Thanks! You make a very good point about the consolidation of the automotive industry that I had not considered.
EATON EARNS $91 MILLION BEFORE RESTRUCTURING CHARGE, ON
SALES OF
Business Wire
January 20, 1999, 5:37 a.m. PT
$1.61 Billion
Business Editors
CLEVELAND--(BUSINESS WIRE)--Jan. 20, 1999--Eaton Corporation
(NYSE:ETN) today announced that, before special charges, fourth
quarter 1998 earnings per share were $1.27, down 23 percent from last
year's $1.66 per fully diluted share. Income before charges reached
$91 million compared to last year's $129 million. Sales were
$1.61 billion compared to $1.93 billion.
As previously announced, Eaton took a fourth quarter, pretax
charge of $29 million, or 26 cents per share. After this restructuring
charge, Eaton earned $72 million, or $1.01 per share.
Income for the full year reached $393 million before all unusual
items, or $5.41 per share, on sales of $6.63 billion. Comparable 1997
earnings were $495 million, or $6.33 per share, on sales of
$7.56 billion. Year-to-year comparisons were materially affected by
1997's business divestitures, which had annual sales totaling about
$1.3 billion. After unusual items in both years, earnings reached
$4.80 per share in 1998 compared to $5.24 in 1997.
Stephen R. Hardis, Chairman and Chief Executive Officer, said,
"After our stellar performance in 1997, 1998 was a disappointment.
Overall results were deeply affected all year by the worldwide
collapse in the semiconductor equipment industry. More recently, sharp
downturns in agricultural equipment and the Brazilian economy have
hurt our results.
"But, we are unwilling to wait for better markets to deliver
superior results. Our resolve to improve operating performance is best
demonstrated by the $125 million we have invested to restructure
Eaton's businesses in just over a year. We are also winning new
business that is enabling the company to outpace its markets. In 1999,
we are determined to prove that 1998 was the aberration and that Eaton
is evolving toward an enterprise that demonstrates superior
performance and higher sustainable growth."
Looking at Eaton's business segments, Hardis noted that
Automotive Components fourth quarter sales reached a record
$505 million, up 12 percent from one year ago. Excluding the
acquisitions of GT Products and Amtec, sales were up 5 percent during
a period when production of light vehicles was flat in the Americas
and Europe. For the year, sales reached a record $1.94 billion,
8% above 1997 results.
Fourth quarter profits for the segment reached $59 million before
restructuring charges of $5 million, 4 percent below last year's
$62 million before charges of $12 million. For the year, profits
reached $224 million before charges, down 6 percent from comparable
1997 results.
Said Hardis, "We continue to achieve impressive new product wins
across our product line, and this is driving higher programmatic
spending in the near term. As these new products come to market over
the next 1 to 3 years, we will see sales and profits outpace overall
market trends." Hardis also noted that the company had recently opened
a new automotive differential plant in Hastings, Nebraska, and had a
major expansion of its supercharger plant underway in Athens, Georgia
-- both to meet sharply higher demand for those products.
During the quarter, Eaton announced it had acquired TGM
Automotiva Ltda, a Brazilian manufacturer of automotive controls with
1997 sales of $9 million. The company also said its Eaton VORAD
subsidiary had signed an agreement with Hitachi, Ltd., of Tokyo to
speed development of electronics technology and increase the
geographic marketing of vehicle collision warning systems.
Fourth quarter sales of Hydraulics & Other Components were
$134 million, down 9 percent from last year's volume and consistent
with the year-to-year change in North American mobile hydraulics
shipments. Full year 1998 sales were a record $599 million, 2 percent
ahead of last year.
Before restructuring charges of about $1 million in both periods,
operating profits reached $17 million in the fourth quarter compared
to $25 million one year earlier. For the year, profits before charges
reached $95 million, off 13 percent from comparable 1997 results. Said
Hardis, "We are adjusting production and employment consistent with
the sharp fourth quarter reduction in agricultural equipment, which
looks to continue at current levels through at least the first quarter
of 1999."
Sales of Industrial & Commercial Controls reached a fourth
quarter record $567 million, 1 percent ahead of year-earlier results.
For the year, sales were up 3 percent to a record $2.32 billion,
compared to about a 1 percent decline in the North American markets
for distribution equipment and industrial controls. Hardis noted that
the segment's above-market growth was attributable to strong
construction and aerospace markets, and to the initial success of
Cutler-Hammer's new Engineering Services and Systems business.
Fourth quarter segment profits reached $50 million before
restructuring charges of $13 million compared to $55 million before
charges of $6 million in 1997. For 1998, profits reached $208 million
before charges of $28 million, 6 percent below comparable profits in
1997.
Semiconductor Equipment sales in the fourth quarter fell to
$47 million, 68 percent below 1997. The segment suffered an operating
loss of $28 million before restructuring charges of $2 million,
$40 million below comparable 1997 results. For the year, Semiconductor
Equipment sales were $267 million compared to 1997's $459 million;
operating losses during the year totaled $80 million before
restructuring charges of $43 million.
Said Hardis, "1998 has truly proved to be a very difficult year
for the semiconductor equipment industry. Eaton can take some comfort
from the fact that we have profoundly restructured this business while
sustaining spending on programs critical to the future of this dynamic
business. The industry appears to have hit bottom and we continue to
target break-even performance based on 1999 sales essentially equal to
1998."
Truck Components sales reached a fourth quarter record
$353 million, 3 percent ahead of 1997. Profits before restructuring
charges of $8 million reached $51 million compared to $63 million one
year earlier. Said Hardis, "While the fourth quarter performance of
Truck Components didn't reach the blow-out proportions of 1997,
margins remained at third quarter levels, completing an excellent year
for this business." For the year, sales were a record $1.47 billion,
25 percent above 1997. Before $17 million of restructuring costs,
profits were a record $237 million, 36 percent ahead of 1997.
Hardis also noted that the company began the previously announced
restructuring of its European Truck Components business. "The Euro,
deregulation, and de-integration of OEMs will combine to fundamentally
change the European competitive landscape. With leading-edge products
and world class costs, we intend to participate fully in the
competitive transformation of European trucking."
Concluded Hardis, "We understand that 1999 is a critical year for
Eaton. This year, we must demonstrate superior performance in the
context of a relatively flat and excruciatingly competitive economic
environment. We are taking the required steps to meet the challenge.
This team is firmly committed, and confident of success."
Eaton Corporation is a global manufacturer of highly engineered
products that serve industrial, vehicle, construction, commercial and
semiconductor markets. Principal products include electrical power
distribution and control equipment, truck drivetrain systems, engine
components, hydraulic products, ion implanters and a wide variety of
controls. Headquartered in Cleveland, the company has 49,500 employees
and 155 manufacturing sites in 25 countries around the world. The
Internet address for Eaton is: eaton.com
The forward-looking statements in this news release 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, labor strikes,
the markets for semiconductor capital equipment, automotive components
and hydraulics around the world. |
