Eaton Corporation (NYSE:ETN) today announced net income per share of $1.14 for the third quarter of 2009, a decrease of 39 percent from net income per share of $1.87 in the third quarter of 2008. Sales in the quarter were $3 billion, 26 percent below the same period in 2008. Net income was $193 million compared to $315 million in 2008, a decrease of 39 percent.
Net income in both periods included charges related to the integration of acquisitions. Before these acquisition integration charges, operating earnings per share in the third quarter of 2009 were $1.21 versus $1.95 in 2008, a decrease of 38 percent.
“We are pleased with our third quarter results, which significantly exceeded our guidance,” said Alexander M. Cutler, Eaton chairman and chief executive officer. “The results reflect the impact of the substantial enterprise-wide reductions in costs we have enacted during the past year. Our revenues in the third quarter grew 4 percent over the second quarter, reflecting equally the very early stages of recovery in our end markets and benefit from the strengthening of currencies against the dollar.
“The sales decline of 26 percent in the quarter consisted of a 23 percent decline in core sales and a 3 percent decline from exchange rates compared to the third quarter of 2008. Our end markets declined by 24 percent in the quarter.
“Our margin performance in the third quarter was much improved, with our segment operating margin rebounding to 10.9 percent from 8.2 percent in the second quarter. We realized significant improvements in the margins of our Electrical Rest of World, Truck, and Automotive segments.
“Our operating cash flow in the third quarter was $471 million and free cash flow was $431 million. In the last four quarters, operating cash flow totaled $1.6 billion – the highest we have ever had in a four quarter period. This strong cash flow has allowed us to pay down debt and improve our liquidity, as has been our plan.
“As we look at our end markets, we expect the economic recovery we are beginning to experience in our early cycle markets will continue. For the full year, we still believe our end markets will decline by 21 to 22 percent.
“We anticipate fourth quarter net income per share will be between $1.00 and $1.10 and operating earnings per share, which exclude charges to integrate our recent acquisitions, will be between $1.15 and $1.25. Accordingly, for the full year, we anticipate that net income per share will be between $2.05 and $2.15, and operating earnings per share will be between $2.40 and $2.50.”
In the Hydraulics segment, third quarter sales were $418 million, down 34 percent from the third quarter of 2008. Hydraulics markets in the third quarter declined 40 percent compared to the same period in 2008, with U.S. markets down 45 percent and non-U.S. markets down 34 percent.
Operating profits in the third quarter were $18 million. Operating profits before acquisition integration charges of $2 million were $20 million, down 72 percent compared to a year earlier.
“Global hydraulics markets showed virtually no improvement in the third quarter,” said Cutler. “We do not expect the fourth quarter to be any better, and as a result, expect that for the full year the global hydraulics markets are likely to decline by 35 percent.”
The Truck segment posted sales of $401 million in the third quarter, down 35 percent compared to 2008. Truck markets in the third quarter were down 31 percent, with U.S. markets down 43 percent and non-U.S. markets down 17 percent. Operating profits were $25 million, down 74 percent versus 2008.
“Orders in the NAFTA Class 8 truck market are improving marginally,” said Cutler. “Other truck markets are expected to be broadly flat over the balance of the year.”