<PAGE> 1
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): January 28, 1999
-------------------------------
Aeroquip-Vickers, Inc.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Ohio 1-924 36-4288310
- --------------------------------------------------------------------------------
(State or Other (Commission (I.R.S. Employer
Jurisdiction of File Number) Identification No.)
Incorporation)
3000 Strayer, Maumee, Ohio 43537-0050
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (419) 867-2200
-----------------------------
Not Applicable
- --------------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
<PAGE> 2
ITEM 5. OTHER EVENTS.
This Current Report on Form 8-K is being filed with the Securities and
Exchange Commission by Aeroquip-Vickers, Inc. (the "Company") for the purpose of
providing the information set forth in a press release issued by the Company on
January 28, 1999, a copy of which is filed as Exhibit 99.1 hereto and
incorporated herein by reference.
ITEM. 7 FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Business Acquired: None.
(b) Pro Forma Financial Information: None.
(c) Exhibits:
99.1 Press Release, dated February 1, 1999.
2
<PAGE> 3
SIGNATURES
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 hereunto duly authorized.
AEROQUIP-VICKERS, INC.
Dated: February 12, 1999 By: /s/ James E. Kline
-------------------------
James E. Kline
Vice President and General Counsel
3
<PAGE> 1
January 28, 1999, Thursday
DISTRIBUTION: Business Editors
LENGTH: 3772 words
HEADLINE: Aeroquip-Vickers Reports Fourth-Quarter and 1998 Results
DATELINE: MAUMEE, Ohio
BODY:
Jan. 28, 1999--Aeroquip-Vickers, Inc. (NYSE:ANV) today announced 1998
fourth-quarter net income of $ 7.4 million, or 27 cents per share, after a
restructuring charge of $ 5 million ($ 3.1 million net of tax), or 11 cents per
share. Fourth-quarter 1997 net income was $ 31.4 million, or $ 1.11 per share.
1998 fourth-quarter sales were $ 519.1 million, compared with $ 522.8 million in
1997. On December 14, the company announced that it expected 1998 fourth-quarter
earnings per share to be between 25 cents and 30 cents (before the restructuring
charge of 11 cents), which was below the then consensus estimate of 85 cents per
share. The per-share improvement above this forecast was due to
better-than-anticipated sales and margin performance in December. As announced
earlier this week, Aeroquip-Vickers has changed its reporting segments to its
two operating companies - Aeroquip Corporation and Vickers, Incorporated. In
addition to this segment reporting, Aeroquip-Vickers will supply sales and
operating income for the markets it serves - industrial, aerospace and
automotive. "Our sales in the fourth quarter were led by an improvement
year-over-year in Aeroquip's sales, as sales in each of Aeroquip's major markets
improved from the 1997 fourth quarter," said Darryl F. Allen, Aeroquip-Vickers'
chairman, president and chief executive officer. "Vickers' sales declined from
the 1997 fourth quarter, but sales to Vickers' aerospace markets improved.
Aeroquip and Vickers continued to win a majority share of the aerospace business
they bid on for their primary product lines, testimony to their product quality,
reliability and customer service. "As we announced in December, our lower
earnings in the fourth quarter compared to a year ago are principally related to
sales in Vickers' industrial markets which began to slow in the third quarter,"
Mr. Allen said. "In the U.S., agriculture, an important sector for Vickers,
continued its steep decline, with orders nearly non-existent. This led to a
16.4% decrease in Vickers' U.S. industrial sales in the 1998 fourth quarter
compared with a year ago. The Brazilian economy also began to weaken in the
fourth quarter, and Asia-Pacific markets continued to be depressed. "In response
to these market conditions, in the 1998 fourth quarter we recorded restructuring
expenses amounting to $ 5 million ($ 3.1 million net of tax), or 11 cents per
share, to resize operations to reflect current business levels. These expenses
are principally for incurred severance costs and other costs associated with
reconfiguring the business. During 1999, we will continue our cost-reduction
efforts to improve manufacturing and operating efficiencies."
The Year 1998
Sales in 1998 reached a new high of $ 2.15 billion, a 1.8% increase over a year
ago. Sales increased 2.8% in the U.S., increased 2.3% in
<PAGE> 2
Europe and declined 12% in the Rest of the World, due almost entirely to the
effect of exchange rate changes. Facilities sold or closed in 1997 as a result
of exiting the automotive interior business contributed $ 67 million in 1997
sales. After excluding these sales, 1998 consolidated sales increased 5.1%.
Operating income for the year 1998 was $ 186.4 million, and compares with
operating income for the year 1997 of $ 221.6 million before a special charge of
$ 30 million to exit the automotive interior plastics business. In 1998, as
required by new accounting rules, Aeroquip-Vickers recognized the cumulative
effect of an accounting change of $ 4.8 million ($ 3.3 million net of tax), or
12 cents per share, to charge to income previously deferred start-up costs for
new facilities. 1998 income per share was $ 3.67 before the cumulative effect of
accounting change of 12 cents per share and the fourth-quarter restructuring
charge of 11 cents per share. This compares with income of $ 4.14 before a
special charge of 63 cents per share in 1997.
Aeroquip
Aeroquip's 1998 fourth-quarter sales increased 3.9%, with about 40% of the
increase due to the effect of exchange rate changes. U.S. sales improved 4% from
a year ago, with increases in each of Aeroquip's major markets. European sales
increased 3.1%, as a decline in fourth-quarter sales volumes in industrial and
automotive markets was more than offset by an increase in aerospace sales volume
and the favorable effect of exchange rate changes. Aeroquip's sales in the Rest
of the World increased due to an acquisition made in 1998. An increase in
Aeroquip's U.S. manufacturing income and operating income was more than offset
by declines in Europe and the Rest of the World. 1998 fourth-quarter operating
income was $ 25.3 million, compared with $ 29.2 million in 1997. "Aeroquip had
record sales and operating income for the year 1998, led by best-ever results in
Aeroquip's industrial and aerospace markets," Mr. Allen said. "The continuous
improvement initiatives throughout Aeroquip's global operations have made
processes more reliable, reduced costs and dramatically increased on-time
delivery. These initiatives were recognized globally through numerous customer
and governmental quality awards in 1998."
Vickers
Vickers' 1998 fourth-quarter sales declined 5.2%. U.S. sales declined 8.3%, as
an increase in aerospace sales was more than offset by a decline in industrial
sales. Vickers' European sales increased 17.6%, with about 20% of the increase
due to the effect of exchange rate changes. European sales increased in both
industrial and aerospace markets. Vickers' sales in the Rest of the World
declined compared with the 1997 fourth quarter.
Vickers' 1998 fourth-quarter manufacturing income declined significantly from
the prior year, as an increase in Europe was more than offset by a decline in
the U.S. and the Rest of the World year over year. 1998 fourth-quarter operating
income was $ 3.1 million, compared with $ 36.6 million in 1997. Operating income
declined in the U.S., Europe and the Rest of the World compared with a year ago.
Lower global demand, combined with the fact that Vickers essentially eliminated
its past due industrial orders in the first half of 1998, reduced pump
production levels by 40% in the second half of the year. This significant
reduction occurred just as Vickers commenced pump manufacturing operations at a
new facility in Greenwood, South Carolina.
"For the year 1998, Vickers' performance in its aerospace markets was its best
ever, as Vickers continued to win a significant majority of the business it bid
on," Mr. Allen said. "Vickers' industrial business has work to do to get back on
track for profitable growth. Initiatives have been implemented to reduce costs
and resize operations to reflect demand and market conditions, and we will
continue to evaluate additional restructuring alternatives."
<PAGE> 3
Industrial Market
Sales to industrial markets declined significantly in the 1998 fourth quarter
from the previous year. A 10.5% increase in European sales (37% of the increase
due to the effect of exchange rate changes) was more than offset by decreases in
the U.S. and the Rest of the World.
In U.S. industrial markets, sales to truck & bus and air conditioning &
refrigeration customers improved from a year ago, while sales to distributors,
construction and agricultural equipment, stationary equipment and electronic
systems customers declined. In Europe, sales to distributors and electronic
systems customers improved, while sales to construction equipment, stationary
equipment and truck & bus customers declined. Sales in Europe also improved due
to the acquisition of an air conditioning & refrigeration business in 1998. The
operating loss in industrial markets was $ 5.0 million, compared with operating
income of $ 22.2 million in the 1997 fourth quarter. "Although certain sectors
of global industrial markets have weakened, we are confident that our strong
customer and supplier relationships, our improving manufacturing processes and
our dedicated employees will foster growth in our industrial markets," Mr. Allen
said.
Aerospace Market
Sales to aerospace markets increased 6.3% in the 1998 fourth quarter from the
previous year. Sales improved 4.5% in the U.S. and 17% in Europe. Aerospace
sales increased to commercial OEM customers, while sales to military customers
were flat.
Aerospace operating income declined to $ 21.8 million from $ 29.2 million in the
1997 fourth quarter. 1998 fourth-quarter aerospace operating income includes a
charge of $ 2.0 million for product warranty claims, while the 1997 fourth
quarter includes a gain of $ 4.3 million from recovery of previously incurred
development and pre-production costs with an aerospace customer. Margins for the
1998 fourth quarter were also weakened by a change in product mix and startup
costs for a machining center in Charleston, South Carolina.
"Sales in our aerospace markets should remain near or above 1998's levels, and
the market should continue as a strong profit contributor in 1999," Mr. Allen
said. "We also expect an additional boost in the future as the new military
programs begin to increase production."
Automotive Market
Sales to automotive markets increased 5.4%, with about half of the increase due
to the effect of exchange rate changes. Part of the increase in sales volume was
due to the acquisition of a South African fluid connectors business in 1998.
Sales to U.S. automotive markets were flat with a year ago, and a 2.5% increase
in European automotive markets was due to the effect of exchange rate changes.
Sales for automotive air conditioning and power-assisted steering fluid
connectors continued strong.
Operating income in automotive markets was $ 11.6 million in the 1998 fourth
quarter, compared with $ 14.4 million in 1997.
"Sales to our automotive markets should continue to grow in 1999 based on booked
business and automotive manufacturers' planned production," Mr. Allen said.
"With the further expansion of our capabilities through initiatives in South
Africa, Germany and the U.S. in 1998, we have additional leverage to increase
our automotive sales worldwide."
Forward-Looking Statements
Portions of this release, which are not historical in nature, are
forward-looking statements. These statements are based on projections and
estimates of the company and its customers regarding automotive and aircraft
production and shipment schedules which are dependent on the performance of the
domestic and international economies and the industrial, aerospace and
automotive industries in which Aeroquip-Vickers does business. The company's
actual performance may differ from that contemplated by the
<PAGE> 4
forward-looking statements as a result of unexpected changes in the production
and shipment schedules of the company's customers. Other factors which could
affect Aeroquip-Vickers' actual performance include its ability to continually
improve margins by achieving anticipated cost reductions in manufacturing
processes, to consistently win new business in each of its industries by
delivering quality product and maintaining competitive pricing, and to
successfully implement its growth strategies.
Aeroquip-Vickers is two companies, Aeroquip Corporation and Vickers,
Incorporated, world leaders in the design, manufacture and distribution of
engineered components and systems to industrial, aerospace and automotive
markets. -0-
Consolidated Results
(dollars in millions, except per share data; all per share amounts
are reported on a diluted basis)
<TABLE>
<CAPTION>
4Q 98 4Q 97 3Q 98 2Q 98
----- ----- ----- -----
<S> <C> <C> <C> <C>
Sales $ 519.1 $ 522.8 $ 509.0 $ 574.3
Operating Income 21.2 (a) 58.3 (b) 42.3 65.1
Operating Margin 4.1%(a) 11.1%(b) 8.3% 11.3%
Income before
Cumulative Effect of
Accounting Change(f) 7.4 (a) 31.4 (b) 23.9 37.8
Income Per Share before
Cumulative Effect of
Accounting Change(f) .27 (a) 1.11 (b) .85 1.33
</TABLE>
<TABLE>
<CAPTION>
1Q 98 Year 98 Year 97
----- ------- -------
<S> <C> <C> <C>
Sales $ 547.1 $ 2,149.5 $ 2,112.3
Operating Income 57.8 186.4 (a) 191.6 (b)(d)
Operating Margin 10.6% 8.7%(a) 9.1%(b)(d)
Income before
Cumulative Effect of
Accounting Change(f) 31.2(c) 100.3 (a)(c) 100.9 (b)(d)(e)
Income Per Share before
Cumulative Effect of
Accounting Change(f) 1.10(c) 3.56 (a)(c) 3.51 (b)(d)(e)
</TABLE>
(a) Includes a restructuring charge of $ 5 million ($ 3.1 million net of tax),
or 11 cents per share.
(b) Includes a gain of $ 1.7 million ($ 1 million net of tax), or 4 cents per
share, the net effect of income from recovery of previously incurred
development and pre-production costs arising from the termination of a
component design and production supply contract and a charge to recognize a
product liability claim from an industrial customer for a unique product
that is no longer manufactured.
(c) Includes a charge of $ 2.5 million ($ 1.5 million net of tax), or 5 cents
per share, for the early retirement of debt.
<PAGE> 5
(d) Includes a special charge of $ 30.0 million ($ 18.5 million net of tax), or
63 cents per share, to exit the automotive interior plastics business.
Before the special charge, operating income and operating margin were $
221.6 million and 10.5%, respectively, for the year 1997.
(e) Includes a charge of $ 1.5 million ($ 900,000 net of tax), or 3 cents per
share, for the early retirement of convertible debt.
(f) The cumulative effect of accounting change amounted to $ 4.8 million ($ 3.3
million net of tax), or 12 cents per share.
Segment Analysis
(dollars in millions)
Aeroquip
<TABLE>
<CAPTION>
4Q 98 4Q 97 3Q 98 2Q 98
----- ----- ----- -----
<S> <C> <C> <C> <C>
Sales $ 269.1 $ 259.1 $ 255.7 $ 280.8
Operating Income 25.3 29.2 (a) 28.1 38.5
Operating Margin 9.4% 11.3%(a) 11.0% 13.7%
</TABLE>
<TABLE>
<CAPTION>
1Q 98 Year 98 Year 97
----- ------- -------
<S> <C> <C> <C>
Sales $ 266.0 $ 1,071.6 $ 1,065.2
Operating Income 32.4 124.3 89.5 (a)(b)
Operating Margin 12.2% 11.6% 8.4%(a)(b)
</TABLE>
(a) Includes a charge of $ 2.6 million to recognize a product liability claim
from an industrial customer for a unique product that is no longer
manufactured.
(b) Includes a special charge of $ 30.0 million to exit the automotive interior
plastics business. Before the special charge, operating income and
operating margin were $ 119.5 million and 11.2%, respectively, for the year
1997.
Vickers
<TABLE>
<CAPTION>
4Q 98 4Q 97 3Q 98 2Q 98
----- ----- ----- -----
<S> <C> <C> <C> <C>
Sales $ 250.0 $ 263.7 $ 253.3 $ 293.5
Operating Income 3.1 36.6 (a) 21.2 33.5
Operating Margin 1.2% 13.9%(a) 8.4% 11.4%
</TABLE>
<TABLE>
<CAPTION>
1Q 98 Year 98 Year 97
----- ------- -------
<S> <C> <C> <C>
Sales $ 281.1 $ 1,077.9 $ 1,047.1
Operating Income 32.7 90.4 132.6 (a)
Operating Margin 11.6% 8.4% 12.7%(a)
</TABLE>
(a) Includes income of $ 4.3 million from recovery of previously
<PAGE> 6
incurred development and pre-production costs with an aerospace customer
arising from the termination of a component design and production supply
contract.
Market Analysis
(dollars in millions)
Industrial
<TABLE>
<CAPTION>
4Q 98 4Q 97 3Q 98 2Q 98
----- ----- ----- -----
<S> <C> <C> <C> <C>
Sales $ 264.9 $ 282.8 $ 275.5 $ 323.3
Operating Income (5.0) 22.2 (a) 12.9 33.5
Operating Margin (1.9)% 7.8%(a) 4.7% 10.4%
</TABLE>
<TABLE>
<CAPTION>
1Q 98 Year 98 Year 97
----- ------- -------
<S> <C> <C> <C>
Sales $ 310.4 $ 1,174.2 $ 1,170.2
Operating Income 27.3 68.7 110.7 (a)
Operating Margin 8.8 5.9% 9.5%(a)
</TABLE>
(a) Includes a charge of $ 2.6 million to recognize a product liability claim
from an industrial customer for a unique product that is no longer
manufactured.
Aerospace
<TABLE>
<CAPTION>
4Q 98 4Q 97 3Q 98 2Q 98
----- ----- ----- -----
<S> <C> <C> <C> <C>
Sales $ 136.7 $ 128.6 $ 133.2 $ 142.8
Operating Income 21.8 29.2 (a) 26.0 26.5
Operating Margin 15.9% 22.7%(a) 19.5% 18.6%
</TABLE>
<TABLE>
<CAPTION>
1Q 98 Year 98 Year 97
----- ------- -------
<S> <C> <C> <C>
Sales $ 134.9 $ 547.5 $ 488.0
Operating Income 24.7 99.0 91.4 (a)
Operating Margin 18.3% 18.1% 18.7%(a)
</TABLE>
(a) Includes income of $ 4.3 million from recovery of previously incurred
development and pre-production costs with an aerospace customer arising from the
termination of a component design and production supply contract.
Automotive
<TABLE>
<CAPTION>
4Q 98 4Q 97 3Q 98 2Q 98
----- ----- ------ -----
<S> <C> <C> <C> <C>
Sales $ 117.5 $ 111.5 $ 100.3 $ 108.2
</TABLE>
<PAGE> 7
<TABLE>
<S> <C> <C> <C> <C>
Operating Income 11.6 14.4 10.3 12.0
Operating Margin 9.9% 12.9% 10.3% 11.1%
</TABLE>
<TABLE>
<CAPTION>
1Q 98 Year 98 Year 97
----- ------- -------
<S> <C> <C> <C>
Sales $ 101.7 $ 427.8 $ 454.1
Operating Income 13.1 47.0 20.0 (a)
Operating Margin 12.8% 11.0% 4.4%(a)
</TABLE>
(a) Includes a special charge of $ 30.0 million to exit the automotive interior
plastics business. Before the special charge, automotive operating income
and operating margin were $ 50.0 million and 11.0%, respectively, for the
year 1997.
<PAGE> 8
STATEMENT OF FINANCIAL POSITION
Aeroquip-Vickers, Inc.
(Dollars in thousands, except share data)
(Unaudited)
<TABLE>
<CAPTION>
December 31 December 31
1998 1997
---------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 17,310 $ 18,736
Receivables 341,825 348,822
Inventories 302,236 294,767
Other current assets 52,146 49,323
---------- ----------
TOTAL CURRENT ASSETS 713,517 711,648
Plants and properties 1,119,557 993,002
Less accumulated depreciation 571,340 518,860
---------- ----------
548,217 474,142
Goodwill 124,890 111,905
Other assets 72,177 78,901
---------- ----------
TOTAL ASSETS $1,458,801 $1,376,596
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 101,829 $ 84,044
Accounts payable 113,698 111,800
Income taxes 27,167 30,496
Other current liabilities 197,726 212,800
Current maturities of long-term
debt 1,035 1,857
----------- -----------
TOTAL CURRENT LIABILITIES 441,455 440,997
Long-term debt 278,343 256,707
Postretirement benefits other
than pensions 121,715 122,272
Other liabilities 48,469 46,421
SHAREHOLDERS' EQUITY
Common stock - par value $5 a share
Authorized - 100,000,000 shares
Outstanding - 27,600,520 and
28,064,981 shares, respectively
(after deducting 6,680,326 and
6,215,865 shares, respectively,
in treasury) 138,003 140,325
Additional paid-in capital 47,841 41,288
Retained earnings 419,178 366,676
Accumulated other comprehensive
income - currency translation
adjustments (36,203) (38,090)
----------- -----------
TOTAL SHAREHOLDERS' EQUITY 568,819 510,199
----------- -----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 1,458,801 $ 1,376,596
=========== ===========
</TABLE>
<PAGE> 9
CONDENSED STATEMENT OF INCOME
Aeroquip-Vickers, Inc.
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Year Ended
December 31 December 31
------------------------------- -------------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 519,131 $ 522,812 $ 2,149,474 $ 2,112,293
Cost of products
sold 409,190 379,105 1,619,905 1,554,668
----------- ----------- ----------- -----------
MANUFACTURING INCOME 109,941 143,707 529,569 557,625
Selling and general
administrative
expenses 71,261 66,579 271,718 263,824
Engineering, research
and development
expenses 17,467 18,849 71,471 72,161
Special charge -- -- -- 30,000
----------- ----------- ----------- -----------
OPERATING INCOME 21,213 58,279 186,380 191,640
Interest expense (6,888) (6,561) (27,013) (27,171)
Other expense - net (3,433) (4,793) (11,830) (16,316)
----------- ----------- ----------- -----------
INCOME BEFORE INCOME
TAXES AND CUMULATIVE
EFFECT OF ACCOUNTING
CHANGE 10,892 46,925 147,537 148,153
Income taxes 3,500 15,500 47,200 47,300
----------- ----------- ----------- -----------
INCOME BEFORE
CUMULATIVE EFFECT
OF ACCOUNTING CHANGE 7,392 31,425 100,337 100,853
Cumulative effect of
accounting change, net
of income tax benefit -- -- 3,283 --
----------- ----------- ----------- -----------
NET INCOME $ 7,392 $ 31,425 $ 97,054 $ 100,853
=========== =========== =========== ===========
NET INCOME PER SHARE
BASIC INCOME PER SHARE
Before cumulative
effect of
accounting change $ .27 $ 1.12 $ 3.58 $ 3.60
Cumulative effect
of accounting
change -- -- (.12) --
Basic net income
per share $ .27 $ 1.12 $ 3.46 $ 3.60
=========== =========== =========== ===========
DILUTED INCOME PER
SHARE
Before cumulative
effect of
accounting change $ .27 $ 1.11 $ 3.56 $ 3.51
Cumulative effect
of accounting
change -- -- (.12) --
----------- ----------- ----------- -----------
Diluted net income
per share $ .27 $ 1.11 $ 3.44 $ 3.51
=========== =========== =========== ===========
CASH DIVIDENDS PER
COMMON SHARE $ .22 $ .20 $ .88 $ .80
=========== =========== =========== ===========
</TABLE>
<PAGE> 10
CONDENSED STATEMENT OF CASH FLOWS
Aeroquip-Vickers, Inc.
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Year Ended
December 31
---------------------------
1998 1997
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 97,054 $ 100,853
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation 70,661 66,562
Amortization 8,986 6,639
Cumulative effect of accounting
change, net of income tax benefit 3,283 --
Special charge -- 30,000
Changes in certain components of
working capital other than debt (3,301) (34,283)
Other 800 (32,087)
--------- ---------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 177,483 137,684
INVESTING ACTIVITIES
Capital expenditures (142,243) (139,811)
Businesses acquired (30,741) --
Sale of businesses -- 43,381
Other 1,532 1,561
--------- ---------
NET CASH USED BY INVESTING
ACTIVITIES (171,452) (94,869)
FINANCING ACTIVITIES
Net increase (decrease) in
short- and long-term debt 33,105 (21,803)
Cash dividends (24,673) (22,465)
Purchase of common stock (23,166) (21,590)
Stock issuance under stock plans 7,518 20,133
Other (773) (924)
--------- ---------
NET CASH USED BY FINANCING
ACTIVITIES (7,989) (46,649)
Effect of exchange rate changes
on cash and cash equivalents 532 (1,364)
--------- ---------
INCREASE IN CASH AND CASH
EQUIVALENTS (1,426) (5,198)
Cash and cash equivalents at
beginning of period 18,736 23,934
--------- ---------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 17,310 $ 18,736
========= =========
</TABLE>
<PAGE> 11
NOTES TO FINANCIAL STATEMENTS
Aeroquip-Vickers, Inc.
December 31, 1998
(Unaudited)
Redemption of Debt
In December 1997, the Company called its 9.55% senior sinking fund
debentures in the principal amount of $42 million for redemption on February 3,
1998. The pretax loss from redemption of the 9.55% senior sinking fund
debentures amounting to $2.5 million was recognized in Other expense - net in
1998.
In June 1997, the Company called its 6% convertible subordinated
debentures in the principal amount of $100 million for redemption and recognized
a loss of $1.5 million in Other expense - net.
Special Charge
In the 1997 first quarter, the Company announced plans to exit its
automotive interior plastics business and recorded a special charge of $30
million ($18.5 million net, or diluted net income per share of $.63 for the
year), comprised principally of severance, lease termination and asset
disposition costs.
Income Taxes
The effective income tax rate for the 1998 fourth quarter and year was
32%. The income tax provision for the year ended December 31, 1997, included a
credit of $11.5 million related to the special charge for costs to exit the
automotive interior plastics business. Exclusive of this item, the effective
income tax rate for the 1997 fourth quarter and year was 33%.
Net Income per Share
Following is a reconciliation of income and average shares for purposes
of calculating basic and diluted net income per share (in thousands, except per
share amounts):
<TABLE>
<CAPTION>
Three Months Ended Year Ended
December 31 December 31
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Basic Income per Share
Income before cumulative
effect of accounting
change $ 7,392 $ 31,425 $ 100,337 $ 100,853
Cumulative effect of
accounting change -- -- (3,283) --
--------- --------- --------- ---------
Net income $ 7,392 $ 31,425 $ 97,054 $ 100,853
========= ========= ========= =========
Average common shares
outstanding 27,669 28,150 28,036 28,050
========= ========= ========= =========
Basic income per share
Before cumulative effect
of accounting change $ .27 $ 1.12 $ 3.58 $ 3.60
Cumulative effect of
accounting change -- -- (.12) --
--------- --------- --------- ---------
Basic net income per
share $ .27 $ 1.12 $ 3.46 $ 3.60
========= ========= ========= =========
Diluted Income per Share
Income before cumulative
effect of accounting -
change $ 7,392 $ 31,425 $ 100,337 $ 100,853
After-tax equivalent of
interest expense on 6%
convertible debentures -- -- -- 2,192
--------- --------- --------- ---------
Income for purposes of
computing diluted income
per share before cumulative
effect of accounting
change 7,392 31,425 100,337 103,045
Cumulative effect of
accounting change -- -- (3,283) --
--------- --------- --------- ---------
Income for purposes of
computing diluted net
income per share $ 7,392 $ 31,425 $ 97,054 $ 103,045
========= ========= ========= =========
Average common shares
outstanding 27,669 28,150 28,036 28,050
Dilutive stock options 5 222 157 210
Assumed conversion of 6%
convertible debentures -- -- -- 1,109
--------- --------- --------- ---------
Average common shares for
purposes of computing
diluted income per share 27,674 28,372 28,193 29,369
========= ========= ========= =========
Diluted income per share
Before cumulative effect
of accounting change $ .27 $ 1.11 $ 3.56 $ 3.51
Cumulative effect of
accounting change -- -- (.12) --
--------- --------- --------- ---------
Diluted net income per
share $ .27 $ 1.11 $ 3.44 $ 3.51
========= ========= ========= =========
</TABLE>
CONTACT: Aeroquip-Vickers, Inc.
Investor: William R. Ammann, 419/867-2215
Media: Richard G. Rump, 419/867-2292
KEYWORD: OHIO
INDUSTRY KEYWORD: AEROSPACE/DEFENSE AUTOMOTIVE EARNINGS
