Eaton Corp. announced a net loss of $50 million, or a loss of 30 cents per share, for the first quarter of 2009, with near record cash generation during the quarter.


This compares to net income per share of $1.64 in the first quarter of 2008. Sales in the quarter were $2.8 billion, 20 percent below the same period in 2008, reflecting the impact of the global recession.

Net income in both periods included charges for integration of acquisitions. Before acquisition integration charges, the operating loss per share in the first quarter of 2009 was $0.22 versus operating earnings per share of $1.70 in 2008. The operating loss for the first quarter of 2009 was $36 million compared to operating earnings of $256 million in 2008.

"Our first quarter results reflect the impact of the severe downturn in many of our end markets and the expenses associated with personnel reductions made in the first quarter," explains Alexander M. Cutler, Eaton chairman and chief executive officer. "Weaker than expected markets were partially offset by lower than originally anticipated severance expense."

The sales decline in the first quarter of 20 percent consisted of a 20 percent decline in organic growth, an 8 percent decline due to lower foreign exchange rates, and 8 percent growth from acquisitions. Eaton's end markets declined 21 percent in the quarter.

"We generated strong cash flow in the first quarter, with operating cash flow totaling $107 million and free cash flow totaling $59 million, the second highest free cash flow for the first quarter we have ever had," Cutler says. "In addition, we issued $550 million of term debt in March, at attractive rates. The combination of our strong cash flow and the term debt issuance allowed us to reduce commercial paper at the end of March to $172 million, a substantial reduction from the $767 million of commercial paper outstanding at the end of December."

Eaton predicts its end markets for all of 2009 will decline between 15 and 16 percent, and says it now believes the economic recovery is more likely to begin in the first quarter of 2010.

The Truck segment posted sales of $292 million, down 49 percent compared to the first quarter of 2008. The segment reported an operating loss in the first quarter of $34 million.

Truck production in the first quarter is forecasted to have declined by 27 percent, with U.S. markets down 32 percent and non-U.S. markets down 20 percent. Eaton says it appears that purchases of components by global truck OEMs and aftermarket channel partners declined even more severely than truck production.

The company's comparative financial results for the three months ended March 31, 2009 are available on the company's Web site, www.eaton.com.