| Capital Structure
ETN's operating cash flow (OCF) in 4Q09 was $469 million and free cash flow was $410 million. ETN generated $1.41 billion in OCF in FY09, including $234 million in employment actions. In FY09, ETN generated free cash flow (FCF) of $1.2 billion; both OCF and FCF were at the higher end of ETN’s projections from 3Q09, but were heavily weighted toward 3Q and 4Q.
Working Capital reduced $560 million y/y in 4Q09 as accounts receivable declined 17% y/y; inventories declined 15% while accounts payable only declined 6% y/y. ETN boosted its cash position to $340 million in 4Q09 while cutting its short-term debt by $973 million.
ETN used its strong cash flow in FY09 to markedly reduce the long-term liabilities, with over $750 million of debt paid off during FY09, $270 million contributed to global pension plans in FY09, and an additional $300 million contributed to U.S. pension plan in end of January 2010. As a result of these actions, the company’s liquidity position is exceptionally strong, with little commercial paper outstanding, no term debt maturities until the middle of 2012, and no additional contributions to the U.S. pension plan required until 2011.
ETN’s FCF is expected to total about $600-$700 million for FY10 well below the record $1.2 billion achieved in FY09. The lower FCF in 2010 principally reflects the expected $130.0 million increase in pension contributions in 2010, about $200 million increase in working capital to support higher sales and about $200 million higher capital spending. ETN projects FY10 operating cash flow in a $1.0-1.1 billion range. Capital expenditures are expected to roughly double to $400 million in 2010 from $195 million in FY09. Depreciation and amortization expense of approximately $620 million is expected during FY10. Working capital is projected to be a roughly $200 million use of cash in 2010, after being a $572 million source of cash in FY09.
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