Eaton Corp. (ETN, Financial) filed Quarterly Report for the period ended 2010-09-30.
Eaton Corp. has a market cap of $14.71 billion; its shares were traded at around $88.06 with a P/E ratio of 16.7 and P/S ratio of 1.2. The dividend yield of Eaton Corp. stocks is 2.7%. 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, James Barrow of Barrow, Hanley, Mewhinney & Strauss, Paul Tudor Jones of The Tudor Group, Steven Cohen of SAC Capital Advisors, Pioneer Investments, Mario Gabelli of GAMCO Investors, Jeremy Grantham of GMO LLC, Kenneth Fisher of Fisher Asset Management, LLC, Richard Aster Jr of Meridian Fund.
Net income of $268 in the third quarter of 2010 increased 39% compared to net income of $193 in the third quarter of 2009. Net income per share of $1.57 in the third quarter of 2010 increased 38% over $1.14 per share for the third quarter of 2009. 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 $272 in the third quarter of 2010, or $1.60 per share, significantly above operating earnings of $205 in the third quarter of 2009, or $1.21 per share.
Net income of $649 in the first nine months of 2010 increased 277% over net income of $172 in the first nine months of 2009. Net income per share of $3.80 in the first nine months of 2010 increased 273% over net income per share of $1.02 in the first nine months of 2009. The increases were primarily due to the same factors as in the third quarter of 2010. Net income in the first nine months 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 nine months of 2010 was $672, or $3.94 per share, compared to net income of $172 in the first nine months of 2009, or $1.02 per share. Before the effect of acquisition integration charges, operating earnings were $665 in the first nine months of 2010, or $3.90 per share, significantly above operating earnings of $208 in the first nine months of 2009, or $1.23 per share. Adjusting for the non-cash, one-time income tax charge related to Medicare Part D, operating earnings in the first nine months of 2010 were $688, or $4.04 per share.
Net cash provided by operating activities was $727 in the first nine months of 2010, a decrease of $176 compared to net cash provided by operating activities of $903 in the first nine months of 2009. Operating cash flows in 2010 reflected higher net income in the first nine months of 2010 of $654, before adjusting for noncontrolling interests, compared to $173 in the first nine months of 2009. Cash provided by operating activities in the first nine months of 2010 was lowered by contributions to pension plans of $378 compared to $209 in the first nine months of 2009, and a use of cash of $70 resulting from an increase in funding of working capital in the first nine months of 2010 compared to a decrease of $553 in working capital in the first nine months of 2009. The increase in working capital funding in the first nine months of 2010, primarily accounts receivable and inventory, was due to higher levels of operations in 2010 resulting from the global economic recovery.
Total debt of $3,504 at September 30, 2010 increased by $37 from $3,467 at December 31, 2009. The increase was primarily due to an increase in long-term debt of $57, 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 26.6% at September 30, 2010 compared to 28.4% at the end of 2009, reflecting the combined effect of the $37 increase in total debt, the $430 increase in Eaton shareholders equity and the $115 increase in cash and short-term investments. The increase in equity primarily resulted from net income of $649, partially offset by cash dividends paid of $265.
During the third quarter of 2010 and the first nine months of 2010, income tax expense of $36 and $89, respectively, was recognized (an effective tax rate of 11.7% in the third quarter and 12.0% in the first nine months of 2010) compared to income tax benefits of $28 and $40 in the third quarter of 2009 and the first nine months of 2009, respectively (a tax benefit rate of 17.0% in the third quarter and 30.5% for the first nine months of 2009). Income tax expense for the first nine months of 2010 included a non-cash, one-time charge of $23 ($0.14 per common share) that was recorded 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 $66 (an effective tax rate of 8.9%) would have been recognized in the first nine months of 2010. Income tax expense for the first nine months 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 nine months of 2010 were adjustments totaling $22 related to an income tax audit of transfer prices for 2005 to 2009. The Company concluded that the effect of these adjustments was not material to the prior period financial statements, as well as the projected 2010 financial statements.
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Eaton Corp. has a market cap of $14.71 billion; its shares were traded at around $88.06 with a P/E ratio of 16.7 and P/S ratio of 1.2. The dividend yield of Eaton Corp. stocks is 2.7%. 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, James Barrow of Barrow, Hanley, Mewhinney & Strauss, Paul Tudor Jones of The Tudor Group, Steven Cohen of SAC Capital Advisors, Pioneer Investments, Mario Gabelli of GAMCO Investors, Jeremy Grantham of GMO LLC, Kenneth Fisher of Fisher Asset Management, LLC, Richard Aster Jr of Meridian Fund.
Highlight of Business Operations:
Eaton reported net sales of $3.6 billion in the third quarter of 2010 and $10.1 billion in the first nine months of 2010, increases of 18% and 15% over the third quarter and the first nine months of 2009, respectively. Net income of $268 in the third quarter of 2010 and $649 in the first nine months of 2010, increased significantly over net income of $193 in the third quarter of 2009 and $172 in the first nine months of 2009. Net income per common share was $1.57 in the third quarter of 2010 and $3.80 in the first nine months of 2010, which increased 38% and 273%, respectively, over net income per share of $1.14 in the third quarter of 2009 and $1.02 in the first nine months of 2009. The results reflect the continued rebound in Eatons end markets in 2010 and the benefits of the substantial changes in the Companys cost structure implemented over the past two years. Additionally, net income in the third quarter and the first nine months of 2010 improved over similar periods in 2009 due to the absence in 2010 of severance and pension and other postretirement benefits expense of $22 in the third quarter of 2009 and $156 in the first nine months of 2009.Net income of $268 in the third quarter of 2010 increased 39% compared to net income of $193 in the third quarter of 2009. Net income per share of $1.57 in the third quarter of 2010 increased 38% over $1.14 per share for the third quarter of 2009. 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 $272 in the third quarter of 2010, or $1.60 per share, significantly above operating earnings of $205 in the third quarter of 2009, or $1.21 per share.
Net income of $649 in the first nine months of 2010 increased 277% over net income of $172 in the first nine months of 2009. Net income per share of $3.80 in the first nine months of 2010 increased 273% over net income per share of $1.02 in the first nine months of 2009. The increases were primarily due to the same factors as in the third quarter of 2010. Net income in the first nine months 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 nine months of 2010 was $672, or $3.94 per share, compared to net income of $172 in the first nine months of 2009, or $1.02 per share. Before the effect of acquisition integration charges, operating earnings were $665 in the first nine months of 2010, or $3.90 per share, significantly above operating earnings of $208 in the first nine months of 2009, or $1.23 per share. Adjusting for the non-cash, one-time income tax charge related to Medicare Part D, operating earnings in the first nine months of 2010 were $688, or $4.04 per share.
Net cash provided by operating activities was $727 in the first nine months of 2010, a decrease of $176 compared to net cash provided by operating activities of $903 in the first nine months of 2009. Operating cash flows in 2010 reflected higher net income in the first nine months of 2010 of $654, before adjusting for noncontrolling interests, compared to $173 in the first nine months of 2009. Cash provided by operating activities in the first nine months of 2010 was lowered by contributions to pension plans of $378 compared to $209 in the first nine months of 2009, and a use of cash of $70 resulting from an increase in funding of working capital in the first nine months of 2010 compared to a decrease of $553 in working capital in the first nine months of 2009. The increase in working capital funding in the first nine months of 2010, primarily accounts receivable and inventory, was due to higher levels of operations in 2010 resulting from the global economic recovery.
Total debt of $3,504 at September 30, 2010 increased by $37 from $3,467 at December 31, 2009. The increase was primarily due to an increase in long-term debt of $57, 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 26.6% at September 30, 2010 compared to 28.4% at the end of 2009, reflecting the combined effect of the $37 increase in total debt, the $430 increase in Eaton shareholders equity and the $115 increase in cash and short-term investments. The increase in equity primarily resulted from net income of $649, partially offset by cash dividends paid of $265.
During the third quarter of 2010 and the first nine months of 2010, income tax expense of $36 and $89, respectively, was recognized (an effective tax rate of 11.7% in the third quarter and 12.0% in the first nine months of 2010) compared to income tax benefits of $28 and $40 in the third quarter of 2009 and the first nine months of 2009, respectively (a tax benefit rate of 17.0% in the third quarter and 30.5% for the first nine months of 2009). Income tax expense for the first nine months of 2010 included a non-cash, one-time charge of $23 ($0.14 per common share) that was recorded 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 $66 (an effective tax rate of 8.9%) would have been recognized in the first nine months of 2010. Income tax expense for the first nine months 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 nine months of 2010 were adjustments totaling $22 related to an income tax audit of transfer prices for 2005 to 2009. The Company concluded that the effect of these adjustments was not material to the prior period financial statements, as well as the projected 2010 financial statements.
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