8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 1, 2023

EATON CORPORATION plc
(Exact name of registrant as specified in its charter)
Ireland	000-54863	98-1059235
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

Eaton House, 30 Pembroke Road, Dublin 4, Ireland	D04 Y0C2
(Address of principal executive offices)	(Zip Code)

	+353 1637 2900
(Registrant’s telephone number, including area code)

Not applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐   Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐   Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐   Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
Ordinary shares ($0.01 par value)	ETN	New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934.

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Section 2 – Financial Information

Item 2.02 Results of Operations and Financial Condition

On August 1, 2023, Eaton Corporation plc issued a press release announcing financial results for the quarter ended June 30, 2023. A copy of this press release is attached hereto as Exhibit 99.

Section 9 – Financial Statements and Exhibits

Item 9.01 Financial Statements and Exhibits

(d) Exhibits:

99	Press release for quarter ended June 30, 2023 furnished herewith.
104	Cover Page Interactive Data File (embedded within the Inline XBRL document)

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

			Eaton Corporation plc
Date:	August 1, 2023	By:	/s/ Daniel R. Hopgood
			Daniel R. Hopgood
			Senior Vice President and Controller

EX-99

Exhibit 99

Eaton Reports Record Quarterly Results With 23% Backlog Growth and 1.2 Book-to-Bill Ratio

• Record second quarter earnings per share of $1.86 and record quarterly adjusted earnings per share of $2.21, up 18% over 2022

• 13% organic sales growth, above the high end of guidance, record quarterly segment margins of 21.6%, 150 basis points above the second quarter of 2022 and a 33% incremental margin

• Robust operating cash flow of $851 million, up 150%, and free cash flow of $691 million, up 244% versus prior year

• Raised adjusted earnings per share guidance midpoint to $8.75 reflecting 16% growth over 2022

DUBLIN--(BUSINESS WIRE)--August 1, 2023--Intelligent power management company Eaton Corporation plc (NYSE:ETN) today announced that earnings per share were $1.86 for the second quarter of 2023. Excluding charges of $0.21 per share related to intangible amortization, $0.08 per share related to acquisitions and divestitures, and $0.06 per share related to a multi-year restructuring program, adjusted earnings per share of $2.21 were a quarterly record and up 18% over the second quarter of 2022.

Sales in the quarter were $5.9 billion, a quarterly record and up 13% from the second quarter of 2022, driven entirely by organic sales growth.

Segment margins were 21.6%, a quarterly record and a 150-basis point improvement over the second quarter of 2022.

Operating cash flow in the quarter was $851 million and free cash flow was $691 million, up $511 million and $490 million, respectively, over the same period in 2022 and in-line with full year targets.

The company raised its full year adjusted earnings per share guidance to between $8.65 and $8.85, up $0.35 at the midpoint. For the third quarter of 2023, the company anticipates organic growth of 9-11% and adjusted earnings per share of between $2.27 and $2.37.

Craig Arnold, Eaton chairman and chief executive officer, said, "Achieving quarterly record adjusted earnings marked the end of a very strong first half of the year. Demand across our markets continues to be strong, propelling backlogs to record levels. We’re confident we can achieve our increased guidance for the year and that we remain well positioned to capitalize on reindustrialization in North America and Europe as well as the secular growth drivers of electrification, energy transition and digitalization."

Business Segment Results

Sales for the Electrical Americas segment were a record $2.5 billion, up 19% from the second quarter of 2022, driven entirely by organic sales growth. Operating profits were a record $669 million, up 35% over the second quarter of 2022. Operating margins in the quarter were a record 26.4%, up 320 basis points over the second quarter of 2022.

The twelve-month rolling average of orders in the second quarter was up 7% organically, with particular strength in data center and distributed IT, industrial facilities, and commercial and institutional markets. Backlog at the end of June was up 30% organically over June 2022.

Sales for the Electrical Global segment were a record $1.6 billion, up 5% from the second quarter of 2022. Organic sales were up 6%, partially offset by the impact of a small divestiture. Operating profits were $290 million, a second quarter record and up 3% over the second quarter of 2022. Operating margins in the quarter were 18.5%, down 40 basis points over the second quarter of 2022.

The twelve-month rolling average of orders in the second quarter was up 1% organically, with strength in utility and data center and distributed IT markets.

On a rolling twelve-month basis, book-to-bill ratio for the Electrical businesses remains very strong at 1.2.

Aerospace segment sales were a record $848 million, up 14% from the second quarter of 2022, driven entirely by organic sales growth. Operating profits were $191 million, a second quarter record and up 17% from the second quarter of 2022. Operating margins in the quarter were 22.5%, up 60 basis points over the second quarter of 2022.

The twelve-month rolling average of orders in the second quarter was up 26% organically with particular strength in defense OEM and commercial and defense aftermarket. Backlog at the end of June was up 26% over June 2022. On a rolling twelve-month basis, book-to-bill ratio for the Aerospace segment remains very strong at 1.2.

The Vehicle segment posted sales of $751 million, up 6% from the second quarter of 2022, driven entirely by organic sales growth. Operating profits were $115 million, up 6% over the second quarter of 2022. Operating margins in the quarter were 15.3%, flat to the second quarter of 2022.

eMobility segment sales were a record $161 million, up 18% over the second quarter of 2022, driven entirely by organic sales growth. The segment recorded an operating loss of $1 million with a 100-basis point improvement over the second quarter of 2022 driven by higher volumes, partially offset by wage and commodity inflation.

Eaton is an intelligent power management company dedicated to improving the quality of life and protecting the environment for people everywhere. We are guided by our commitment to do business right, to operate sustainably and to help our customers manage power ─ today and well into the future. By capitalizing on the global growth trends of electrification and digitalization, we’re accelerating the planet’s transition to renewable energy, helping to solve the world’s most urgent power management challenges, and doing what’s best for our stakeholders and all of society.

Founded in 1911, Eaton is marking its 100th anniversary of being listed on the New York Stock Exchange. We reported revenues of $20.8 billion in 2022 and serve customers in more than 170 countries. For more information, visit www.eaton.com. Follow us on Twitter and LinkedIn.

Notice of conference call: Eaton’s conference call to discuss its second quarter results is available to all interested parties today as a live audio webcast at 11 a.m. United States Eastern time via a link on Eaton’s home page. This news release can be accessed under its headline on the home page. Also available on the website before the call will be a presentation on second quarter results, which will be covered during the call.

This news release contains forward-looking statements concerning third quarter and full year 2023 adjusted earnings per share, third quarter 2023 organic sales growth, and anticipated restructuring program charges and savings. These statements should be used with caution and are subject to various risks and uncertainties, many of which are outside the company’s control. The following factors could cause actual results to differ materially from those in the forward-looking statements: the course of the COVID-19 pandemic globally and government actions related thereto; geopolitical tensions, unanticipated changes in the markets for the company’s business segments; unanticipated downturns in business relationships with customers or their purchases from us; competitive pressures on sales and pricing; supply chain disruptions, 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; natural disasters; the performance of recent acquisitions; unanticipated difficulties completing or integrating acquisitions; new laws and governmental regulations; interest rate changes; changes in tax laws or tax regulations; stock market and currency fluctuations; and unanticipated deterioration of economic and financial conditions in the United States and around the world. We do not assume any obligation to update these forward-looking statements.

Financial Results

The company’s comparative financial results for the three months ended June 30, 2023, are available on the company’s website, www.eaton.com.

EATON CORPORATION plc
CONSOLIDATED STATEMENTS OF INCOME
	Three months ended June 30						Six months ended June 30
(In millions except for per share data)	2023			2022			2023			2022
Net sales	$	5,866		$	5,212		$	11,349		$	10,054
Cost of products sold		3,747			3,505			7,346			6,774
Selling and administrative expense		986			828			1,890			1,618
Research and development expense		187			168			366			333
Interest expense - net		42			31			91			63
Gain on sale of business		—			—			—			24
Other expense (income) - net		7			(41	)		(4	)		(50	)
Income before income taxes		898			720			1,660			1,339
Income tax expense		153			119			276			205
Net income		745			601			1,384			1,135
Less net income for noncontrolling interests		(1	)		—			(3	)		(1	)
Net income attributable to Eaton ordinary shareholders	$	744		$	601		$	1,382		$	1,133
Net income per share attributable to Eaton ordinary shareholders
Diluted	$	1.86		$	1.50		$	3.45		$	2.82
Basic		1.86			1.51			3.47			2.84
Weighted-average number of ordinary shares outstanding
Diluted		400.7			400.7			400.6			401.2
Basic		398.9			399.0			398.7			399.1
Cash dividends declared per ordinary share	$	0.86		$	0.81		$	1.72		$	1.62
Reconciliation of net income attributable to Eaton ordinary shareholders to adjusted earnings
Net income attributable to Eaton ordinary shareholders	$	744		$	601		$	1,382		$	1,133
Excluding acquisition and divestiture charges, after-tax		30			44			41			47
Excluding restructuring program charges, after-tax		24			8			31			22
Excluding intangible asset amortization expense, after-tax		88			99			186			198
Adjusted earnings	$	886		$	751		$	1,639		$	1,400
Net income per share attributable to Eaton ordinary shareholders - diluted	$	1.86		$	1.50		$	3.45		$	2.82
Excluding per share impact of acquisition and divestiture charges, after-tax		0.08			0.11			0.10			0.12
Excluding per share impact of restructuring program charges, after-tax		0.06			0.02			0.08			0.05
Excluding per share impact of intangible asset amortization expense, after-tax		0.21			0.24			0.46			0.50
Adjusted earnings per ordinary share	$	2.21		$	1.87		$	4.09		$	3.49
See accompanying notes.

EATON CORPORATION plc
BUSINESS SEGMENT INFORMATION
	Three months ended June 30						Six months ended June 30
(In millions)	2023			2022			2023			2022
Net sales
Electrical Americas	$	2,538		$	2,131		$	4,832		$	4,022
Electrical Global		1,569			1,495			3,069			2,932
Aerospace		848			742			1,650			1,459
Vehicle		751			708			1,490			1,379
eMobility		161			136			308			262
Total net sales	$	5,866		$	5,212		$	11,349		$	10,054
Segment operating profit (loss)
Electrical Americas	$	669		$	495		$	1,194		$	857
Electrical Global		290			282			564			561
Aerospace		191			163			371			321
Vehicle		115			108			222			221
eMobility		(1	)		(2	)		(5	)		(5	)
Total segment operating profit		1,264			1,046			2,346			1,955
Corporate
Intangible asset amortization expense		(113	)		(122	)		(237	)		(250	)
Interest expense - net		(42	)		(31	)		(91	)		(63	)
Pension and other postretirement benefits income		11			9			22			28
Restructuring program charges		(29	)		(10	)		(39	)		(28	)
Other expense - net		(192	)		(171	)		(340	)		(302	)
Income before income taxes		898			720			1,660			1,339
Income tax expense		153			119			276			205
Net income		745			601			1,384			1,135
Less net income for noncontrolling interests		(1	)		—			(3	)		(1	)
Net income attributable to Eaton ordinary shareholders	$	744		$	601		$	1,382		$	1,133
See accompanying notes.

EATON CORPORATION plc
CONDENSED CONSOLIDATED BALANCE SHEETS
	June 30,		December 31,
(In millions)	2023		2022
Assets
Current assets
Cash	$	353	$	294
Short-term investments		977		261
Accounts receivable - net		4,399		4,076
Inventory		3,670		3,430
Prepaid expenses and other current assets		904		685
Total current assets		10,303		8,746
Property, plant and equipment - net		3,267		3,146
Other noncurrent assets
Goodwill		14,914		14,796
Other intangible assets		5,285		5,485
Operating lease assets		594		570
Deferred income taxes		354		330
Other assets		2,056		1,940
Total assets	$	36,772	$	35,014
Liabilities and shareholders’ equity
Current liabilities
Short-term debt	$	94	$	324
Current portion of long-term debt		402		10
Accounts payable		3,192		3,072
Accrued compensation		465		467
Other current liabilities		2,571		2,488
Total current liabilities		6,725		6,360
Noncurrent liabilities
Long-term debt		8,804		8,321
Pension liabilities		642		649
Other postretirement benefits liabilities		173		177
Operating lease liabilities		482		459
Deferred income taxes		531		530
Other noncurrent liabilities		1,428		1,444
Total noncurrent liabilities		12,060		11,580
Shareholders’ equity
Eaton shareholders’ equity		17,953		17,038
Noncontrolling interests		36		38
Total equity		17,988		17,075
Total liabilities and equity	$	36,772	$	35,014
See accompanying notes.

EATON CORPORATION plc
NOTES TO THE SECOND QUARTER 2023 EARNINGS RELEASE

Amounts are in millions of dollars unless indicated otherwise (per share data assume dilution). Columns and rows may not add and the sum of components may not equal total amounts reported due to rounding.

Note 1. NON-GAAP FINANCIAL INFORMATION

This earnings release includes certain non-GAAP financial measures. These financial measures include adjusted earnings, adjusted earnings per ordinary share, and free cash flow, each of which differs from the most directly comparable measure calculated in accordance with generally accepted accounting principles (GAAP). A reconciliation of each of these financial measures to the most directly comparable GAAP measure is included in this earnings release. Management believes that these financial measures are useful to investors because they provide additional meaningful financial information that should be considered when assessing our business performance and trends, and they allow investors to more easily compare Eaton Corporation plc's (Eaton or the Company) financial performance period to period. Management uses this information in monitoring and evaluating the on-going performance of Eaton and each business segment.

The Company's third quarter and full year adjusted earnings guidance for 2023 is as follows:

	Three months ended September 30, 2023	Year ended December 31, 2023
Net income per share attributable to Eaton ordinary shareholders - diluted	$2.00 - $2.10	$7.46 - $7.66
Excluding per share impact of acquisition and divestiture charges, after tax	0.05	0.20
Excluding per share impact of restructuring program charges, after tax	0.02	0.11
Excluding per share impact of intangible asset amortization expense, after tax	0.20	0.88
Adjusted earnings per ordinary share	$2.27 - $2.37	$8.65 - $8.85

A reconciliation of net income attributable to Eaton ordinary shareholders per share to adjusted earnings per ordinary share is as follows:

	Year ended December 31, 2022
Net income per share attributable to Eaton ordinary shareholders - diluted	$	6.14
Excluding per share impact of acquisition and divestiture charges, after tax		0.37
Excluding per share impact of restructuring program charges, after tax		0.07
Excluding per share impact of intangible asset amortization expense, after tax		0.99
Adjusted earnings per ordinary share	$	7.57

A reconciliation of operating cash flow to free cash flow is as follows:

	Three months ended June 30
(In millions)	2023			2022
Operating cash flow	$	851		$	340
Capital expenditures for property, plant and equipment		(160	)		(139	)
Free cash flow	$	691		$	201

Note 2. ACQUISITIONS AND DIVESTITURE OF BUSINESSES

Acquisition of a 49% stake in Jiangsu Ryan Electrical Co. Ltd.

On April 23, 2023, Eaton acquired a 49 percent stake in Jiangsu Ryan Electrical Co. Ltd., a manufacturer of power distribution and sub-transmission transformers in China. Eaton accounts for this investment on the equity method of accounting and is reported within the Electrical Global business segment.

Acquisition of a 50% stake in Jiangsu Huineng Electric Co., Ltd’s circuit breaker business

On July 1, 2022, Eaton acquired a 50 percent stake in Jiangsu Huineng Electric Co., Ltd’s circuit breaker business, which manufactures and markets low-voltage circuit breakers in China. Eaton accounts for this investment on the equity method of accounting and is reported within the Electrical Global business segment.

Russia

During the second quarter of 2022, in light of the ongoing war with Ukraine, the Company decided to exit its business operations in Russia and recorded charges of $29 million presented in Other expense (income) - net on the Consolidated Statements of Income. The charges consisted primarily of write-downs of accounts receivable, inventory and other assets, and accruals for severance.

Acquisition of Royal Power Solutions

On January 5, 2022, Eaton acquired Royal Power Solutions for $610 million, net of cash received. Royal Power Solutions is a U.S. based manufacturer of high-precision electrical connectivity components used in electric vehicle, energy management, industrial and mobility markets. Royal Power Solutions is reported within the eMobility business segment.

Sale of Hydraulics business

On August 2, 2021, Eaton completed the sale of the Hydraulics business to Danfoss A/S and recognized a pre-tax gain of $617 million in 2021. The Company finalized negotiations of post-closing adjustments with Danfoss A/S and recognized an additional pre-tax gain of $24 million in the first quarter of 2022 and received cash of $22 million in the second quarter of 2022 from Danfoss A/S to fully settle all post-closing adjustments.

Note 3. ACQUISITION AND DIVESTITURE CHARGES

Eaton incurs integration charges and transaction costs to acquire and integrate businesses, and transaction, separation and other costs to divest and exit businesses. Eaton also recognizes gains and losses on the sale of businesses. A summary of these Corporate items is as follows:

	Three months ended June 30				Six months ended June 30
(In millions except for per share data)	2023		2022		2023		2022
Acquisition integration, divestiture charges and transaction costs	$	38	$	51	$	51	$	79
Gain on the sale of the Hydraulics business		—		—		—		(24	)
Total before income taxes		38		51		51		55
Income tax benefit		7		7		10		8
Total after income taxes	$	30	$	44	$	41	$	47
Per ordinary share - diluted	$	0.08	$	0.11	$	0.10	$	0.12

Acquisition integration, divestiture charges and transaction costs in 2023 and 2022 are related to the acquisition of Royal Power Solutions and other acquisitions completed prior to 2022, including other charges and income to acquire and exit businesses. Costs in 2023 also included certain indemnity claims associated with the sale of 50% interest in the commercial vehicle automated transmission business in 2017. Costs in 2022 also included charges of $29 million presented in Other expense (income) - net on the Consolidated Statements of Income related to the decision in the second quarter of 2022 to exit the Company's business operations in Russia. These charges consisted primarily of write-downs of accounts receivable, inventory and other assets, and accruals for severance. These charges were included in Cost of products sold, Selling and administrative expense, Research and development expense, or Other expense (income) - net. In Business Segment Information, the charges were included in Other expense - net.

Note 4. RESTRUCTURING CHARGES

In the second quarter of 2020, Eaton initiated a multi-year restructuring program to reduce its cost structure and gain efficiencies in its business segments and at corporate in order to initially respond to declining market conditions brought on by the COVID-19 pandemic. Since the inception of the program, the Company has incurred charges of $364 million. These restructuring activities are expected to be completed in 2023 with total estimated charges of $380 million cumulatively for the entire program and projected mature year savings of $265 million when fully implemented. The remaining charges in 2023 are expected to relate primarily to plant closing and other costs.

A summary of restructuring program charges is as follows:

	Three months ended June 30				Six months ended June 30
(In millions except for per share data)	2023		2022		2023		2022
Workforce reductions	$	15	$	2	$	17	$	7
Plant closing and other		15		8		22		21
Total before income taxes		29		10		39		28
Income tax benefit		6		2		8		6
Total after income taxes	$	24	$	8	$	31	$	22
Per ordinary share - diluted	$	0.06	$	0.02	$	0.08	$	0.05

Restructuring program charges related to the following segments:

	Three months ended June 30				Six months ended June 30
(In millions)	2023		2022		2023		2022
Electrical Americas	$	1	$	5	$	3	$	10
Electrical Global		14		1		18		6
Aerospace		2		2		3		5
Vehicle		1		3		3		6
eMobility		6		—		7		—
Corporate		5		—		6		2
Total	$	29	$	10	$	39	$	28

These restructuring program charges were included in Cost of products sold, Selling and administrative expense, Research and development expense, or Other expense (income) - net, as appropriate. In Business Segment Information, these restructuring program charges are treated as Corporate items.

Note 5. INTANGIBLE ASSET AMORTIZATION EXPENSE

Intangible asset amortization expense is as follows:

	Three months ended June 30				Six months ended June 30
(In millions except for per share data)	2023		2022		2023		2022
Intangible asset amortization expense	$	113	$	122	$	237	$	250
Income tax benefit		24		23		51		52
Total after income taxes	$	88	$	99	$	186	$	198
Per ordinary share - diluted	$	0.21	$	0.24	$	0.46	$	0.50

Contacts

Eaton Corporation plc
Jennifer Tolhurst
Media Relations
+1 (440) 523-4006
jennifertolhurst@eaton.com

Yan Jin
Investor Relations
+1 (440) 523-7558

XML

Document and Entity Information	Aug. 01, 2023
Cover [Abstract]
Document Type	8-K
Amendment Flag	false
Document Period End Date	Aug. 01, 2023
Entity File Number	000-54863
Entity Registrant Name	EATON CORPORATION plc
Entity Central Index Key	0001551182
Entity Incorporation, State or Country Code	L2
Entity Tax Identification Number	98-1059235
Entity Address, Address Line One	Eaton House, 30 Pembroke Road
Entity Address, Address Line Two	EATON HOUSE
Entity Address, City or Town	Dublin 4
Entity Address, Country	IE
Entity Address, Postal Zip Code	D04 Y0C2
City Area Code	353
Local Phone Number	1637 2900
Title of 12(b) Security	Ordinary shares ($0.01 par value)
Trading Symbol	ETN
Security Exchange Name	NYSE
Entity Emerging Growth Company	false
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Entity Information, Former Legal or Registered Name	Not applicable