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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 3, 1998
EATON CORPORATION
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(Exact name of registrant as specified in its charter)
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<CAPTION>
<S> <C> <C>
Ohio 1-1396 34-0196300
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(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
Eaton Center
Cleveland, Ohio 44114
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(Address of principal executive offices) Zip Code
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(216) 523-5000
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Registrants' telephone number,
including area code
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Item 5. Other Events.
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Financial Results
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Eaton Corporation announced all-time record sales, earnings and earnings per
share for the fourth quarter of 1997. Sales in the quarter were $1.93 billion
compared to $1.72 billion in the fourth quarter of 1996. Net income reached $129
million, up 95 percent from last year's $66 million, which had been reduced by a
$23 million after tax restructuring charge. Earnings per share for the fourth
quarter were $1.70 compared to $0.85 in 1996, or $1.15 per share excluding last
year's restructuring charge.
During the fourth quarter, Eaton had one-time net gains of $69 million, or $0.90
per share, related to the December 1, 1997 divestiture of its Appliance Controls
business and the October 1, 1997 sale of its AIL Systems Inc. subsidiary. These
gains were entirely offset by the previously announced $54 million charge
related to the redemption of the 7 percent debentures due April 1, 2011, and by
a $15 million after tax charge related to restructuring actions in the current
quarter.
Sales, net income and earnings per share for 1997 also established new records.
Net income for the full year reached $410 million, or $5.34 per share, on sales
of $7.56 billion. Comparable 1996 earnings were $349 million, or $4.50 per
share, on sales of $6.96 billion. Before special items in both years, earnings
increased 31% to $6.45 per share in 1997 from $4.91 in 1996.
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YEAR 2000
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Computer software that uses two digits rather than four to identify the
applicable year may be unable to interpret appropriately the calendar year 2000,
and thus could cause disruptions of normal business activities. The Company
uses software in various aspects of its business, including manufacturing,
product development and many administrative functions, and much of this
software will be unable to interpret the calendar year 2000 appropriately unless
it is modified or replaced.
The Company is addressing this year 2000 issue with a corporate-wide initiative
led by the Company's Vice President -- Information Technologies and involving
coordinators for each Company location. The initiative includes the
identification of affected software, the development of a plan for correcting
that software in the most effective manner, the implementation of that plan and
the monitoring of its implementation. The program also includes communications
with the Company's significant suppliers and customers to determine the extent
to which the Company's systems are vulnerable to any failures by them to
address the year 2000 issue. In most instances, the Company will replace older
software with new programs and systems, which will significantly upgrade the
existing software as well as appropriately interpret the calendar year 2000.
Although the timing of these replacements is influenced by the year 2000 issue,
in most instances they will be capital expenditures that would have occurred
in the normal course of business in any event. The Company expects that most of
the modifications and replacements will be in place before the end of 1998.
Given the information available at this time, management currently anticipates
that the total costs to the Company to modify or replace its software in order
to remediate this issue should not have a material adverse effect on the
Company's liquidity or its results of operations, and that those costs should
not cause reported financial information not to be indicative of future
operating results or future financial condition.
Certain statements made herein are "Forward-Looking Statements" within the
meaning of the Private Securities Litigation Reform Act of 1995, and although
such statements are based on management's best estimates, actual results could
differ materially from those anticipated. Specific factors which might cause a
material difference include the availability and cost of trained personnel and
the ability to locate all computer codes requiring correction.
Press Releases
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The following press releases are attached as exhibits and incorporated herein by
reference:
1. Press release dated January 30, 1998, concerning completion of stock
repurchase program.
2. Press release dated January 30, 1998, concerning declaration of quarterly
dividend.
3. Press release dated January 5, 1998, concerning completion of sale of axle
and brake business to Dana Corporation.
4. Press release dated December 1, 1997, concerning redemption of outstanding
7% debentures.
5. Press release dated December 1, 1997, concerning completion of sale of
appliance controls business to Siebe plc.
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
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(c) Exhibits
99(a) Press release dated January 30, 1998, concerning completion of stock
repurchase program.
99(b) Press release dated January 30, 1998, concerning declaration of quarterly
dividend.
99(c) Press release dated January 5, 1998, concerning completion of sale of
axle and brake business to Dana Corporation.
99(d) Press release dated December 1, 1997, concerning redemption of
outstanding 7% debentures.
99(e) Press release dated December 1, 1997, concerning completion of sale of
appliance controls business to Siebe plc.
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SIGNATURE
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EATON CORPORATION
/s/ G.L. Gherlein
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G.L. Gherlein
Executive Vice President and
General Counsel
DATE: February 3, 1998
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Current Report on Form 8-K
Eaton Corporation
EXHIBIT INDEX
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Exhibit
Number Exhibit Description
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99(a) Press release dated January 30, 1998, concerning completion of stock
repurchase program.
99(b) Press release dated January 30, 1998, concerning declaration of quarterly
dividend.
99(c) Press release dated January 5, 1998, concerning completion of sale of
axle and brake business to Dana Corporation.
99(d) Press release dated December 1, 1997, concerning redemption of
outstanding 7% debentures.
99(e) Press release dated December 1, 1997, concerning completion of sale of
appliance controls business to Siebe plc.
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Exhibit 99(a)
January 30, 1998
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CLEVELAND, OHIO ... Eaton Corporation today said it has completed the $500
million repurchase of common shares that was authorized by the company's Board
of Directors on September 24, 1997. The company said at the time of the
authorization that it was repurchasing the shares in order to avoid dilution of
share earnings that might result from the sale of the company's Axle & Brake and
Appliance Controls businesses. The buyback resulted in 5.5 million shares being
repurchased. Eaton now has 71.5 million shares outstanding.
A second program, approved by the board in December, 1994, authorizing the
repurchase of 5 million shares, continues in effect. Approximately 3 million
shares have been purchased under that program, which is intended to offset
earnings dilution resulting from employee exercise of stock options.
Eaton Corporation is a global manufacturer of highly engineered product 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
49,000 employees and 145 manufacturing sites in 28 countries around the world.
Sales for 1997 were $7.6 billion.
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Exhibit 99(b)
January 30, 1998
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CLEVELAND, OHIO...Eaton Corporation's Board of Directors today declared a
regular quarterly dividend of $.44 per common share, payable on February 25 to
shareholders of record on February 9, 1998. Eaton has paid dividends on common
shares annually since 1923.
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
49,000 employees and 145 manufacturing sites in 28 countries around the world.
Sales for 1997 were $7.6 billion.
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Exhibit 99(c)
January 5, 1998
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CLEVELAND, OHIO... Eaton Corporation (NYSE:ETN) today said it has concluded the
sale of the company's worldwide axle and brake business to Dana Corporation
(NYSE:DCN) for $287 million.
On July 9, 1997, the two companies announced the signing of definitive
agreements whereby Eaton would purchase Dana's worldwide clutch business for
$180 million, and Dana would purchase Eaton's Axle and Brake business for $287
million. Eaton concluded the purchase of the clutch business, which has sales of
about $200 million and consists of 675 employees at nine locations in five
countries, on August 31, 1997. Both transactions were for cash.
Prior to the sale, Eaton's worldwide Axle and Brake Operations had 3,400
employees at nine facilities in five countries, and annualized sales of more
than $600 million.
At the time of the original announcement, Eaton chairman, Stephen R. Hardis,
said, "We view this transaction as one of the most strategic repositioning moves
made by the company in its recent history, and a reflection of our commitment to
the trucking industry."
With the sale completed, Eaton will exclusively represent, on a worldwide basis,
a complete range of heavy-duty (class 8) drivetrain products to North American
original equipment manufacturers. This will include Eaton's market-leading,
heavy-duty transmission business, its new clutch business, and heavy-duty axles
and brakes, which it will market under an agreement with Dana that was part of
the original transaction. Both Eaton and Dana independently will continue to
manufacture and sell medium-duty transmissions.
"As a result of this transaction, in combination with our recently announced
Truck Component Operations--Worldwide reorganization, Eaton will now be better
able to respond to the demand by its global customers for enhanced drivetrain
solutions," Hardis said.
Eaton's transmission business was not affected by the transaction, and Dana will
continue to market a complete line of medium duty axle and brake products, as
well as medium- and heavy-duty driveshafts worldwide.
Eaton Corporation, headquartered in Cleveland, Ohio, is a global manufacturer of
highly engineered products which serve industrial, vehicle, construction,
commercial and semiconductor markets. Principal products include electrical
power distribution and control equipment, truck components and drivetrain
systems, engine components, hydraulic products, ion implanters and a wide
variety of controls. As a result of today's action, Eaton now has 48,000
employees and 145 manufacturing sites in 28 countries around the world. Sales
for 1996 were $7 billion.
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Exhibit 99(d)
December 1, 1997
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CLEVELAND, OH ... Eaton Corporation today announced that it will use a portion
of the proceeds from the sale of its Appliance Control business to redeem all of
its outstanding 7 percent debentures due April 1, 2011.
The redemption price is 100 percent of the principal amount of the debentures,
for a total of $200 million plus accrued and unpaid interest to the redemption
date of December 31, 1997. The redemption will result in a charge to fourth
quarter earnings of 71 cents a share.
Eaton announced earlier today that it had completed the sale of its appliance
controls to Siebe plc for $310 million. The gain on the sale will fully offset
the charge to earnings resulting from the redemption.
The trustee and paying agent for the debentures is The First National Bank of
Chicago. Those debenture holders wishing to submit their debentures by mail
should address the agent at:
The First National Bank of Chicago
Registered Bond Processing Unit
Suite 0124
One First National Plaza
Chicago IL 60670
Those debenture holders wishing to submit their debentures by hand should
contact the agent at:
The First National Bank of Chicago
Registered Bond Processing Unit
One North State Street
Chicago IL 60602
or
First Chicago Trust Company of New York
14 Wall Street
New York, NY 10005
Eaton Corporation is a global manufacturer of highly engineered products which
serve industrial, vehicle, construction, commercial and semiconductor 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 56,000 employees and 165 manufacturing sites in 26 countries around
the world. Sales for 1996 were $7 billion.
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Exhibit 99(e)
December 1, 1997
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CLEVELAND, OH.... Eaton Corporation (NYSE:ETN) today announced it has concluded
the sale of its worldwide Appliance Controls business to Siebe plc, for $310
million, effective November 30, 1997.
On September 23, 1997, the two companies announced the signing of a definitive
agreement whereby Eaton would sell to Siebe the $440 million business unit that
manufactures timers, switches, water valves, thermostats and various range
controls for appliance makers. Eaton's Appliance Controls operation has 4,800
employees at 17 facilities in North America, South America, Europe, Australia
and Asia.
Siebe plc is one of the United Kingdom's largest diversified engineering groups
and incorporates over 200 companies worldwide, employing more than 50,000
people. The company designs and manufactures temperature and appliance controls,
electronic power controls, process automation and building control systems, and
engineered industrial equipment. The company had sales of $4.8 billion for the
fiscal year ended April 5, 1997.
Eaton Corporation is a global manufacturer of highly engineered products which
serve industrial, vehicle, construction, commercial and semiconductor 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 56,000 employees and 165 manufacturing sites in 26 countries around
the world. Sales for 1996 were $7 billion.
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