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For the first six months of 2002, operating earnings per share were $2.17 on sales of $3.60 billion. Comparable first half 2001 operating earnings were $1.98 per share on sales of $3.85 billion. Net income for the first six months of 2002 was $1.68 per share compared to $1.41 per share in 2001. In comparison to 2001, first half 2002 results were favorably impacted by $.44 per share by the adoption of Statement of Financial Accounting Standards No. 142, which discontinued the amortization of goodwill and certain intangible assets, and were unfavorably impacted by $.30 per share due to lower pension income.
The company's comparative financial results
Alexander M. Cutler, Eaton chairman and CEO, said, "We are pleased with our second quarter results ﾖ they are at the high end of our own expectations and represent the first year-over-year improvement in our quarterly results since 2000. We are clearly realizing the benefit of the aggressive actions we have taken over the last 18 months to resize our corporation, even though the majority of our end markets remain depressed. We remain on track to realize $130 million of savings in 2002 from these restructuring actions.
"We made further progress implementing the Eaton Business System during the second quarter, with results evident in the continued tight control over working capital and capital expenditures. These improvements helped us to pay down an additional $63 million of debt during the second quarter, bringing the total reduction in debt for the first six months of 2002 to $162 million.
"While our forecast for our overall end markets has improved slightly compared to our view at the end of the first quarter, we still do not expect to see any material recovery until the end of the third quarter.
"We continue to exercise tight control of all expenditures and are fully implementing the additional restructuring activities that we announced at the beginning of this year.Restructuring expense in the second quarter was $3 million, bringing restructuring expenses for the first half to $52 million. We still expect our full-year restructuring expenses to be $59 million.
"We are maintaining full-year operating earnings guidance of $4.25 to $4.50 per share, despite the divestiture of our Navy Controls business, which is expected to close shortly. We anticipate third quarter operating earnings per share will be in the $1.20 to $1.30 range," said Cutler.
Business Segment results
Second quarter sales of Eaton's largest business segment, Fluid Power, were $628 million, 4 percent below one year earlier. This compares to a decline of about 8 percent in Fluid Power's markets, with North American fluid power industry shipments off about 4 percent, and aerospace markets off about 18 percent. Segment profits before restructuring costs were $59 million, $1 million less than last year.
"We do not anticipate a recovery in the traditional mobile and industrial hydraulics markets until year end," said Cutler. "The decline in the aerospace market has been slower than we expected. We now anticipate a 25 to 30 percent decline in commercial aerospace markets in the second half of 2002, offset by a 5 percent improvement in military markets.
"During the second quarter, we purchased the remaining 40 percent interest in our hydraulics systems joint venture company, Jining Eaton Hydraulics Company, Ltd.,