MIRA INFORM REPORT

 

 

Report Date :

19.05.2008

 

IDENTIFICATION DETAILS

 

Name :

EATON CORPORATION

 

 

Registered Office :

Eaton Center,1111 Superior Avenue, Cleveland, OH 44114-2584

 

 

Country :

United States

 

 

Financials (as on) :

31.12.2007

 

 

Date of Incorporation :

28.08. 1916

 

 

Legal Form :

Public Company quoted at the NYSE under symbol “ETN”

 

 

Line of Business :

Manufacturer of Electrical Systems and Components

 

 

RATING & COMMENTS

 

MIRA’s Rating :

Aa

 

RATING

STATUS

PROPOSED CREDIT LINE

71-85

Aa

Possesses adequate working capital. No caution needed for credit transaction. It has above average (strong) capability for payment of interest and principal sums

Large

 

Maximum Credit Limit :

USD 3,000,000

 

 

Status :

Very Good

 

 

Payment Behaviour :

Regular

 

 

 

REQUIRED CREDIT

 

 

ADVISED CREDIT

 

 

Maximum

 

 

3,000,000 USD

 

 

GEOPOLITICS

 

 

POLITICAL DATA

 

 

ECONOMIC DATA

FORM OF GOVERNMENT

 

ECONOMIC RISK

Federal

 


None

 

CURRENCY

 

BRANCH SITUATION

 

USD 100 = EUR 69

 

Satisfying

 

 

IDENTIFICATION

 

 

Company Name:

 

 

EATON CORP.

Address:

 

Eaton Center,

1111 Superior Avenue,

Cleveland, OH 44114-2584,

USA

 

Phone:

Facsimile:

 

ID:

 

State:

 

Managers:

 

(+1) 216-523-5000
(+1) 216-523-4787

 

47290

 

OHIO

 

Alexander M. CUTLER,

Chief Executive Officer

 

 

Date founded:

 

August 28, 1916

 

Public Company quoted at the NYSE under symbol “ETN”

 

145.8 million Common Shares

 

64,000 Employees

 

Legal form:

 

 

Stock:

Staff:

Business: 

Manufacturer of electrical systems and components.

 

 

BANKS

 

- BANK OF AMERICA,

- JP MORGAN CHASE BANK.

 

 

 

 

BUSINESS

 

Eaton Corporation designs, manufactures, markets, and services electrical systems and components worldwide.

 

It offers electrical products for power quality, distribution, and control; fluid power systems and services for industrial, mobile, and aircraft equipment; intelligent truck drivetrain systems for safety and fuel economy; and automotive engine air management systems, powertrain solutions, and specialty controls for performance, fuel economy, and safety.

 

The company's product lines include electrical power distribution and control equipment, engine components, and hydraulic and fluid power products for aerospace, automotive, and other industrial uses.

 

The company operates manufacturing facilities in dozens of countries throughout the world.

 

Business Overview:

 

Demand for auto parts is driven by new car sales, which are strongly affected by interest rates, and by the replacement market. The profitability of a company in the industry depends partly on how difficult it is to manufacture its products and partly on the volume of demand, since many costs are fixed. Small companies can compete successfully with large ones by focusing on a small number of products, or some highly technical ones.

 

 

SHAREHOLDERS – SUBSIDIARIES – MANAGERS

 

There were 145.8 million Common Shares outstanding as of September 30, 2007.

 

As a Public Company 77% of Shares were held by Institutional & Mutual Fund Owners.

 

MAJOR HOLDERS:

 

-          AXA,

-          Bank of New York Mellon Corporation, 

-          FMR CORPORATION (FIDELITY MANAGEMENT & RESEARCH CORP),

-          STATE STREET CORPORATION,

-          LORD ABBETT & CO,

-          VANGUARD GROUP, INC., 

-          MASSACHUSETTS FINANCIAL SERVICES CO,

-          Barclays Global Investors UK Holdings Ltd,

-          Ameriprise Financial, Inc.,

-          JP MORGAN CHASE & COMPANY,

-          VANGUARD 500 INDEX FUND,

-          WASHINGTON MUTUAL INVESTORS FUND,

-          LORD ABBETT AFFILIATED FUND,

-          AMERICAN CENTURY GROWTH FUND,

-          RiverSource Diversified Equity Income Fd ,

-          VANGUARD TOTAL STOCK MARKET INDEX FUND, 

-          VARIABLE INSURANCE PRODUCTS FD II-CONTRAFUND PORTFOLIO,

-          SPDR TRUST SERIES, 

-          GOLDMAN SACHS MID-CAP VALUE FUND,

-          VANGUARD INSTITUTIONAL INDEX FUND-INSTITUTIONAL INDEX FD.

 

The individual shareholders are:

 

-          CUTLER ALEXANDER,

-          FEARON RICHARD,

-          SWEETNAM JAMES,

-          CRAIG ARNOLD,

-          CARSON RANDY.

 

 

SENIOR MANAGEMENT:

 

-          Alexander M. Cutler Chairman and Chief Executive Officer; President,

-          Richard H. Fearon Executive Vice President - Chief Financial and Planning Officer,

-          Stephen M. Buente Senior Vice President and President - Automotive group,

-          James E. Sweetnam Senior Vice President and President - Truck group,

-          Craig Arnold Senior Vice President and President - Fluid Power group,

-          Randy W. Carson Senior Vice President and President - Electrical group.

 

 

FINANCIALS – COMMERCIAL TRENDS AND FORECAST

 

Net sales in third quarter 2007 were a new record for Eaton. Sales growth of 7% in third quarter 2007 compared to third quarter 2006 consisted of 1% from organic growth, 3% from acquisitions of businesses and 3% from foreign exchange rates.

Gross profit increased 15% in third quarter 2007 compared to third quarter 2006 and improved to 27.8% of net sales, up from 25.8% of net sales in third quarter 2006.

 

 

INCOME STATEMENT (Annual data)

All numbers in thousands

 

PERIOD ENDING

31-Dec-07

31-Dec-06

31-Dec-05

Total Revenue

13,033,000  

12,370,000  

11,115,000  

Cost of Revenue

9,382,000  

9,050,000  

8,012,000  

 

Gross Profit

3,651,000  

3,320,000  

3,103,000  

 

 

Operating Expenses

 

Research Development

335,000  

321,000  

287,000  

 

Selling General and Administrative

2,139,000  

1,946,000  

1,757,000  

 

Non Recurring

-  

-  

-  

 

Others

-  

-  

-  

 

 

 

Total Operating Expenses

-  

-  

-  

 

 

 

 

 

 

 

 

 

 

 

 

Operating Income or Loss

1,177,000  

1,053,000  

1,059,000  

 

 

 

 

Income from Continuing Operations

 

 

Total Other Income/Expenses Net

11,000  

40,000  

27,000  

 

 

Earnings Before Interest And Taxes

1,188,000  

1,093,000  

1,086,000  

 

 

Interest Expense

147,000  

104,000  

90,000  

 

 

Income Before Tax

1,041,000  

989,000  

996,000  

 

 

Income Tax Expense

82,000  

77,000  

191,000  

 

 

Minority Interest

-  

-  

-  

 

 

 

 

Net Income From Continuing Ops

959,000  

912,000  

805,000  

 

 

 

 

Non-recurring Events

 

 

Discontinued Operations

35,000  

38,000  

-  

 

 

Extraordinary Items

-  

-  

-  

 

 

Effect Of Accounting Changes

-  

-  

-  

 

 

Other Items

-  

-  

-  

 

 

 

 

 

Net Income

994,000  

950,000  

805,000  

 

Preferred Stock And Other Adjustments

-  

-  

-  

 

 

 

Net Income Applicable To Common Shares

$994,000  

$950,000  

$805,000  

 

 

 

BALANCE SHEETS (Annual data)

Assets

Current Assets

 

Cash And Cash Equivalents

142,000  

114,000  

110,000  

 

Short Term Investments

504,000  

671,000  

226,000  

 

Net Receivables

2,499,000  

2,195,000  

2,028,000  

 

Inventory

1,483,000  

1,293,000  

1,099,000  

 

Other Current Assets

139,000  

135,000  

115,000  

 

Total Current Assets

4,767,000  

4,408,000  

3,578,000  

Long Term Investments

-  

-  

-  

Property Plant and Equipment

2,333,000  

2,271,000  

2,175,000  

Goodwill

3,982,000  

3,034,000  

3,139,000  

Intangible Assets

1,557,000  

969,000  

626,000  

Accumulated Amortization

-  

-  

-  

Other Assets

-  

-  

-  

Deferred Long Term Asset Charges

791,000  

735,000  

700,000  

 

Total Assets

13,430,000  

11,417,000  

10,218,000  

 

Liabilities

Current Liabilities

 

Accounts Payable

1,525,000  

1,504,000  

1,392,000  

 

Short/Current Long Term Debt

985,000  

812,000  

634,000  

 

Other Current Liabilities

1,149,000  

1,091,000  

942,000  

 

Total Current Liabilities

3,659,000  

3,407,000  

2,968,000  

Long Term Debt

2,432,000  

1,774,000  

1,830,000  

Other Liabilities

2,167,000  

2,130,000  

1,642,000  

Deferred Long Term Liability Charges

-  

-  

-  

Minority Interest

-  

-  

-  

Negative Goodwill

-  

-  

-  

 

Total Liabilities

8,258,000  

7,311,000  

6,440,000  

 

Stockholders' Equity

Misc Stocks Options Warrants

-  

-  

-  

Redeemable Preferred Stock

-  

-  

-  

Preferred Stock

-  

-  

-  

Common Stock

73,000  

73,000  

74,000  

Retained Earnings

3,257,000  

2,796,000  

2,376,000  

Treasury Stock

-  

-  

-  

Capital Surplus

2,290,000  

2,114,000  

2,013,000  

Other Stockholder Equity

(448,000)

(877,000)

(685,000)

 

Total Stockholder Equity

5,172,000  

4,106,000  

3,778,000  

 

Net Tangible Assets

($367,000)

$103,000  

$13,000  

 

 

There are numerous UCC files listed with the Secretary of State.

 

No legal filing listed with the District Court.

 

 

RATING

 

 

Local credit bureau gave a very high credit rate.

 

The Company is in “good standing”.

This means that all local and federal taxes were paid on due date.

 

-        The cash flow is good.

-        Payments are made on a regular basis.

 

 

Our final opinion

This is a large Company working on the global market.

 

We estimate that the Company doesn't present any risk.

A large credit line may be considered.

 

 

SUMMARY

 

 

 

FINANCIAL SUMMARY

 

 

DEBT COLLECTIONS AND PAYMENTS

PROFITABILITY

 

INDEBTNESS

 

CASH

 

Good

 

Controlled

 

Large

 

PUBLIC

 

PAYMENTS

 

 

Yes

 

Regular

 

 

ADVISED CREDIT

 

3,000,000 USD

 

 

 

 

 

 

 

RATING EXPLANATIONS

 

RATING

STATUS

 

 

PROPOSED CREDIT LINE

>86

Aaa

Possesses an extremely sound financial base with the strongest capability for timely payment of interest and principal sums

 

Unlimited

71-85

Aa

Possesses adequate working capital. No caution needed for credit transaction. It has above average (strong) capability for payment of interest and principal sums

 

Large

56-70

A

Financial & operational base are regarded healthy. General unfavourable factors will not cause fatal effect. Satisfactory capability for payment of interest and principal sums

 

Fairly Large

41-55

Ba

Overall operation is considered normal. Capable to meet normal commitments.

 

Satisfactory

26-40

B

Unfavourable & favourable factors carry similar weight in credit consideration. Capability to overcome financial difficulties seems comparatively below average.

 

Small

11-25

Ca

Adverse factors are apparent. Repayment of interest and principal sums in default or expected to be in default upon maturity

 

Limited with full security

<10

C

Absolute credit risk exists. Caution needed to be exercised

 

 

Credit not recommended

NR

In view of the lack of information, we have no basis upon which to recommend credit dealings

No Rating

 

 

This score serves as a reference to assess SC’s credit risk and to set the amount of credit to be extended. It is calculated from a composite of weighted scores obtained from each of the major sections of this report. The assessed factors and their relative weights (as indicated through %) are as follows:

 

Financial condition (40%)            Ownership background (20%)                 Payment record (10%)

Credit history (10%)                    Market trend (10%)                                Operational size (10%)

 

 

 

 

PRIVATE & CONFIDENTIAL : This information is provided to you at your request, you having employed MIPL for such purpose. You will use the information as aid only in determining the propriety of giving credit and generally as an aid to your business and for no other purpose. You will hold the information in strict confidence, and shall not reveal it or make it known to the subject persons, firms or corporations or to any other. MIPL does not warrant the correctness of the information as you hold it free of any liability whatsoever. You will be liable to and indemnify MIPL for any loss, damage or expense, occasioned by your breach or non observance of any one, or more of these conditions