Eaton Reports First Quarter Net Income of $1.00 Per Share, More Than Double First Quarter Last Year
CLEVELAND--Diversified industrial manufacturer Eaton Corporation (NYSE:ETN) announced net income per share of $1.00 for the first quarter of 2003, an increase of 113 percent over net income per share of $.47 in the first quarter of 2002. Sales in the quarter were $1.92 billion, 12 percent above last year. Net income was $72 million compared to $33 million in 2002.
Net income in both periods included charges related to restructuring activities. Before these charges, 2003 first quarter operating earnings per share were 14 percent above 2002, with 2003 operating earnings per share of $1.06 versus $.93 per share in 2002. Operating earnings for the first quarter of 2003 were $77 million versus $66 million in 2002.
Alexander M. Cutler, Eaton chairman and chief executive officer, said, "We are very pleased with our first quarter results, which were ahead of our expectations despite flat markets and considerable economic uncertainty. For the past four quarters, we have experienced growth in revenue and improved operating margins compared to the same period a year ago.
"Our sales growth in the first quarter of 12 percent compared to last year has been due to continued growth in excess of our end markets, revenue from the four acquisitions we completed from November through January, and higher exchange rates. Approximately 5 percent of the growth came from outgrowing end markets, another 5 percent from the acquisitions, and 2 percent from higher exchange rates.
"We concentrated during the first quarter on integrating our recent acquisitions. Progress has been made in reducing their working capital and improving their performance, but we are still in the early stages of our integration process. We anticipate that working capital levels in the acquired businesses will be reduced significantly by the end of the year.
"During the first quarter, we paid down $9 million of debt, while paying cash of $221 million to fund the acquisitions of the electrical business of Delta plc and the power systems business of Commonwealth Sprague Capacitor.
"We now expect our end markets in the first half of 2003 to be slightly weaker than a year ago. In the second half, assuming current uncertainties related to the economy are resolved, we expect growth to resume towards year end. As a result, for the year as a whole, we anticipate little overall growth in our end markets.
"We anticipate full-year net income per share of $4.50 to $4.75 and second quarter net income per share of $1.15 to $1.25," said Cutler. "Excluding the restructuring charges to integrate our four recent acquisitions, we are maintaining our full-year operating earnings guidance of $5.00 to $5.25 per share. We anticipate second quarter operating earnings per share will be in the $1.30 to $1.40 range.
"In late March, Institutional Shareholder Services ranked our corporate governance practices in the top 2 percent of all United States capital goods companies. We are pleased that our focus on good corporate governance is being recognized."
Business Segment Results
First quarter sales of Eaton's largest business segment, Fluid Power, were $697 million, 17 percent above one year earlier, and excluding the impact of the Boston Weatherhead and Mechanical Products acquisitions, up 9 percent over the first quarter of 2002. This compares to a decline of 3 percent in Fluid Power's markets, with North American fluid power industry shipments down about 2 percent, commercial aerospace markets off 20 percent, and defense aerospace markets up by 11 percent. Operating profits in the first quarter were $58 million. Operating profits before restructuring charges were $63 million, up 5 percent compared to a year earlier.
"We do not anticipate a recovery in the traditional mobile and industrial hydraulics markets until late in the year. The construction and agricultural equipment markets have shown little growth thus far, and are likely to be restrained until economic uncertainties are resolved," said Cutler. "The decline in the commercial aerospace market has occurred as we expected. Military aerospace markets have been strong, largely offsetting the decline in the commercial markets."
For more financial details visit Eaton's website.
Eaton is a global diversified industrial manufacturer with 2002 sales of $7.2 billion that is a leader in fluid power systems; electrical power quality, distribution and control; automotive engine air management and fuel economy; and intelligent truck systems for fuel economy and safety. Eaton has 51,000 employees and sells products in more than 50 countries.
Source: Eaton Corporation plc