Eaton Corp plc

Previous wording

Eaton Corporation plc (Eaton or the Company) is an intelligent power management company dedicated to protecting the environment and improving the quality of life for people everywhere. We make products for the data center, utility, industrial, commercial, machine building, residential, aerospace and mobility markets. We are well positioned to capitalize on the megatrends of electrification, energy transition and digitalization. The reindustrialization of North America and Europe, growth in North American megaprojects, and increased global infrastructure spending focused on clean energy programs are expanding our end markets and positioning Eaton for growth for years to come. We are strengthening our participation across the entire electrical power value chain and benefiting from momentum in the data center and utility end markets as well as a growth cycle in the commercial aerospace and defense markets. We are guided by our commitment to operate sustainably and with the highest ethical standards. Our work is accelerating the planet’s transition to renewable energy sources, helping to solve the world’s most urgent power management challenges, and building a more sustainable society for people today and for future generations.

Current wording

Eaton Corporation plc (Eaton or the Company) is an intelligent power management company dedicated to protecting the environment and improving the quality of life for people everywhere. We make products for the data center, utility, industrial, commercial, machine building, residential, aerospace and mobility markets. We are capitalizing on the megatrends of the energy transition, electrification, and digitalization. The reindustrialization of and growth of megaprojects in North America and increased global infrastructure spending focused on clean energy programs are expanding our end markets and positioning Eaton for growth for years to come. We are strengthening our participation across the entire electrical power value chain and benefiting from momentum in the data center and utility end markets as well as a growth cycle in the commercial aerospace and defense markets. We are guided by our commitment to operate sustainably and with the highest ethical standards. Our work is accelerating the planet’s transition to renewable energy sources, helping to solve the world’s most urgent power management challenges, and building a more sustainable society for people today and for future generations.

Previous wording

Acquisition integration, divestiture charges and transaction costs (income) in 2024 and 2023 are primarily related to acquisitions completed prior to 2023, including other charges and income to acquire and exit businesses. 2024 also included the reduction in fair value of contingent future consideration from the Green Motion SA acquisition. These charges were included in Cost of products sold, Selling and administrative expense, Research and development expense, or Other income - net. In Business Segment Information in Note 16, the charges were included in Other expense - net.

Current wording

Acquisition integration, divestiture charges and transaction costs in 2025 are primarily related to the acquisitions of Fibrebond and Exertherm, transactions completed prior to 2023, and other charges to acquire and exit businesses. Acquisition integration, divestiture charges and transaction costs in 2024 are primarily related to acquisitions completed prior to 2023, and include other charges and income to acquire and exit businesses. These charges were included in Cost of products sold, Selling and administrative expense, Research and development expense, or Other income - net. In Business Segment Information in Note 14, the charges were included in Other expense - net.

Previous wording

During the first quarter of 2024, Eaton implemented a new multi-year restructuring program to accelerate opportunities to optimize its operations and global support structure. These actions will better align the Company's functions to support anticipated growth and drive greater effectiveness throughout the Company. Restructuring charges incurred under this program were $54 million in the third quarter and $132 million in the first nine months of 2024. This restructuring program is expected to be completed in 2026 and is expected to incur additional expenses related to workforce reductions of $198 million and plant closing and other costs of $45 million, resulting in total estimated charges of $375 million for the entire program. The Company expects mature year benefits of $325 million when the multi-year program is fully implemented.

Current wording

During the first quarter of 2024, Eaton implemented a multi-year restructuring program to accelerate opportunities to optimize its operations and global support structure. These actions will better align the Company's functions to support anticipated growth and drive greater effectiveness throughout the Company. Since the inception of the program, the Company has incurred charges of $220 million. This restructuring program is expected to be completed in 2026 and is expected to incur additional expenses related to workforce reductions of $171 million and plant closing and other costs of $84 million, resulting in total estimated charges of $475 million for the entire program. The Company expects mature year benefits of $375 million when the multi-year program is fully implemented.

Previous wording

Organic sales increased 8%in thethird quarter of 2024 due to strength in commercial & institutional end-markets in the Electrical Americas business segment, strength in data center and utility end-markets in the Electrical Americas and Electrical Global business segments, and strength in commercial OEM, commercial aftermarket, and military aftermarket in the Aerospace business segment, partially offset by weakness in industrial end-markets in the Electrical Americas business segment, weakness in the residential end-markets in the Electrical Americas and Electrical Global business segments, and weakness in the North American region in the Vehicle business segment.

Current wording

The increase in organic salesin thefirst quarter of 2025 was due to strength in data center and utility end-markets in the Electrical Americas and Electrical Global business segments, strength in machine OEM in the Electrical Global business segment, and strength in commercial aftermarket, military OEM, and military aftermarket in the Aerospace business segment, partially offset by weakness in industrial and residential end-markets in the Electrical Americas business segment.

Previous wording

Gross profit margin increased from 37.3% in the third quarter of 2023 to 38.6% in the third quarter of 2024. Material factors affecting this increase were a 270 basis point increase from higher sales and a 160 basis point increase from operating efficiencies, partially offset by a 120 basis point decline from higher commodity and wage inflation and a 110 basis point decline from higher costs to support growth initiatives.

Current wording

Gross profit margin increased from 37.3% in the first quarter of 2024 to 38.4% in the first quarter of 2025. Material factors affecting this increase were a 190 basis point increase from higher sales and a 140 basis point increase from operating efficiencies, partially offset by a 170 basis point decline from commodity and wage inflation and a 70 basis point decline from unfavorable product mix.

Previous wording

The effective income tax rate for the third quarter of 2024 was expense of 16.1% compared to expense of 17.3% for the third quarter of 2023. The decrease in the effective tax rate in the third quarter of 2024 was due to the reduction of a valuation allowance on a foreign tax attribute, partially offset by greater levels of income in higher tax jurisdictions. The effective income tax rate for the first nine months of 2024 was expense of 16.8% compared to expense of 16.9% for the first nine months of 2023. The decrease in the effective tax rate in the first nine months of 2024 was due to a larger impact from the excess tax benefits recognized for employee share-based payments and the reduction of valuation allowances on foreign tax attributes, partially offset by greater levels of income in higher tax jurisdictions.

Current wording

The effective income tax rate for the first quarter of 2025 was expense of 18.0% compared to expense of 17.9% for the first quarter of 2024.

Previous wording

The increase in organic sales in the third quarter of 2024 was due to strength in data center, commercial & institutional, and utility end-markets, partially offset by weakness in industrial and residential end-markets. The increase in organic sales in the first nine months of 2024 was due to strength in data center and commercial & institutional end-markets, partially offset by weakness in residential end-markets.

Current wording

The increase in organic sales in the first quarter of 2025 was due to strength in data center and utility end-markets, partially offset by weakness in industrial and residential end-markets.

Previous wording

The increase in organic sales in the third quarter and first nine months of 2024 was due to strength in data center and utility end-markets, partially offset by weakness in residential end-markets. Additionally, the increase in organic sales in the third quarter of 2024 was due to strength in the European and Asia Pacific regions, partially offset by weakness in the Global Energy Infrastructure Solutions (GEIS) business, and the increase in organic sales in the first nine months of 2024 was due to strength in the Asia Pacific region.

Current wording

The increase in organic sales in the first quarter of 2025 was due to strength in data center, machine OEM, and utility end-markets. Additionally, the increase in organic sales was due to strength in the European and Asia Pacific regions.

Previous wording

The decrease in organic sales in the third quarter and first nine months of 2024 was due to weakness in the North American and European regions, partially offset by strength in the South American region.

Current wording

The decrease in organic sales in the first quarter of 2025 was due to weakness in the North American truck and light vehicle markets.

Previous wording

Despite OEM delays in electric vehicle rollouts due to weaker than expected customer demand, organic sales increased in the third quarter and first nine months of 2024 due to strength in the European region, partially offset by weakness in the North American region.

Current wording

The increase in organic sales in the in the first quarter of 2025 was due to strength in the European region, partially offset by weakness in the North American region.

Previous wording

The operating margin increased from 24.1% in the third quarter of 2023 to 24.4% in the third quarter of 2024. Material factors affecting this increase were a 450 basis point increase from higher sales and a 220 basis point increase from operating efficiencies, partially offset by a 410 basis point decline from higher costs to support growth initiatives and a 260 basis point decline from higher commodity and wage inflation. The operating margin was flat at 23.0% in both the first nine months of 2024 and 2023. Material factors affecting the operating margin were a 450 basis point increase from higher sales and a 90 basis point increase from the sale of a production facility in the first quarter of 2024, partially offset by a 260 basis point decline from higher commodity and wage inflation and a 240 basis point decline from higher costs to support growth initiatives.

Current wording

The operating margin was flat at negative 2.7% in both the first quarter of 2025 and 2024. Material factors affecting the operating margin were a 690 basis point increase from operating efficiencies, a 300 basis point increase from higher sales and a 190 basis point increase from favorable product mix, partially offset by a 450 basis point decline from higher commodity and wage inflation, a 330 basis point decline from the sale of non-production facilities in the first quarter of 2024, and a 330 basis point decline from higher costs to support growth initiatives.

Previous wording

On September 30, 2024, the Company replaced its existing $500 million 364-day revolving credit facility with a new $500 million 364-day revolving credit facility that will expire on September 29, 2025. The Company also has a $2,500 million five-year revolving credit facility that will expire on October 1, 2027. The revolving credit facilities totaling $3,000 million are used to support commercial paper borrowings and are fully and unconditionally guaranteed by Eaton and certain of its direct and indirect subsidiaries on an unsubordinated, unsecured basis. There were no borrowings outstanding under Eaton’s revolving credit facilities at September 30, 2024. The Company maintains access to the commercial paper markets through its $3,000 million commercial paper program, of which none was outstanding on September 30, 2024.

Current wording

The Company maintains revolving credit facilities consisting of a $500 million 364-day revolving credit facility that will expire on September 29, 2025 and a $2,500 million five-year revolving credit facility that will expire on October 1, 2027. The revolving credit facilities totaling $3,000 million are used to support commercial paper borrowings and are fully and unconditionally guaranteed by Eaton and certain of its direct and indirect subsidiaries on an unsubordinated, unsecured basis. There were no borrowings outstanding under Eaton’s revolving credit facilities at March 31, 2025. The Company maintains access to the commercial paper markets through its $3,000 million commercial paper program, of which $800 million was outstanding on March 31, 2025, used primarily with funding the acquisition of Fibrebond Corporation.

Previous wording

Over the course of a year, cash, short-term investments, and short-term debt may fluctuate in order to manage global liquidity. As of September 30, 2024 and December 31, 2023, Eaton had cash of $473 million and $488 million, short-term investments of $1,521 million and $2,121 million, and short-term debt of $3 million and $8 million, respectively. Eaton believes it has the operating flexibility, cash flow, cash and short-term investment balances, availability under existing revolving credit facilities, and access to capital markets in excess of the liquidity necessary to meet future operating needs of the business, fund capital expenditures and acquisitions of businesses, as well as scheduled payments of long-term debt.

Current wording

Over the course of a year, cash, short-term investments, and short-term debt may fluctuate in order to manage global liquidity. As of March 31, 2025 and December 31, 2024, Eaton had cash of $1,777 million and $555 million, short-term investments of $162 million and $1,525 million, respectively, with $805 million short-term debt as of March 31, 2025 and no short-term debt as of December 31, 2024. Eaton believes it has the operating flexibility, cash flow, cash and short-term investment balances, availability under existing revolving credit facilities, and access to capital markets in excess of the liquidity necessary to meet future operating needs of the business, fund capital expenditures and acquisitions of businesses, as well as scheduled payments of long-term debt.

Previous wording

Net cash provided by operating activities increased by $404 million in the first nine months of 2024 compared to 2023. Material factors affecting this increase were higher net income of $550 million, partially offset by higher working capital balances of $221 million.

Current wording

Net cash provided by operating activities decreased by $237 million in the first three months of 2025 compared to 2024. Material factors affecting this decrease were higher working capital balances of $389 million, partially offset by higher net income of $143 million.

Previous wording

Net cash used in financing activities increased by $2,185 million in the first nine months of 2024 compared to 2023. Material factors affecting this increase were an increase in repurchase of shares to $1,615 million in 2024 compared to no repurchase of shares in 2023, and an increase in payments on borrowings to $1,011 million in 2024 from $11 million in 2023, partially offset by an increase in proceeds from borrowings to $1,084 million in 2024 from $818 million in 2023 and a decrease in net payments of short-term debt to $6 million in 2024 from $295 million in 2023.

Current wording

Net cash used in financing activities decreased by $292 million in the first three months of 2025 compared to 2024. Material factors affecting this decrease were net proceeds of short-term debt of $805 million in 2025 compared to net payments of short-term debt of $7 million in 2024, partially offset by an increase in repurchase of shares to $615 million in 2025 from $138 million in 2024.

Previous wording

Capital expenditures were $553 million and $514 million in the first nine months of 2024 and 2023, respectively. The Company plans to increase capital expenditures over the next five years to expand production capacity across various markets to support anticipated growth. As a result, Eaton expects approximately $800 million in capital expenditures in 2024.

Current wording

Capital expenditures were $147 million and $183 million in the first three months of 2025 and 2024, respectively. The Company plans to increase capital expenditures over the next several years to expand production capacity across various markets to support anticipated growth. As a result, Eaton expects approximately $900 million in capital expenditures in 2025.

Previous wording

Cash dividend payments were $1,130 million and $1,035 million in the first nine months of 2024 and 2023, respectively. Payment of quarterly dividends in the future depends upon the Company’s ability to generate net income and operating cash flows, among other factors, and is subject to declaration by the Eaton Board of Directors. The Company intends to continue to pay quarterly dividends in 2024.

Current wording

Cash dividend payments were $397 million and $368 million in the first three months of 2025 and 2024, respectively. Payment of quarterly dividends in the future depends upon the Company’s ability to generate net income and operating cash flows, among other factors, and is subject to declaration by the Eaton Board of Directors. The Company intends to continue to pay quarterly dividends in 2025.

Previous wording

On February 27, 2019, the Board of Directors adopted a share repurchase program for share repurchases up to $5.0 billion of ordinary shares (2019 Program). On February 23, 2022, the Board renewed the 2019 Program by providing authority for up to $5.0 billion in repurchases to be made during the three-year period commencing on that date (2022 Program). Under the 2022 Program, the ordinary shares are expected to be repurchased over time, depending on market conditions, the market price of ordinary shares, capital levels, and other considerations. During the three and nine months ended September 30, 2024, 3.0 million and 5.3 million ordinary shares, respectively, were repurchased under the 2022 program in the open market at a total cost of $891 million and $1,629 million, respectively. During the three and nine months ended September 30, 2023, no ordinary shares were repurchased. The Company will continue to pursue share repurchases in 2024 depending on market conditions and capital levels.

Current wording

On February 23, 2022, the Board of Directors adopted a share repurchase program for repurchases of ordinary shares up to $5.0 billion to be made during the three-year period commencing on that date (2022 Program). On February 27, 2025, the Board of Directors renewed the 2022 Program by providing authority for up to $9.0 billion in repurchases to be made during the three-year period commencing on that date (2025 Program). Under the 2025 Program, the ordinary shares are expected to be repurchased over time, depending on market conditions, the market price of ordinary shares, capital levels, and other considerations. During the three months ended March 31, 2025, 1.9 million ordinary shares were repurchased under the 2025 and 2022 Programs in the open market at a total cost of $608 million. During the three months ended March 31, 2024, 0.5 million ordinary shares were repurchased under the 2022 program in the open market at a total cost of $138 million. The Company will continue to pursue share repurchases in 2025 depending on market conditions and capital levels.

Previous wording

The Company paid cash of $50 million to acquire a business in the first nine months of 2024. There were no business acquisitions in the first nine months of 2023. The Company paid cash of $68 million for investments in associate companies in the first nine months of 2024 and 2023. The Company will continue to focus on deploying its capital toward businesses that provide opportunities for higher growth and strong returns, and align with secular trends and its power management strategies.

Current wording

There were no business acquisitions in the first three months of 2025 and 2024. The Company paid cash of $13 million for investments in associate companies in the first three months of 2025. There were no investments in associate companies in the first three months 2024. The Company will continue to focus on deploying its capital toward businesses that provide opportunities for higher growth and strong returns, and align with secular trends and its power management strategies. On April 1, 2025, Eaton acquired Fibrebond Corporation for $1.45 billion, net of cash acquired.

Previous wording

The Company manages a number of short-term and long-term debt instruments, including commercial paper. At September 30, 2024, the Company had Short-term debt of $3 million, Current portion of long-term debt of $714 million, and Long-term debt of $8,678 million. The Company believes it has the operating flexibility, cash flow, and access to capital markets to meet scheduled payments of long-term debt.

Current wording

The Company manages a number of short-term and long-term debt instruments, including commercial paper. At March 31, 2025, the Company had Short-term debt of $805 million, Current portion of long-term debt of $1,666 million, and Long-term debt of $7,609 million. The Company believes it has the operating flexibility, cash flow, and access to capital markets to meet scheduled payments of long-term debt.

Previous wording

This Form 10-Q Report contains forward-looking statements concerning litigation, expected capital deployment, expected capital expenditures, future dividend payments, anticipated share repurchases, future impact from Hurricane Helene and labor strikes, and expected restructuring program charges and benefits. These statements may discuss goals, intentions and expectations as to future trends, plans, events, results of operations or financial condition, or state other information relating to Eaton, based on current beliefs of management as well as assumptions made by, and information currently available to, management. Forward-looking statements generally will be accompanied by words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “guidance,” “intend,” “may,” “possible,” “potential,” “predict,” “project” or other similar words, phrases or expressions. These statements should be used with caution and are subject to various risks and uncertainties, many of which are outside Eaton’s control. The following factors could cause actual results to differ materially from those in the forward-looking statements: global pandemics such as COVID-19; unanticipated changes in the markets for the Company’s business segments; unanticipated downturns in business relationships with customers or their purchases from us; the availability of credit to customers and suppliers; supply chain disruptions, competitive pressures on sales and pricing; unanticipated changes in the cost of material, labor and other production costs, or unexpected costs that cannot be recouped in product pricing; the introduction of competing technologies; unexpected technical or marketing difficulties; unexpected claims, charges, litigation or dispute resolutions; strikes or other labor unrest at Eaton or at our customers or suppliers; the impact of acquisitions and divestitures; unanticipated difficulties integrating acquisitions; new laws and governmental regulations; interest rate changes; tax rate changes or exposure to additional income tax liability; stock market and currency fluctuations; war, geopolitical tensions, natural disasters, civil or political unrest or terrorism; and unanticipated deterioration of economic and financial conditions in the United States and around the world. Eaton does not assume any obligation to update these forward-looking statements.

Current wording

This Form 10-Q Report contains forward-looking statements concerning litigation, expected capital expenditures, future dividend payments, anticipated share repurchases, liquidity, and expected restructuring program charges and benefits. These statements may discuss goals, intentions and expectations as to future trends, plans, events, results of operations or financial condition, or state other information relating to Eaton, based on current beliefs of management as well as assumptions made by, and information currently available to, management. Forward-looking statements generally will be accompanied by words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “guidance,” “intend,” “may,” “possible,” “potential,” “predict,” “project” or other similar words, phrases or expressions. These statements should be used with caution and are subject to various risks and uncertainties, many of which are outside Eaton’s control. The following factors could cause actual results to differ materially from those in the forward-looking statements: global pandemics; unanticipated changes in the markets for the Company’s business segments; unanticipated downturns in business relationships with customers or their purchases from us; the availability of credit to customers and suppliers; supply chain disruptions, competitive pressures on sales and pricing; unanticipated changes in the cost of material, labor and other production costs, or unexpected costs that cannot be recouped in product pricing; the introduction of disruptive or competing technologies; unexpected technical or marketing difficulties; unexpected or adverse determinations with respect to claims, charges, audits, investigations, court or administrative proceedings, litigation, arbitrations, judgements, or dispute resolutions; strikes or other labor unrest at Eaton or at our customers or suppliers; the impact of acquisitions and divestitures unanticipated difficulties integrating acquisitions; the effect, interpretation, or application of new or existing laws, regulations, legal proceedings or accounting pronouncements, tariffs and governmental regulations; interest rate changes; tax rate changes or exposure to additional income tax liability; stock market and currency fluctuations; war, geopolitical tensions, natural disasters, civil or political unrest or terrorism; and unanticipated deterioration of economic and financial conditions in the United States and around the world. Eaton does not assume any obligation to update these forward-looking statements.