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Eaton Reports Record Sales
Eaton announced record quarterly sales, net income, and cash flow for the second quarter of 2006. Net income per share was $1.64 for the second quarter of 2006, an increase of 20 percent over net income per share of $1.37 in the second quarter of 2005. Sales in the quarter were ...
... $3.19 billion, 12 percent above the same period in 2005. Net income was $253 million compared to $209 million in 2005, an increase of 21 percent.
Business Segment Results
Second quarter sales for the Electrical segment were $1.04 billion, up 13 percent over 2005. Operating profits in the second quarter were $113 million. Excluding acquisition integration charges of $3 million during the quarter, operating profits were $116 million, up 23 percent from results in 2005. The Excel 07 program had a positive impact of $4 million in the quarter due to the sale of a small power generation control product line.
"End markets for our electrical business grew about 8 percent during the second quarter, with strong growth in non-residential construction markets offsetting weakness in the residential market. Our growth in power quality applications continues to be impressive," said Cutler. "In addition, our operating margins expanded to 11.2 percent, compared to 10.2 percent in the second quarter of 2005. We are particularly pleased that we were able to increase our margins despite absorbing $14 million of additional costs in the second quarter from the rise in copper prices over the past year.
"We expect end market growth in the second half to be between 5 and 6 percent, led by strength in the non-residential construction and power quality markets."
In the Fluid Power segment, second quarter sales were $1.03 billion, 22 percent above the second quarter of 2005. Excluding the impact of acquisitions, second quarter sales were up 4 percent compared to 2005. Fluid Power markets grew 4 percent compared to the same period in 2005, with global fluid power industry shipments up an estimated 7 percent, the commercial and business jet aerospace market up 5 percent, the defense aerospace market up 2 percent, and European automotive production down 4 percent.
Operating profits in the second quarter were $110 million. Excluding acquisition integration charges of $3 million during the quarter, operating profits were $113 million, an increase of 19 percent compared to a year earlier. There were $7 million of Excel 07 net costs in the quarter.
"In the second quarter, the global hydraulics markets maintained the strong growth experienced in the first quarter," said Cutler. "The commercial aerospace market grew slightly less than expected, due principally to slower than expected growth in the aftermarket.
"We announced during the quarter a joint initiative with the Environmental Protection Agency, International Truck and Bus, and United Parcel Service to test a new hydraulic hybrid diesel truck," said Cutler. "This technology offers the potential to significantly improve fuel economy and reduce carbon dioxide emissions."
The Truck segment posted sales of $646 million in the second quarter, up 8 percent compared to 2005. NAFTA heavy-duty production was up 7 percent compared to 2005, NAFTA medium-duty production was down 1 percent, and both European truck and Brazilian vehicle production were up 2 percent.
Operating profits in the second quarter were $133 million. Excluding acquisition integration charges of $2 million during the quarter, operating profits were $135 million, an increase of 13 percent over 2005. Excel 07 net costs were $7 million during the quarter.
"Second quarter production of NAFTA heavy-duty trucks totaled 97,000 units, about 6 percent more than in the first quarter of 2006," said Cutler. "Orders during the second quarter averaged 28,000 units per month, higher than we had expected at the start of the quarter. The backlog at the end of June was estimated to be about 205,000 units.
The Automotive segment posted second quarter sales of $474 million, a slight increase over the second quarter of 2005. Automotive production in NAFTA was down 1 percent and in Europe was down 4 percent, compared to the second quarter of 2005.
Operating profits were $47 million. Excluding acquisition integration charges of $1 million, operating profits were $48 million, down 28 percent from 2005. Excel 07 net costs were $12 million during the quarter.
"The automotive markets were sluggish in the second quarter," said Cutler. "We are expecting that for 2006 as a whole the markets in NAFTA and Europe will be slightly weaker than in 2005. In light of this, we took several significant Excel 07 actions to better position our business for the future."
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