Eaton increases dividend by 12.5 percent and announces 2-for-1 stock split
CLEVELAND ... Diversified industrial manufacturer Eaton Corporation (NYSE:ETN) today announced net income per share of $1.44 for the fourth quarter of 2003, an increase of 53 percent over net income per share of $.94 in the fourth quarter of 2002. Sales in the quarter were $2.08 billion, 17 percent above the same period in 2002 and a record for the fourth quarter. Net income was $114 million compared to $67 million in 2002, an increase of 70 percent.
Net income in both periods included charges related to restructuring activities. Before restructuring charges, operating earnings per share in the fourth quarter of 2003 were $1.55 versus $.98 per share in 2002, an increase of 58 percent. Operating earnings for the fourth quarter of 2003 were $122 million compared to $69 million in 2002, an increase of 77 percent.
For the full year 2003, sales were $8.06 billion, 12 percent above 2002, and the highest sales since 2000. Net income of $386 million increased 37 percent over 2002, and net income per share of $5.13 rose 31 percent. Operating earnings per share for 2003 of $5.45 rose 24 percent above 2002. Operating earnings in 2003 totaled $410 million versus $315 million in 2002, an increase of 30 percent.
Alexander M. Cutler, Eaton chairman and chief executive officer, said, "We had a very good year. We are very pleased with our fourth quarter, which exceeded our previous guidance. Sales growth in the fourth quarter of 17 percent consisted of 7 percent from acquisitions, 4 percent from higher exchange rates, and 6 percent from organic growth. Our organic growth was made up of 4 percent growth in our end markets and 2 percent growth from outgrowing our end markets.
"Our cash flow from operations in the fourth quarter was $357 million and totaled $874 million for all of 2003. We are particularly pleased with our continued strong cash flow, which is a function of our earnings growth and our success in keeping tight control over working capital."
In light of strong full-year results and growing momentum in many of its markets, Eaton is taking the following actions:
Splitting its stock 2-for-1
Increasing its quarterly dividend by 12.5 percent, from $.48 per share to $.54 per Share on a pre-split basis
Contributing $75 million to its qualified pension plans in the United States
Initiating a plan to repurchase 2.1 million shares on a pre-split basis to offset the shares issued during 2003 from the exercise of stock options.
Further information concerning the timing of the stock split and payment of the quarterly dividend are included in a separate press release issued simultaneously with this release.
"As we survey our end markets in 2004, we anticipate growth of approximately 4 percent," said Cutler. "As in 2003, we expect to outgrow our end markets by 2 to 3 percent. We will also record additional growth from the full year impact of the Delta acquisition, and from the new joint ventures we established during the year with Caterpillar, and with Shaanxi Fast Gear and Senstar in China.
"We anticipate net income per share on a pre-split basis for the first quarter of 2004 to be $1.45 to $1.55, and for the full year to be $6.30 to $6.60. Operating earnings per share, which exclude restructuring charges to integrate our recent acquisitions and joint ventures, are anticipated to be $1.50 to $1.60 on a pre-split basis for the first quarter of 2004, and $6.50 to $6.80 for the full year."
Fourth quarter sales of Eaton's largest business segment, Fluid Power, were $703 million, 13 percent above the fourth quarter of 2002. Both sales and operating profits for Fluid Power were fourth quarter records. Fluid Power markets grew 6 percent compared to the same period in 2002, with North American fluid power industry shipments up 4 percent, commercial aerospace markets up 1 percent, and defense aerospace markets up 22 percent. Operating profits in the fourth quarter were $61 million. Operating profits before restructuring charges were $64 million, up 45 percent compared to a year earlier, reflecting significantly improved results across most of the business.
"The traditional mobile and industrial markets began to recover in the fourth quarter, reflecting the pickup in capital goods expenditures," said Cutler. "We anticipate that this recovery will gather steam during 2004, resulting in the first year of growth in these markets since 2000.
"The commercial and defense aerospace markets grew as we expected in the fourth quarter," said Cutler. "We foresee no growth in commercial aerospace during 2004, with modest growth in defense aerospace."
In the Electrical segment, fourth quarter sales were $612 million, up 27 percent over 2002. Excluding the impact of the Delta and Commonwealth Sprague Capacitor acquisitions and the new joint venture formed with Caterpillar, fourth quarter sales were up 6 percent compared to 2002. Operating profits in the fourth quarter were $44 million. Operating profits before restructuring charges were $54 million, up 32 percent from results in 2002.
"End markets for our electrical business grew about 1 percent during the fourth quarter," said Cutler. "We anticipate that growth will begin to accelerate over the course of 2004."
"We are pleased that the profit margin of our electrical business, excluding recent acquisitions and joint ventures, was 10 percent for the second quarter in a row, and that the Delta acquisition posted modest profits in the fourth quarter," said Cutler.
The Automotive segment posted fourth quarter sales of $423 million, 7 percent above the comparable quarter of 2002. Automotive production in NAFTA and Europe was flat compared to the fourth quarter of 2002. Operating profits were $60 million, up 13 percent.
"Automotive segment revenue considerably outpaced its end markets in the fourth quarter, consistent with its performance all year," said Cutler. "As we expected, our margins rebounded to 14 percent in the quarter, reflecting improved performance on several new program launches that had reduced margins in the second and third quarters.
"For 2004, we anticipate flat markets for both NAFTA and European automotive production. Based on new product wins already awarded, we believe we will outgrow these end markets as we did during 2003," said Cutler.
The Truck segment posted sales of $345 million in the fourth quarter, up 26 percent compared to 2002, and recorded operating profits of $54 million, more than double the profit earned in the fourth quarter of 2002. NAFTA heavy-duty production was up 19 percent compared to 2002, NAFTA medium-duty production was up 13 percent, European truck production was down 4 percent, and Brazilian vehicle production was down 4 percent.
"Fourth quarter production of NAFTA heavy-duty trucks totaled 50,000 units, slightly more than in the third quarter," said Cutler. "Orders for new NAFTA heavy-duty trucks in December were 26,000 units. As a result, we believe that production in the first quarter of 2004 will be about 55,000 units, with growth accelerating as the year progresses. For all of 2004, we believe that the NAFTA heavy-duty market is likely to total 240,000 units."
Eaton is a global diversified industrial manufacturer with 2003 sales of $8.1 billion that is a leader in fluid power systems; electrical power quality, distribution and control; automotive engine air management and fuel economy; and intelligent systems for fuel economy and safety in trucks. Eaton has 51,000 employees and sells products to customers in more than 100 countries.
Notice of Conference Call: Eaton's conference call to discuss its fourth quarter results is available to all interested parties via live audio webcast today at 10 a.m. EDT through the Investor Relations tab on Eaton's home page. This news release can be accessed under the Corporate News heading on the Eaton home page by clicking on the news release.
This news release contains forward-looking statements concerning the first quarter 2004 and full year 2004 net income per share and operating earnings per share, our worldwide markets, our growth in relation to end markets, our growth from acquisitions and joint ventures, and the repurchase of shares. 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; acquisitions and divestitures; new laws and governmental regulations; interest rate changes; stock market 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.