Eaton 2Q sales up but net off

Electronic News, August 12, 1996

Cleveland--Eaton Corp. reported 2Q96 sales of $1.78 billion compared to $1.76 billion in 2Q95. Net income in the quarter ended June 30, 1996 was $103 million, down 6 percent from last year's $110 million. Earnings per share (EPS) for the second quarter were $1.32 versus $1.41 in 1995.

Net income for the first six months of 1996 reached $198 million, or $2.55 per share, on sales of $3.52 billion. Comparable first-half earnings in 1995 were $218 million, or $2.79 per share, on sales of $3.49 billion.

CEO Stephen R. Hardis said: "It is difficult to measure up to the performance of a year ago, when our markets were still surging across the board...This year, activity in our markets was much more mixed. In addition, we spent about $8.5 million more than in last year's second quarter on major programs...."

In Electrical and Electronic Controls, Mr. Hardis said that activity remained strong. Segment sales increased more than 7 percent above year ago levels to $984 million, while segment profits rose 8 percent to $86 million. Automotive and Appliance Controls were particularly strong, up 11 percent from a year ago, in an environment where North American light vehicle production was up about 5 percent and activity in European markets continued flat. Mr. Hardis also pointed out that, while sales of Specialty Controls were up over 12 percent from last year, they were essentially flat compared to this year's first quarter. "Worldwide demand for semiconductor capital equipment has slowed in lagged response to the downturn in the semiconductor industry's book-to-bill ratio. As the leading worldwide producer of ion implanters, we are seeing the effects of the slowdown in our operating results."

Results in the Vehicle Components Segment remained below expectations. Segment sales were $771 million, down about 5 percent from last year's second quarter, while segment profits were $89 million, 20 percent below last year's levels. Notable was the acquisition in the earlier quarter of CAPCO Automotive Products Corp. with 1995 sales of $176 million. Excluding the CAPCO effects, segment sales in this year's second quarter were about $748 million, 8 percent below one year ago, while profits were about $92 million, 17 percent below last year's second quarter.

Looking ahead, Mr. Hardis said, "The second half of 1996 remains challenging. While North American markets continue to track our expectations, the semiconductor capital equipment market will not be a source of incremental strength as we move through the remainder of the year. Europe may be even softer than our relatively pessimistic expectations, and recovery in Latin America is clearly taking longer than we earlier anticipated. While CAPCO should not have a material effect on 1996 results, we do not expect this strategic acquisition to become accretive until 1997.

He continued: "Our ability to report improved results in the second half of the year will continue to depend on our making sustained progress in addressing some of our operational problems, achieving the benefits of our earlier restructuring efforts, and success in our new product introductions. Regardless of market conditions, our commitment remains to outperform expectations based on the cyclical levels of our traditional markets."