Cooper Industries Reports Increased Revenue, Earnings for 1998
26 January 1999
Cooper Industries Reports Increased Revenue, Earnings for 1998; Continued Investments and Cost Control Drive Earnings Per Share Increase of 10% Compared to 1997
HOUSTON, Jan. 26 -- Cooper Industries, Inc.
announced today the company's results for the fourth quarter and full year,
with revenues, earnings and earnings per share increases in line with earlier
expectations.
For the year, the company's reported earnings per share rose 13%, to
$3.69 from $3.26 in 1997 while net income increased 7% to $423 million from
$395 million in 1997. Both periods include a contribution from the company's
recently discontinued automotive business and certain non-recurring items.
Excluding these items, Cooper's 1998 continuing diluted earnings per share
increased 10% to $2.47 for 1998 from $2.25 for 1997 while income after taxes
rose 4%, to $283 million from $271 million for the prior year. Revenues for
the year from continuing operations increased 7%, to $3.7 billion from
$3.4 billion.
For the three months ended December 31, 1998, Cooper's reported share
earnings increased 43% to $ 1.29 from $.90 in 1997, while net income increased
21% to $132 million from $109 million in 1997, including a contribution from
the company's discontinued automotive business and non-recurring items.
Excluding these items, Cooper's 1998 fourth quarter diluted earnings per share
from continuing operations increased 14%, to $.74 from $.65 in the fourth
quarter of 1997, while income after taxes declined 3%, to $75.9 million from
$78.5 million for the prior year. Fourth quarter revenues from continuing
operations increased 5%, to $882 million from $839 million in 1997.
Cooper had additions to net income and earnings per share from non-
recurring items in both 1998 and 1997. In the fourth quarter of 1998, the
company realized a pre-tax gain of $135.2 million ($86.5 million after tax)
associated with the settlement of an exchangeable debt obligation and the sale
of investments. This gain was partially offset by a $53.6 million
($33.5 million after tax) charge for expenses primarily associated with the
company's previously announced cost-reduction actions. No other non-recurring
items were included in the company's 1998 results.
Cooper's 1997 net income and earnings per share included $12.2 million and
$.10 a share, respectively, from non-recurring items, including $6.1 million
and $.05 a share in the fourth quarter.
"Cooper Industries had an extraordinary year in 1998," said H. John Riley,
Jr., Cooper's Chairman, President and Chief Executive Officer. "During the
year, we completed a complex transformation of the company while achieving
another year of earnings growth, enhanced returns and increased
competitiveness. A company that once had a significant dependence on highly
cyclical energy markets and several low return investments has emerged as a
company focused on higher growth and less volatile businesses. In 1998, we
finished a key step in that process with the sale of our automotive business."
Proceeds from this sale were used to aggressively realign the company's
capital structure through share repurchases and debt reduction. More than
$1 billion of common stock was repurchased, reducing shares outstanding by
over 20%. In addition, debt was reduced by $900 million. At year-end,
Cooper's debt-to-total capitalization ratio was 36%, at the low end of the
company's operating range, providing a strong platform for future growth.
Throughout the year, Cooper continued to grow and strengthen the core of
the company through the reinvestment of its operating cash flow. The
company's product and geographic coverage were expanded with several important
complementary acquisitions in each business segment. In addition, more than
$140 million in capital additions were made to maintain and improve Cooper's
overall performance.
"We achieved reasonable financial results in 1998, despite troublesome
economic and market conditions in many parts of the world," said Riley.
"Consistent demand remains a primary characteristic of most of our markets and
has helped us to weather many of the disruptive events of this past year," he
added.
Annual revenues for the Electrical Products segment increased 10 percent
from the prior year. Continued growth in demand for lighting fixtures was
complemented by steady replacement demand for electrical and electronic fuses,
electrical construction materials and power transformers. Demand for some
power systems equipment and electrical construction materials was negatively
impacted by the global decline in energy and natural resources projects and
the interruption of growth in Southeast Asia.
Electrical Products' revenue growth was also supplemented through recent
acquisitions. These acquisitions and performance improvements for lighting
products operations were the primary sources of earnings growth in 1998.
Their contribution was offset by the impact of slowing markets in other
business areas and costs associated with the implementation of a business
enterprise system for the power systems operations.
Revenues, earnings and margins for the Tools & Hardware segment increased
in 1998, primarily due to recent investments in several complementary
acquisitions. In addition, new hand tools products, growing consumer hand
tools markets and increased sales of power tools for general industry and
automotive assembly applications helped offset some of the impact from the
continued decline in demand for industrial hand tools.
"As a result of our 1998 actions and other programs we executed over the
last several years, we enter 1999 a fundamentally different and stronger
company. Our investments in the Electrical Products and Tools & Hardware
businesses are the sole focus of the company today. Five years ago, these
businesses were only 48% of revenues and 38% of assets. Yet, Cooper's new
operating and capital structures have greater revenue and earnings growth
potential and enable us to continue to make strategic acquisitions that will
leverage our returns.
"While we still have much to do, including the completion of the cost-
reduction program announced in the fourth quarter, I am excited about the
current direction of Cooper and optimistic about the future. Though it is
clear that we won't be able to rely solely on market growth to ensure our
success, I am confident that we will see continued earnings growth in 1999.
The steps we took in 1998, combined with our proven ability to manage our
businesses well, equip Cooper to deliver continued growth in the year ahead,"
Riley concluded.
In early October 1998, Cooper completed the sale of its automotive
business for $1.9 billion. Consequently, this segment's results are reported
as discontinued operations and the company's past financial performance has
been restated. Comparisons of 1998 and 1997 fourth-quarter and full-year
results appear on the following pages.
Cooper Industries, with 1998 revenues of $ 3.7 billion, is a worldwide
manufacturer of electrical products, tools and hardware. Additional
information about Cooper is available on the company's World Wide Web site:
http://www.cooperindustries.com.
Statements in this news release are forward-looking under the Private
Securities Litigation Reform Act of 1995. These statements are subject to
various risks and uncertainties, many of which are outside the control of the
company, such as the level of market demand for the company's products,
competitive pressures and future economic conditions. These factors are
discussed in the company's 1997 Annual Report on Form 10-K and other
Securities and Exchange Commission filings.
CONSOLIDATED RESULTS OF OPERATIONS
Quarter Ended December 31, % Change
1998 1997(A)
(in millions where applicable)
Revenues:
Electrical Products $ 670.5 $ 648.5 3.4%
Tools & Hardware 211.4 190.2 11.1%
Total revenues 881.9 838.7 5.2%
Cost of sales 583.6 547.9
Selling and administrative
expenses 153.9 137.6
Goodwill amortization 11.4 8.5
Nonrecurring gains (135.2) ---
Nonrecurring charges 53.6 ---
Interest expense 14.4 20.1
Income Before
Income Taxes 200.2 124.6
Income Taxes 71.3 40.0
Continuing income 128.9 84.6
Discontinued operations,
net of tax 2.9 24.3
Net Income $ 131.8 $ 108.9
Net Income Per Common Share:
Basic
Continuing Operations $ 1.27 $ 0.71
Discontinued Operations 0.03 0.20
Net Income $ 1.30 $ 0.91
Diluted
Continuing Operations $ 1.26 $ 0.70
Discontinued Operations 0.03 0.20
Net Income $ 1.29 $ 0.90
Shares Utilized in Computation
of Income Per Common Share:
Basic 101.5 million 119.9 million
Diluted 102.5 million 121.2 million
PERCENTAGE OF REVENUES
Quarter Ended December 31,
1998 1997
Revenues 100.0% 100.0%
Cost of sales 66.2% 65.3%
Selling and administrative
expenses 17.5% 16.4%
Continuing Income
Before Income Taxes 22.7% 14.9%
Continuing Income 14.6% 10.1%
(A) The 1997 amounts have been restated to reflect the reclassification of
the Company's Automotive Products segment as a discontinued operation.
CONSOLIDATED RESULTS OF OPERATIONS
Additional Information for the Quarter Ended December 31, 1998
Net Income Per
Net Income Diluted Common Share
1998 1997 1998 1997
(in millions where applicable)
From Continuing Operations:
Before nonrecurring items $ 75.9 $ 78.5 $ .74 $ .65
Nonrecurring items 53.0 6.1(A) .52 .05
128.9 84.6 1.26 .70
From Discontinued Operations:
Before nonrecurring items 2.9 24.3 .03 .20
Nonrecurring items --- --- --- ---
2.9 24.3 .03 .20
Net Income $131.8 $108.9 $1.29 $ .90
(A) Relates to the favorable settlements of state tax issues in the fourth
quarter of 1997.
CONSOLIDATED RESULTS OF OPERATIONS
Twelve Months Ended December 31, % Change
1998 1997(A)
(in millions where applicable)
Revenues:
Electrical Products $ 2,824.4 $ 2,568.3 10.0%
Tools & Hardware 826.8 749.9 10.3%
Subtotal 3,651.2 3,318.2 10.0%
Kirsch(B) --- 97.4 n.m.
Total revenues 3,651.2 3,415.6 6.9%
Cost of sales 2,447.1 2,281.6
Selling and administrative
expenses 616.4 580.5
Goodwill amortization 43.8 32.4
Nonrecurring gains (135.2) (93.0)
Nonrecurring charges 53.6 40.5
Interest expense 101.9 90.4
Income Before Income Taxes 523.6 483.2
Income Taxes 187.7 173.2
Continuing income 335.9 310.0
Discontinued operations,
net of tax 87.1 84.6
Net Income $ 423.0 $ 394.6
Net Income Per Common Share:
Basic
Continuing Operations $ 2.97 $ 2.64
Discontinued Operations 0.77 0.72
Net Income $ 3.74 $ 3.36
Diluted
Continuing Operations $ 2.93 $ 2.57(C)
Discontinued Operations 0.76 0.69
Net Income $ 3.69 $ 3.26
Shares Utilized in Computation
of Income Per Common Share:
Basic 113.2 million 117.5 million
Diluted 114.7 million 122.9 million
PERCENTAGE OF REVENUES
Twelve Months Ended December 31,
1998 1997
Revenues 100.0% 100.0%
Cost of sales 67.0% 66.8%
Selling and administrative
expenses 16.9% 17.0%
Continuing Income Before
Income Taxes 14.3% 14.1%
Continuing Income 9.2% 9.1%
(A) The 1997 amounts have been restated to reflect the reclassification of
the Company's Automotive Products segment as a discontinued operation.
(B) Kirsch was sold to Newell Co. on May 30, 1997.
(C) The 1997 calculation assumes conversion of the remaining 7.05%
Convertible Subordinated Debentures to Common stock. As a result,
interest on the debentures of $5.8 million, net of tax, was added back to
continuing income and net income in the computation of diluted earnings
per share.
CONSOLIDATED RESULTS OF OPERATIONS
Additional Information for the Twelve Months Ended December 31, 1998
Twelve Months Ended December 31, % Change
1998 1997(A)
(in millions where applicable)
Revenues:
Electrical Products $ 2,824.4 $ 2,568.3 10.0%
Tools & Hardware 826.8 749.9 10.3%
Subtotal 3,651.2 3,318.2 10.0%
Kirsch(C) --- 97.4 n.m.
Total revenues 3,651.2 3,415.6 6.9%
Operating earnings(B):
Electrical Products $ 479.0 $ 461.6 3.8%
Tools & Hardware 112.4 99.6 12.9%
Subtotal 591.4 561.2 5.4%
Kirsch(C) --- 4.8 n.m.
Total operating
earnings $ 591.4 $ 566.0 4.5%
Net Income Per
Net Income Diluted Common Share
1998 1997 1998 1997
(in millions where applicable)
From Continuing Operations:
Before nonrecurring items $282.9 $270.9 $2.47 $2.25
Nonrecurring items 53.0 39.1 .46 .32
335.9 310.0 2.93 2.57
From Discontinued Operations:
Before nonrecurring items 87.1 111.5 .76 .91
Nonrecurring items --- (26.9) --- (.22)
87.1 84.6 .76 .69
Net Income $423.0 $394.6 $3.69 $3.26
(A) The 1997 amounts have been restated to reflect the reclassification of
the Company's Automotive Products segment as a discontinued operation.
(B) Excludes nonrecurring gains and charges.
(C) Kirsch was sold to Newell Co. on May 30, 1997.