy and the actions of Eaton managers to realize the potential of our prior investments. The North American heavy truck market is likely to be down 20 percent to 25 percent in 1996, but semiconductor capital equipment should be up another 40 percent. Light vehicle production is likely to be flat, with passenger cars down slightly and light trucks modestly higher.
"The U.S. capital spending boom, while clearly maturing, is expected to show sustained, moderate growth. Activity in Europe should rise modestly and, more importantly, we expect to increasingly benefit from the restructuring of these businesses in recent years. Over the course of 1996, we expect to get beyond the transitional difficulties in Cutler-Hammer and our automotive controls business that have hurt Eaton's overall performance this year. While we can't control the global economy or our markets, we intend to demonstrate the earnings potential of Eaton Corporation again in 1996."
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 at Eaton Center in Cleveland, the company has 52,000 employees and 150 manufacturing sites in 23 countries around the world. Sales for 1995 were $6.8 billion.