Full Year 2010 Net Income of $5.46 Per Share, 141 Percent Above 2009
Earnings Forecast to Grow Substantially In 2011
Announces 17 Percent Increase in Quarterly Dividend
Announces 2-For-1 Stock Split
CLEVELAND ... Diversified industrial manufacturer Eaton Corporation (NYSE:ETN) today announced net income per share of $1.63 for the fourth quarter of 2010, a 30 percent increase over net income per share of $1.25 in the fourth quarter of 2009. Net income in both periods included charges related to acquisition integration. Before acquisition integration charges, operating earnings per share in the fourth quarter of 2010 were $1.69 compared to $1.35 per share in the fourth quarter of 2009, an increase of 25 percent.
"Our fourth quarter results were very strong, substantially exceeding the high end of our guidance despite recording a pretax provision of $36 million, or 15 cents per share after tax, during the quarter for a Brazilian legal judgment," said Alexander M. Cutler, Eaton chairman and chief executive officer.
Sales in the quarter were $3.7 billion, 17 percent higher than the same period in 2009. Net income was $280 million compared to $211 million in 2009, an increase of 33 percent. Operating earnings, which exclude acquisition integration charges, for the fourth quarter of 2010 were $291 million compared to $229 million in 2009, an increase of 27 percent.
"Sales growth in the fourth quarter of 17 percent consisted of 16 percent growth in core sales and 2 percent growth from acquisitions, offset slightly by a 1 percent decline due to foreign exchange. End markets in the fourth quarter grew by 13 percent," said Cutler. "Our segment operating margin in the fourth quarter was 13.7 percent, an all-time record and a notable improvement over our segment operating margin of 13.4 percent in the third quarter."
For the full year 2010, sales were $13.7 billion, 16 percent higher than 2009. Net income was $929 million, an increase of 143 percent over 2009, and net income per share of $5.46 was 141 percent more than in 2009. Operating earnings in 2010 totaled $956 million versus $437 million in 2009, an increase of 119 percent. Operating earnings per share for 2010 of $5.61 were 117 percent higher than in 2009.
"Our full year 2010 sales growth of 16 percent reflects a rebound from the depressed market levels of 2009 and our 30 percent growth in revenues from developing countries," said Cutler. "We are pleased with the momentum we see in our businesses and with the strong incremental earnings we have been able to generate from the additional sales volume.
"We had excellent cash flow in the fourth quarter, with operating cash flow totaling $555 million," said Cutler. "Full year operating cash flow totaled $1.3 billion, including $400 million in contributions made to our pension plans during 2010. We also acquired businesses with revenues in the year prior to the acquisition of $220 million.
"We estimate our markets for all of 2011 will grow 8 percent, with the markets in all six segments registering growth, the first year since 2006 in which the markets for all of our segments have grown. We expect to outgrow our end markets in 2011 by approximately $450 million," said Cutler. "The incremental revenues in 2011 from our recent acquisitions are expected to total $160 million. In total, we anticipate our revenues in 2011 will grow by 12 percent compared to 2010.
"We expect that 2011 operating earnings per share will set a new record," said Cutler. "We estimate that first quarter operating earnings per share, which exclude an estimated $0.02 of charges to integrate our recent acquisitions, will be between $1.50 and $1.60 per share. For the full year 2011, we estimate that operating earnings per share, which exclude an estimated $0.08 of charges to integrate our recent acquisitions, will be between $7.00 and $7.60.
"In light of our strong 2010 results and our outlook for 2011, we are increasing our quarterly dividend by 17 percent," said Cutler. "In addition, due to the handsome growth in our stock price, which has risen by more than 60 percent since the start of 2010, we are announcing a two-for-one stock split. Note that the per share guidance for 2011 in the preceding paragraph is stated on a pre-split basis."
Business Segment Results
Fourth quarter sales for the Electrical Americas segment were $1.0 billion, up 22 percent from the fourth quarter of 2009. Operating profits in the fourth quarter were $163 million, up 29 percent over the fourth quarter of 2009.
"End markets for our Electrical Americas segment grew 9 percent during the fourth quarter, slightly faster than in the third quarter, and our orders in the fourth quarter grew by 14 percent," said Cutler. "We were pleased with the margins in our Electrical Americas segment in the fourth quarter. Our operating margin was 16.1 percent, a significant improvement over the 14.6 percent margin in the third quarter.
"Our industrial controls and power quality markets showed robust growth during the quarter," said Cutler. "For 2011, we expect our markets to increase by approximately 6 percent."
Fourth quarter sales for the Electrical Rest of World segment were $768 million, up 10 percent over the fourth quarter of 2009. Operating profits were $81 million. Excluding acquisition integration charges of $13 million during the quarter, operating profits totaled a quarterly record of $94 million, up 27 percent compared to the fourth quarter of 2009.
"During the fourth quarter, our Rest of World electrical markets grew 10 percent," said Cutler. "We were pleased with our 12.2 percent operating margin in the quarter.
"Orders in the fourth quarter grew 10 percent," said Cutler. "For 2011, our Electrical Rest of World markets are expected to grow by 7 percent, with Asian growth outpacing growth in Europe.
"We announced last week we reached agreement to acquire ACTOM (Pty) Limited's low-voltage electrical business in South Africa," said Cutler. "In addition to greatly expanding our electrical business in South Africa, this acquisition provides a strong platform to pursue growth in other southern African countries."
In the Hydraulics segment, fourth quarter sales were $571 million, 36 percent higher than the fourth quarter of 2009. Hydraulics markets in the fourth quarter grew 38 percent compared to the same period in 2009, with U.S. markets up 46 percent and non-U.S. markets up 32 percent.
Operating profits in the fourth quarter were $72 million, and adjusting for acquisition integration charges of $1 million in the fourth quarter of 2010, were $73 million. This compares to operating profits in the fourth quarter of 2009 of $13 million.
"The global hydraulics market had another quarter of strong growth, capping a year in which our global hydraulics markets grew by 34 percent. Our bookings grew 41 percent over the fourth quarter of 2009," said Cutler. "For 2011, we anticipate global hydraulics markets will be up 12 percent.
"We were pleased to complete the acquisition of the Tuthill Coupling Group on January 1," said Cutler. "This acquisition further expands our offerings of hydraulic and pneumatic quick connect coupling solutions."
The Aerospace segment posted fourth quarter sales of $400 million, an increase of 5 percent from the fourth quarter of 2009. Aerospace markets in the fourth quarter grew by 1 percent.
Operating profits in the fourth quarter were $63 million. Excluding acquisition integration charges of $1 million, operating profits were $64 million, up 28 percent from the fourth quarter of 2009.
"Our bookings were up 36 percent in the quarter," said Cutler. "For 2011, aerospace markets are expected to grow by 4 percent."
The Truck segment posted sales of $518 million in the fourth quarter, up 17 percent compared to 2009. Truck markets in the fourth quarter grew 16 percent, with U.S. markets up 20 percent and non-U.S. markets up 14 percent. Operating profits were $66 million, an increase of 29 percent compared to the fourth quarter of 2009.
"For 2011, we expect good market growth, driven by a sharp rebound in NAFTA Class 8 truck production" said Cutler. "We anticipate our overall truck markets will grow 20 percent, with U.S. markets growing 40 percent and non-U.S. markets growing 7 percent."
The Automotive segment posted fourth quarter sales of $394 million, up 9 percent from the fourth quarter of 2009. Automotive unit production in the fourth quarter grew by 9 percent, with U.S. markets up 10 percent and non-U.S. markets up 9 percent. Operating profits in the fourth quarter were $43 million, an increase of 34 percent over the fourth quarter of 2009.
"Looking at 2011, we anticipate auto production will grow 6 percent," said Cutler. "We expect growth in U.S. production of 7 percent and growth in non-U.S. production of about 5 percent."
The presentation to be discussed on today's earnings conference call at 10 a.m. Eastern time is currently available on www.eaton.com.
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.
Notice of conference call: Eaton's conference call to discuss its fourth 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 fourth quarter results, which will be covered during the call.
This news release contains forward-looking statements concerning the first quarter 2011 and full year 2011 net income per share and operating earnings per share, the growth in full year 2011 revenues, the performance of our worldwide markets, and our growth in relation to end 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; the impact of acquisitions and divestitures; unanticipated difficulties integrating acquisitions; new laws and governmental regulations; interest rate changes; changes in currency exchange rates; 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.
Donald Bullock (216) 523-5127