Eaton Corporation 2003 Annual Report: Financial Highlights

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	Introduction
	Financial Highlights
	Letter to Shareholders
	Signs of Eaton
		Achieve
		Imagine
		Connect
		Integrate
		Energize
	Financial Review
	Leadership

We have done what it takes to meet the challenges of a down economy. Now all the signs point to Eaton as ready and positioned for growth.

Our positive 2003 results are a clear indication that our operating strategy is working. At the heart of this strategy is the Eaton Business System, which has enabled us to:

Outgrow our end markets through new products, superior customer service and strategic acquisitions.
Maintain tight control over expenses and identify new sources of improved productivity.
Improve how we utilize our assets and focus our capital investments.
Strengthen our balance sheet by reducing working capital requirements and lowering capital expenditures.
Aggressively resize the corporation, capturing the full benefits of our restructuring actions initiated in 2000, as well as our recent acquisitions.


		Eaton is prepared for take-off. In 2003, we were selected to provide project management services and electrical distribution equipment for Heathrow Airport's Terminal 5 (T5) expansion, one of the largest construction projects in Europe. Specifically, Eaton will provide low voltage switchgear, busbar trunking, capacitors and loose gear, as well as engineering and start-up support. Heathrow's existing four terminals currently manage 63 million passengers per year. When construction for the estimated $7 billion project is completed in 2008, Terminal 5 will accommodate an additional 30 million passengers.

But we know that spending money on growth does not necessarily create growth. With acquisitions, for example, the proof is in the integration and the ability to take full advantage of synergies.

We invested in Eaton during the year by acquiring and successfully integrating the electrical division of Delta plc and the power systems business of Commonwealth Sprague Capacitor Inc. These acquisitions, combined with two others completed towards the end of 2002, added more than $500 million in incremental sales to our 2003 revenues. They also enabled Eaton to expand its existing businesses and geographic footprint, and to enhance support to multinational customers. In the last 11 years, we have completed 51 acquisitions and 49 divestitures.

We are not done yet. Our primary target is to become recognized as one of the great, premier companies among the diversified industrials. To take this company from good to great, we intend to grow sales and earnings by 10 percent annually; increase our base profitability to 13 percent as measured by earnings before interest and taxes; reduce fixed capital intensity to less than 4 percent of sales; and decrease inventory by 25 percent.

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