EATON CORPORATION plc |
(Exact name of registrant as specified in its charter) |
Ireland | 98-1059235 | |
(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification Number) | |
Fitzwilliam Hall, Fitzwilliam Place, Dublin 2, Ireland | - | |
(Address of principal executive offices) | (Zip Code) |
+1 (440) 523-5000 | |||||||||||
(Registrant's telephone number, including area code) | |||||||||||
Not applicable | |||||||||||
(Former name, former address and former fiscal year if changed since last report) | |||||||||||
Large accelerated filer þ | Accelerated filer o | Non-accelerated filer o | Smaller reporting company o | |||
(Do not check if a smaller reporting company) |
TABLE OF CONTENTS | |
ITEM 1. | FINANCIAL STATEMENTS. |
Three months ended March 31 | |||||||
(In millions except for per share data) | 2014 | 2013 | |||||
Net sales | $ | 5,492 | $ | 5,310 | |||
Cost of products sold | 3,858 | 3,735 | |||||
Selling and administrative expense | 962 | 958 | |||||
Research and development expense | 162 | 152 | |||||
Interest expense - net | 62 | 75 | |||||
Other income - net | (5 | ) | (10 | ) | |||
Income before income taxes | 453 | 400 | |||||
Income tax expense | 12 | 20 | |||||
Net income | 441 | 380 | |||||
Less net income for noncontrolling interests | (2 | ) | (2 | ) | |||
Net income attributable to Eaton ordinary shareholders | $ | 439 | $ | 378 | |||
Net income per ordinary share | |||||||
Diluted | $ | 0.92 | $ | 0.79 | |||
Basic | 0.92 | 0.80 | |||||
Weighted-average number of ordinary shares outstanding | |||||||
Diluted | 478.8 | 475.1 | |||||
Basic | 475.8 | 471.9 | |||||
Cash dividends declared per ordinary share | $ | 0.49 | $ | 0.42 |
Three months ended March 31 | |||||||
(In millions) | 2014 | 2013 | |||||
Net income | $ | 441 | $ | 380 | |||
Less net income for noncontrolling interests | (2 | ) | (2 | ) | |||
Net income attributable to Eaton ordinary shareholders | 439 | 378 | |||||
Other comprehensive income, net of tax | |||||||
Currency translation and related hedging instruments | (47 | ) | (281 | ) | |||
Pensions and other postretirement benefits | 50 | 53 | |||||
Cash flow hedges | — | (7 | ) | ||||
Other comprehensive income (loss) attributable to Eaton ordinary shareholders | 3 | (235 | ) | ||||
Total comprehensive income attributable to Eaton ordinary shareholders | $ | 442 | $ | 143 |
(In millions) | March 31, 2014 | December 31, 2013 | |||||
Assets | |||||||
Current assets | |||||||
Cash | $ | 784 | $ | 915 | |||
Short-term investments | 360 | 794 | |||||
Accounts receivable - net | 3,889 | 3,648 | |||||
Inventory | 2,532 | 2,382 | |||||
Deferred income taxes | 554 | 577 | |||||
Prepaid expenses and other current assets | 564 | 415 | |||||
Total current assets | 8,683 | 8,731 | |||||
Property, plant and equipment - net | 3,806 | 3,833 | |||||
Other noncurrent assets | |||||||
Goodwill | 14,450 | 14,495 | |||||
Other intangible assets | 7,078 | 7,186 | |||||
Deferred income taxes | 257 | 240 | |||||
Other assets | 988 | 1,006 | |||||
Total assets | $ | 35,262 | $ | 35,491 | |||
Liabilities and shareholders’ equity | |||||||
Current liabilities | |||||||
Short-term debt | $ | 8 | $ | 13 | |||
Current portion of long-term debt | 316 | 567 | |||||
Accounts payable | 2,076 | 1,960 | |||||
Accrued compensation | 334 | 461 | |||||
Other current liabilities | 2,071 | 1,913 | |||||
Total current liabilities | 4,805 | 4,914 | |||||
Noncurrent liabilities | |||||||
Long-term debt | 8,991 | 8,969 | |||||
Pension liabilities | 1,228 | 1,465 | |||||
Other postretirement benefits liabilities | 666 | 668 | |||||
Deferred income taxes | 1,296 | 1,313 | |||||
Other noncurrent liabilities | 1,165 | 1,299 | |||||
Total noncurrent liabilities | 13,346 | 13,714 | |||||
Shareholders’ equity | |||||||
Eaton shareholders’ equity | 17,037 | 16,791 | |||||
Noncontrolling interests | 74 | 72 | |||||
Total equity | 17,111 | 16,863 | |||||
Total liabilities and equity | $ | 35,262 | $ | 35,491 |
Three months ended March 31 | |||||||
(In millions) | 2014 | 2013 | |||||
Operating activities | |||||||
Net income | $ | 441 | $ | 380 | |||
Adjustments to reconcile to net cash provided by operating activities | |||||||
Depreciation and amortization | 249 | 245 | |||||
Deferred income taxes | (24 | ) | 104 | ||||
Pension and other postretirement benefits expense | 99 | 87 | |||||
Contributions to pension plans | (272 | ) | (208 | ) | |||
Excess tax benefit from equity-based compensation | (20 | ) | (16 | ) | |||
Changes in working capital | (370 | ) | (546 | ) | |||
Other - net | (91 | ) | 54 | ||||
Net cash provided by operating activities | 12 | 100 | |||||
Investing activities | |||||||
Capital expenditures for property, plant and equipment | (110 | ) | (122 | ) | |||
Sales of short-term investments - net | 431 | 132 | |||||
Proceeds from sale of business | 3 | 761 | |||||
Other - net | (20 | ) | 2 | ||||
Net cash provided by investing activities | 304 | 773 | |||||
Financing activities | |||||||
Payments on borrowings | (257 | ) | (687 | ) | |||
Cash dividends paid | (229 | ) | (194 | ) | |||
Exercise of employee stock options | 23 | 56 | |||||
Excess tax benefit from equity-based compensation | 20 | 16 | |||||
Other - net | — | (1 | ) | ||||
Net cash used in financing activities | (443 | ) | (810 | ) | |||
Effect of currency on cash | (4 | ) | (1 | ) | |||
Total (decrease) increase in cash | (131 | ) | 62 | ||||
Cash at the beginning of the period | 915 | 577 | |||||
Cash at the end of the period | $ | 784 | $ | 639 |
Note 1. | BASIS OF PRESENTATION |
Note 2. | ACQUISITIONS AND SALE OF BUSINESSES |
Acquired businesses | Date of transaction | Business segment | Annual sales | |||
Cooper Industries plc (Cooper) | November 30, 2012 | Electrical Products; Electrical Systems and Services | $5,409 for 2011 | |||
A diversified global manufacturer of electrical products and systems, with brands including Bussmann electrical and electronic fuses; Crouse-Hinds and CEAG explosion-proof electrical equipment; Halo and Metalux lighting fixtures; and Kyle and McGraw-Edison power systems products. | ||||||
Rolec Comercial e Industrial S.A. | September 28, 2012 | Electrical Systems and Services | $85 for the 12 months ended September 30, 2012 | |||
A Chilean manufacturer of integrated power assemblies and low- and medium-voltage switchgear, and a provider of engineering services serving mining and other heavy industrial applications in Chile and Peru. | ||||||
Jeil Hydraulics Co., Ltd. | July 6, 2012 | Hydraulics | $189 for 2011 | |||
A Korean manufacturer of track drive motors, swing drive motors, main control valves and remote control valves for the construction equipment market. | ||||||
Polimer Kaucuk Sanayi ve Pazarlama A.S. | June 1, 2012 | Hydraulics | $335 for 2011 | |||
A Turkish manufacturer of hydraulic and industrial hose for construction, mining, agriculture, oil and gas, manufacturing, food and beverage, and chemicals markets. This business sells its products under the SEL brand name. | ||||||
Gycom Electrical Low-Voltage Power Distribution, Control and Automation | June 1, 2012 | Electrical Systems and Services | $24 for 2011 | |||
A Swedish electrical low-voltage power distribution, control and automation components business. |
Note 3. | ACQUISITION INTEGRATION AND RESTRUCTURING CHARGES |
Three months ended March 31 | |||||||
2014 | 2013 | ||||||
Acquisition integration charges | |||||||
Electrical Products | $ | 29 | $ | 3 | |||
Electrical Systems and Services | 26 | 5 | |||||
Hydraulics | 4 | 12 | |||||
Total business segments | 59 | 20 | |||||
Corporate | 7 | 6 | |||||
Total acquisition integration charges | 66 | 26 | |||||
Transaction costs | |||||||
Corporate | — | 5 | |||||
Total transaction costs | — | 5 | |||||
Total acquisition integration charges and transaction costs before income taxes | $ | 66 | $ | 31 | |||
Total after income taxes | $ | 44 | $ | 22 | |||
Per ordinary share - diluted | $ | 0.09 | $ | 0.05 |
Note 4. | GOODWILL |
March 31, 2014 | December 31, 2013 | ||||||
Electrical Products | $ | 7,153 | $ | 7,189 | |||
Electrical Systems and Services | 4,508 | 4,517 | |||||
Hydraulics | 1,384 | 1,385 | |||||
Aerospace | 1,048 | 1,048 | |||||
Vehicle | 357 | 356 | |||||
Total goodwill | $ | 14,450 | $ | 14,495 |
Note 5. | RETIREMENT BENEFITS PLANS |
United States pension benefit expense | Non-United States pension benefit expense | Other postretirement benefits expense | |||||||||||||||||||||
Three months ended March 31 | |||||||||||||||||||||||
2014 | 2013 | 2014 | 2013 | 2014 | 2013 | ||||||||||||||||||
Service cost | $ | 29 | $ | 32 | $ | 16 | $ | 15 | $ | 4 | $ | 5 | |||||||||||
Interest cost | 40 | 37 | 22 | 20 | 9 | 9 | |||||||||||||||||
Expected return on plan assets | (61 | ) | (57 | ) | (25 | ) | (21 | ) | (1 | ) | (2 | ) | |||||||||||
Amortization | 23 | 33 | 7 | 7 | 2 | 3 | |||||||||||||||||
31 | 45 | 20 | 21 | 14 | 15 | ||||||||||||||||||
Settlement loss | 34 | 6 | — | — | — | — | |||||||||||||||||
Total expense | $ | 65 | $ | 51 | $ | 20 | $ | 21 | $ | 14 | $ | 15 |
Note 6. | LEGAL CONTINGENCIES |
Note 7. | INCOME TAXES |
Note 8. | EQUITY |
Eaton shareholders’ equity | Noncontrolling interests | Total equity | |||||||||
Balance at December 31, 2013 | $ | 16,791 | $ | 72 | $ | 16,863 | |||||
Net income | 439 | 2 | 441 | ||||||||
Other comprehensive income | 3 | — | 3 | ||||||||
Cash dividends paid and accrued | (234 | ) | — | (234 | ) | ||||||
Issuance of shares under equity-based compensation plans - net | 38 | — | 38 | ||||||||
Balance at March 31, 2014 | $ | 17,037 | $ | 74 | $ | 17,111 |
Currency translation and related hedging instruments | Pensions and other postretirement benefits | Cash flow hedges | Total | ||||||||||||
Balance at December 31, 2013 | $ | (395 | ) | $ | (1,170 | ) | $ | 5 | $ | (1,560 | ) | ||||
Other comprehensive (loss) income before reclassifications | (47 | ) | 9 | 1 | (37 | ) | |||||||||
Amounts reclassified from Accumulated other comprehensive (loss) income | — | 41 | (1 | ) | 40 | ||||||||||
Net current-period other comprehensive (loss) income | (47 | ) | 50 | — | 3 | ||||||||||
Balance at March 31, 2014 | $ | (442 | ) | $ | (1,120 | ) | $ | 5 | $ | (1,557 | ) |
Three months ended March 31, 2014 | Consolidated Statements of Income classification | |||||
Amortization of defined benefit pension items | ||||||
Actuarial loss | $ | (66 | ) | 1 | ||
Tax benefit | 25 | |||||
Total, net of tax | (41 | ) | ||||
Loss on cash flow hedges | ||||||
Currency exchange contracts | 2 | Cost of products sold | ||||
Tax expense | (1 | ) | ||||
Total, net of tax | 1 | |||||
Total reclassifications for the period | $ | (40 | ) |
Three months ended March 31 | |||||||
(Shares in millions) | 2014 | 2013 | |||||
Net income attributable to Eaton ordinary shareholders | $ | 439 | $ | 378 | |||
Weighted-average number of ordinary shares outstanding - diluted | 478.8 | 475.1 | |||||
Less dilutive effect of equity-based compensation | 3.0 | 3.2 | |||||
Weighted-average number of ordinary shares outstanding - basic | 475.8 | 471.9 | |||||
Net income per ordinary share | |||||||
Diluted | $ | 0.92 | $ | 0.79 | |||
Basic | 0.92 | 0.80 |
Note 9. | FAIR VALUE MEASUREMENTS |
Total | Quoted prices in active markets for identical assets (Level 1) | Other observable inputs (Level 2) | Unobservable inputs (Level 3) | ||||||||||||
March 31, 2014 | |||||||||||||||
Cash | $ | 784 | $ | 784 | $ | — | $ | — | |||||||
Short-term investments | 360 | 360 | — | — | |||||||||||
Net derivative contracts | 1 | — | 1 | — | |||||||||||
Long-term debt converted to floating interest rates by interest rate swaps - net | (10 | ) | — | (10 | ) | — | |||||||||
December 31, 2013 | |||||||||||||||
Cash | $ | 915 | $ | 915 | $ | — | $ | — | |||||||
Short-term investments | 794 | 794 | — | — | |||||||||||
Net derivative contracts | (35 | ) | — | (35 | ) | — | |||||||||
Long-term debt converted to floating interest rates by interest rate swaps - net | (39 | ) | — | (39 | ) | — |
Note 10. | DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES |
• | Hedges of the change in the fair value of a recognized fixed-rate asset or liability, or the firm commitment to acquire such an asset or liability (a fair value hedge); for these hedges, the gain or loss from the derivative financial instrument, as well as the offsetting loss or gain on the hedged item attributable to the hedged risk, are recognized in income during the period of change in fair value. |
• | Hedges of the variable cash flows of a recognized variable-rate asset or liability, or the forecasted acquisition of such an asset or liability (a cash flow hedge); for these hedges, the effective portion of the gain or loss from the derivative financial instrument is recognized in Accumulated other comprehensive loss and reclassified to income in the same period when the gain or loss on the hedged item is included in income. |
• | Hedges of the currency exposure related to a net investment in a foreign operation (a net investment hedge); for these hedges, the effective portion of the gain or loss from the derivative financial instrument is recognized in Accumulated other comprehensive loss and reclassified to income in the same period when the gain or loss related to the net investment in the foreign operation is included in income. |
Notional amount | Other current assets | Other long-term assets | Other current liabilities | Other long-term liabilities | Type of hedge | Term | |||||||||||||||||
March 31, 2014 | |||||||||||||||||||||||
Derivatives designated as hedges | |||||||||||||||||||||||
Fixed-to-floating interest rate swaps | $ | 3,290 | $ | — | $ | 39 | $ | — | $ | 49 | Fair value | 3 to 20 years | |||||||||||
Floating-to-fixed interest rate swaps | 300 | — | — | — | — | Cash flow | 3 months | ||||||||||||||||
Currency exchange contracts | 495 | 12 | — | 3 | — | Cash flow | 12 to 36 months | ||||||||||||||||
Commodity contracts | 1 | — | — | — | — | Cash flow | 1 to 12 months | ||||||||||||||||
Total | $ | 12 | $ | 39 | $ | 3 | $ | 49 | |||||||||||||||
Derivatives not designated as hedges | |||||||||||||||||||||||
Currency exchange contracts | $ | 4,160 | $ | 23 | $ | 21 | 1 to 12 months |
Notional amount | Other current assets | Other long-term assets | Other current liabilities | Other long-term liabilities | Type of hedge | Term | |||||||||||||||||
December 31, 2013 | |||||||||||||||||||||||
Derivatives designated as hedges | |||||||||||||||||||||||
Fixed-to-floating interest rate swaps | $ | 3,090 | $ | 1 | $ | 36 | $ | — | $ | 76 | Fair value | 3 months to 20 years | |||||||||||
Floating-to-fixed interest rate swaps | 300 | — | — | 1 | — | Cash flow | 6 months | ||||||||||||||||
Currency exchange contracts | 393 | 12 | — | 3 | — | Cash flow | 12 to 36 months | ||||||||||||||||
Commodity contracts | 1 | — | — | — | — | Cash flow | 1 to 12 months | ||||||||||||||||
Total | $ | 13 | $ | 36 | $ | 4 | $ | 76 | |||||||||||||||
Derivatives not designated as hedges | |||||||||||||||||||||||
Currency exchange contracts | $ | 4,277 | $ | 22 | $ | 26 | 1 to 12 months |
Three months ended March 31 | |||||||||||||||
2014 | 2013 | ||||||||||||||
Gain (loss) recognized in Accumulated other comprehensive income (loss) | Gain (loss) reclassified from Accumulated other comprehensive income (loss) | Gain (loss) recognized in Accumulated other comprehensive income (loss) | Gain (loss) reclassified from Accumulated other comprehensive income (loss) | ||||||||||||
Derivatives designated as cash flow hedges | |||||||||||||||
Currency exchange contracts | $ | 2 | $ | 2 | $ | (9 | ) | $ | 1 |
Three months ended March 31 | |||||||
2014 | 2013 | ||||||
Derivatives designated as fair value hedges | |||||||
Fixed-to-floating interest rate swaps | $ | 29 | $ | (8 | ) | ||
Related long-term debt converted to floating interest rates by interest rate swaps | (29 | ) | 8 | ||||
$ | — | $ | — |
Note 11. | INVENTORY |
March 31, 2014 | December 31, 2013 | ||||||
Raw materials | $ | 1,103 | $ | 955 | |||
Work-in-process | 323 | 428 | |||||
Finished goods | 1,226 | 1,115 | |||||
Inventory at FIFO | 2,652 | 2,498 | |||||
Excess of FIFO over LIFO cost | (120 | ) | (116 | ) | |||
Total inventory | $ | 2,532 | $ | 2,382 |
Note 12. | BUSINESS SEGMENT INFORMATION |
Three months ended March 31 | |||||||
2014 | 2013 | ||||||
Net sales | |||||||
Electrical Products | $ | 1,726 | $ | 1,660 | |||
Electrical Systems and Services | 1,524 | 1,521 | |||||
Hydraulics | 782 | 756 | |||||
Aerospace | 464 | 434 | |||||
Vehicle | 996 | 939 | |||||
Total net sales | $ | 5,492 | $ | 5,310 | |||
Segment operating profit | |||||||
Electrical Products | $ | 250 | $ | 241 | |||
Electrical Systems and Services | 169 | 210 | |||||
Hydraulics | 108 | 78 | |||||
Aerospace | 62 | 62 | |||||
Vehicle | 151 | 132 | |||||
Total segment operating profit | 740 | 723 | |||||
Corporate | |||||||
Amortization of intangible assets | (110 | ) | (107 | ) | |||
Interest expense - net | (62 | ) | (75 | ) | |||
Pension and other postretirement benefits expense | (51 | ) | (38 | ) | |||
Inventory step-up adjustment | — | (33 | ) | ||||
Other corporate expense - net | (64 | ) | (70 | ) | |||
Income before income taxes | 453 | 400 | |||||
Income tax expense | 12 | 20 | |||||
Net income | 441 | 380 | |||||
Less net income for noncontrolling interests | (2 | ) | (2 | ) | |||
Net income attributable to Eaton ordinary shareholders | $ | 439 | $ | 378 |
Note 13. | CONDENSED CONSOLIDATING FINANCIAL STATEMENTS |
CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME FOR THE THREE MONTHS ENDED MARCH 31, 2014 | |||||||||||||||||||||||
Eaton Corporation plc | Eaton Corporation | Guarantors | Other subsidiaries | Consolidating adjustments | Total | ||||||||||||||||||
Net sales | $ | — | $ | 1,667 | $ | 1,641 | $ | 3,291 | $ | (1,107 | ) | $ | 5,492 | ||||||||||
Cost of products sold | — | 1,342 | 1,218 | 2,392 | (1,094 | ) | 3,858 | ||||||||||||||||
Selling and administrative expense | 2 | 361 | 200 | 399 | — | 962 | |||||||||||||||||
Research and development expense | — | 60 | 50 | 52 | — | 162 | |||||||||||||||||
Interest expense (income) - net | — | 59 | 7 | (6 | ) | 2 | 62 | ||||||||||||||||
Other expense (income) - net | — | 5 | 3 | (13 | ) | — | (5 | ) | |||||||||||||||
Equity in (earnings) loss of subsidiaries, net of tax | (469 | ) | (207 | ) | (485 | ) | (201 | ) | 1,362 | — | |||||||||||||
Intercompany expense (income) - net | 28 | (71 | ) | 120 | (77 | ) | — | — | |||||||||||||||
Income before income taxes | 439 | 118 | 528 | 745 | (1,377 | ) | 453 | ||||||||||||||||
Income tax (benefit) expense | — | (25 | ) | (7 | ) | 49 | (5 | ) | 12 | ||||||||||||||
Net income | 439 | 143 | 535 | 696 | (1,372 | ) | 441 | ||||||||||||||||
Less net income for noncontrolling interests | — | — | — | (2 | ) | — | (2 | ) | |||||||||||||||
Net income attributable to Eaton ordinary shareholders | $ | 439 | $ | 143 | $ | 535 | $ | 694 | $ | (1,372 | ) | $ | 439 | ||||||||||
Other comprehensive income (loss) | $ | 3 | $ | 28 | $ | 23 | $ | (15 | ) | $ | (36 | ) | $ | 3 | |||||||||
Total comprehensive income attributable to Eaton ordinary shareholders | $ | 442 | $ | 171 | $ | 558 | $ | 679 | $ | (1,408 | ) | $ | 442 |
CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME FOR THE THREE MONTHS ENDED MARCH 31, 2013 | |||||||||||||||||||||||
Eaton Corporation plc | Eaton Corporation | Guarantors | Other subsidiaries | Consolidating adjustments | Total | ||||||||||||||||||
Net sales | $ | — | $ | 1,588 | $ | 1,573 | $ | 3,273 | $ | (1,124 | ) | $ | 5,310 | ||||||||||
Cost of products sold | — | 1,239 | 1,195 | 2,425 | (1,124 | ) | 3,735 | ||||||||||||||||
Selling and administrative expense | 2 | 341 | 198 | 417 | — | 958 | |||||||||||||||||
Research and development expense | — | 58 | 47 | 47 | — | 152 | |||||||||||||||||
Interest expense (income) - net | — | 74 | 7 | (6 | ) | — | 75 | ||||||||||||||||
Other (income) expense - net | — | (5 | ) | 8 | (13 | ) | — | (10 | ) | ||||||||||||||
Equity in (earnings) loss of subsidiaries, net of tax | (444 | ) | (309 | ) | (567 | ) | (166 | ) | 1,486 | — | |||||||||||||
Intercompany expense (income) - net | 64 | (102 | ) | 176 | (138 | ) | — | — | |||||||||||||||
Income before income taxes | 378 | 292 | 509 | 707 | (1,486 | ) | 400 | ||||||||||||||||
Income tax (benefit) expense | — | (2 | ) | (37 | ) | 59 | — | 20 | |||||||||||||||
Net income | 378 | 294 | 546 | 648 | (1,486 | ) | 380 | ||||||||||||||||
Less net income for noncontrolling interests | — | — | — | (2 | ) | — | (2 | ) | |||||||||||||||
Net income attributable to Eaton ordinary shareholders | $ | 378 | $ | 294 | $ | 546 | $ | 646 | $ | (1,486 | ) | $ | 378 | ||||||||||
Other comprehensive loss | $ | (235 | ) | $ | (22 | ) | $ | (233 | ) | $ | (391 | ) | $ | 646 | $ | (235 | ) | ||||||
Total comprehensive income attributable to Eaton ordinary shareholders | $ | 143 | $ | 272 | $ | 313 | $ | 255 | $ | (840 | ) | $ | 143 |
CONDENSED CONSOLIDATING BALANCE SHEETS MARCH 31, 2014 | |||||||||||||||||||||||
Eaton Corporation plc | Eaton Corporation | Guarantors | Other subsidiaries | Consolidating adjustments | Total | ||||||||||||||||||
Assets | |||||||||||||||||||||||
Current assets | |||||||||||||||||||||||
Cash | $ | 8 | $ | 46 | $ | 12 | $ | 718 | $ | — | $ | 784 | |||||||||||
Short-term investments | — | — | 35 | 325 | — | 360 | |||||||||||||||||
Accounts receivable - net | — | 506 | 986 | 2,397 | — | 3,889 | |||||||||||||||||
Intercompany accounts receivable | 10 | 682 | 3,508 | 4,900 | (9,100 | ) | — | ||||||||||||||||
Inventory | — | 368 | 656 | 1,558 | (50 | ) | 2,532 | ||||||||||||||||
Prepaid expenses and other current assets | — | 473 | 156 | 476 | 13 | 1,118 | |||||||||||||||||
Total current assets | 18 | 2,075 | 5,353 | 10,374 | (9,137 | ) | 8,683 | ||||||||||||||||
Property, plant and equipment - net | — | 966 | 765 | 2,075 | — | 3,806 | |||||||||||||||||
Other noncurrent assets | |||||||||||||||||||||||
Goodwill | — | 1,382 | 6,301 | 6,767 | — | 14,450 | |||||||||||||||||
Other intangible assets | — | 207 | 3,949 | 2,922 | — | 7,078 | |||||||||||||||||
Deferred income taxes | — | 826 | 12 | 153 | (734 | ) | 257 | ||||||||||||||||
Investment in subsidiaries | 25,427 | 9,057 | 41,344 | 8,701 | (84,529 | ) | — | ||||||||||||||||
Intercompany loans receivable | — | 7,872 | 2,643 | 19,840 | (30,355 | ) | — | ||||||||||||||||
Other assets | — | 417 | 183 | 388 | — | 988 | |||||||||||||||||
Total assets | $ | 25,445 | $ | 22,802 | $ | 60,550 | $ | 51,220 | $ | (124,755 | ) | $ | 35,262 | ||||||||||
Liabilities and shareholders’ equity | |||||||||||||||||||||||
Current liabilities | |||||||||||||||||||||||
Short-term debt | $ | — | $ | — | $ | — | $ | 8 | $ | — | $ | 8 | |||||||||||
Current portion of long-term debt | — | 301 | 1 | 14 | — | 316 | |||||||||||||||||
Accounts payable | — | 475 | 391 | 1,210 | — | 2,076 | |||||||||||||||||
Intercompany accounts payable | 10 | 3,609 | 3,626 | 1,855 | (9,100 | ) | — | ||||||||||||||||
Accrued compensation | — | 48 | 42 | 244 | — | 334 | |||||||||||||||||
Other current liabilities | 10 | 667 | 381 | 1,017 | (4 | ) | 2,071 | ||||||||||||||||
Total current liabilities | 20 | 5,100 | 4,441 | 4,348 | (9,104 | ) | 4,805 | ||||||||||||||||
Noncurrent liabilities | |||||||||||||||||||||||
Long-term debt | — | 7,720 | 1,259 | 17 | (5 | ) | 8,991 | ||||||||||||||||
Pension liabilities | — | 375 | 79 | 774 | — | 1,228 | |||||||||||||||||
Other postretirement benefits liabilities | — | 402 | 171 | 93 | — | 666 | |||||||||||||||||
Deferred income taxes | — | — | 1,287 | 743 | (734 | ) | 1,296 | ||||||||||||||||
Intercompany loans payable | 8,388 | 2,669 | 18,084 | 1,214 | (30,355 | ) | — | ||||||||||||||||
Other noncurrent liabilities | — | 545 | 155 | 465 | — | 1,165 | |||||||||||||||||
Total noncurrent liabilities | 8,388 | 11,711 | 21,035 | 3,306 | (31,094 | ) | 13,346 | ||||||||||||||||
Shareholders’ equity | |||||||||||||||||||||||
Eaton shareholders' equity | 17,037 | 5,991 | 35,074 | 43,499 | (84,564 | ) | 17,037 | ||||||||||||||||
Noncontrolling interests | — | — | — | 67 | 7 | 74 | |||||||||||||||||
Total equity | 17,037 | 5,991 | 35,074 | 43,566 | (84,557 | ) | 17,111 | ||||||||||||||||
Total liabilities and equity | $ | 25,445 | $ | 22,802 | $ | 60,550 | $ | 51,220 | $ | (124,755 | ) | $ | 35,262 |
CONDENSED CONSOLIDATING BALANCE SHEETS DECEMBER 31, 2013 | |||||||||||||||||||||||
Eaton Corporation plc | Eaton Corporation | Guarantors | Other subsidiaries | Consolidating adjustments | Total | ||||||||||||||||||
Assets | |||||||||||||||||||||||
Current assets | |||||||||||||||||||||||
Cash | $ | 3 | $ | 51 | $ | 10 | $ | 851 | $ | — | $ | 915 | |||||||||||
Short-term investments | — | — | 134 | 660 | — | 794 | |||||||||||||||||
Accounts receivable - net | — | 473 | 922 | 2,253 | — | 3,648 | |||||||||||||||||
Intercompany accounts receivable | 5 | 471 | 3,368 | 4,470 | (8,314 | ) | — | ||||||||||||||||
Inventory | — | 344 | 609 | 1,466 | (37 | ) | 2,382 | ||||||||||||||||
Prepaid expenses and other current assets | — | 458 | 175 | 350 | 9 | 992 | |||||||||||||||||
Total current assets | 8 | 1,797 | 5,218 | 10,050 | (8,342 | ) | 8,731 | ||||||||||||||||
Property, plant and equipment - net | — | 982 | 761 | 2,090 | — | 3,833 | |||||||||||||||||
Other noncurrent assets | |||||||||||||||||||||||
Goodwill | — | 1,382 | 6,350 | 6,763 | — | 14,495 | |||||||||||||||||
Other intangible assets | — | 211 | 3,996 | 2,979 | — | 7,186 | |||||||||||||||||
Deferred income taxes | — | 839 | 3 | 145 | (747 | ) | 240 | ||||||||||||||||
Investment in subsidiaries | 24,940 | 8,853 | 40,776 | 8,473 | (83,042 | ) | — | ||||||||||||||||
Intercompany loans receivable | — | 8,019 | 2,518 | 18,776 | (29,313 | ) | — | ||||||||||||||||
Other assets | — | 450 | 186 | 370 | — | 1,006 | |||||||||||||||||
Total assets | $ | 24,948 | $ | 22,533 | $ | 59,808 | $ | 49,646 | $ | (121,444 | ) | $ | 35,491 | ||||||||||
Liabilities and shareholders’ equity | |||||||||||||||||||||||
Current liabilities | |||||||||||||||||||||||
Short-term debt | $ | — | $ | — | $ | — | $ | 13 | $ | — | $ | 13 | |||||||||||
Current portion of long-term debt | — | 552 | — | 15 | — | 567 | |||||||||||||||||
Accounts payable | — | 440 | 380 | 1,140 | — | 1,960 | |||||||||||||||||
Intercompany accounts payable | 4 | 3,751 | 3,288 | 1,271 | (8,314 | ) | — | ||||||||||||||||
Accrued compensation | — | 140 | 37 | 284 | — | 461 | |||||||||||||||||
Other current liabilities | 5 | 547 | 400 | 965 | (4 | ) | 1,913 | ||||||||||||||||
Total current liabilities | 9 | 5,430 | 4,105 | 3,688 | (8,318 | ) | 4,914 | ||||||||||||||||
Noncurrent liabilities | |||||||||||||||||||||||
Long-term debt | — | 7,693 | 1,266 | 16 | (6 | ) | 8,969 | ||||||||||||||||
Pension liabilities | — | 546 | 131 | 788 | — | 1,465 | |||||||||||||||||
Other postretirement benefits liabilities | — | 402 | 171 | 95 | — | 668 | |||||||||||||||||
Deferred income taxes | — | — | 1,303 | 757 | (747 | ) | 1,313 | ||||||||||||||||
Intercompany loans payable | 8,148 | 2,113 | 18,207 | 845 | (29,313 | ) | — | ||||||||||||||||
Other noncurrent liabilities | — | 652 | 162 | 485 | — | 1,299 | |||||||||||||||||
Total noncurrent liabilities | 8,148 | 11,406 | 21,240 | 2,986 | (30,066 | ) | 13,714 | ||||||||||||||||
Shareholders’ equity | |||||||||||||||||||||||
Eaton shareholders' equity | 16,791 | 5,697 | 34,463 | 42,906 | (83,066 | ) | 16,791 | ||||||||||||||||
Noncontrolling interests | — | — | — | 66 | 6 | 72 | |||||||||||||||||
Total equity | 16,791 | 5,697 | 34,463 | 42,972 | (83,060 | ) | 16,863 | ||||||||||||||||
Total liabilities and equity | $ | 24,948 | $ | 22,533 | $ | 59,808 | $ | 49,646 | $ | (121,444 | ) | $ | 35,491 |
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2014 | |||||||||||||||||||||||
Eaton Corporation plc | Eaton Corporation | Guarantors | Other subsidiaries | Consolidating adjustments | Total | ||||||||||||||||||
Net cash provided by (used in) operating activities | $ | 17 | $ | (463 | ) | $ | 182 | $ | 276 | $ | — | $ | 12 | ||||||||||
Investing activities | |||||||||||||||||||||||
Capital expenditures for property, plant and equipment | — | (25 | ) | (29 | ) | (56 | ) | — | (110 | ) | |||||||||||||
Sales of short-term investments - net | — | — | 98 | 333 | — | 431 | |||||||||||||||||
Loans to affiliates | — | (7 | ) | — | (1,056 | ) | 1,063 | — | |||||||||||||||
Repayments of loans from affiliates | — | 171 | — | 814 | (985 | ) | — | ||||||||||||||||
Proceeds from sale of business | — | — | — | 3 | — | 3 | |||||||||||||||||
Other - net | — | (13 | ) | (1 | ) | (6 | ) | — | (20 | ) | |||||||||||||
Net cash provided by investing activities | — | 126 | 68 | 32 | 78 | 304 | |||||||||||||||||
Financing activities | |||||||||||||||||||||||
Payments on borrowings | — | (251 | ) | — | (6 | ) | — | (257 | ) | ||||||||||||||
Proceeds from borrowings from affiliates | — | 946 | 110 | 7 | (1,063 | ) | — | ||||||||||||||||
Payments on borrowings from affiliates | — | (510 | ) | (304 | ) | (171 | ) | 985 | — | ||||||||||||||
Other intercompany financing activities | 217 | 104 | (54 | ) | (267 | ) | — | — | |||||||||||||||
Cash dividends paid | (229 | ) | — | — | — | — | (229 | ) | |||||||||||||||
Exercise of employee stock options | — | 23 | — | — | — | 23 | |||||||||||||||||
Excess tax benefit from equity-based compensation | — | 20 | — | — | — | 20 | |||||||||||||||||
Net cash (used in) provided by financing activities | (12 | ) | 332 | (248 | ) | (437 | ) | (78 | ) | (443 | ) | ||||||||||||
Effect of currency on cash | — | — | — | (4 | ) | — | (4 | ) | |||||||||||||||
Total increase (decrease) in cash | 5 | (5 | ) | 2 | (133 | ) | — | (131 | ) | ||||||||||||||
Cash at the beginning of the period | 3 | 51 | 10 | 851 | — | 915 | |||||||||||||||||
Cash at the end of the period | $ | 8 | $ | 46 | $ | 12 | $ | 718 | $ | — | $ | 784 |
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2013 | |||||||||||||||||||||||
Eaton Corporation plc | Eaton Corporation | Guarantors | Other subsidiaries | Consolidating adjustments | Total | ||||||||||||||||||
Net cash provided by (used in) operating activities | $ | 62 | $ | (301 | ) | $ | 778 | $ | (439 | ) | $ | — | $ | 100 | |||||||||
Investing activities | |||||||||||||||||||||||
Capital expenditures for property, plant and equipment | — | (51 | ) | (18 | ) | (53 | ) | — | (122 | ) | |||||||||||||
Sales of short-term investments - net | — | 25 | 31 | 76 | — | 132 | |||||||||||||||||
Loans to affiliates | — | (36 | ) | — | (438 | ) | 474 | — | |||||||||||||||
Repayments of loans from affiliates | — | 28 | 82 | 303 | (413 | ) | — | ||||||||||||||||
Proceeds from sale of business | — | — | — | 761 | — | 761 | |||||||||||||||||
Other - net | — | 4 | (3 | ) | 1 | — | 2 | ||||||||||||||||
Net cash (used in) provided by investing activities | — | (30 | ) | 92 | 650 | 61 | 773 | ||||||||||||||||
Financing activities | |||||||||||||||||||||||
Payments on borrowings | — | (676 | ) | (8 | ) | (3 | ) | — | (687 | ) | |||||||||||||
Proceeds from borrowings from affiliates | — | 437 | 1 | 36 | (474 | ) | — | ||||||||||||||||
Payments on borrowings from affiliates | — | (131 | ) | (171 | ) | (111 | ) | 413 | — | ||||||||||||||
Other intercompany financing activities | 129 | 687 | (692 | ) | (124 | ) | — | — | |||||||||||||||
Cash dividends paid | (194 | ) | — | — | — | — | (194 | ) | |||||||||||||||
Exercise of employee stock options | — | 56 | — | — | — | 56 | |||||||||||||||||
Excess tax benefit from equity-based compensation | — | 16 | — | — | — | 16 | |||||||||||||||||
Other - net | — | — | — | (1 | ) | — | (1 | ) | |||||||||||||||
Net cash (used in) provided by financing activities | (65 | ) | 389 | (870 | ) | (203 | ) | (61 | ) | (810 | ) | ||||||||||||
Effect of currency on cash | — | — | — | (1 | ) | — | (1 | ) | |||||||||||||||
Total (decrease) increase in cash | (3 | ) | 58 | — | 7 | — | 62 | ||||||||||||||||
Cash at the beginning of the period | 7 | 54 | 14 | 502 | — | 577 | |||||||||||||||||
Cash at the end of the period | $ | 4 | $ | 112 | $ | 14 | $ | 509 | $ | — | $ | 639 |
ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. |
Three months ended March 31 | |||||||
2014 | 2013 | ||||||
Net sales | $ | 5,492 | $ | 5,310 | |||
Net income attributable to Eaton ordinary shareholders | 439 | 378 | |||||
Net income per ordinary share - diluted | $ | 0.92 | $ | 0.79 |
Three months ended March 31 | Increase | |||||||||
2014 | 2013 | |||||||||
Net sales | $ | 5,492 | $ | 5,310 | 3 | % | ||||
Gross profit | 1,634 | 1,575 | 4 | % | ||||||
Percent of net sales | 29.8 | % | 29.7 | % | ||||||
Income before income taxes | 453 | 400 | 13 | % | ||||||
Net income | $ | 441 | $ | 380 | 16 | % | ||||
Less net income for noncontrolling interests | (2 | ) | (2 | ) | ||||||
Net income attributable to Eaton ordinary shareholders | 439 | 378 | 16 | % | ||||||
Excluding acquisition integration charges and transaction costs (after-tax) | 44 | 22 | ||||||||
Operating earnings | $ | 483 | $ | 400 | 21 | % | ||||
Net income per ordinary share - diluted | $ | 0.92 | $ | 0.79 | 16 | % | ||||
Excluding per share impact of acquisition integration charges and transaction costs (after-tax) | 0.09 | 0.05 | ||||||||
Operating earnings per ordinary share | $ | 1.01 | $ | 0.84 | 20 | % |
Three months ended March 31 | Increase | |||||||||
2014 | 2013 | |||||||||
Net sales | $ | 1,726 | $ | 1,660 | 4 | % | ||||
Operating profit | 250 | 241 | 4 | % | ||||||
Operating margin | 14.5 | % | 14.5 | % | ||||||
Acquisition integration charges | $ | 29 | $ | 3 | ||||||
Before acquisition integration charges | ||||||||||
Operating profit | $ | 279 | $ | 244 | 14 | % | ||||
Operating margin | 16.2 | % | 14.7 | % |
Three months ended March 31 | Increase (decrease) | |||||||||
2014 | 2013 | |||||||||
Net sales | $ | 1,524 | $ | 1,521 | — | % | ||||
Operating profit | 169 | 210 | (20 | )% | ||||||
Operating margin | 11.1 | % | 13.8 | % | ||||||
Acquisition integration charges | $ | 26 | $ | 5 | ||||||
Before acquisition integration charges | ||||||||||
Operating profit | $ | 195 | $ | 215 | (9 | )% | ||||
Operating margin | 12.8 | % | 14.1 | % |
Three months ended March 31 | Increase | |||||||||
2014 | 2013 | |||||||||
Net sales | $ | 782 | $ | 756 | 3 | % | ||||
Operating profit | 108 | 78 | 38 | % | ||||||
Operating margin | 13.8 | % | 10.3 | % | ||||||
Acquisition integration charges | $ | 4 | $ | 12 | ||||||
Before acquisition integration charges | ||||||||||
Operating profit | $ | 112 | $ | 90 | 24 | % | ||||
Operating margin | 14.3 | % | 11.9 | % |
Three months ended March 31 | Increase (decrease) | |||||||||
2014 | 2013 | |||||||||
Net sales | $ | 464 | $ | 434 | 7 | % | ||||
Operating profit | 62 | 62 | — | % | ||||||
Operating margin | 13.4 | % | 14.3 | % |
Three months ended March 31 | Increase | |||||||||
2014 | 2013 | |||||||||
Net sales | $ | 996 | $ | 939 | 6 | % | ||||
Operating profit | 151 | 132 | 14 | % | ||||||
Operating margin | 15.2 | % | 14.1 | % |
Three months ended March 31 | Increase (decrease) | |||||||||
2014 | 2013 | |||||||||
Amortization of intangible assets | $ | 110 | $ | 107 | 3 | % | ||||
Interest expense - net | 62 | 75 | (17 | )% | ||||||
Pension and other postretirement benefits expense | 51 | 38 | 34 | % | ||||||
Inventory step-up adjustment | — | 33 | NM | |||||||
Other corporate expense - net | 64 | 70 | (9 | )% | ||||||
Total corporate expense | $ | 287 | $ | 323 | (11 | )% |
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. |
ITEM 4. | CONTROLS AND PROCEDURES. |
ITEM 1. | LEGAL PROCEEDINGS. |
ITEM 1A. | RISK FACTORS. |
ITEM 6. | EXHIBITS. |
EATON CORPORATION plc | ||||
Registrant | ||||
Date: | May 5, 2014 | By: | /s/ Richard H. Fearon | |
Richard H. Fearon | ||||
Principal Financial Officer | ||||
(On behalf of the registrant and as Principal Financial Officer) | ||||
3 (i) | Certificate of Incorporation - Incorporated by reference to the Form S-8 filed November 30, 2012 | ||
3 (ii) | Amended and restated Memorandum and Articles of Incorporation - Incorporated by reference to the Form 10-Q Report for the three months ended September 30, 2012 | ||
4 (a) | Pursuant to Regulation S-K Item 601(b)(4), Eaton agrees to furnish to the SEC, upon request, a copy of the instruments defining the rights of holders of its other long-term debt | ||
10.1 | Form of Restricted Share Unit Agreement — Filed in conjunction with this Form 10-Q Report * | ||
12 | Ratio of Earnings to Fixed Charges — Filed in conjunction with this Form 10-Q Report * | ||
31.1 | Certification of Principal Executive Officer (Pursuant to Rule 13a-14(a)) — Filed in conjunction with this Form 10-Q Report * | ||
31.2 | Certification of Principal Financial Officer (Pursuant to Rule 13a-14(a)) — Filed in conjunction with this Form 10-Q Report * | ||
32.1 | Certification of Principal Executive Officer (Pursuant to Rule 13a-14(b) as adopted pursuant to Section 906 of the Sarbanes-Oxley Act) — Filed in conjunction with this Form 10-Q Report * | ||
32.2 | Certification of Principal Financial Officer (Pursuant to Rule 13a-14(b) as adopted pursuant to Section 906 of the Sarbanes-Oxley Act) — Filed in conjunction with this Form 10-Q Report * | ||
101.INS | XBRL Instance Document * | ||
101.SCH | XBRL Taxonomy Extension Schema Document * | ||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document * | ||
101.DEF | XBRL Taxonomy Extension Label Definition Document * | ||
101.LAB | XBRL Taxonomy Extension Label Linkbase Document * | ||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document * |
* | Submitted electronically herewith. |
A. | The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 25% or more of either (i) the then outstanding Ordinary Shares of the Company (the “Outstanding Ordinary Shares”) or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that for purposes of this subsection, the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, or (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company; or |
B. | Individuals who, as of the date hereof, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least two-thirds of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or |
C. | Consummation by the Company of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company or the acquisition of assets of another corporation (a “Business Combination”), in each case, unless, following such Business |
D. | Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. |
Three months ended March 31 | Year ended December 31 | |||||||||||||||||||||||
(Millions of dollars) | 2014 | 2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||||
Income from continuing operations before income taxes and noncontrolling interests in consolidated subsidiaries | $ | 453 | $ | 1,884 | $ | 1,251 | $ | 1,553 | $ | 1,036 | $ | 303 | ||||||||||||
Adjustments | ||||||||||||||||||||||||
(Income) loss of equity investees | (2 | ) | 2 | (2 | ) | (2 | ) | (14 | ) | (6 | ) | |||||||||||||
Distributed income of equity investees | — | 77 | 19 | 3 | 15 | 9 | ||||||||||||||||||
Interest expensed | 67 | 290 | 165 | 154 | 162 | 170 | ||||||||||||||||||
Amortization of debt issue costs | 2 | 10 | 74 | 4 | 4 | 5 | ||||||||||||||||||
Estimated portion of rent expense representing interest | 21 | 80 | 66 | 65 | 57 | 59 | ||||||||||||||||||
Amortization of capitalized interest | 3 | 13 | 12 | 10 | 10 | 13 | ||||||||||||||||||
Adjusted income from continuing operations before income taxes | $ | 544 | $ | 2,356 | $ | 1,585 | $ | 1,787 | $ | 1,270 | $ | 553 | ||||||||||||
Fixed charges | ||||||||||||||||||||||||
Interest expensed | $ | 67 | $ | 290 | $ | 165 | $ | 154 | $ | 162 | $ | 170 | ||||||||||||
Interest capitalized | 3 | 11 | 23 | 18 | 8 | 7 | ||||||||||||||||||
Amortization of debt issue costs | 2 | 10 | 74 | 4 | 4 | 5 | ||||||||||||||||||
Estimated portion of rent expense representing interest | 21 | 80 | 66 | 65 | 57 | 59 | ||||||||||||||||||
Total fixed charges | $ | 93 | $ | 391 | $ | 328 | $ | 241 | $ | 231 | $ | 241 | ||||||||||||
Ratio of earnings to fixed charges | 5.85 | 6.03 | 4.83 | 7.41 | 5.50 | 2.29 |
1. | I have reviewed this quarterly report on Form 10-Q of Eaton Corporation plc; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: | May 5, 2014 | /s/ Alexander M. Cutler | |
Alexander M. Cutler | |||
Principal Executive Officer |
1. | I have reviewed this quarterly report on Form 10-Q of Eaton Corporation plc; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: | May 5, 2014 | /s/ Richard H. Fearon | |
Richard H. Fearon | |||
Principal Financial Officer |
Date: | May 5, 2014 | /s/ Alexander M. Cutler | |
Alexander M. Cutler | |||
Principal Executive Officer |
Date: | May 5, 2014 | /s/ Richard H. Fearon | |
Richard H. Fearon | |||
Principal Financial Officer |
Condensed Consolidating Financial Information Condensed Income Statement (Details) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | |
---|---|---|
Mar. 31, 2014
|
Mar. 31, 2013
|
|
Condensed Income Statements, Captions [Line Items] | ||
Net sales | $ 5,492 | $ 5,310 |
Cost of products sold | 3,858 | 3,735 |
Selling and administrative expense | 962 | 958 |
Research and development expense | 162 | 152 |
Interest expense (income) - net | 62 | 75 |
Other expense (income) - net | (5) | (10) |
Equity in (earnings) loss of subsidiaries, net of tax | 0 | 0 |
Intercompany expense (income) - net | 0 | 0 |
Income before income taxes | 453 | 400 |
Income tax (benefit) expense | 12 | 20 |
Net income | 441 | 380 |
Less net income for noncontrolling interests | (2) | (2) |
Net income attributable to Eaton ordinary shareholders | 439 | 378 |
Other comprehensive income (loss) | 3 | (235) |
Total comprehensive income attributable to Eaton ordinary shareholders | 442 | 143 |
Eaton Corporation plc [Member]
|
||
Condensed Income Statements, Captions [Line Items] | ||
Net sales | 0 | 0 |
Cost of products sold | 0 | 0 |
Selling and administrative expense | 2 | 2 |
Research and development expense | 0 | 0 |
Interest expense (income) - net | 0 | 0 |
Other expense (income) - net | 0 | 0 |
Equity in (earnings) loss of subsidiaries, net of tax | (469) | (444) |
Intercompany expense (income) - net | 28 | 64 |
Income before income taxes | 439 | 378 |
Income tax (benefit) expense | 0 | 0 |
Net income | 439 | 378 |
Less net income for noncontrolling interests | 0 | 0 |
Net income attributable to Eaton ordinary shareholders | 439 | 378 |
Other comprehensive income (loss) | 3 | (235) |
Total comprehensive income attributable to Eaton ordinary shareholders | 442 | 143 |
Eaton Corporation [Member]
|
||
Condensed Income Statements, Captions [Line Items] | ||
Net sales | 1,667 | 1,588 |
Cost of products sold | 1,342 | 1,239 |
Selling and administrative expense | 361 | 341 |
Research and development expense | 60 | 58 |
Interest expense (income) - net | 59 | 74 |
Other expense (income) - net | 5 | (5) |
Equity in (earnings) loss of subsidiaries, net of tax | (207) | (309) |
Intercompany expense (income) - net | (71) | (102) |
Income before income taxes | 118 | 292 |
Income tax (benefit) expense | (25) | (2) |
Net income | 143 | 294 |
Less net income for noncontrolling interests | 0 | 0 |
Net income attributable to Eaton ordinary shareholders | 143 | 294 |
Other comprehensive income (loss) | 28 | (22) |
Total comprehensive income attributable to Eaton ordinary shareholders | 171 | 272 |
Guarantors [Member]
|
||
Condensed Income Statements, Captions [Line Items] | ||
Net sales | 1,641 | 1,573 |
Cost of products sold | 1,218 | 1,195 |
Selling and administrative expense | 200 | 198 |
Research and development expense | 50 | 47 |
Interest expense (income) - net | 7 | 7 |
Other expense (income) - net | 3 | 8 |
Equity in (earnings) loss of subsidiaries, net of tax | (485) | (567) |
Intercompany expense (income) - net | 120 | 176 |
Income before income taxes | 528 | 509 |
Income tax (benefit) expense | (7) | (37) |
Net income | 535 | 546 |
Less net income for noncontrolling interests | 0 | 0 |
Net income attributable to Eaton ordinary shareholders | 535 | 546 |
Other comprehensive income (loss) | 23 | (233) |
Total comprehensive income attributable to Eaton ordinary shareholders | 558 | 313 |
Other subsidiaries [Member]
|
||
Condensed Income Statements, Captions [Line Items] | ||
Net sales | 3,291 | 3,273 |
Cost of products sold | 2,392 | 2,425 |
Selling and administrative expense | 399 | 417 |
Research and development expense | 52 | 47 |
Interest expense (income) - net | (6) | (6) |
Other expense (income) - net | (13) | (13) |
Equity in (earnings) loss of subsidiaries, net of tax | (201) | (166) |
Intercompany expense (income) - net | (77) | (138) |
Income before income taxes | 745 | 707 |
Income tax (benefit) expense | 49 | 59 |
Net income | 696 | 648 |
Less net income for noncontrolling interests | (2) | (2) |
Net income attributable to Eaton ordinary shareholders | 694 | 646 |
Other comprehensive income (loss) | (15) | (391) |
Total comprehensive income attributable to Eaton ordinary shareholders | 679 | 255 |
Consolidating adjustments [Member]
|
||
Condensed Income Statements, Captions [Line Items] | ||
Net sales | (1,107) | (1,124) |
Cost of products sold | (1,094) | (1,124) |
Selling and administrative expense | 0 | 0 |
Research and development expense | 0 | 0 |
Interest expense (income) - net | 2 | 0 |
Other expense (income) - net | 0 | 0 |
Equity in (earnings) loss of subsidiaries, net of tax | 1,362 | 1,486 |
Intercompany expense (income) - net | 0 | 0 |
Income before income taxes | (1,377) | (1,486) |
Income tax (benefit) expense | (5) | 0 |
Net income | (1,372) | (1,486) |
Less net income for noncontrolling interests | 0 | 0 |
Net income attributable to Eaton ordinary shareholders | (1,372) | (1,486) |
Other comprehensive income (loss) | (36) | 646 |
Total comprehensive income attributable to Eaton ordinary shareholders | $ (1,408) | $ (840) |
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