CLEVELAND -- Eaton Corp. today announced net income per share of $1.38 for the fourth quarter of 2005, an increase of 19 percent over net income per share of $1.16 in the fourth quarter of 2004. Sales in the quarter were a record $2.8 billion, 8 percent above the same period in 2004. Net income was $210 million compared to $183 million in 2004, an increase of 15 percent.

Net income in both periods included charges related to restructuring activities. Before restructuring charges, operating earnings per share in the fourth quarter of 2005 were $1.43 versus $1.23 per share in 2004, an increase of 16 percent. Operating earnings for the fourth quarter of 2005 were $219 million compared to $194 million in 2004, an increase of 13 percent.

Sales growth in the fourth quarter of 8 percent consisted of 5 percent organic growth and 4 percent from acquisitions, offset by a 1 percent decline from lower exchange rates. The 5 percent organic growth was made up of 3 percent growth in end markets and 2 percent growth from outgrowing end markets.

For the full year 2005, sales were $11.1 billion, 13 percent above 2004. Net income of $805 million increased 24 percent over 2004, and net income per share of $5.23 rose 27 percent. Operating earnings per share for 2005 of $5.38 rose 25 percent above 2004. Operating earnings in 2005 totaled $829 million versus $675 million in 2004, an increase of 23 percent.

Alexander Cutler, Eaton chairman and CEO, said, "We had another quarter of strong performance, marking this as the fifteenth quarter in a row where we have recorded a year-over-year increase in operating earnings per share of more than 10 percent.

"Looking at 2005 as a whole, we had an outstanding year," said Cutler. "Our sales grew 13 percent, operating earnings per share grew 25 percent, and our return on equity was 22 percent. In addition, we generated a record amount of cash, with operating cash flow in 2005 rising 35 percent, to just over $1.1 billion.

"In 2000, we set several challenging goals for Eaton over the 2000-2005 time period, " said Cutler. “ I am pleased to report that we exceeded most of the goals. In particular, our compound annual growth in operating earnings per share of 15 percent exceeded our 10 percent goal. In addition, our annual total return to shareholders over the last five years has averaged 18 percent."

In light of its strong results and future prospects, Eaton is taking the following actions:

-- Increasing its quarterly dividend by 13 percent, from $.31 per share to $.35 per share

-- Making a voluntary contribution of $100 million to its qualified pension plan in the United States.

"As we survey our end markets in 2006, we anticipate growth of approximately 3 percent," said Cutler. "We expect to outgrow our end markets by well over 50 percent, and we expect to also record approximately $475 million of growth from the full-year impact of the eight acquisitions and one joint venture we concluded in 2005. As a result, we anticipate overall growth in our sales in 2006 of approximately 10 percent.

"We anticipate net income per share for the first quarter of 2006 to be $1.20 to $1.30, and for the full year to be $5.75 to $6.05. Operating earnings per share, which exclude restructuring charges to integrate our recent acquisitions and joint ventures, are anticipated to be $1.25 to $1.35 for the first quarter of 2006, and $5.95 to $6.25 for the full year."

For more information about Eaton, visit: www.eaton.com.

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