Eaton Corp. (ETN, Financial) filed Quarterly Report for the period ended 2010-06-30.
Eaton Corp. has a market cap of $12.98 billion; its shares were traded at around $77.45 with a P/E ratio of 15.9 and P/S ratio of 1.1. The dividend yield of Eaton Corp. stocks is 2.6%. Eaton Corp. had an annual average earning growth of 5.5% over the past 10 years.ETN is in the portfolios of David Williams of Columbia Value and Restructuring Fund, Richard Snow of Snow Capital Management, L.P., John Buckingham of Al Frank Asset Management, Inc., David Dreman of Dreman Value Management, Dodge & Cox, Brian Rogers of T Rowe Price Equity Income Fund, Brian Rogers of T Rowe Price Equity Income Fund, James Barrow of Barrow, Hanley, Mewhinney & Strauss, Pioneer Investments, Bruce Kovner of Caxton Associates, Kenneth Fisher of Fisher Asset Management, LLC, Richard Aster Jr of Meridian Fund, Manning & Napier Advisors, Inc, Jeremy Grantham of GMO LLC.
Net income of $226 in the second quarter of 2010, or $1.33 per common share, increased significantly compared to net income of $29 in the second quarter of 2009, or $.17 per share. The increases were primarily due to higher sales in 2010 and the factors that affected gross profit discussed above. Before the effect of acquisition integration charges, operating earnings were $232 in the second quarter of 2010, or $1.36 per share, significantly above operating earnings of $39 in the second quarter of 2009, or $.23 per share.
Net income of $381 in the first half of 2010, or $2.24 per common share, increased significantly over a net loss of $(21) in the first half of 2009, or $(.13) per share, primarily due to the same factors as in the second quarter of 2010. Net income in the first half of 2010 included a non-cash, one-time income tax charge of $23 ($.14 per common share) that was recognized in the first quarter of 2010 related to Medicare Part D resulting from the new Health Care Reform and Education Reconciliation Act. Adjusting for this one-time income tax charge, net income in the first half of 2010 was $404, or $2.38 per share, compared to a net loss of $(21) in the first half of 2009, or ($.13) per share. Before the effect of acquisition integration charges, operating earnings were $393 in the first half of 2010, or $2.31 per share, significantly above operating earnings of $3 in the first half of 2009, or $.01 per share. Adjusting for the non-cash, one-time income tax charge related to Medicare Part D, operating earnings in the first half of 2010 were $416, or $2.45 per share.
Net cash provided by operating activities was $307 in the first half of 2010, a decrease of $136 compared to net cash provided by operating activities of $443 in the first half of 2009. Operating cash flows in 2010 reflected higher net income in the first half of 2010 of $385, before adjusting for noncontrolling interests, compared to the net loss of ($21) in the first half of 2009. Cash provided by operating activities in the first half of 2010 was lowered by contributions to pension plans of $349 compared to $125 in the first half of 2009, and a use of cash of $121 resulting from an increase in funding of working capital in the first half of 2010 compared to a decrease of $251 in working capital in the first half of 2009. The increase in working capital funding in the first half of 2010, primarily accounts receivable and inventory, was due to higher levels of operations in 2010 resulting from the global economic recovery. Cash and short-term investments totaled $787 at June 30, 2010, an increase of $14 from $773 at December 31, 2009.
Total debt of $3,476 at June 30, 2010 increased by $9 from $3,467 at December 31, 2009. The increase was primarily due to an increase in long-term debt of $29, partially offset by a $20 reduction of short-term debt. Short-term debt was reduced through the use of cash generated from operations. The net-debt-to-capital ratio was 29.0% at June 30, 2010 compared to 28.4% at the end of 2009, reflecting the combined effect of the $9 increase in total debt and the $207 decrease in Eaton shareholders equity, partially offset by the $14 increase in cash and short-term investments. The decrease in equity primarily resulted from foreign currency translation adjustments of $483 and cash dividends paid of $168, partially offset by net income of $381.
During the second quarter and the first half of 2010, income tax expense of $22 and $53, respectively, was recognized (an effective tax rate of 9.0% in the second quarter and 12.2% in the first half of 2010) compared to income tax benefits of $1 and $12 in the second quarter and the first half of 2009, respectively (a tax benefit rate of 4.8% in the second quarter and 36.6% in the first half of 2009). Income tax expense for the first half of 2010 included a non-cash, one-time charge of $23 ($0.14 per common share) that was recognized in the first quarter of 2010 to reflect the impact of the Health Care Reform and Education Reconciliation Act on taxation associated with Medicare Part D. Without this one-time charge, income tax expense of $30 (an effective tax rate of 6.9%) would have been recognized in the first half of 2010. Income tax expense for the first half of 2010 also reflected a benefit associated with the successful resolution of international tax audit issues; the recognition of state and local income tax attributes involving tax loss carryforwards, tax credits and other temporary differences; the recognition of international tax incentives; and the recognition of other international tax benefits. Included as an offset to the aforementioned income tax benefits that lowered the effective income tax rate in the first half of 2010 was an adjustment totaling $29 that was recognized in the first quarter of 2010 related to an income tax audit of transfer prices for 2005 to 2009. After further analysis of the facts surrounding the income tax audit and related adjustments, the Company recognized a $7 reduction of income tax expense in the second quarter of 2010.
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Eaton Corp. has a market cap of $12.98 billion; its shares were traded at around $77.45 with a P/E ratio of 15.9 and P/S ratio of 1.1. The dividend yield of Eaton Corp. stocks is 2.6%. Eaton Corp. had an annual average earning growth of 5.5% over the past 10 years.ETN is in the portfolios of David Williams of Columbia Value and Restructuring Fund, Richard Snow of Snow Capital Management, L.P., John Buckingham of Al Frank Asset Management, Inc., David Dreman of Dreman Value Management, Dodge & Cox, Brian Rogers of T Rowe Price Equity Income Fund, Brian Rogers of T Rowe Price Equity Income Fund, James Barrow of Barrow, Hanley, Mewhinney & Strauss, Pioneer Investments, Bruce Kovner of Caxton Associates, Kenneth Fisher of Fisher Asset Management, LLC, Richard Aster Jr of Meridian Fund, Manning & Napier Advisors, Inc, Jeremy Grantham of GMO LLC.
Highlight of Business Operations:
Eaton reported net sales of $3.4 billion in the second quarter of 2010 and $6.5 billion in the first half of 2010, increases of 16% and 13% over the second quarter and the first half of 2009, respectively. Net income of $226 in the second quarter of 2010 and $381 in the first half of 2010 increased significantly over net income of $29 in the second quarter of 2009 and a net loss of $(21) in the first half of 2009. Net income per common share was $1.33 in the second quarter of 2010 and $2.24 in the first half of 2010, which also increased significantly over net income per share of $.17 in the second quarter of 2009 and a net loss of ($.13) per share in the first half of 2009. The continued expansion in the global economy drove growth in most of the Companys end markets and the Companys newly reset cost structure allowed Eaton to realize strong incremental margins on the increase in sales in 2010. Additionally, net income for the second quarter and the first half of 2010 improved over similar periods in 2009 due to the absence in 2010 of severance and pension and other postretirement benefits expense of $69 in the second quarter of 2009 and $134 in the first half of 2009. Net income in the first half of 2010 included a non-cash, one-time income tax charge of $23 ($.14 per common share) that was recognized in the first quarter of 2010 related to Medicare Part D resulting from the new Health Care Reform and Education Reconciliation Act. Adjusting for this one-time income tax charge, net income in the first half of 2010 was $404, or $2.38 per share, compared to a net loss of $(21) in the first half of 2009, or ($.13) per share.Net income of $226 in the second quarter of 2010, or $1.33 per common share, increased significantly compared to net income of $29 in the second quarter of 2009, or $.17 per share. The increases were primarily due to higher sales in 2010 and the factors that affected gross profit discussed above. Before the effect of acquisition integration charges, operating earnings were $232 in the second quarter of 2010, or $1.36 per share, significantly above operating earnings of $39 in the second quarter of 2009, or $.23 per share.
Net income of $381 in the first half of 2010, or $2.24 per common share, increased significantly over a net loss of $(21) in the first half of 2009, or $(.13) per share, primarily due to the same factors as in the second quarter of 2010. Net income in the first half of 2010 included a non-cash, one-time income tax charge of $23 ($.14 per common share) that was recognized in the first quarter of 2010 related to Medicare Part D resulting from the new Health Care Reform and Education Reconciliation Act. Adjusting for this one-time income tax charge, net income in the first half of 2010 was $404, or $2.38 per share, compared to a net loss of $(21) in the first half of 2009, or ($.13) per share. Before the effect of acquisition integration charges, operating earnings were $393 in the first half of 2010, or $2.31 per share, significantly above operating earnings of $3 in the first half of 2009, or $.01 per share. Adjusting for the non-cash, one-time income tax charge related to Medicare Part D, operating earnings in the first half of 2010 were $416, or $2.45 per share.
Net cash provided by operating activities was $307 in the first half of 2010, a decrease of $136 compared to net cash provided by operating activities of $443 in the first half of 2009. Operating cash flows in 2010 reflected higher net income in the first half of 2010 of $385, before adjusting for noncontrolling interests, compared to the net loss of ($21) in the first half of 2009. Cash provided by operating activities in the first half of 2010 was lowered by contributions to pension plans of $349 compared to $125 in the first half of 2009, and a use of cash of $121 resulting from an increase in funding of working capital in the first half of 2010 compared to a decrease of $251 in working capital in the first half of 2009. The increase in working capital funding in the first half of 2010, primarily accounts receivable and inventory, was due to higher levels of operations in 2010 resulting from the global economic recovery. Cash and short-term investments totaled $787 at June 30, 2010, an increase of $14 from $773 at December 31, 2009.
Total debt of $3,476 at June 30, 2010 increased by $9 from $3,467 at December 31, 2009. The increase was primarily due to an increase in long-term debt of $29, partially offset by a $20 reduction of short-term debt. Short-term debt was reduced through the use of cash generated from operations. The net-debt-to-capital ratio was 29.0% at June 30, 2010 compared to 28.4% at the end of 2009, reflecting the combined effect of the $9 increase in total debt and the $207 decrease in Eaton shareholders equity, partially offset by the $14 increase in cash and short-term investments. The decrease in equity primarily resulted from foreign currency translation adjustments of $483 and cash dividends paid of $168, partially offset by net income of $381.
During the second quarter and the first half of 2010, income tax expense of $22 and $53, respectively, was recognized (an effective tax rate of 9.0% in the second quarter and 12.2% in the first half of 2010) compared to income tax benefits of $1 and $12 in the second quarter and the first half of 2009, respectively (a tax benefit rate of 4.8% in the second quarter and 36.6% in the first half of 2009). Income tax expense for the first half of 2010 included a non-cash, one-time charge of $23 ($0.14 per common share) that was recognized in the first quarter of 2010 to reflect the impact of the Health Care Reform and Education Reconciliation Act on taxation associated with Medicare Part D. Without this one-time charge, income tax expense of $30 (an effective tax rate of 6.9%) would have been recognized in the first half of 2010. Income tax expense for the first half of 2010 also reflected a benefit associated with the successful resolution of international tax audit issues; the recognition of state and local income tax attributes involving tax loss carryforwards, tax credits and other temporary differences; the recognition of international tax incentives; and the recognition of other international tax benefits. Included as an offset to the aforementioned income tax benefits that lowered the effective income tax rate in the first half of 2010 was an adjustment totaling $29 that was recognized in the first quarter of 2010 related to an income tax audit of transfer prices for 2005 to 2009. After further analysis of the facts surrounding the income tax audit and related adjustments, the Company recognized a $7 reduction of income tax expense in the second quarter of 2010.
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