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Eaton Corporation,Cleveland, OH, announced sales in the first quarter of 2005 were $2.65 billion, 19 percent above the same period in 2004. Net income was $187 million, compared to $134 million in the first quarter of 2004, an increase of 40 percent.
Net income in both periods included charges for restructuring activities related to the integration of acquisitions. Before these restructuring charges, operating earnings per share in the first quarter of 2005 were $1.23 versus $.88 per share in 2004, an increase of 40 percent, and operating earnings for the first quarter of 2005 were $193 million compared to $138 million in 2004, an increase of 40 percent.
Alexander M. Cutler, Eaton chairman and chief executive officer, said, "We are pleased with our first quarter, which came in near the top of our guidance. Sales growth in the first quarter of 19 percent consisted of 10 percent from acquisitions, 7 percent from organic growth, and 2 percent from higher exchange rates. Our end markets during the quarter grew 6 percent.
"In the first quarter, our segment operating margin before restructuring charges was 12.6 percent, a significant increase over 11.7 percent a year ago," said Cutler. "We continue to anticipate growth of 5 percent for our end markets in 2005," said Cutler. "The residential electrical markets are stronger than we had anticipated, but this strength is offset by weaker aerospace and automotive markets.
"Consistent with the plan announced in January, Eaton spent $250 million repurchasing shares during the quarter," said Cutler. "We repurchased 3.63 million shares, at an average price of $69 per share.
"We anticipate net income per share for the second quarter of 2005 to be between $1.20 and $1.30. Operating earnings per share, which excludes restructuring charges to integrate our recent acquisitions, are expected to be between $1.25 and $1.35 in the second quarter of 2005. We are maintaining our full-year guidance for both net income per share and operating earnings per share, at $4.90 to $5.10, and $5.10 to $5.30, respectively."
Business Segment Results
First quarter sales of Eaton's largest business segment, Electrical, were $848 million, up 39 percent over 2004. Excluding the impact of the Powerware acquisition, first quarter sales were up 5 percent compared to 2004. Operating profits in the first quarter were $71 million. Operating profits before restructuring charges were $76 million, up 52 percent from 2004.
"End markets for our electrical business grew about 5 percent during the first quarter," said Cutler. "The residential markets remained very strong during the quarter, while growth in the nonresidential markets was modest."
Fluid Power segment first quarter sales were $785 million, 2 percent above the first quarter of 2004. Fluid Power markets grew 2 percent compared to the same period in 2004, with global fluid power shipments up 10 percent, commercial aerospace up 7 percent, defense aerospace down 19 percent, and European automotive down 2 percent. Operating profits in the first quarter were $76 million. Operating profits before restructuring charges were $80 million, a decline of 2 percent compared to a year earlier.
"The mobile and industrial hydraulics markets remained strong in the first quarter," said Cutler. "We expect continued growth in these markets throughout 2005. The commercial aerospace market grew slightly less than expected in the first quarter, while defense aerospace was much weaker than we anticipated.
"Sales in our automotive fluid connector business declined further in the first quarter, reflecting weaker auto markets and the loss of certain programs," said Cutler. "We anticipate that sales should begin to recover toward the end of 2005.
"We completed the acquisition of Winner Group Holdings at the end of March," said Cutler. "Winner is the largest