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) | |
Eaton House, 30 Pembroke Road, Dublin 4, Ireland | - | |
(Address of principal executive offices) | (Zip Code) |
+1 353 1637 2900 | |||||||||||
(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 | |
EX-12 | |
EX-31.1 | |
EX-31.2 | |
EX-32.1 | |
EX-32.2 | |
EX-99.1 FRS 102 NOTIFICATION | |
EX-101 INSTANCE DOCUMENT | |
EX-101 SCHEMA DOCUMENT | |
EX-101 CALCULATION LINKBASE DOCUMENT | |
EX-101 DEFINITION LINKBASE DOCUMENT | |
EX-101 LABELS LINKBASE DOCUMENT | |
EX-101 PRESENTATION LINKBASE DOCUMENT |
ITEM 1. | FINANCIAL STATEMENTS. |
Three months ended September 30 | Nine months ended September 30 | ||||||||||||||
(In millions except for per share data) | 2015 | 2014 | 2015 | 2014 | |||||||||||
Net sales | $ | 5,203 | $ | 5,728 | $ | 15,798 | $ | 16,987 | |||||||
Cost of products sold | 3,597 | 3,916 | 10,865 | 11,799 | |||||||||||
Selling and administrative expense | 907 | 961 | 2,723 | 2,907 | |||||||||||
Litigation settlements | — | — | — | 644 | |||||||||||
Research and development expense | 156 | 163 | 472 | 493 | |||||||||||
Interest expense - net | 59 | 56 | 175 | 173 | |||||||||||
Other income - net | (3 | ) | (10 | ) | (27 | ) | (181 | ) | |||||||
Income before income taxes | 487 | 642 | 1,590 | 1,152 | |||||||||||
Income tax expense (benefit) | 42 | 37 | 143 | (66 | ) | ||||||||||
Net income | 445 | 605 | 1,447 | 1,218 | |||||||||||
Less net loss (income) for noncontrolling interests | 1 | (3 | ) | — | (6 | ) | |||||||||
Net income attributable to Eaton ordinary shareholders | $ | 446 | $ | 602 | $ | 1,447 | $ | 1,212 | |||||||
Net income per ordinary share | |||||||||||||||
Diluted | $ | 0.96 | $ | 1.26 | $ | 3.09 | $ | 2.53 | |||||||
Basic | 0.96 | 1.27 | 3.10 | 2.55 | |||||||||||
Weighted-average number of ordinary shares outstanding | |||||||||||||||
Diluted | 466.4 | 477.2 | 468.5 | 478.2 | |||||||||||
Basic | 465.1 | 474.8 | 466.8 | 475.5 | |||||||||||
Cash dividends declared per ordinary share | $ | 0.55 | $ | 0.49 | $ | 1.65 | $ | 1.47 |
Three months ended September 30 | Nine months ended September 30 | ||||||||||||||
(In millions) | 2015 | 2014 | 2015 | 2014 | |||||||||||
Net income | $ | 445 | $ | 605 | $ | 1,447 | $ | 1,218 | |||||||
Less net loss (income) for noncontrolling interests | 1 | (3 | ) | — | (6 | ) | |||||||||
Net income attributable to Eaton ordinary shareholders | 446 | 602 | 1,447 | 1,212 | |||||||||||
Other comprehensive income (loss), net of tax | |||||||||||||||
Currency translation and related hedging instruments | (372 | ) | (609 | ) | (883 | ) | (598 | ) | |||||||
Pensions and other postretirement benefits | 60 | 45 | 164 | 118 | |||||||||||
Cash flow hedges | — | (3 | ) | 3 | (1 | ) | |||||||||
Other comprehensive loss attributable to Eaton ordinary shareholders | (312 | ) | (567 | ) | (716 | ) | (481 | ) | |||||||
Total comprehensive income attributable to Eaton ordinary shareholders | $ | 134 | $ | 35 | $ | 731 | $ | 731 |
(In millions) | September 30, 2015 | December 31, 2014 | |||||
Assets | |||||||
Current assets | |||||||
Cash | $ | 418 | $ | 781 | |||
Short-term investments | 150 | 245 | |||||
Accounts receivable - net | 3,656 | 3,667 | |||||
Inventory | 2,395 | 2,428 | |||||
Deferred income taxes | 550 | 593 | |||||
Prepaid expenses and other current assets | 410 | 386 | |||||
Total current assets | 7,579 | 8,100 | |||||
Property, plant and equipment - net | 3,590 | 3,750 | |||||
Other noncurrent assets | |||||||
Goodwill | 13,540 | 13,893 | |||||
Other intangible assets | 6,139 | 6,556 | |||||
Deferred income taxes | 246 | 228 | |||||
Other assets | 1,107 | 1,002 | |||||
Total assets | $ | 32,201 | $ | 33,529 | |||
Liabilities and shareholders’ equity | |||||||
Current liabilities | |||||||
Short-term debt | $ | 1 | $ | 2 | |||
Current portion of long-term debt | 841 | 1,008 | |||||
Accounts payable | 1,997 | 1,940 | |||||
Accrued compensation | 373 | 420 | |||||
Other current liabilities | 1,888 | 1,985 | |||||
Total current liabilities | 5,100 | 5,355 | |||||
Noncurrent liabilities | |||||||
Long-term debt | 7,830 | 8,024 | |||||
Pension liabilities | 1,539 | 1,812 | |||||
Other postretirement benefits liabilities | 502 | 513 | |||||
Deferred income taxes | 820 | 901 | |||||
Other noncurrent liabilities | 997 | 1,085 | |||||
Total noncurrent liabilities | 11,688 | 12,335 | |||||
Shareholders’ equity | |||||||
Eaton shareholders’ equity | 15,366 | 15,786 | |||||
Noncontrolling interests | 47 | 53 | |||||
Total equity | 15,413 | 15,839 | |||||
Total liabilities and equity | $ | 32,201 | $ | 33,529 |
Nine months ended September 30 | |||||||
(In millions) | 2015 | 2014 | |||||
Operating activities | |||||||
Net income | $ | 1,447 | $ | 1,218 | |||
Adjustments to reconcile to net cash provided by operating activities | |||||||
Depreciation and amortization | 692 | 743 | |||||
Deferred income taxes | (101 | ) | (286 | ) | |||
Pension and other postretirement benefits expense | 244 | 260 | |||||
Contributions to pension plans | (290 | ) | (333 | ) | |||
Contributions to other postretirement benefits plans | (24 | ) | (38 | ) | |||
Excess tax benefit from equity-based compensation | — | (20 | ) | ||||
Gain on sale of businesses | — | (68 | ) | ||||
Changes in working capital | (184 | ) | (391 | ) | |||
Other - net | (155 | ) | (151 | ) | |||
Net cash provided by operating activities | 1,629 | 934 | |||||
Investing activities | |||||||
Cash paid for acquisitions of businesses, net of cash acquired | (38 | ) | — | ||||
Capital expenditures for property, plant and equipment | (368 | ) | (378 | ) | |||
Sales of short-term investments - net | 76 | 445 | |||||
Proceeds from sale of businesses | 1 | 282 | |||||
Other - net | (44 | ) | (56 | ) | |||
Net cash (used in) provided by investing activities | (373 | ) | 293 | ||||
Financing activities | |||||||
Proceeds from borrowings | 1 | — | |||||
Payments on borrowings | (405 | ) | (580 | ) | |||
Cash dividends paid | (771 | ) | (700 | ) | |||
Exercise of employee stock options | 48 | 50 | |||||
Repurchase of shares | (454 | ) | (267 | ) | |||
Excess tax benefit from equity-based compensation | — | 20 | |||||
Other - net | (8 | ) | (3 | ) | |||
Net cash used in financing activities | (1,589 | ) | (1,480 | ) | |||
Effect of currency on cash | (30 | ) | (7 | ) | |||
Total decrease in cash | (363 | ) | (260 | ) | |||
Cash at the beginning of the period | 781 | 915 | |||||
Cash at the end of the period | $ | 418 | $ | 655 |
Note 1. | BASIS OF PRESENTATION |
Note 2. | ACQUISITION AND SALE OF BUSINESSES |
Note 3. | ACQUISITION INTEGRATION CHARGES |
Three months ended September 30 | Nine months ended September 30 | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Business segment | |||||||||||||||
Electrical Products | $ | 5 | $ | 8 | $ | 17 | $ | 49 | |||||||
Electrical Systems and Services | 3 | 4 | 10 | 43 | |||||||||||
Hydraulics | — | 2 | 2 | 11 | |||||||||||
Total business segments | 8 | 14 | 29 | 103 | |||||||||||
Corporate | 2 | 5 | 4 | 19 | |||||||||||
Total acquisition integration charges before income taxes | $ | 10 | $ | 19 | $ | 33 | $ | 122 | |||||||
Total after income taxes | $ | 7 | $ | 14 | $ | 22 | $ | 81 | |||||||
Per ordinary share - diluted | $ | 0.01 | $ | 0.03 | $ | 0.05 | $ | 0.17 |
Three months ended September 30, 2015 | |||
Electrical Products | 11 | ||
Electrical Systems & Services | 26 | ||
Hydraulics | 25 | ||
Aerospace | 5 | ||
Vehicle | 29 | ||
Corporate | 17 | ||
Total | 113 |
Workforce reductions | Plant closing and other | Total | |||||||
Balance at December 31, 2014 | — | — | — | ||||||
Liability recognized | 99 | 14 | 113 | ||||||
Payments | (29 | ) | (1 | ) | (30 | ) | |||
Other adjustments | — | (12 | ) | (12 | ) | ||||
Balance at September 30, 2015 | 70 | 1 | 71 |
Electrical Products | Electrical Systems and Services | Hydraulics | Aerospace | Vehicle | Total | |||||||||||||||||||
December 31, 2014 | $ | 6,940 | $ | 4,314 | $ | 1,327 | $ | 962 | $ | 350 | $ | 13,893 | ||||||||||||
Additions | — | 21 | — | — | — | 21 | ||||||||||||||||||
Reclassifications | (106 | ) | 106 | — | — | — | — | |||||||||||||||||
Translation | (170 | ) | (129 | ) | (65 | ) | (3 | ) | (7 | ) | (374 | ) | ||||||||||||
September 30, 2015 | $ | 6,664 | $ | 4,312 | $ | 1,262 | $ | 959 | $ | 343 | $ | 13,540 |
United States pension benefit expense | Non-United States pension benefit expense | Other postretirement benefits expense | |||||||||||||||||||||
Three months ended September 30 | |||||||||||||||||||||||
2015 | 2014 | 2015 | 2014 | 2015 | 2014 | ||||||||||||||||||
Service cost | $ | 31 | $ | 30 | $ | 18 | $ | 17 | $ | 2 | $ | 4 | |||||||||||
Interest cost | 39 | 41 | 18 | 21 | 6 | 9 | |||||||||||||||||
Expected return on plan assets | (65 | ) | (61 | ) | (25 | ) | (25 | ) | (2 | ) | (1 | ) | |||||||||||
Amortization | 29 | 23 | 10 | 7 | — | 1 | |||||||||||||||||
34 | 33 | 21 | 20 | 6 | 13 | ||||||||||||||||||
Settlements | 25 | 14 | — | — | — | — | |||||||||||||||||
Total expense | $ | 59 | $ | 47 | $ | 21 | $ | 20 | $ | 6 | $ | 13 |
United States pension benefit expense | Non-United States pension benefit expense | Other postretirement benefits expense | |||||||||||||||||||||
Nine months ended September 30 | |||||||||||||||||||||||
2015 | 2014 | 2015 | 2014 | 2015 | 2014 | ||||||||||||||||||
Service cost | $ | 92 | $ | 88 | $ | 55 | $ | 50 | $ | 5 | $ | 13 | |||||||||||
Interest cost | 117 | 122 | 54 | 65 | 18 | 28 | |||||||||||||||||
Expected return on plan assets | (196 | ) | (184 | ) | (75 | ) | (75 | ) | (4 | ) | (4 | ) | |||||||||||
Amortization | 89 | 69 | 30 | 21 | 1 | 5 | |||||||||||||||||
102 | 95 | 64 | 61 | 20 | 42 | ||||||||||||||||||
Settlements | 58 | 62 | — | — | — | — | |||||||||||||||||
Total expense | $ | 160 | $ | 157 | $ | 64 | $ | 61 | $ | 20 | $ | 42 |
Eaton shareholders’ equity | Noncontrolling interests | Total equity | |||||||||
Balance at December 31, 2014 | $ | 15,786 | $ | 53 | $ | 15,839 | |||||
Net income | 1,447 | — | 1,447 | ||||||||
Other comprehensive loss | (716 | ) | — | (716 | ) | ||||||
Cash dividends paid | (771 | ) | (6 | ) | (777 | ) | |||||
Issuance of shares under equity-based compensation plans - net | 77 | — | 77 | ||||||||
Repurchase of shares | (454 | ) | — | (454 | ) | ||||||
Change in Capital | (3 | ) | — | (3 | ) | ||||||
Balance at September 30, 2015 | $ | 15,366 | $ | 47 | $ | 15,413 |
Currency translation and related hedging instruments | Pensions and other postretirement benefits | Cash flow hedges | Total | ||||||||||||
Balance at December 31, 2014 | $ | (1,414 | ) | $ | (1,485 | ) | $ | — | $ | (2,899 | ) | ||||
Other comprehensive (loss) income before reclassifications | (883 | ) | 48 | 10 | (825 | ) | |||||||||
Amounts reclassified from Accumulated other comprehensive loss | — | 116 | (7 | ) | 109 | ||||||||||
Net current-period Other comprehensive (loss) income | (883 | ) | 164 | 3 | (716 | ) | |||||||||
Balance at September 30, 2015 | $ | (2,297 | ) | $ | (1,321 | ) | $ | 3 | $ | (3,615 | ) |
Nine months ended September 30, 2015 | Consolidated statements of income classification | ||||
Amortization of pensions and other postretirement benefits items | |||||
Actuarial loss and prior service cost | $ | (178 | ) | 1 | |
Tax benefit | 62 | ||||
Total, net of tax | (116 | ) | |||
Gains and (losses) on cash flow hedges | |||||
Currency exchange contracts | 11 | Cost of products sold | |||
Tax expense | (4 | ) | |||
Total, net of tax | 7 | ||||
Total reclassifications for the period | $ | (109 | ) |
Three months ended September 30 | Nine months ended September 30 | ||||||||||||||
(Shares in millions) | 2015 | 2014 | 2015 | 2014 | |||||||||||
Net income attributable to Eaton ordinary shareholders | $ | 446 | $ | 602 | $ | 1,447 | $ | 1,212 | |||||||
Weighted-average number of ordinary shares outstanding - diluted | 466.4 | 477.2 | 468.5 | 478.2 | |||||||||||
Less dilutive effect of equity-based compensation | 1.3 | 2.4 | 1.7 | 2.7 | |||||||||||
Weighted-average number of ordinary shares outstanding - basic | 465.1 | 474.8 | 466.8 | 475.5 | |||||||||||
Net income per ordinary share | |||||||||||||||
Diluted | $ | 0.96 | $ | 1.26 | $ | 3.09 | $ | 2.53 | |||||||
Basic | 0.96 | 1.27 | 3.10 | 2.55 |
Total | Level 1 | Level 2 | Level 3 | ||||||||||||
September 30, 2015 | |||||||||||||||
Cash | $ | 418 | $ | 418 | $ | — | $ | — | |||||||
Short-term investments | 150 | 150 | — | — | |||||||||||
Net derivative contracts | 161 | — | 161 | — | |||||||||||
Long-term debt converted to floating interest rates by interest rate swaps - net | (136 | ) | — | (136 | ) | — | |||||||||
December 31, 2014 | |||||||||||||||
Cash | $ | 781 | $ | 781 | $ | — | $ | — | |||||||
Short-term investments | 245 | 245 | — | — | |||||||||||
Net derivative contracts | 70 | — | 70 | — | |||||||||||
Long-term debt converted to floating interest rates by interest rate swaps - net | (74 | ) | — | (74 | ) | — |
• | 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 noncurrent assets | Other current liabilities | Other noncurrent liabilities | Type of hedge | Term | |||||||||||||||||
September 30, 2015 | |||||||||||||||||||||||
Derivatives designated as hedges | |||||||||||||||||||||||
Fixed-to-floating interest rate swaps | $ | 3,440 | $ | — | $ | 136 | $ | — | $ | — | Fair value | 18 months to 19 years | |||||||||||
Currency exchange contracts | 749 | 16 | 1 | 6 | 5 | Cash flow | 1 to 36 months | ||||||||||||||||
Commodity contracts | 1 | — | — | — | — | Cash flow | 1 to 12 months | ||||||||||||||||
Total | $ | 16 | $ | 137 | $ | 6 | $ | 5 | |||||||||||||||
Derivatives not designated as hedges | |||||||||||||||||||||||
Currency exchange contracts | $ | 3,465 | $ | 43 | $ | 24 | 1 to 12 months | ||||||||||||||||
Total | $ | 43 | $ | 24 | |||||||||||||||||||
December 31, 2014 | |||||||||||||||||||||||
Derivatives designated as hedges | |||||||||||||||||||||||
Fixed-to-floating interest rate swaps | $ | 3,440 | $ | — | $ | 84 | $ | — | $ | 10 | Fair value | 2 to 19 years | |||||||||||
Currency exchange contracts | 432 | 8 | 1 | 5 | 3 | Cash flow | 1 to 36 months | ||||||||||||||||
Commodity contracts | 1 | — | — | — | — | Cash flow | 1 to 12 months | ||||||||||||||||
Total | $ | 8 | $ | 85 | $ | 5 | $ | 13 | |||||||||||||||
Derivatives not designated as hedges | |||||||||||||||||||||||
Currency exchange contracts | $ | 4,447 | $ | 47 | $ | 52 | 1 to 12 months | ||||||||||||||||
Total | $ | 47 | $ | 52 |
Gain (loss) recognized in other comprehensive (loss) income | Location of gain reclassified from Accumulated other comprehensive loss | Gain (loss) reclassified from Accumulated other comprehensive loss | |||||||||||||||
Three months ended September 30 | Three months ended September 30 | ||||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||||
Derivatives designated as cash flow hedges | |||||||||||||||||
Currency exchange contracts | 6 | (3 | ) | Cost of products sold | 5 | 1 | |||||||||||
Total | $ | 6 | $ | (3 | ) | $ | 5 | $ | 1 |
Gain (loss) recognized in other comprehensive (loss) income | Location of gain reclassified from Accumulated other comprehensive loss | Gain (loss) reclassified from Accumulated other comprehensive loss | |||||||||||||||
Nine months ended September 30 | Nine months ended September 30 | ||||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||||
Derivatives designated as cash flow hedges | |||||||||||||||||
Floating-to-fixed interest rate swaps | $ | — | $ | — | Interest expense - net | $ | — | $ | (1 | ) | |||||||
Currency exchange contracts | 16 | 2 | Cost of products sold | 11 | 5 | ||||||||||||
Total | $ | 16 | $ | 2 | $ | 11 | $ | 4 |
Three months ended September 30 | Nine months ended September 30 | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Derivatives designated as fair value hedges | |||||||||||||||
Fixed-to-floating interest rate swaps | $ | 65 | $ | (12 | ) | $ | 62 | $ | 61 | ||||||
Related long-term debt converted to floating interest rates by interest rate swaps | (65 | ) | 12 | (62 | ) | (61 | ) | ||||||||
$ | — | $ | — | $ | — | $ | — |
September 30, 2015 | December 31, 2014 | ||||||
Raw materials | $ | 1,140 | $ | 924 | |||
Work-in-process | 242 | 422 | |||||
Finished goods | 1,136 | 1,201 | |||||
Inventory at FIFO | 2,518 | 2,547 | |||||
Excess of FIFO over LIFO cost | (123 | ) | (119 | ) | |||
Total inventory | $ | 2,395 | $ | 2,428 |
Three months ended September 30 | Nine months ended September 30 | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Net sales | |||||||||||||||
Electrical Products | $ | 1,771 | $ | 1,875 | $ | 5,246 | $ | 5,433 | |||||||
Electrical Systems and Services | 1,487 | 1,655 | 4,437 | 4,807 | |||||||||||
Hydraulics | 599 | 733 | 1,907 | 2,302 | |||||||||||
Aerospace | 449 | 454 | 1,367 | 1,404 | |||||||||||
Vehicle | 897 | 1,011 | 2,841 | 3,041 | |||||||||||
Total net sales | $ | 5,203 | $ | 5,728 | $ | 15,798 | $ | 16,987 | |||||||
Segment operating profit | |||||||||||||||
Electrical Products | $ | 322 | $ | 330 | $ | 858 | $ | 880 | |||||||
Electrical Systems and Services | 164 | 238 | 573 | 601 | |||||||||||
Hydraulics | 44 | 84 | 184 | 286 | |||||||||||
Aerospace | 79 | 72 | 233 | 203 | |||||||||||
Vehicle | 136 | 176 | 490 | 482 | |||||||||||
Total segment operating profit | 745 | 900 | 2,338 | 2,452 | |||||||||||
Corporate | |||||||||||||||
Litigation settlements | — | — | — | (644 | ) | ||||||||||
Amortization of intangible assets | (102 | ) | (107 | ) | (306 | ) | (326 | ) | |||||||
Interest expense - net | (59 | ) | (56 | ) | (175 | ) | (173 | ) | |||||||
Pension and other postretirement benefits expense | (38 | ) | (31 | ) | (99 | ) | (114 | ) | |||||||
Other corporate expense - net | (59 | ) | (64 | ) | (168 | ) | (43 | ) | |||||||
Income before income taxes | 487 | 642 | 1,590 | 1,152 | |||||||||||
Income tax expense (benefit) | 42 | 37 | 143 | (66 | ) | ||||||||||
Net income | 445 | 605 | 1,447 | 1,218 | |||||||||||
Less net loss (income) for noncontrolling interests | 1 | (3 | ) | — | (6 | ) | |||||||||
Net income attributable to Eaton ordinary shareholders | $ | 446 | $ | 602 | $ | 1,447 | $ | 1,212 |
CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2015 | |||||||||||||||||||||||
Eaton Corporation plc | Eaton Corporation | Guarantors | Other subsidiaries | Consolidating adjustments | Total | ||||||||||||||||||
Net sales | $ | — | $ | 1,755 | $ | 1,664 | $ | 3,105 | $ | (1,321 | ) | $ | 5,203 | ||||||||||
Cost of products sold | — | 1,380 | 1,269 | 2,265 | (1,317 | ) | 3,597 | ||||||||||||||||
Selling and administrative expense | 2 | 375 | 191 | 339 | — | 907 | |||||||||||||||||
Research and development expense | — | 65 | 51 | 40 | — | 156 | |||||||||||||||||
Interest expense (income) - net | — | 54 | 5 | (3 | ) | 3 | 59 | ||||||||||||||||
Other expense (income) - net | — | 11 | 3 | (17 | ) | — | (3 | ) | |||||||||||||||
Equity in loss (earnings) of subsidiaries, net of tax | (534 | ) | (266 | ) | (888 | ) | (66 | ) | 1,754 | — | |||||||||||||
Intercompany expense (income) - net | 86 | (54 | ) | 258 | (290 | ) | — | — | |||||||||||||||
Income (loss) before income taxes | 446 | 190 | 775 | 837 | (1,761 | ) | 487 | ||||||||||||||||
Income tax expense (benefit) | — | 17 | (15 | ) | 38 | 2 | 42 | ||||||||||||||||
Net income (loss) | 446 | 173 | 790 | 799 | (1,763 | ) | 445 | ||||||||||||||||
Less net loss (income) for noncontrolling interests | — | — | — | 1 | — | 1 | |||||||||||||||||
Net income (loss) attributable to Eaton ordinary shareholders | $ | 446 | $ | 173 | $ | 790 | $ | 800 | $ | (1,763 | ) | $ | 446 | ||||||||||
Other comprehensive income (loss) | $ | (312 | ) | $ | (28 | ) | $ | (305 | ) | $ | (415 | ) | $ | 748 | $ | (312 | ) | ||||||
Total comprehensive income (loss) attributable to Eaton ordinary shareholders | $ | 134 | $ | 145 | $ | 485 | $ | 385 | $ | (1,015 | ) | $ | 134 |
CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2014 | |||||||||||||||||||||||
Eaton Corporation plc | Eaton Corporation | Guarantors | Other subsidiaries | Consolidating adjustments | Total | ||||||||||||||||||
Net sales | $ | — | $ | 1,814 | $ | 1,738 | $ | 3,416 | $ | (1,240 | ) | $ | 5,728 | ||||||||||
Cost of products sold | — | 1,402 | 1,266 | 2,489 | (1,241 | ) | 3,916 | ||||||||||||||||
Selling and administrative expense | 2 | 354 | 209 | 396 | — | 961 | |||||||||||||||||
Research and development expense | — | 63 | 49 | 51 | — | 163 | |||||||||||||||||
Interest expense (income) - net | — | 58 | 7 | (8 | ) | (1 | ) | 56 | |||||||||||||||
Other expense (income) - net | — | 3 | 11 | (24 | ) | — | (10 | ) | |||||||||||||||
Equity in loss (earnings) of subsidiaries, net of tax | (670 | ) | (251 | ) | (820 | ) | (232 | ) | 1,973 | — | |||||||||||||
Intercompany expense (income) - net | 66 | (59 | ) | 293 | (300 | ) | — | — | |||||||||||||||
Income (loss) before income taxes | 602 | 244 | 723 | 1,044 | (1,971 | ) | 642 | ||||||||||||||||
Income tax expense (benefit) | — | 12 | — | 25 | — | 37 | |||||||||||||||||
Net income (loss) | 602 | 232 | 723 | 1,019 | (1,971 | ) | 605 | ||||||||||||||||
Less net loss (income) for noncontrolling interests | — | — | — | (3 | ) | — | (3 | ) | |||||||||||||||
Net income (loss) attributable to Eaton ordinary shareholders | $ | 602 | $ | 232 | $ | 723 | $ | 1,016 | $ | (1,971 | ) | $ | 602 | ||||||||||
Other comprehensive income (loss) | $ | (567 | ) | $ | 8 | $ | (560 | ) | $ | (696 | ) | $ | 1,248 | $ | (567 | ) | |||||||
Total comprehensive income (loss) attributable to Eaton ordinary shareholders | $ | 35 | $ | 240 | $ | 163 | $ | 320 | $ | (723 | ) | $ | 35 |
CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2015 | |||||||||||||||||||||||
Eaton Corporation plc | Eaton Corporation | Guarantors | Other subsidiaries | Consolidating adjustments | Total | ||||||||||||||||||
Net sales | $ | — | $ | 5,263 | $ | 5,065 | $ | 9,469 | $ | (3,999 | ) | $ | 15,798 | ||||||||||
Cost of products sold | — | 4,123 | 3,837 | 6,864 | (3,959 | ) | 10,865 | ||||||||||||||||
Selling and administrative expense | 6 | 1,120 | 539 | 1,058 | — | 2,723 | |||||||||||||||||
Research and development expense | — | 202 | 145 | 125 | — | 472 | |||||||||||||||||
Interest expense (income) - net | — | 166 | 16 | (10 | ) | 3 | 175 | ||||||||||||||||
Other expense (income) - net | — | 17 | (5 | ) | (39 | ) | — | (27 | ) | ||||||||||||||
Equity in loss (earnings) of subsidiaries, net of tax | (1,698 | ) | (536 | ) | (2,405 | ) | (323 | ) | 4,962 | — | |||||||||||||
Intercompany expense (income) - net | 245 | (362 | ) | 1,010 | (893 | ) | — | — | |||||||||||||||
Income (loss) before income taxes | 1,447 | 533 | 1,928 | 2,687 | (5,005 | ) | 1,590 | ||||||||||||||||
Income tax expense (benefit) | — | 36 | (32 | ) | 154 | (15 | ) | 143 | |||||||||||||||
Net income (loss) | 1,447 | 497 | 1,960 | 2,533 | (4,990 | ) | 1,447 | ||||||||||||||||
Less net loss (income) for noncontrolling interests | — | — | — | (1 | ) | 1 | — | ||||||||||||||||
Net income (loss) attributable to Eaton ordinary shareholders | $ | 1,447 | $ | 497 | $ | 1,960 | $ | 2,532 | $ | (4,989 | ) | $ | 1,447 | ||||||||||
Other comprehensive income (loss) | $ | (716 | ) | $ | 35 | $ | (691 | ) | $ | (879 | ) | $ | 1,535 | $ | (716 | ) | |||||||
Total comprehensive income (loss) attributable to Eaton ordinary shareholders | $ | 731 | $ | 532 | $ | 1,269 | $ | 1,653 | $ | (3,454 | ) | $ | 731 |
CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2014 | |||||||||||||||||||||||
Eaton Corporation plc | Eaton Corporation | Guarantors | Other subsidiaries | Consolidating adjustments | Total | ||||||||||||||||||
Net sales | $ | — | $ | 5,231 | $ | 5,158 | $ | 10,061 | $ | (3,463 | ) | $ | 16,987 | ||||||||||
Cost of products sold | — | 4,122 | 3,772 | 7,354 | (3,449 | ) | 11,799 | ||||||||||||||||
Selling and administrative expense | 2 | 1,085 | 602 | 1,218 | — | 2,907 | |||||||||||||||||
Litigation settlements | — | 644 | — | — | — | 644 | |||||||||||||||||
Research and development expense | — | 185 | 151 | 157 | — | 493 | |||||||||||||||||
Interest expense (income) - net | — | 172 | 20 | (22 | ) | 3 | 173 | ||||||||||||||||
Other expense (income) - net | — | (42 | ) | (81 | ) | (58 | ) | — | (181 | ) | |||||||||||||
Equity in loss (earnings) of subsidiaries, net of tax | (1,370 | ) | (433 | ) | (1,567 | ) | 32 | 3,338 | — | ||||||||||||||
Intercompany expense (income) - net | 156 | (176 | ) | 571 | (551 | ) | — | — | |||||||||||||||
Income (loss) before income taxes | 1,212 | (326 | ) | 1,690 | 1,931 | (3,355 | ) | 1,152 | |||||||||||||||
Income tax expense (benefit) | — | (257 | ) | 71 | 126 | (6 | ) | (66 | ) | ||||||||||||||
Net income (loss) | 1,212 | (69 | ) | 1,619 | 1,805 | (3,349 | ) | 1,218 | |||||||||||||||
Less net loss (income) for noncontrolling interests | — | — | — | (6 | ) | — | (6 | ) | |||||||||||||||
Net income (loss) attributable to Eaton ordinary shareholders | $ | 1,212 | $ | (69 | ) | $ | 1,619 | $ | 1,799 | $ | (3,349 | ) | $ | 1,212 | |||||||||
Other comprehensive income (loss) | $ | (481 | ) | $ | 75 | $ | (447 | ) | $ | (626 | ) | $ | 998 | $ | (481 | ) | |||||||
Total comprehensive income (loss) attributable to Eaton ordinary shareholders | $ | 731 | $ | 6 | $ | 1,172 | $ | 1,173 | $ | (2,351 | ) | $ | 731 |
CONDENSED CONSOLIDATING BALANCE SHEETS SEPTEMBER 30, 2015 | |||||||||||||||||||||||
Eaton Corporation plc | Eaton Corporation | Guarantors | Other subsidiaries | Consolidating adjustments | Total | ||||||||||||||||||
Assets | |||||||||||||||||||||||
Current assets | |||||||||||||||||||||||
Cash | $ | — | $ | 145 | $ | 12 | $ | 261 | $ | — | $ | 418 | |||||||||||
Short-term investments | — | — | 1 | 149 | — | 150 | |||||||||||||||||
Accounts receivable - net | — | 514 | 1,071 | 2,071 | — | 3,656 | |||||||||||||||||
Intercompany accounts receivable | 1 | 771 | 3,880 | 2,991 | (7,643 | ) | — | ||||||||||||||||
Inventory | — | 358 | 687 | 1,441 | (91 | ) | 2,395 | ||||||||||||||||
Deferred income taxes | — | 379 | 112 | 59 | — | 550 | |||||||||||||||||
Prepaid expenses and other current assets | — | 105 | 52 | 229 | 24 | 410 | |||||||||||||||||
Total current assets | 1 | 2,272 | 5,815 | 7,201 | (7,710 | ) | 7,579 | ||||||||||||||||
Property, plant and equipment - net | — | 937 | 748 | 1,905 | — | 3,590 | |||||||||||||||||
Other noncurrent assets | |||||||||||||||||||||||
Goodwill | — | 1,355 | 6,256 | 5,929 | — | 13,540 | |||||||||||||||||
Other intangible assets | — | 185 | 3,671 | 2,283 | — | 6,139 | |||||||||||||||||
Deferred income taxes | — | 831 | 6 | 199 | (790 | ) | 246 | ||||||||||||||||
Investment in subsidiaries | 29,102 | 12,705 | 59,435 | 9,841 | (111,083 | ) | — | ||||||||||||||||
Intercompany loans receivable | — | 7,697 | 1,552 | 43,377 | (52,626 | ) | — | ||||||||||||||||
Other assets | — | 582 | 128 | 397 | — | 1,107 | |||||||||||||||||
Total assets | $ | 29,103 | $ | 26,564 | $ | 77,611 | $ | 71,132 | $ | (172,209 | ) | $ | 32,201 | ||||||||||
Liabilities and shareholders’ equity | |||||||||||||||||||||||
Current liabilities | |||||||||||||||||||||||
Short-term debt | $ | — | $ | — | $ | — | $ | 1 | $ | — | $ | 1 | |||||||||||
Current portion of long-term debt | — | 600 | 241 | — | — | 841 | |||||||||||||||||
Accounts payable | — | 510 | 353 | 1,134 | — | 1,997 | |||||||||||||||||
Intercompany accounts payable | 111 | 4,022 | 2,444 | 1,066 | (7,643 | ) | — | ||||||||||||||||
Accrued compensation | — | 69 | 54 | 250 | — | 373 | |||||||||||||||||
Other current liabilities | 1 | 675 | 288 | 931 | (7 | ) | 1,888 | ||||||||||||||||
Total current liabilities | 112 | 5,876 | 3,380 | 3,382 | (7,650 | ) | 5,100 | ||||||||||||||||
Noncurrent liabilities | |||||||||||||||||||||||
Long-term debt | — | 7,130 | 679 | 18 | 3 | 7,830 | |||||||||||||||||
Pension liabilities | — | 591 | 143 | 805 | — | 1,539 | |||||||||||||||||
Other postretirement benefits liabilities | — | 278 | 136 | 88 | — | 502 | |||||||||||||||||
Deferred income taxes | — | 14 | 1,033 | 563 | (790 | ) | 820 | ||||||||||||||||
Intercompany loans payable | 13,625 | 1,951 | 36,063 | 987 | (52,626 | ) | — | ||||||||||||||||
Other noncurrent liabilities | — | 414 | 170 | 413 | — | 997 | |||||||||||||||||
Total noncurrent liabilities | 13,625 | 10,378 | 38,224 | 2,874 | (53,413 | ) | 11,688 | ||||||||||||||||
Shareholders’ equity | |||||||||||||||||||||||
Eaton shareholders' equity | 15,366 | 10,310 | 36,007 | 64,836 | (111,153 | ) | 15,366 | ||||||||||||||||
Noncontrolling interests | — | — | — | 40 | 7 | 47 | |||||||||||||||||
Total equity | 15,366 | 10,310 | 36,007 | 64,876 | (111,146 | ) | 15,413 | ||||||||||||||||
Total liabilities and equity | $ | 29,103 | $ | 26,564 | $ | 77,611 | $ | 71,132 | $ | (172,209 | ) | $ | 32,201 |
CONDENSED CONSOLIDATING BALANCE SHEETS DECEMBER 31, 2014 | |||||||||||||||||||||||
Eaton Corporation plc | Eaton Corporation | Guarantors | Other subsidiaries | Consolidating adjustments | Total | ||||||||||||||||||
Assets | |||||||||||||||||||||||
Current assets | |||||||||||||||||||||||
Cash | $ | 1 | $ | 173 | $ | 13 | $ | 594 | $ | — | $ | 781 | |||||||||||
Short-term investments | — | — | 1 | 244 | — | 245 | |||||||||||||||||
Accounts receivable - net | — | 500 | 955 | 2,212 | — | 3,667 | |||||||||||||||||
Intercompany accounts receivable | 2 | 759 | 3,820 | 4,101 | (8,682 | ) | — | ||||||||||||||||
Inventory | — | 397 | 637 | 1,445 | (51 | ) | 2,428 | ||||||||||||||||
Deferred income taxes | — | 368 | 132 | 93 | — | 593 | |||||||||||||||||
Prepaid expenses and other current assets | — | 96 | 39 | 247 | 4 | 386 | |||||||||||||||||
Total current assets | 3 | 2,293 | 5,597 | 8,936 | (8,729 | ) | 8,100 | ||||||||||||||||
Property, plant and equipment - net | — | 972 | 756 | 2,022 | — | 3,750 | |||||||||||||||||
Other noncurrent assets | |||||||||||||||||||||||
Goodwill | — | 1,355 | 6,256 | 6,282 | — | 13,893 | |||||||||||||||||
Other intangible assets | — | 196 | 3,811 | 2,549 | — | 6,556 | |||||||||||||||||
Deferred income taxes | — | 889 | 10 | 137 | (808 | ) | 228 | ||||||||||||||||
Investment in subsidiaries | 26,612 | 12,198 | 58,680 | 9,145 | (106,635 | ) | — | ||||||||||||||||
Intercompany loans receivable | — | 7,542 | 2,249 | 40,635 | (50,426 | ) | — | ||||||||||||||||
Other assets | — | 473 | 141 | 388 | — | 1,002 | |||||||||||||||||
Total assets | $ | 26,615 | $ | 25,918 | $ | 77,500 | $ | 70,094 | $ | (166,598 | ) | $ | 33,529 | ||||||||||
Liabilities and shareholders’ equity | |||||||||||||||||||||||
Current liabilities | |||||||||||||||||||||||
Short-term debt | $ | — | $ | — | $ | — | $ | 2 | $ | — | $ | 2 | |||||||||||
Current portion of long-term debt | — | 702 | 304 | 2 | — | 1,008 | |||||||||||||||||
Accounts payable | — | 475 | 340 | 1,125 | — | 1,940 | |||||||||||||||||
Intercompany accounts payable | 117 | 4,087 | 3,441 | 1,037 | (8,682 | ) | — | ||||||||||||||||
Accrued compensation | — | 112 | 59 | 249 | — | 420 | |||||||||||||||||
Other current liabilities | 1 | 674 | 340 | 984 | (14 | ) | 1,985 | ||||||||||||||||
Total current liabilities | 118 | 6,050 | 4,484 | 3,399 | (8,696 | ) | 5,355 | ||||||||||||||||
Noncurrent liabilities | |||||||||||||||||||||||
Long-term debt | — | 7,079 | 932 | 13 | — | 8,024 | |||||||||||||||||
Pension liabilities | — | 726 | 183 | 903 | — | 1,812 | |||||||||||||||||
Other postretirement benefits liabilities | — | 283 | 136 | 94 | — | 513 | |||||||||||||||||
Deferred income taxes | — | — | 1,160 | 549 | (808 | ) | 901 | ||||||||||||||||
Intercompany loans payable | 10,711 | 2,723 | 36,162 | 830 | (50,426 | ) | — | ||||||||||||||||
Other noncurrent liabilities | — | 457 | 183 | 445 | — | 1,085 | |||||||||||||||||
Total noncurrent liabilities | 10,711 | 11,268 | 38,756 | 2,834 | (51,234 | ) | 12,335 | ||||||||||||||||
Shareholders’ equity | |||||||||||||||||||||||
Eaton shareholders' equity | 15,786 | 8,600 | 34,260 | 63,816 | (106,676 | ) | 15,786 | ||||||||||||||||
Noncontrolling interests | — | — | — | 45 | 8 | 53 | |||||||||||||||||
Total equity | 15,786 | 8,600 | 34,260 | 63,861 | (106,668 | ) | 15,839 | ||||||||||||||||
Total liabilities and equity | $ | 26,615 | $ | 25,918 | $ | 77,500 | $ | 70,094 | $ | (166,598 | ) | $ | 33,529 |
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2015 | |||||||||||||||||||||||
Eaton Corporation plc | Eaton Corporation | Guarantors | Other subsidiaries | Consolidating adjustments | Total | ||||||||||||||||||
Net cash provided by (used in) operating activities | $ | (85 | ) | $ | (93 | ) | $ | (23 | ) | $ | 1,830 | $ | — | $ | 1,629 | ||||||||
Investing activities | |||||||||||||||||||||||
Cash paid for acquisitions of businesses, net of cash acquired | — | — | — | (38 | ) | — | (38 | ) | |||||||||||||||
Capital expenditures for property, plant and equipment | — | (68 | ) | (100 | ) | (200 | ) | — | (368 | ) | |||||||||||||
Sales (purchases) of short-term investments - net | — | — | — | 76 | — | 76 | |||||||||||||||||
Investments in affiliates | (1,482 | ) | — | (1,176 | ) | (1,482 | ) | 4,140 | — | ||||||||||||||
Loans to affiliates | — | (307 | ) | (39 | ) | (7,638 | ) | 7,984 | — | ||||||||||||||
Repayments of loans from affiliates | — | 306 | 58 | 5,514 | (5,878 | ) | — | ||||||||||||||||
Proceeds from sale of business | — | — | — | 1 | — | 1 | |||||||||||||||||
Other - net | — | (41 | ) | 33 | (36 | ) | — | (44 | ) | ||||||||||||||
Net cash provided by (used in) investing activities | (1,482 | ) | (110 | ) | (1,224 | ) | (3,803 | ) | 6,246 | (373 | ) | ||||||||||||
Financing activities | |||||||||||||||||||||||
Proceeds from borrowings | — | — | — | 1 | — | 1 | |||||||||||||||||
Payments on borrowings | — | (102 | ) | (301 | ) | (2 | ) | — | (405 | ) | |||||||||||||
Proceeds from borrowings from affiliates | 2,783 | 4,577 | 581 | 43 | (7,984 | ) | — | ||||||||||||||||
Payments on borrowings from affiliates | (40 | ) | (4,617 | ) | (1,160 | ) | (61 | ) | 5,878 | — | |||||||||||||
Capital contributions from affiliates | — | 1,176 | 1,482 | 1,482 | (4,140 | ) | — | ||||||||||||||||
Other intercompany financing activities | — | (859 | ) | 644 | 215 | — | — | ||||||||||||||||
Cash dividends paid | (771 | ) | — | — | — | — | (771 | ) | |||||||||||||||
Exercise of employee stock options | 48 | — | — | — | — | 48 | |||||||||||||||||
Repurchase of shares | (454 | ) | — | — | — | — | (454 | ) | |||||||||||||||
Other - net | — | — | — | (8 | ) | — | (8 | ) | |||||||||||||||
Net cash provided by (used in) financing activities | 1,566 | 175 | 1,246 | 1,670 | (6,246 | ) | (1,589 | ) | |||||||||||||||
Effect of currency on cash | — | — | — | (30 | ) | — | (30 | ) | |||||||||||||||
Total increase (decrease) in cash | (1 | ) | (28 | ) | (1 | ) | (333 | ) | — | (363 | ) | ||||||||||||
Cash at the beginning of the period | 1 | 173 | 13 | 594 | — | 781 | |||||||||||||||||
Cash at the end of the period | $ | — | $ | 145 | $ | 12 | $ | 261 | $ | — | $ | 418 |
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2014 | |||||||||||||||||||||||
Eaton Corporation plc | Eaton Corporation | Guarantors | Other subsidiaries | Consolidating adjustments | Total | ||||||||||||||||||
Net cash provided by (used in) operating activities | $ | (4 | ) | $ | (699 | ) | $ | 172 | $ | 1,433 | $ | 32 | $ | 934 | |||||||||
Investing activities | |||||||||||||||||||||||
Capital expenditures for property, plant and equipment | — | (78 | ) | (94 | ) | (206 | ) | — | (378 | ) | |||||||||||||
Sales (purchases) of short-term investments - net | — | — | 132 | 313 | — | 445 | |||||||||||||||||
Loans to affiliates | — | (151 | ) | — | (6,347 | ) | 6,498 | — | |||||||||||||||
Repayments of loans from affiliates | — | 176 | 213 | 5,133 | (5,522 | ) | — | ||||||||||||||||
Proceeds from sale of businesses | — | 93 | 175 | 14 | — | 282 | |||||||||||||||||
Other - net | — | (40 | ) | 46 | (62 | ) | — | (56 | ) | ||||||||||||||
Net cash provided by (used in) investing activities | — | — | 472 | (1,155 | ) | 976 | 293 | ||||||||||||||||
Financing activities | |||||||||||||||||||||||
Payments on borrowings | — | (552 | ) | (1 | ) | (27 | ) | — | (580 | ) | |||||||||||||
Proceeds from borrowings from affiliates | 726 | 5,510 | 254 | 8 | (6,498 | ) | — | ||||||||||||||||
Payments on borrowings from affiliates | (25 | ) | (4,794 | ) | (320 | ) | (383 | ) | 5,522 | — | |||||||||||||
Other intercompany financing activities | 218 | 574 | (554 | ) | (238 | ) | — | — | |||||||||||||||
Cash dividends paid | (700 | ) | — | — | — | — | (700 | ) | |||||||||||||||
Cash dividends paid to affiliates | — | — | — | 32 | (32 | ) | — | ||||||||||||||||
Exercise of employee stock options | 50 | — | — | — | — | 50 | |||||||||||||||||
Repurchase of shares | (267 | ) | — | — | — | — | (267 | ) | |||||||||||||||
Excess tax benefit from equity-based compensation | — | 20 | — | — | — | 20 | |||||||||||||||||
Other - net | — | — | — | (3 | ) | — | (3 | ) | |||||||||||||||
Net cash provided by (used in) financing activities | 2 | 758 | (621 | ) | (611 | ) | (1,008 | ) | (1,480 | ) | |||||||||||||
Effect of currency on cash | — | — | — | (7 | ) | — | (7 | ) | |||||||||||||||
Total increase (decrease) in cash | (2 | ) | 59 | 23 | (340 | ) | — | (260 | ) | ||||||||||||||
Cash at the beginning of the period | 3 | 51 | 10 | 851 | — | 915 | |||||||||||||||||
Cash at the end of the period | $ | 1 | $ | 110 | $ | 33 | $ | 511 | $ | — | $ | 655 |
ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. |
Three months ended September 30 | Nine months ended September 30 | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Net sales | $ | 5,203 | $ | 5,728 | $ | 15,798 | $ | 16,987 | |||||||
Net income attributable to Eaton ordinary shareholders | 446 | 602 | 1,447 | 1,212 | |||||||||||
Net income per ordinary share - diluted | $ | 0.96 | $ | 1.26 | $ | 3.09 | $ | 2.53 |
Three months ended September 30 | Decrease | Nine months ended September 30 | Increase (decrease) | ||||||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||||||||
Net sales | $ | 5,203 | $ | 5,728 | (9 | )% | $ | 15,798 | $ | 16,987 | (7 | )% | |||||||||
Gross profit | 1,606 | 1,812 | (11 | )% | 4,933 | 5,188 | (5 | )% | |||||||||||||
Percent of net sales | 30.9 | % | 31.6 | % | 31.2 | % | 30.5 | % | |||||||||||||
Income before income taxes | 487 | 642 | (24 | )% | 1,590 | 1,152 | 38 | % | |||||||||||||
Net income | 445 | 605 | (26 | )% | 1,447 | 1,218 | 19 | % | |||||||||||||
Less net income for noncontrolling interests | 1 | (3 | ) | — | (6 | ) | |||||||||||||||
Net income attributable to Eaton ordinary shareholders | 446 | 602 | (26 | )% | 1,447 | 1,212 | 19 | % | |||||||||||||
Excluding acquisition integration charges (after-tax) | 7 | 14 | 22 | 81 | |||||||||||||||||
Operating earnings | $ | 453 | $ | 616 | (26 | )% | $ | 1,469 | $ | 1,293 | 14 | % | |||||||||
Net income per ordinary share - diluted | $ | 0.96 | $ | 1.26 | (24 | )% | $ | 3.09 | $ | 2.53 | 22 | % | |||||||||
Excluding per share impact of acquisition integration charges costs (after-tax) | 0.01 | 0.03 | 0.05 | 0.17 | |||||||||||||||||
Operating earnings per ordinary share | $ | 0.97 | $ | 1.29 | (25 | )% | $ | 3.14 | $ | 2.70 | 16 | % |
Three months ended September 30 | Decrease | Nine months ended September 30 | Decrease | ||||||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||||||||
Net sales | $ | 1,771 | $ | 1,875 | (6 | )% | $ | 5,246 | $ | 5,433 | (3 | )% | |||||||||
Operating profit | $ | 322 | $ | 330 | (2 | )% | $ | 858 | $ | 880 | (3 | )% | |||||||||
Operating margin | 18.2 | % | 17.6 | % | 16.4 | % | 16.2 | % | |||||||||||||
Acquisition integration charges | $ | 5 | $ | 8 | $ | 17 | $ | 49 | |||||||||||||
Before acquisition integration charges | |||||||||||||||||||||
Operating profit | $ | 327 | $ | 338 | (3 | )% | $ | 875 | $ | 929 | (6 | )% | |||||||||
Operating margin | 18.5 | % | 18.0 | % | 16.7 | % | 17.1 | % |
Three months ended September 30 | Decrease | Nine months ended September 30 | Decrease | ||||||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||||||||
Net sales | $ | 1,487 | $ | 1,655 | (10 | )% | $ | 4,437 | $ | 4,807 | (8 | )% | |||||||||
Operating profit | $ | 164 | $ | 238 | (31 | )% | $ | 573 | $ | 601 | (5 | )% | |||||||||
Operating margin | 11.0 | % | 14.4 | % | 12.9 | % | 12.5 | % | |||||||||||||
Acquisition integration charges | $ | 3 | $ | 4 | $ | 10 | $ | 43 | |||||||||||||
Before acquisition integration charges | |||||||||||||||||||||
Operating profit | $ | 167 | $ | 242 | (31 | )% | $ | 583 | $ | 644 | (9 | )% | |||||||||
Operating margin | 11.2 | % | 14.6 | % | 13.1 | % | 13.4 | % |
Three months ended September 30 | Decrease | Nine months ended September 30 | Decrease | ||||||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||||||||
Net sales | $ | 599 | $ | 733 | (18 | )% | $ | 1,907 | $ | 2,302 | (17 | )% | |||||||||
Operating profit | $ | 44 | $ | 84 | (48 | )% | $ | 184 | $ | 286 | (36 | )% | |||||||||
Operating margin | 7.3 | % | 11.5 | % | 9.6 | % | 12.4 | % | |||||||||||||
Acquisition integration charges | $ | — | $ | 2 | $ | 2 | $ | 11 | |||||||||||||
Before acquisition integration charges | |||||||||||||||||||||
Operating profit | $ | 44 | $ | 86 | (49 | )% | $ | 186 | $ | 297 | (37 | )% | |||||||||
Operating margin | 7.3 | % | 11.7 | % | 9.8 | % | 12.9 | % |
Three months ended September 30 | Increase (decrease) | Nine months ended September 30 | Increase (decrease) | ||||||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||||||||
Net sales | $ | 449 | $ | 454 | (1 | )% | $ | 1,367 | $ | 1,404 | (3 | )% | |||||||||
Operating profit | $ | 79 | $ | 72 | 10 | % | $ | 233 | $ | 203 | 15 | % | |||||||||
Operating margin | 17.6 | % | 15.9 | % | 17.0 | % | 14.5 | % |
Three months ended September 30 | Decrease | Nine months ended September 30 | Increase (decrease) | ||||||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||||||||
Net sales | $ | 897 | $ | 1,011 | (11 | )% | $ | 2,841 | $ | 3,041 | (7 | )% | |||||||||
Operating profit | $ | 136 | $ | 176 | (23 | )% | $ | 490 | $ | 482 | 2 | % | |||||||||
Operating margin | 15.2 | % | 17.4 | % | 17.2 | % | 15.9 | % |
Three months ended September 30 | Increase (decrease) | Nine months ended September 30 | Increase (decrease) | ||||||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||||||||
Litigation settlements | $ | — | $ | — | NM | $ | — | $ | 644 | NM | |||||||||||
Amortization of intangible assets | 102 | 107 | (5 | )% | 306 | 326 | (6 | )% | |||||||||||||
Interest expense - net | 59 | 56 | 5 | % | 175 | 173 | 1 | % | |||||||||||||
Pension and other postretirement benefits expense | 38 | 31 | 23 | % | 99 | 114 | (13 | )% | |||||||||||||
Gain on divestiture of Aerospace businesses | — | 2 | NM | — | (154 | ) | NM | ||||||||||||||
Other corporate expense - net | 59 | 62 | (5 | )% | 168 | 197 | (15 | )% | |||||||||||||
Total corporate expense | $ | 258 | $ | 258 | — | % | $ | 748 | $ | 1,300 | (42 | )% |
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. |
ITEM 4. | CONTROLS AND PROCEDURES. |
ITEM 1. | LEGAL PROCEEDINGS. |
ITEM 1A. | RISK FACTORS. |
ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. |
Month | Total number of shares purchased | Average price paid per share | Total number of shares purchased as part of publicly announced plans or programs | Maximum number of shares that may yet be purchased under the plans or programs | |||||||||
July | 1,825,000 | $ | 61.21 | 1,825,000 | 26,206,817 | ||||||||
August | 2,684,170 | $ | 58.62 | 2,684,170 | 23,522,647 | ||||||||
September | 276,781 | $ | 54.85 | 276,781 | 23,245,866 | ||||||||
Total | 4,785,951 | $ | 59.39 | 4,785,951 |
ITEM 6. | EXHIBITS. |
EATON CORPORATION plc | ||||
Registrant | ||||
Date: | October 30, 2015 | 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 | ||
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 * | ||
91.1 | FRS 102 Notification (incorporated herein by reference to Exhibit 91.1 to Form 10-Q for the quarter ended June 30, 2015 filed with the Securities and Exchange Commission on July 29, 2015.) | ||
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. |
Nine months ended September 30 | Year ended December 31 | |||||||||||||||||||||||
(Millions of dollars) | 2015 | 2014 | 2013 | 2012 | 2011 | 2010 | ||||||||||||||||||
Income from continuing operations before income taxes and noncontrolling interests in consolidated subsidiaries | $ | 1,590 | $ | 1,761 | $ | 1,884 | $ | 1,251 | $ | 1,553 | $ | 1,036 | ||||||||||||
Adjustments | ||||||||||||||||||||||||
(Income) losses of equity investees | (8 | ) | (6 | ) | 2 | (2 | ) | (2 | ) | (14 | ) | |||||||||||||
Distributed income of equity investees | 7 | 4 | 77 | 19 | 3 | 15 | ||||||||||||||||||
Interest expensed | 177 | 250 | 290 | 165 | 154 | 162 | ||||||||||||||||||
Amortization of debt issue costs | 6 | 9 | 10 | 74 | 4 | 4 | ||||||||||||||||||
Estimated portion of rent expense representing interest | 57 | 81 | 80 | 66 | 65 | 57 | ||||||||||||||||||
Amortization of capitalized interest | 7 | 14 | 13 | 12 | 10 | 10 | ||||||||||||||||||
Adjusted income from continuing operations before income taxes | $ | 1,836 | $ | 2,113 | $ | 2,356 | $ | 1,585 | $ | 1,787 | $ | 1,270 | ||||||||||||
Fixed charges | ||||||||||||||||||||||||
Interest expensed | $ | 177 | $ | 250 | $ | 290 | $ | 165 | $ | 154 | $ | 162 | ||||||||||||
Interest capitalized | 10 | 13 | 11 | 23 | 18 | 8 | ||||||||||||||||||
Amortization of debt issue costs | 6 | 9 | 10 | 74 | 4 | 4 | ||||||||||||||||||
Estimated portion of rent expense representing interest | 57 | 81 | 80 | 66 | 65 | 57 | ||||||||||||||||||
Total fixed charges | $ | 250 | $ | 353 | $ | 391 | $ | 328 | $ | 241 | $ | 231 | ||||||||||||
Ratio of earnings to fixed charges | 7.34 | 5.99 | 6.03 | 4.83 | 7.41 | 5.50 |
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: | October 30, 2015 | /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: | October 30, 2015 | /s/ Richard H. Fearon | |
Richard H. Fearon | |||
Principal Financial Officer |
Date: | October 30, 2015 | /s/ Alexander M. Cutler | |
Alexander M. Cutler | |||
Principal Executive Officer |
Date: | October 30, 2015 | /s/ Richard H. Fearon | |
Richard H. Fearon | |||
Principal Financial Officer |
Legal Contingencies (Details) BRL in Millions, $ in Millions |
3 Months Ended | 9 Months Ended | |||||||
---|---|---|---|---|---|---|---|---|---|
Jul. 16, 2014
USD ($)
|
Jul. 08, 2014
USD ($)
|
Jun. 23, 2014
USD ($)
|
Jun. 18, 2014
USD ($)
|
Dec. 31, 2010
USD ($)
|
Dec. 31, 2010
BRL
|
Sep. 30, 2015
USD ($)
|
Sep. 30, 2015
BRL
|
Sep. 30, 2015
BRL
|
|
Raysul [Member] | |||||||||
Loss Contingencies [Line Items] | |||||||||
Loss Contingency Accrual | $ 23.0 | BRL 91 | |||||||
Loss Contingency Accrual, Provision | $ 15.0 | BRL 60 | $ 8.0 | BRL 31 | |||||
Meritor [Member] | |||||||||
Loss Contingencies [Line Items] | |||||||||
Loss Contingency, Loss in Period | $ 500.0 | ||||||||
Litigation Settlement, Amount | $ 500.0 | ||||||||
Triumph [Member] | |||||||||
Loss Contingencies [Line Items] | |||||||||
Loss Contingency, Loss in Period | $ 147.5 | ||||||||
Litigation Settlement, Amount | $ 147.5 |
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