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Eaton First Quarter Net Income Per Share Rises 80 Percent

Dépèche transmise le 20 avril 2011 par Business Wire

Eaton First Quarter Net Income Per Share Rises 80 Percent

Eaton First Quarter Net Income Per Share Rises 80 Percent

CLEVELAND--(BUSINESS WIRE)--Diversified industrial manufacturer Eaton Corporation (NYSE:ETN) today announced net income per share of $0.83 for the first quarter of 2011, an increase of 80 percent over the first quarter of 2010. Sales in the quarter were $3.8 billion, 23 percent above the same period in 2010. Net income was $287 million, up 85 percent over the first quarter of 2010.

“The joint venture will focus on the design and manufacture of fuel and hydraulic conveyance systems.”

Net income in both periods included charges for integration of acquisitions. Before acquisition integration charges, operating earnings per share in the first quarter of 2011 was $0.84, an increase of 75 percent over the first quarter of 2010. Operating earnings for the first quarter of 2011 were $289 million, an increase of 80 percent over 2010.

Alexander M. Cutler, Eaton chairman and chief executive officer, said, “We had a strong first quarter, with earnings per share above the high end of our increased earnings guidance provided at the end of February. Our markets enjoyed strong growth during the first quarter, increasing 14 percent compared to the first quarter of 2010. The sales growth in the first quarter of 23 percent consisted of 19 percent organic growth, 2 percent from acquisitions, and 2 percent from higher foreign exchange rates.

“Our Electrical Americas, Hydraulics, and Truck markets grew more strongly than anticipated and we are increasing our expectations for the growth of these three markets in 2011,” said Cutler. “As a result, we now anticipate our markets for all of 2011 will grow by 10 percent.

“We anticipate net income per share for the second quarter of 2011 to be between $0.89 and $0.95 and operating earnings per share, which exclude charges to integrate our recent acquisitions, to be between $0.90 and $0.96. As a result of our strong first quarter and our slightly stronger market outlook for the year, we are raising our full year guidance by $0.15 for net income per share to between $3.66 and $3.96 and for operating earnings per share to between $3.70 and $4.00.”

Business Segment Results

Sales for the Electrical Americas segment were $964 million, up 20 percent over 2010. The sales increase was made up of a 15 percent increase in core sales, 4 percent from acquisitions, and 1 percent from foreign exchange. Operating profits were $132 million. Excluding acquisition integration charges of $3 million during the quarter, operating profits were $135 million, up 27 percent over the first quarter of 2010.

“End markets for our Electrical Americas segment grew 14 percent in the first quarter,” said Cutler. “We saw solid growth in our industrial markets, and we continue to believe nonresidential construction activity is on track to begin recovering by the middle of this year.

“Our bookings in the Electrical Americas segment were up 21 percent from the first quarter a year ago,” said Cutler. “We are revising our estimate of the growth in 2011 of the Electrical Americas markets to 7 percent, 1 percent higher than our prior estimate.”

Sales for the Electrical Rest of World segment were $743 million, up 22 percent over the first quarter of 2010. Our Electrical Rest of World markets grew 9 percent in the quarter. The segment reported operating profits of $70 million, compared to operating profits of $42 million in the first quarter of 2010. Bookings in the quarter grew 9 percent over the first quarter of 2010.

“During the quarter, we reached agreement to acquire ACTOM (Pty) Limited’s low-voltage electrical business in South Africa,” said Cutler. “This acquisition provides us with a solid position in the South African electrical market, as well as a platform for growth in southern Africa.”

Hydraulics segment sales were $685 million, an increase of 40 percent compared to the first quarter of 2010. Global hydraulics markets increased 27 percent in the quarter compared to the first quarter of 2010. Operating profits in the first quarter were $106 million, an increase of 96 percent over the first quarter of 2010.

“The hydraulics markets in the first quarter continued their ‘V’ shape recovery from the sharp downturn of 2008-2009,” said Cutler. “Bookings in the quarter grew 39 percent over the first quarter of 2010, establishing a new quarterly bookings record. For all of 2011, we now believe hydraulics markets are likely to grow by 18 percent, up from our prior estimate of 16 percent.

“We were particularly pleased with the record quarterly margin of 15.5 percent,” said Cutler. “We believe this business is likely to earn margins of this level for the full year.

“We completed the acquisition of Tuthill Couplings on January 1,” said Cutler. “This acquisition further expands our offerings of hydraulic and pneumatic quick connect coupling solutions.

“We signed an agreement in March to acquire Internormen Technology Group, a leader in hydraulic filtration and instrumentation based in Germany,” said Cutler. “This acquisition significantly expands our portfolio of filtration products and adds additional presence in emerging markets.”

Aerospace segment sales were $389 million, up 3 percent over the first quarter of 2010. Aerospace markets grew 2 percent compared to the first quarter of 2010. Operating profits in the first quarter were $45 million, a decline of 8 percent compared to a year earlier.

“Our margins in Aerospace were impacted during the quarter by increased expenses stemming from changes in scope, program delays, and execution of new customer programs,” said Cutler. “We anticipate that margins will likely improve by the second half of the year.

“We were pleased to establish our new joint venture in China with Shanghai Aircraft Manufacturing Co., Ltd., a subsidiary of Commercial Aircraft Corporation of China (COMAC), to produce products for the new COMAC C919 single-aisle passenger aircraft,” said Cutler. “The joint venture will focus on the design and manufacture of fuel and hydraulic conveyance systems.”

The Truck segment posted sales of $576 million, up 27 percent compared to the first quarter of 2010. Truck markets increased by 20 percent in the first quarter. The segment reported operating profits in the first quarter of $90 million, an increase of 96 percent over the first quarter of 2010.

“U.S. truck markets accelerated in the first quarter, growing 36 percent compared to the first quarter in 2010 and 16 percent over the fourth quarter of 2010,” said Cutler. “Our non-U.S. markets grew 9 percent.

“We were pleased with the 15.6 percent operating margin our Truck segment posted in the first quarter,” said Cutler. “As the NAFTA Class 8 market continues to expand over the course of this year, we believe margins will improve even further.”

The Automotive segment posted first quarter sales of $446 million, up 19 percent from the first quarter of 2010. Global automotive markets were up 13 percent. The segment reported operating profits of $50 million, up 19 percent compared to the first quarter of 2010.

“Global auto markets posted strong growth in the first quarter,” said Cutler. “U.S. markets grew 17 percent while markets outside the U.S. grew 12 percent.”

Eaton Corporation is a diversified power management company with 2010 sales of $13.7 billion. Celebrating its 100th anniversary in 2011, Eaton is a global technology leader in electrical components and systems for power quality, distribution and control; hydraulics components, systems and services for industrial and mobile equipment; aerospace fuel, hydraulics and pneumatic systems for commercial and military use; and truck and automotive drivetrain and powertrain systems for performance, fuel economy and safety. Eaton has approximately 70,000 employees and sells products to customers in more than 150 countries. For more information, visit www.eaton.com.

Notice of conference call: Eaton’s conference call to discuss its first quarter results is available to all interested parties as a live audio webcast today at 10 a.m. Eastern time via a link on the center of Eaton’s home page. This news release can be accessed under its headline on the home page. Also available on the website prior to the call will be a presentation on first quarter results, which will be covered during the call.

This news release contains forward-looking statements concerning second quarter and full year 2011 net income per share and operating earnings per share, and our worldwide markets. These statements should be used with caution and are subject to various risks and uncertainties, many of which are outside the company’s control. The following factors could cause actual results to differ materially from those in the forward-looking statements: unanticipated changes in the markets for the company’s business segments; unanticipated downturns in business relationships with customers or their purchases from us; competitive pressures on sales and pricing; increases in the cost of material and other production costs, or unexpected costs that cannot be recouped in product pricing; the introduction of competing technologies; unexpected technical or marketing difficulties; unexpected claims, charges, litigation or dispute resolutions; strikes or other labor unrest; the impact of acquisitions and divestitures; unanticipated difficulties integrating acquisitions; new laws and governmental regulations; interest rate changes; stock market and currency fluctuations; and unanticipated deterioration of economic and financial conditions in the United States and around the world. We do not assume any obligation to update these forward-looking statements.

Financial Results

The company’s comparative financial results for the three months ended March 31, 2011 are available on the company’s website, www.eaton.com.

EATON CORPORATION  
CONSOLIDATED STATEMENTS OF INCOME
 
Three months ended
(In millions except for per share data) March 31
2011 2010
Net sales $ 3,803 $ 3,103
 
Cost of products sold 2,682 2,201
Selling and administrative expense 665 587
Research and development expense 105 101
Interest expense-net 32 35
Other income-net   (16 )   (8 )
Income before income taxes 335 187
Income tax expense   49     31  
Net income 286 156
Adjustment for net income (loss) for noncontrolling interests   1     (1 )
Net income attributable to Eaton common shareholders $ 287   $ 155  
 
Net income per common share
Diluted $ 0.83 $ 0.46
Basic 0.84 0.46
 
Weighted-average number of common shares outstanding
Diluted 345.7 339.2
Basic 340.1 334.2
 
Cash dividends paid per common share $ 0.34 $ 0.25
 
Reconciliation of net income attributable to Eaton common
shareholders to operating earnings
Net income attributable to Eaton common shareholders $ 287 $ 155
Excluding acquisition integration charges (after-tax)   2     6  
Operating earnings $ 289   $ 161  
 
Net income per common share - diluted $ 0.83 $ 0.46
Excluding per share impact of acquisition integration charges (after-tax)   0.01     0.02  
Operating earnings per common share $ 0.84   $ 0.48  
 

Net income per common share, weighted-average number of common shares outstanding, cash dividends paid per
common share and operating earnings per common share have been restated to give effect to the two-for-one
stock split. See the accompanying notes for additional information.

 
See accompanying notes.
 

EATON CORPORATION      
BUSINESS SEGMENT INFORMATION
 
Three months ended
(In millions) March 31
2011 2010
Net sales
Electrical Americas $ 964 $ 802
Electrical Rest of World 743 608
Hydraulics 685 490
Aerospace 389 376
Truck 576 453
Automotive   446     374  
Total net sales $ 3,803   $ 3,103  
 
Segment operating profit
Electrical Americas $ 132 $ 105
Electrical Rest of World 70 42
Hydraulics 106 54
Aerospace 45 49
Truck 90 46
Automotive   50     42  
Total segment operating profit 493 338
 
Corporate
Amortization of intangible assets (48 ) (45 )
Interest expense-net (32 ) (35 )
Pension and other postretirement benefits expense (33 ) (32 )
Other corporate expense-net   (45 )   (39 )
Income before income taxes 335 187
Income tax expense   49     31  
Net income 286 156
Adjustment for net income (loss) for noncontrolling interests   1     (1 )
Net income attributable to Eaton common shareholders $ 287   $ 155  
 
See accompanying notes.

EATON CORPORATION      
CONDENSED CONSOLIDATED BALANCE SHEETS
   
March 31, December 31,
(In millions) 2011 2010
 
Assets
Current assets
Cash $ 201 $ 333
Short-term investments 496 838
Accounts receivable-net 2,466 2,239
Inventory 1,667 1,564
Other current assets   640   532
Total current assets 5,470 5,506
 
Property, plant and equipment-net 2,523 2,477
 

Other noncurrent assets

Goodwill 5,569 5,454
Other intangible assets 2,304 2,272
Deferred income taxes and other noncurrent assets   1,471   1,543
Total assets $ 17,337 $ 17,252
 
Liabilities and shareholders' equity
Current liabilities
Short-term debt $ 93 $ 72
Current portion of long-term debt 4 4
Accounts payable 1,456 1,408
Accrued compensation 300 465
Other current liabilities   1,348   1,284
Total current liabilities   3,201   3,233
 
Non-current liabilities
Long-term debt 3,354 3,382
Pension liabilities 1,207 1,429
Other postretirement benefits liabilities 741 743
Deferred income taxes and other long-term liabilities   1,010   1,062
Total noncurrent liabilities   6,312   6,616
 
Shareholders' equity
Eaton shareholders' equity 7,783 7,362
Noncontrolling interests   41   41
Total equity   7,824   7,403
Total liabilities and equity $ 17,337 $ 17,252
 
See accompanying notes.

EATON CORPORATION

NOTES TO THE FIRST QUARTER 2011 EARNINGS RELEASE

Amounts are in millions of dollars unless indicated otherwise (per share data assume dilution).

On January 27, 2011, Eaton’s Board of Directors announced a two-for-one stock split of the Company’s common shares effective in the form of a 100% stock dividend. The record date for the stock split was February 7, 2011, and the additional shares were distributed on February 28, 2011. Accordingly, all per share amounts and average shares outstanding presented in this earnings release have been adjusted retroactively to reflect the stock split.

This earnings release includes certain non-GAAP financial measures. These financial measures include operating earnings, operating earnings per common share, and operating profit before acquisition integration charges for each business segment, each of which excludes amounts that differ from the most directly comparable measure calculated in accordance with generally accepted accounting principles (GAAP). A reconciliation of each of these financial measures to the most directly comparable GAAP measure is included in this earnings release. Management believes that these financial measures are useful to investors because they exclude transactions of an unusual nature, allowing investors to more easily compare Eaton's financial performance period to period. Management uses this information in monitoring and evaluating the on-going performance of Eaton and each business segment.

Note 1. ACQUISITIONS OF BUSINESSES

In 2011 and 2010, Eaton acquired businesses and entered into a joint venture in separate transactions. The Consolidated Statements of Income include the results of these businesses from the dates of the transactions or formation. These transactions are summarized below:

Acquired business  

Date of
transaction

 

Business
segment

  Annual sales

Eaton-SAMC (Shanghai) Aircraft Conveyance
System Manufacturing Co., Ltd.

March 8,
2011

Aerospace

New joint
venture

A 49%-owned joint venture in China focusing on
the design, development, manufacturing and
support of fuel and hydraulic conveyance
systems for the global civil aviation market.

 
Tuthill Coupling Group January 1, Hydraulics $35 for the

A United States and France-based manufacturer
of pneumatic and hydraulic quick coupling
solutions and leak-free connectors used in
industrial, construction, mining, defense, energy
and power applications.

2011

year ended
November 30,
2010

 
Chloride Phoenixtec Electronics October 12, Electrical Rest $25 for the

A China manufacturer of uninterruptible power
supply (UPS) systems. Eaton acquired the
remaining shares to increase its ownership from
50% to 100%.

2010 of World

year ended
September 30,
2010

 
CopperLogic, Inc. October 1, Electrical $35 for the

A United States-based manufacturer of
electrical and electromechanical systems.

 

2010 Americas

year ended
September 30,
2010

 
Wright Line Holding, Inc. August 25, Electrical $101 for the

A United States provider of customized
enclosures, rack systems, and air-flow
management systems to store, power, and
secure mission-critical IT data center electronics.

2010 Americas

year ended
June 30, 2010

 
EMC Engineers, Inc. July 15, Electrical $24 for 2009

A United States energy engineering and energy
services company that delivers energy efficiency
solutions for a wide range of governmental,
educational, commercial and industrial facilities.

2010 Americas

 

On January 20, 2011, Eaton reached an agreement to acquire ACTOM (Pty) Limited’s low-voltage electrical business in South Africa. This business is a manufacturer and supplier of motor control components, engineered electrical distribution systems, and uninterruptible power supply systems and had sales of $58 for the year ended December 31, 2010. The terms of the agreement are subject to regulatory approvals and other customary closing conditions. The acquisition is expected to close during the second quarter of 2011. This business will be included in the Electrical Rest of World segment.

On March 14, 2011, Eaton reached an agreement to acquire Internormen Technology Group, a leading Germany-based manufacturer of hydraulic filtration and instrumentation. This business had sales of more than $55 in 2010 and has sales and distribution subsidiaries in India, China, Brazil and the United States. The terms of the agreement are subject to customary closing conditions. The acquisition is expected to close during the second quarter of 2011. This business will be included in the Hydraulics segment.

Note 2. ACQUISITION INTEGRATION CHARGES

Eaton incurs charges related to the integration of acquired businesses. A summary of these charges follows:

  Three months ended March 31

Acquisition
integration
charges

 

Operating profit
as reported

 

Operating profit
excluding acquisition
integration charges

2011     2010 2011   2010 2011   2010

Business segment

Electrical Americas $ 3 $ 1

Business Wire

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