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): April 2, 1998
EATON CORPORATION
- -----------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Ohio 1-1396 34-0196300
- ----------------- ------------ -------------------
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
Eaton Center
Cleveland, Ohio 44114
- ---------------------------------------- ------------------
(Address of principal executive offices) Zip Code
(216) 523-5000
------------------------------
Registrants' telephone number,
including area code
<PAGE>
Item 5. Other Events
EATON TO CHANGE BUSINESS SEGMENT REPORTING
Cleveland, Ohio...Eaton Corporation announced today that when
reporting first quarter 1998 results, the company will change
its business segment reporting in order to comply with a new
requirement of the Financial Accounting Standards Board.
The new FASB standard, Statement 131, must be adopted by 1999
and requires that a company's financial reporting segments be
based on the way that management organizes the segments within
the company for making operating decisions and assessing
performance.
Eaton had previously reported its financial results in two major
business segments: (1) Electrical and Electronic Controls and
(2) Vehicle Components. In the future, the company will report
information for the following five business segments: Industrial
& Commercial Controls, Automotive Components, Truck Components,
Semiconductor Equipment, and Hydraulics & Other Components.
In order to facilitate a better understanding of the first
quarter results, a five-year history based on the new segment
reporting format is attached.
Stephen R. Hardis, chairman and chief executive officer, said
the new reporting format will provide significantly more detailed
information about Eaton's operations.
"The five-year results attest to the historical earnings strength
of the company's primary businesses," Hardis said. "Providing
additional financial information will help investors understand
that Eaton is a changed company."
"During the past year, a number of strategic acquisitions and
divestitures have significantly strengthened the long-range
earnings outlook," Hardis said. "More importantly, the new segment
reporting reveals not only the financial strength, but the
balance of our company."
"The new segment breakdown also shows the long-term growth of our
semiconductor operations. Even though that industry is currently
in a down cycle, we're continuing to invest in order to extend
our global leadership in this high technology industry. Despite
its relatively severe cyclical swings, this business offers
exciting potential."
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.
<PAGE>
<TABLE>
EATON CORPORATION
NEW SEGMENT PRESENTATION
SUMMARY OF NET SALES, OPERATING SEGMENT PROFIT AND
RECONCILIATIONS TO INCOME BEFORE INCOME TAXES
1993 TO 1997
<CAPTION>
(Millions)
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET SALES
Industrial & Commercial
Controls $2,251 $2,096 $1,976 $1,812 $ 779
Automotive Components 1,927 1,877 1,711 1,380 1,173
Truck Components 1,173 912 1,023 916 724
Semiconductor Equipment 459 446 383 213 125
Hydraulics & Other
Components 588 533 532 470 395
------ ------ ------ ------ ------
Ongoing Operations 6,398 5,864 5,625 4,791 3,196
Divested Operations 1,165 1,097 1,197 1,261 1,205
------ ------ ------ ------ ------
$7,563 $6,961 $6,822 $6,052 $4,401
====== ====== ====== ====== ======
OPERATING PROFIT
Industrial & Commercial
Controls $ 216 $ 175 $ 153 $ 147 $ 59
Automotive Components 228 203 183 158 92
Truck Components 170 77 186 173 128
Semiconductor Equipment 29 60 76 40 12
Hydraulics & Other
Components 108 101 104 82 63
------ ------ ------ ------ ------
Ongoing Operations 751 616 702 600 354
Divested Operations 73 5 26 32 36
Interest Expense (86) (85) (87) (83) (65)
Interest Income 7 6 6 7 8
Intangibles Amortization (48) (41) (34) (29) (9)
Purchased In-Process R&D (85) 0 0 0 0
Gains on Sales of
Businesses 91 0 0 0 0
DCBU Acquisition Inte-
gration Charge 0 0 0 0 (55)
General Corporate
Expense - net (35) (16) (21) (39) (7)
------ ------ ------ ------ ------
Income Before Income
Taxes $ 668 $ 485 $ 592 $ 488 $ 262
====== ====== ====== ====== ======
</TABLE>
<PAGE>
Operating segment profit in 1997 was reduced by restruc-
turing charges as follows (in millions): Industrial &
Commercial Controls - $4; Automotive Components - $10;
Truck Components - $3; Hydraulics & Other Components - $1
and Corporate - $6.
Operating segment profit in 1996 was reduced by restruc-
turing charges as follows (in millions): Industrial &
Commercial Controls - $3; Automotive Components - $10;
Truck Components - $16; Semiconductor Equipment - $2;
Hydraulics & Other Components - $4 and Divested
Operations - $15.
Automotive Components' operating segment profit in 1993
was reduced by a $9 million restructuring charge.
<PAGE>
<TABLE>
EATON CORPORATION
NEW SEGMENT PRESENTATION
SUMMARY OF ASSETS, CAPITAL EXPENDITURES AND DEPRECIATION
1993 TO 1997
<CAPTION>
(Millions)
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
ASSETS
Industrial & Commercial
Controls $1,028 $1,003 $ 975 $ 926 $ 346
Automotive Components 985 954 963 763 615
Truck Components 599 485 395 388 308
Semiconductor Equipment 344 252 198 143 91
Hydraulics & Other
Components 315 280 268 232 207
------ ------ ------ ------ ------
Total operating
segment assets 3,271 2,974 2,799 2,452 1,567
Divested Operations 327 691 679 757 787
Intangible assets and
excess of cost over net
assets of businesses
acquired 1,189 1,007 923 867 142
Corporate 678 635 652 606 772
------ ------ ------ ------ ------
Total assets $5,465 $5,307 $5,053 $4,682 $3,268
====== ====== ====== ====== ======
EXPENDITURES FOR PROPERTY, PLANT AND EQUIPMENT
Industrial & Commercial
Controls $ 113 $ 84 $ 76 $ 38 $ 18
Automotive Components 129 96 141 74 67
Truck Components 52 37 74 53 38
Semiconductor Equipment 14 25 8 3 2
Hydraulics & Other
Components 33 31 30 21 15
------ ------ ------ ------ ------
Total operating
segment capital
expenditures 341 273 329 189 140
Divested Operations 58 53 46 57 55
Corporate 39 21 24 21 32
------ ------ ------ ------ ------
$ 438 $ 347 $ 399 $ 267 $ 227
====== ====== ====== ====== ======
DEPRECIATION OF PROPERTY, PLANT AND EQUIPMENT
Industrial & Commercial
Controls $ 59 $ 52 $ 45 $ 44 $ 23
Automotive Components 86 84 75 60 58
Truck Components 47 44 36 32 29
Semiconductor Equipment 7 3 3 2 2
Hydraulics & Other
Components 21 20 17 15 14
------ ------ ------ ------ ------
Total operating segment
depreciation 220 203 176 153 126
Divested Operations 46 49 45 47 42
Corporate 19 18 17 16 14
------ ------ ------ ------ ------
$ 285 $ 270 $ 238 $ 216 $ 182
====== ====== ====== ====== ======
</TABLE>
<PAGE>
<TABLE>
EATON CORPORATION
NEW SEGMENT PRESENTATION
SUMMARY OF QUARTERLY NET SALES, OPERATING SEGMENT PROFIT
AND RECONCILIATIONS TO INCOME BEFORE INCOME TAXES
<CAPTION>
(Millions)
1997
---------------------------------
1 2 3 4
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET SALES
Industrial & Commercial Controls $ 535 $ 567 $ 586 $ 563
Automotive Components 490 496 456 485
Truck Components 254 273 303 343
Semiconductor Equipment 78 107 131 143
Hydraulics & Other Components 144 153 145 146
------ ------ ------ ------
Ongoing Operations 1,501 1,596 1,621 1,680
Divested Operations 288 313 310 254
------ ------ ------ ------
$1,789 $1,909 $1,931 $1,934
====== ====== ====== ======
OPERATING PROFIT
Industrial & Commercial Controls $ 46 $ 57 $ 64 $ 49
Automotive Components 63 66 48 51
Truck Components 32 36 43 59
Semiconductor Equipment 0 4 14 11
Hydraulics & Other Components 27 30 27 24
------ ------ ------ ------
Ongoing Operations 168 193 196 194
Divested Operations 14 25 22 12
Interest Expense (20) (20) (22) (24)
Interest Income 2 1 2 2
Intangibles Amortization (10) (10) (13) (15)
Purchased In-Process R&D 0 0 (85) 0
Gains on Sales of Businesses 0 0 0 91
General Corporate Expense - net (9) (7) (5) (14)
------ ------ ------ ------
Income Before Income Taxes $ 145 $ 182 $ 95 $ 246
====== ====== ====== ======
</TABLE>
Operating segment profit in the fourth quarter of 1997
was reduced by restructuring charges as follows (in
millions): Industrial & Commercial Controls - $4;
Automotive Components - $10; Truck Components - $3;
Hydraulics & Other Components - $1 and Corporate - $6.
<PAGE>
<TABLE>
EATON CORPORATION
NEW SEGMENT PRESENTATION
SUMMARY OF QUARTERLY NET SALES, OPERATING SEGMENT PROFIT
AND RECONCILIATIONS TO INCOME BEFORE INCOME TAXES
<CAPTION>
(Millions)
1996
---------------------------------
1 2 3 4
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET SALES
Industrial & Commercial Controls $ 506 $ 517 $ 542 $ 531
Automotive Components 472 495 452 458
Truck Components 224 235 232 221
Semiconductor Equipment 130 122 94 100
Hydraulics & Other Components 142 138 125 128
------ ------ ------ ------
Ongoing Operations 1,474 1,507 1,445 1,438
Divested Operations 262 275 274 286
------ ------ ------ ------
$1,736 $1,782 $1,719 $1,724
====== ====== ====== ======
OPERATING PROFIT
Industrial & Commercial Controls $ 40 $ 43 $ 48 $ 44
Automotive Components 52 64 47 40
Truck Components 33 28 16 0
Semiconductor Equipment 26 25 8 1
Hydraulics & Other Components 28 26 21 26
------ ------ ------ ------
Ongoing Operations 179 186 140 111
Divested Operations (2) (5) 6 6
Interest Expense (21) (22) (21) (21)
Interest Income 2 1 2 1
Intangibles Amortization (9) (6) (14) (12)
General Corporate Expense - net (8) (5) 2 (5)
------ ------ ------ ------
Income Before Income Taxes $ 141 $ 149 $ 115 $ 80
====== ====== ====== ======
</TABLE>
<PAGE>
Operating segment profit in the first quarter of 1996
was reduced by restructuring charges as follows (in
millions): Automotive Components - $1 and Divested
Operations - $4.
Operating segment profit in the second quarter of 1996
was reduced by restructuring charges as follows (in
millions): Automotive Components - $1; Truck
Components - $1; Hydraulics & Other Components - $2
and Divested Operations - $5.
Operating segment profit in the third quarter of 1996
was reduced by restructuring charges as follows (in
millions): Industrial & Commercial Controls - $1; Truck
Components - $2; Hydraulics & Other Components - $1
and Divested Operations - $3.
Operating segment profit in the fourth quarter of 1996
was reduced by restructuring charges as follows (in
millions): Industrial & Commercial Controls - $2;
Automotive Components - $8; Truck Components - $13;
Semiconductor Equipment - $2; Hydraulics & Other
Components - $1 and Divested operations - $3.
<PAGE>
<TABLE>
EATON CORPORATION
NEW SEGMENT PRESENTATION
SUMMARY OF QUARTERLY NET SALES, OPERATING SEGMENT PROFIT
AND RECONCILIATIONS TO INCOME BEFORE INCOME TAXES
<CAPTION>
(Millions)
1995
---------------------------------
1 2 3 4
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET SALES
Industrial & Commercial Controls $ 471 $ 496 $ 519 $ 490
Automotive Components 438 440 401 432
Truck Components 277 272 245 229
Semiconductor Equipment 76 105 99 103
Hydraulics & Other Components 140 138 126 128
------ ------ ------ ------
Ongoing Operations 1,402 1,451 1,390 1,382
Divested Operations 329 307 282 279
------ ------ ------ ------
$1,731 $1,758 $1,672 $1,661
====== ====== ====== ======
OPERATING PROFIT
Industrial & Commercial Controls $ 34 $ 42 $ 42 $ 35
Automotive Components 58 48 28 49
Truck Components 58 54 41 33
Semiconductor Equipment 20 23 22 11
Hydraulics & Other Components 25 26 25 28
------ ------ ------ ------
Ongoing Operations 195 193 158 156
Divested Operations 10 6 1 9
Interest Expense (20) (23) (22) (22)
Interest Income 1 2 1 2
Intangibles Amortization (8) (9) (8) (9)
General Corporate Expense - net (15) (5) 8 (9)
------ ------ ------ ------
Income Before Income Taxes $ 163 $ 164 $ 138 $ 127
====== ====== ====== ======
</TABLE>
<PAGE>
EATON CORPORATION
1997 BUSINESS SEGMENT REPORTING FOOTNOTE REVISED FOR NEW FASB 131
Eaton is a global manufacturer of highly engineered products which
serve the industrial, vehicle, construction, commercial and semi-
conductor markets with operations located in 28 countries. The
Company has aggregated its operations into five operating segments
based on product technology and markets served. Major products
included in each business segment and other information follows.
Industrial and Commercial Controls
- ----------------------------------
To control and protect electric motors -- pushbuttons, starters,
contactors, variable speed drives, and motor control centers
Position sensing -- photoelectric and proximity sensors
To permit human interface with machines -- industrial workstations
and programmable logic controllers
To manage electric current distribution in homes, businesses and
industry -- switchgear, load interrupter assemblies, unitized
power centers, medium voltage starters, switchboards, panelboards,
automatic transfer switches, busway, loadcenters, metercenters,
dry-type transformers, safety switches, power distribution systems,
power breakers, vacuum interrupters, and molded case circuit
breakers
For power tools, telecommunications and office equipment, trucks,
farm machinery and recreational vehicles -- power and variable
speed switches, magnetic hydraulic circuit breakers, and elec-
tronic controls
For commercial and military aircraft, missiles and space vehicles
- -- actuators, thermal circuit breakers, cockpit controls, illumi-
nated displays, integrated panels, relays and valves
For Navy ships or U.S. Army -- power control and conversion
equipment
Automotive Components
- ---------------------
For a wide variety of power train applications -- valve train
systems, intake and exhaust valves, lash compensation lifters
and lash adjusters, viscous fan drives, plastic fans and shrouds,
and superchargers
For vehicle drive train applications -- leaf springs, limited slip
differentials, locking differentials, transmission dampers,
precision gear forgings, and air control valves
For passenger cars and trucks -- climate controls, switches to
control windows, door locks, seats, mirrors, lights, wipers, cruise
control, etc., engine sensors, speed controls, collision warning
systems, mirror actuators, transmission controls, keyless entry
systems, daytime running lamp controls, speed-sensitive steering
systems, and trucking information systems
<PAGE>
Truck Components
- ----------------
For commercial trucks, including heavy-, medium-, and light-duty --
heavy-, medium-, and light-duty mechanical transmissions, heavy-
duty automated transmissions, heavy- and medium-duty clutches, and
traction control systems
Transmissions for off-highway construction equipment
Semiconductor Equipment
- -----------------------
For products and services used in semiconductor processing --
high- and medium- current implanters and high-energy implanters;
integrated implant products and services that deliver the lowest
cost of ownership and contamination-free production of semi-
conductor devices, including those requiring special capabilities
such as wafer repositioning and extreme tilt angles; photo-
stablizers, ozone and plasma ashers, thermal processing systems,
flat panel display equipment, repair/refurnished parts shops,
regional spare parts depots, and innovative parts management
programs
Hydraulics and Other Components
- -------------------------------
For off-highway equipment, primarily, and some industrial
applications -- hydraulic pumps, motors, valves, cylinders, power
steering units, transaxles and transmissions
Fasteners for automotive and other commercial products, clutches
and brakes for industrial machines, and golf grips
Divested Operations
- -------------------
On January 2, 1998, the Company completed the sale of its
Axle/Brake business which had sales of $659 million in 1997 and
$542 million in 1996. This business manufactured components for
commercial trucks, primarily heavy- and medium-duty, and
construction off-highway equipment. Components manufactured by
this business included heavy- and medium-duty drive axles, steer
axles, trailer axles, brakes, automatic slack adjusters, forgings,
and castings.
On December 1, 1997, the Company sold the Appliance Controls
business which had sales of $418 million in 1997 and $432 million
in 1996. Components manufactured by this business included timers,
pressure and vacuum controls, synchronous motors, range controls,
thermostats, and water valves.
On October 1, 1997, the Company sold the majority of AIL Systems
Inc. which represented the Defense Systems business segment (the
Company continues to hold a minor interest in AIL). This business,
which had sales of $71 million in 1997 and $112 million in 1996,
manufactured products for the U.S. Defense Department, including
advanced technical systems, antenna systems, electronic warfare
systems, and radar systems.
<PAGE>
Other Information
- -----------------
The principal markets for Industrial and Commercial Controls and
Semiconductor Equipment are industrial, construction, commercial,
automotive, aerospace and government customers concentrated
principally in North America, however, sales are made globally.
Sales are made directly by the Company and indirectly through
distributors and manufacturers' representatives to such customers.
The principal market for Automotive Components, Truck Components,
and Hydraulics and Other Components is original equipment manu-
facturers of heavy-, medium-, and light-duty trucks, passenger cars
and off-highway vehicles. These original equipment manufacturers
are generally concentrated in North America, however, sales are
made on a global basis. Most sales of these products are made
directly to such manufacturers.
The accounting policies of the operating segments are the same as
the policies described under "Accounting Policies" in the financial
review, except that inventories and related cost of products sold
of the segments are accounted for using the FIFO method.
The company accounts for intersegment sales and transfers at the
same prices as if the sales and transfers were made to third
parties.
The Company evaluates the performance of each operating segment
based on pretax income of the segment, excluding interest expense,
interest income, amortization of intangible assets and excess of
cost over net assets of businesses acquired, certain other non-
operating income (expense), and general corporate expense.
Identifiable assets for each operating segment represent those
used in operations and exclude intangible assets and excess of
cost over net assets of businesses acquired, and general corporate
assets which principally consist of short-term investments,
deferred income taxes, certain accounts receivables, and certain
property, plant and equipment and other assets.
Net sales to divisions and subsidiaries of one customer, primarily
from the Automotive Components, Truck Components, and Hydraulics
and Other Components segments, were (in millions) $766 in 1997,
$739 in 1996 and $740 in 1995 (10% of sales in 1997 and 11% of
sales in 1996 and 1995). Sales from the Company's United States
operations to customers in foreign countries, primarily Canada,
(in millions) were $791 in 1997, $743 in 1996 and $709 in 1995
(10% of sales in 1997, 11% in 1996, and 10% in 1995).
<PAGE>
SIGNATURE
---------
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/ Gerald L. Gherlein
----------------------
G.L. Gherlein
Executive Vice President
and General Counsel
DATE: April 2, 1998
<PAGE>
