Cooper Industries Reports First-Quarter 2001 Earnings
HOUSTON, April 24 Cooper
Industries, Inc. today reported first-quarter earnings per share
of $.60 (diluted), compared with $.89 for the first quarter of 2000. Earnings
were in line with recent Company guidance. Revenues for the first quarter
2001 grew to $1.10 billion, compared with $1.04 billion for the same period
last year. Absent acquisitions, revenues for the 2001 first quarter would
have been $978.3 million. Operating earnings for the first quarter 2001 were
$111.9 million, compared with $147.4 million for the first quarter 2000. Net
income for the 2001 first quarter was $56.4 million, compared with
$83.9 million for the same period in 2000.
"It is very evident that the manufacturing sector has been particularly
hard hit by the weakened North American economy," said H. John Riley, Jr.,
chairman, president and chief executive officer. "Despite the inherent
challenges of doing business in this environment, we continued to grow the
size and scope of our business during the quarter. This is a direct result of
our strategy to continue to amass through internal growth and acquisitions a
premier group of electrical products and tools businesses with brand names
that hold leadership positions in their respective markets.
"Our earnings performance in the quarter was, however, affected by lower
margins due to a rapid decline in business volumes, the resulting increased
market competition and the costs of production inefficiencies as we adjust
manufacturing capacity accordingly. Also during the quarter, we experienced
an abnormally negative mix in sales skewed to lower-margin products,"
continued Riley.
"Importantly, we continued to invest in key growth initiatives and value-
added projects to lower costs and enhance our distribution channels. At the
same time, we are taking decisive and accelerated actions to appropriately
size our businesses to market conditions by reducing headcount and curtailing
discretionary spending and by taking other actions to further emphasize cash
generation."
Segment Results
Demand for Cooper's products is affected by overall economic conditions,
with particular sensitivity to construction activity; electrical, electronic
and telecommunications demand; capital spending in the energy and automotive
industries; and spending in the utility sector.
First-quarter 2001 revenues for the Company's Electrical Products segment
were $910.0 million driven by the impact of acquisitions, compared with
$839.1 million for the same period last year. Without acquisitions, segment
revenues declined by 5 percent from the same period last year. Operating
earnings in the first quarter 2001 for Electrical Products were
$102.6 million, compared with $133.2 million for the 2000 first quarter.
Revenues for the 2001 first quarter for the Company's Tools & Hardware
segment were $185.1 million, compared with $199.8 million for the first
quarter of 2000. Operating earnings for the first quarter 2001 for Tools &
Hardware were $16.9 million, compared with $22.0 million for the same period
last year.
During the first quarter of 2001, the weakness in the overall North
American economy resulted in dynamics that affected virtually all of the
markets Cooper served.
A contraction in domestic industrial production and construction activity
and excess inventory in distributors' warehouses impacted demand across all of
our businesses. In addition, slowed consumer spending has resulted in reduced
purchases by major retailers as they adjust inventory levels to current market
requirements.
Telecommunications and electronics -- industries that accounted for
significant growth for Cooper in 2000 -- were considerably weakened by lower
demand from key customers in these markets. This resulted in significant
rescheduling and, in some cases, cancellations of orders. Due to continued
industry consolidation, energy-related capital projects have yet to respond
measurably despite a very positive price environment. In addition, utility
spending remains uncertain as a result of the overall economic environment.
On a more positive note, our European-based electrical products and tools
businesses posted results in line with expectations for the quarter.
Outlook
"Since the fourth quarter of last year, we have been adjusting our
business plans as the economy weakened. Early on, we curtailed capital
spending, instituted headcount freezes and reviewed all discretionary
expenditures," continued Riley. "During the past three months, these actions
have increased in urgency and have been significantly accelerated. All but
the most critical capital projects have been deferred until we begin to see
reasonable signs of recovery. We are taking further actions to eliminate all
discretionary spending, with a concerted emphasis on cash flow. And we are
implementing workforce reductions both in headcount and in man-hours worked.
As a result of specific actions already taken and planned, we expect total
headcount will be reduced by approximately 2,000 employees by year end.
"As part of our ongoing broad-based cost-reduction initiatives, we are
continuing to move labor to lower-cost geographical areas. As a result of our
current assessment of business conditions, we are further accelerating
completion of factories in Mexico and the outsourcing of certain products to
our Asian joint-venture partners.
"Cooper's outstanding brands, strong distribution channels and solid
financial base continue to position the Company to generate value for our
shareholders even during this challenging period," continued Riley. "At this
time, despite uncertain economic conditions, we are comfortable with current
analyst consensus estimates regarding the Company's financial performance for
2001. Furthermore, we expect that as markets recover, Cooper will emerge as
an even more formidable competitor in the global electrical products and tools
marketplace."
CONSOLIDATED RESULTS OF OPERATIONS
Quarter Ended March 31,
2001 2000
(in millions where applicable)
Revenues $1,095.1 $1,038.9
Cost of sales 768.9 701.7
Selling and administrative expenses 199.5 176.4
Goodwill amortization 14.8 13.4
Operating earnings 111.9 147.4
Interest expense 25.1 18.3
Income Before Income Taxes 86.8 129.1
Income Taxes 30.4 45.2
Net Income $ 56.4 $ 83.9
Net Income Per Common Share:
Basic $ .60 $ .89
Diluted $ .60 $ .89
Shares Utilized in Computation
of Income Per Common Share:
Basic 93.8 million 93.8 million
Diluted 94.7 million 94.4 million
PERCENTAGE OF REVENUES
Quarter Ended March 31,
2001 2000
Revenues 100.0% 100.0%
Cost of sales 70.2% 67.5%
Selling and administrative expenses 18.2% 17.0%
Operating earnings 10.2% 14.2%
Income Before Income Taxes 7.9% 12.4%
Net Income 5.2% 8.1%
CONSOLIDATED RESULTS OF OPERATIONS (Continued)
Additional Information for the Quarter Ended March 31
Segment Information
Quarter Ended March 31,
2001 2000
(in millions)
Revenues:
Electrical Products $ 910.0 $ 839.1
Tools & Hardware 185.1 199.8
Total $1,095.1 $1,038.9
Segment Operating Earnings:
Electrical Products $ 102.6 $ 133.2
Tools & Hardware 16.9 22.0
Total 119.5 155.2
General Corporate expense 7.6 7.8
Interest expense 25.1 18.3
Income before income taxes $ 86.8 $ 129.1
Quarter Ended March 31,
2001 2000
Return on Sales: (A)
Electrical Products 11.3% 15.9%
Tools & Hardware 9.1% 11.0%
Total Segments 10.9% 14.9%
(A) Adjusting for recent acquisitions, return on sales in 2001 was
12.2% for Electrical Products and 9.1% for Tools & Hardware. Return
on sales in 2001 for the total of the segments was 11.6%.
