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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended June 30, 2023
Commission file number 000-54863
EATON CORPORATION plc
(Exact name of registrant as specified in its charter)
Ireland98-1059235
(State or other jurisdiction of incorporation or organization)(IRS Employer Identification Number)
Eaton House, 30 Pembroke Road,Dublin 4,IrelandD04 Y0C2
(Address of principal executive offices)(Zip Code)
+3531637 2900
(Registrant's telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Ordinary shares ($0.01 par value)ETNNew York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer," “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer Accelerated filer Non-accelerated filer
Smaller reporting company
 Emerging growth company
 (Do not check if a smaller reporting 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.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
There were 399.0 million Ordinary Shares outstanding as of June 30, 2023.





PART I — FINANCIAL INFORMATION

ITEM 1.FINANCIAL STATEMENTS.

EATON CORPORATION plc
CONSOLIDATED STATEMENTS OF INCOME
Three months ended
June 30
Six months ended
June 30
(In millions except for per share data)2023202220232022
Net sales$5,866 $5,212 $11,349 $10,054 
Cost of products sold3,747 3,505 7,346 6,774 
Selling and administrative expense986 828 1,890 1,618 
Research and development expense187 168 366 333 
Interest expense - net42 31 91 63 
Gain on sale of business   24 
Other expense (income) - net7 (41)(4)(50)
Income before income taxes898 720 1,660 1,339 
Income tax expense153 119 276 205 
Net income745 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 
Basic1.86 1.51 3.47 2.84 
Weighted-average number of ordinary shares outstanding  
Diluted400.7 400.7 400.6 401.2 
Basic398.9 399.0 398.7 399.1 
Cash dividends declared per ordinary share$0.86 $0.81 $1.72 $1.62 

The accompanying notes are an integral part of these condensed consolidated financial statements.
2

EATON CORPORATION plc
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Three months ended
June 30
Six months ended
June 30
(In millions)2023202220232022
Net income$745 $601 $1,384 $1,135 
Less net income for noncontrolling interests(1) (3)(1)
Net income attributable to Eaton ordinary shareholders744 601 1,382 1,133 
Other comprehensive income (loss), net of tax
Currency translation and related hedging instruments57 (470)176 (533)
Pensions and other postretirement benefits(2)(41)(5)36 
Cash flow hedges(1)68 14 169 
Other comprehensive income (loss) attributable to Eaton
   ordinary shareholders
53 (444)185 (328)
Total comprehensive income attributable to Eaton
  ordinary shareholders
$797 $157 $1,567 $805 

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

EATON CORPORATION plc
CONSOLIDATED BALANCE SHEETS
(In millions)June 30,
2023
December 31,
2022
Assets  
Current assets  
Cash$353 $294 
Short-term investments977 261 
Accounts receivable - net4,399 4,076 
Inventory3,670 3,430 
Prepaid expenses and other current assets904 685 
Total current assets10,303 8,746 
Property, plant and equipment
Land and buildings2,198 2,129 
Machinery and equipment6,139 5,885 
Gross property, plant and equipment8,337 8,013 
Accumulated depreciation(5,071)(4,867)
Net property, plant and equipment3,267 3,146 
Other noncurrent assets
Goodwill14,914 14,796 
Other intangible assets5,285 5,485 
Operating lease assets594 570 
Deferred income taxes354 330 
Other assets2,056 1,940 
Total assets$36,772 $35,014 
Liabilities and shareholders’ equity  
Current liabilities  
Short-term debt$94 $324 
Current portion of long-term debt402 10 
Accounts payable3,192 3,072 
Accrued compensation465 467 
Other current liabilities2,571 2,488 
Total current liabilities6,725 6,360 
Noncurrent liabilities  
Long-term debt8,804 8,321 
Pension liabilities642 649 
Other postretirement benefits liabilities173 177 
Operating lease liabilities482 459 
Deferred income taxes531 530 
Other noncurrent liabilities1,428 1,444 
Total noncurrent liabilities12,060 11,580 
Shareholders’ equity  
Ordinary shares (399.0 million outstanding in 2023 and 397.8 million in 2022)
4 4 
Capital in excess of par value12,554 12,512 
Retained earnings9,156 8,468 
Accumulated other comprehensive loss(3,760)(3,946)
Shares held in trust(1)(1)
Total Eaton shareholders’ equity17,953 17,038 
Noncontrolling interests36 38 
Total equity17,988 17,075 
Total liabilities and equity$36,772 $35,014 
The accompanying notes are an integral part of these condensed consolidated financial statements.
4

EATON CORPORATION plc
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended
June 30
(In millions)20232022
Operating activities  
Net income$1,384 $1,135 
Adjustments to reconcile to net cash provided by operating activities  
Depreciation and amortization466 479 
Deferred income taxes(3)(14)
Pension and other postretirement benefits expense9 21 
Contributions to pension plans(51)(55)
Contributions to other postretirement benefits plans(10)(12)
Gain on sale of business (24)
Changes in working capital(622)(1,144)
Other - net12 (5)
Net cash provided by operating activities1,185 382 
Investing activities  
Capital expenditures for property, plant and equipment(286)(254)
Proceeds from sales of property, plant and equipment 92 
Cash paid for acquisition of a business, net of cash acquired (612)
Proceeds from (payments for) sale of business, net of cash sold(1)22 
Investments in associate companies(68)(17)
Purchases of short-term investments - net(719)(4)
Proceeds from (payments for) settlement of currency exchange contracts not designated as hedges - net42 (9)
Other - net2 (41)
Net cash used in investing activities(1,030)(822)
Financing activities  
Proceeds from borrowings818  
Payments on borrowings(5)(6)
Short-term debt, net(225)1,384 
Cash dividends paid(692)(654)
Exercise of employee stock options46 13 
Repurchase of shares (186)
Employee taxes paid from shares withheld (47)(58)
Other - net(7)(1)
Net cash provided by (used in) financing activities(113)492 
Effect of currency on cash16 15 
Total increase in cash59 66 
Cash at the beginning of the period294 297 
Cash at the end of the period$353 $364 

The accompanying notes are an integral part of these condensed consolidated financial statements.
5

EATON CORPORATION plc
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Amounts are in millions 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.BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of Eaton Corporation plc (Eaton or the Company) have been prepared in accordance with generally accepted accounting principles for interim financial information, the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by United States generally accepted accounting principles (US GAAP) for complete financial statements. However, in the opinion of management, all adjustments (consisting of normal recurring accruals) have been made that are necessary for a fair presentation of the condensed consolidated financial statements for the interim periods.
This Form 10-Q should be read in conjunction with the consolidated financial statements and related notes included in Eaton’s 2022 Form 10-K. The interim period results are not necessarily indicative of the results to be expected for the full year. Management has evaluated subsequent events through the date this Form 10-Q was filed with the Securities and Exchange Commission.
Adoption of New Accounting Standard
Eaton adopted Accounting Standards Update 2022-04, Liabilities - Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations, in the first quarter of 2023. The standard requires disclosure of certain information about the Company's supply chain finance program, including key terms and a rollforward of confirmed amounts payable. The adoption of the standard did not have a material impact on the condensed consolidated financial statements.
Note 2.ACQUISITIONS AND DIVESTITURE OF BUSINESSES
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.
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.
Eaton's 2022 Condensed Consolidated Financial Statements include Royal Power Solutions' results of operations, including segment operating profit of $11 million on sales of $79 million, from the date of acquisition through June 30, 2022.
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 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.
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.
6

Note 3.    REVENUE RECOGNITION
Sales are recognized when obligations under the terms of the contract are satisfied and control of promised goods or services have transferred to our customers. Control is transferred when the customer has the ability to direct the use of and obtain benefits from the goods or services. Sales are measured at the amount of consideration the Company expects to be paid in exchange for these products or services.
The following table provides disaggregated sales by lines of businesses, geographic destination, market channel or end market, as applicable, for the Company's operating segments:
Three months ended
June 30
Six months ended
June 30
(In millions)2023202220232022
Electrical Americas
Products$757 $695 $1,473 $1,298 
Systems1,781 1,436 3,359 2,724 
Total$2,538 $2,131 $4,832 $4,022 
Electrical Global
Products$889 $878 $1,772 $1,754 
Systems680 617 1,297 1,178 
Total$1,569 $1,495 $3,069 $2,932 
Aerospace
Original Equipment Manufacturers$324 $285 $638 $577 
Aftermarket297 242 561 463 
Industrial and Other226 215 451 419 
Total$848 $742 $1,650 $1,459 
Vehicle
Commercial$459 $445 $907 $847 
Passenger and Light Duty292 263 583 532 
Total$751 $708 $1,490 $1,379 
eMobility$161 $136 $308 $262 
Total net sales$5,866 $5,212 $11,349 $10,054 

7

The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables (revenue recognized exceeds amount billed to the customer), and deferred revenue (advance payments and billings in excess of revenue recognized). Accounts receivable from customers were $3,876 million and $3,581 million at June 30, 2023 and December 31, 2022, respectively. Amounts are billed as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals or upon achievement of contractual milestones. These assets and liabilities are reported on the Consolidated Balance Sheets on a contract-by-contract basis at the end of each reporting period. Unbilled receivables were $287 million and $233 million at June 30, 2023 and December 31, 2022, respectively, and are recorded in Prepaid expenses and other current assets. The increase in unbilled receivables reflects higher revenue recognized from increased business activity in 2023.
Changes in the deferred revenue liabilities are as follows:
(In millions)Deferred Revenue
Balance at January 1, 2023$508 
Customer deposits and billings1,052 
Revenue recognized in the period(949)
Translation9 
Balance at June 30, 2023$620 
(In millions)Deferred Revenue
Balance at January 1, 2022$422 
Customer deposits and billings742 
Revenue recognized in the period(705)
Translation(15)
Balance at June 30, 2022$444 
Deferred revenue liabilities of $604 million and $489 million as of June 30, 2023 and December 31, 2022, respectively, were included in Other current liabilities with the remaining balance presented in Other noncurrent liabilities.
A significant portion of open orders placed with Eaton are by original equipment manufacturers or distributors. These open orders are not considered firm as they have been historically subject to releases by customers. In measuring backlog of unsatisfied or partially satisfied obligations, only the amount of orders to which customers are firmly committed are included. Using this criterion, total backlog at June 30, 2023 was approximately $12.5 billion. At June 30, 2023, approximately 82% of this backlog is targeted for delivery to customers in the next twelve months and the rest thereafter.

Note 4. CREDIT LOSSES FOR RECEIVABLES
Receivables are exposed to credit risk based on the customers’ ability to pay which is influenced by, among other factors, their financial liquidity position. Eaton’s receivables are generally short-term in nature with a majority outstanding less than 90 days.
Eaton performs ongoing credit evaluation of its customers and maintains sufficient allowances for potential credit losses. The Company evaluates the collectability of its receivables based on the length of time the receivable is past due, and any anticipated future write-off based on historic experience adjusted for market conditions. The Company's segments, supported by our global credit department, perform the credit evaluation and monitoring process to estimate and manage credit risk. The process includes an evaluation of credit losses for both the overall segment receivable and specific customer balances. The process also includes review of customer financial information and credit ratings, approval and monitoring of customer credit limits, and an assessment of market conditions. The Company may also require prepayment from customers to mitigate credit risk. Receivable balances are written off against an allowance for credit losses after a final determination of collectability has been made.
Accounts receivable are net of an allowance for credit losses of $39 million and $31 million at June 30, 2023 and December 31, 2022, respectively. The change in the allowance for credit losses includes expense and net write-offs, none of which are significant.

8

Note 5.    INVENTORY
Inventory is carried at lower of cost or net realizable value. The components of inventory are as follows:
(In millions)June 30,
2023
December 31,
2022
Raw materials$1,458 $1,275 
Work-in-process930 781 
Finished goods1,282 1,375 
Total inventory$3,670 $3,430 

Note 6.    GOODWILL
Changes in the carrying amount of goodwill by segment are as follows:
(In millions)January 1, 2023TranslationJune 30, 2023
Electrical Americas$7,402 $11 $7,413 
Electrical Global3,929 59 3,988 
Aerospace2,844 47 2,891 
Vehicle287 1 289 
eMobility334  334 
Total$14,796 $118 $14,914 

Note 7.    SUPPLY CHAIN FINANCE PROGRAM
The Company negotiates payment terms directly with its suppliers for the purchase of goods and services. In addition, a third-party financial institution offers a voluntary supply chain finance (SCF) program that enables certain of the Company’s suppliers, at the supplier’s sole discretion, to sell receivables due from the Company to the financial institution on terms directly negotiated with the financial institution. If a supplier elects to participate in the SCF program, the supplier decides which invoices are sold to the financial institution and the Company has no economic interest in a supplier’s decision to sell an invoice. Payments by the Company to participating suppliers are paid to the financial institution on the invoice due date, regardless of whether an individual invoice is sold by the supplier to the financial institution. The amounts due to the financial institution for suppliers that participate in the SCF program are included in Accounts payable on the Consolidated Balance Sheets, and the associated payments are included in operating activities on the Condensed Consolidated Statements of Cash Flows.
The changes in SCF obligations are as follows:
(In millions)SCF Obligations
Balance at January 1, 2023$208 
Invoices confirmed during the period634 
Invoices paid during the period(519)
Translation13 
Balance at June 30, 2023$336 

9

Note 8.    DEBT
On May 18, 2023, Eaton issued senior notes (2023 Notes) with a face amount of $500 million. The 2023 Notes mature in 2028 with interest payable semi-annually at a rate of 4.35% per annum. The issuer received proceeds totaling $497 million from the issuance, net of financing costs. The 2023 Notes are fully and unconditionally guaranteed on an unsubordinated, unsecured basis by Eaton and certain of its direct and indirect subsidiaries. The 2023 Notes contain customary optional redemption and par call provisions. The 2023 Notes also contain a provision which upon a change of control requires the Company to make an offer to purchase all or any part of the 2023 Notes at a purchase price of 101% of the principal amount plus accrued and unpaid interest. The 2023 Notes are subject to customary non-financial covenants.
On March 3, 2023, a subsidiary of Eaton issued Euro denominated notes (2023 Euro Notes) in a private issuance with a face value of €300 million ($318 million). The floating rate notes are due June 3, 2024 with interest payable quarterly based on the three-month Euro Interbank Offered Rate plus 25 basis points. The 2023 Euro Notes are fully and unconditionally guaranteed on an unsubordinated, unsecured basis by Eaton. The 2023 Euro Notes contain a change of control provision which requires the Company to make an offer to purchase all or any part of the 2023 Euro Notes at a purchase price of 100.5% of the principal amount plus accrued and unpaid interest. The 2023 Euro Notes are subject to customary non-financial covenants.

Note 9.    RETIREMENT BENEFITS PLANS
The components of retirement benefits expense (income) are as follows:
United States
pension benefit expense (income)
Non-United States
pension benefit expense (income)
Other postretirement
benefits expense (income)
Three months ended June 30
(In millions)202320222023202220232022
Service cost$5 $8 $10 $14 $ $1 
Interest cost35 28 21 12 3 1 
Expected return on plan assets(49)(52)(30)(29)  
Amortization1 4 3 12 (5)(2)
(8)(12)4 9 (2) 
Settlements10 17  1   
Total expense (income)$2 $5 $4 $10 $(2)$ 
United States
pension benefit expense (income)
Non-United States
pension benefit expense (income)
Other postretirement
benefits expense (income)
Six months ended June 30
(In millions)202320222023202220232022
Service cost$10 $16 $21 $30 $ $1 
Interest cost71 48 42 24 5 3 
Expected return on plan assets(98)(105)(60)(60)  
Amortization2 12 4 24 (9)(4)
(15)(29)7 18 (3) 
Settlements19 31 1 1   
Total expense (income)$4 $2 $8 $19 $(3)$ 
The components of retirement benefits expense (income) other than service costs are included in Other expense (income) - net.
During 2020, the Company announced it was freezing its United States pension plans for its non-union employees. The freeze was effective January 1, 2021 for non-union U.S. employees whose retirement benefit was determined under a cash balance formula and is effective January 1, 2026 for non-union U.S. employees whose retirement benefit is determined under a final average pay formula.
10

During the second quarter and first six months of 2023, the Company recognized settlement losses from lump-sum distributions of $10 million and $20 million, respectively. During the second quarter and first six months of 2022, the Company recognized settlement losses from lump-sum distributions of $18 million and $32 million, respectively. During the second quarter and first six months of 2022, the Company remeasured certain pension plans as a result of lump-sum distributions exceeding or expected to exceed the sum of service and interest costs for the year. These remeasurements resulted in a decrease of $137 million and $90 million in funded status and corresponding increase in Accumulated other comprehensive loss in the second quarter and first six months of 2022, respectively.
Note 10.     LEGAL CONTINGENCIES
Eaton is subject to a broad range of claims, administrative and legal proceedings such as lawsuits that relate to contractual allegations and indemnity claims, tax audits, patent infringement, personal injuries, antitrust matters, and employment-related matters. Eaton is also subject to legal claims from historic products which may have contained asbestos. Insurance may cover some of the costs associated with these claims and proceedings. Although it is not possible to predict with certainty the outcome or cost of these matters, the Company believes they will not have a material adverse effect on the Condensed Consolidated Financial Statements.
 
Note 11.     INCOME TAXES
The effective income tax rate for the second quarter of 2023 was expense of 17.0% compared to expense of 16.5% for the second quarter of 2022. The effective income tax rate for the first six months of 2023 was expense of 16.6% compared to expense of 15.3% for the first six months of 2022. The increase in the effective tax rate in the second quarter and first six months of 2023 was primarily due to greater levels of income in higher tax jurisdictions.
11

Note 12. EQUITY
The changes in Shareholders’ equity are as follows:
Ordinary sharesCapital in excess of par valueRetained earningsAccumulated other comprehensive lossShares held in trustTotal Eaton shareholders' equityNoncontrolling interestsTotal equity
(In millions)SharesDollars
Balance at January 1, 2023397.8 $4 $12,512 $8,468 $(3,946)$(1)$17,038 $38 $17,075 
Net income— — — 638 — — 638 1 639 
Other comprehensive income, net of tax132 132 — 132 
Cash dividends paid and accrued— — — (348)— — (348)(4)(352)
Issuance of shares under equity-based
   compensation plans
0.7 — (11)(1)— 1 (11)— (11)
Changes in noncontrolling interest of
   consolidated subsidiaries - net
— — — — — — — 1 1 
Balance at March 31, 2023398.6 $4 $12,502 $8,757 $(3,814)$ $17,449 $36 $17,485 
Net income— — — 744 — — 744 1 745 
Other comprehensive income, net of tax53 53 53 
Cash dividends paid— — — (344)— — (344)— (344)
Issuance of shares under equity-based
   compensation plans
0.4 — 52 (1)— (1)51 — 51 
Changes in noncontrolling interest of
   consolidated subsidiaries - net
— — — — — — — (1)(1)
Balance at June 30, 2023399.0 $4 $12,554 $9,156 $(3,760)$(1)$17,953 $36 $17,988 
Ordinary sharesCapital in excess of par valueRetained earningsAccumulated other comprehensive lossShares held in trustTotal Eaton shareholders' equityNoncontrolling interestsTotal equity
(In millions)SharesDollars
Balance at January 1, 2022398.8 $4 $12,449 $7,594 $(3,633)$(1)$16,413 $38 $16,451 
Net income— — — 532 — — 532 1 533 
Other comprehensive income, net of tax116 116 — 116 
Cash dividends paid and accrued— — — (331)— — (331)(2)(333)
Issuance of shares under equity-based
   compensation plans
0.8 — (22)(2)— — (24)— (24)
Changes in noncontrolling interest of
   consolidated subsidiaries - net
— — — — — — — (1)(1)
Repurchase of shares(0.6)— — (86)— — (86)— (86)
Balance at March 31, 2022399.0 $4 $12,427 $7,707 $(3,517)$(1)$16,620 $36 $16,656 
Net income— — — 601 — — 601 — 601 
Other comprehensive loss, net of tax(444)(444)(444)
Cash dividends paid— — — (323)— — (323)— (323)
Issuance of shares under equity-based
   compensation plans
— — 26 1 — — 27 — 27 
Changes in noncontrolling interest of
   consolidated subsidiaries - net
— — (1)— — — (1)— (1)
Repurchase of shares(0.7)— — (100)— — (100)— (100)
Balance at June 30, 2022398.3 $4 $12,452 $7,886 $(3,961)$(1)$16,380 $36 $16,416 
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 six months ended June 30, 2023, no ordinary shares were repurchased. During the three and six months ended June 30, 2022, 0.7 million and 1.3 million ordinary shares, respectively, were repurchased under the 2022 program in the open market at a total cost of $100 million and $186 million, respectively.




12

The changes in Accumulated other comprehensive loss are as follows:
(In millions)Currency translation and related hedging instrumentsPensions and other postretirement benefitsCash flow
hedges
Total
Balance at January 1, 2023$(3,264)$(810)$129 $(3,946)
Other comprehensive income (loss) before
   reclassifications
182 (19)39 201 
Amounts reclassified from Accumulated other
   comprehensive loss (income)
(6)15 (26)(16)
Net current-period Other comprehensive
   income (loss)
176 (5)14 185 
Balance at June 30, 2023$(3,088)$(815)$143 $(3,760)
The reclassifications out of Accumulated other comprehensive loss are as follows:
(In millions)Six months ended June 30, 2023Consolidated Statements
of Income classification
Gains and (losses) on net investment hedges (amount excluded
  from effectiveness testing)
Currency exchange contracts$6 Interest expense - net
Tax expense 
Total, net of tax6 
Amortization of defined benefits pensions and other
  postretirement benefits items
Actuarial loss and prior service cost(17)1
Tax benefit2 
Total, net of tax(15)
Gains and (losses) on cash flow hedges
Floating-to-fixed interest rate swaps6 Interest expense - net
Currency exchange contracts26 Net sales and Cost of products sold
Tax expense(7)
Total, net of tax26 
Total reclassifications for the period$16 
1 These components of Accumulated other comprehensive loss are included in the computation of net periodic benefit cost. See Note 9 for additional information about pension and other postretirement benefits items.
13

Net Income Per Share Attributable to Eaton Ordinary Shareholders
A summary of the calculation of net income per share attributable to Eaton ordinary shareholders is as follows:
Three months ended
June 30
Six months ended
June 30
(In millions except for per share data)2023202220232022
Net income attributable to Eaton ordinary shareholders$744 $601 $1,382 $1,133 
Weighted-average number of ordinary shares outstanding - diluted400.7 400.7 400.6 401.2 
Less dilutive effect of equity-based compensation1.8 1.7 1.9 2.1 
Weighted-average number of ordinary shares outstanding - basic398.9 399.0 398.7 399.1 
Net income per share attributable to Eaton ordinary shareholders  
Diluted$1.86 $1.50 $3.45 $2.82 
Basic1.86 1.51 3.47 2.84 
For the second quarter and first six months of 2023, 0.1 million stock options were excluded from the calculation of diluted net income per share attributable to Eaton ordinary shareholders because the exercise price of the options exceeded the average market price of the ordinary shares during the period and their effect, accordingly, would have been antidilutive. For the second quarter and first six months of 2022, all stock options were included in the calculation of diluted net income per share attributable to Eaton ordinary shareholders because they were all dilutive.

Note 13.     FAIR VALUE MEASUREMENTS
Fair value is measured based on an exit price, representing the amount that would be received to sell an asset or paid to satisfy a liability in an orderly transaction between market participants. Fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, a fair value hierarchy is established, which categorizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices in active markets; (Level 2) inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
A summary of financial instruments and contingent consideration recognized at fair value, and the fair value measurements used, is as follows:
(In millions)TotalLevel 1Level 2Level 3
June 30, 2023    
Cash$353 $353 $ $ 
Short-term investments977 977   
Net derivative contracts46  46  
Contingent future payments from acquisition of Green Motion(46)  (46)
December 31, 2022    
Cash$294 $294 $ $ 
Short-term investments261 261   
Net derivative contracts29  29  
Contingent future payments from acquisition of Green Motion(44)  (44)
Eaton values its financial instruments using an industry standard market approach, in which prices and other relevant information is generated by market transactions involving identical or comparable assets or liabilities.
14

On March 22, 2021, Eaton acquired Green Motion SA, a leading designer and manufacturer of electric vehicle charging hardware and related software based in Switzerland. Green Motion SA was acquired for $106 million, including $49 million of cash paid at closing and an initial estimate of $57 million for the fair value of contingent future consideration based on 2023 and 2024 revenue performance. The fair value of contingent consideration liabilities is estimated by discounting contingent payments expected to be made, and may increase or decrease based on changes in revenue estimates and discount rates, with a maximum possible undiscounted value of $114 million. As of June 30, 2023, the fair value of the contingent future payments has been reduced to $46 million based primarily on anticipated reductions in projected 2023 revenue compared to the initial estimate.
Other Fair Value Measurements
Long-term debt and the current portion of long-term debt had a carrying value of $9,206 million and fair value of $8,622 million at June 30, 2023 compared to $8,331 million and $7,625 million, respectively, at December 31, 2022. The fair value of Eaton's debt instruments was estimated using prevailing market interest rates on debt with similar creditworthiness, terms and maturities and is considered a Level 2 fair value measurement.

Note 14.     DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES
In the normal course of business, Eaton is exposed to certain risks related to fluctuations in interest rates, currency exchange rates and commodity prices. The Company uses various derivative and non-derivative financial instruments, primarily interest rate swaps, currency forward exchange contracts, currency swaps and commodity contracts to manage risks from these market fluctuations. The instruments used by Eaton are straightforward, non-leveraged instruments. The counterparties to these instruments are financial institutions with strong credit ratings. Eaton maintains control over the size of positions entered into with any one counterparty and regularly monitors the credit rating of these institutions. Such instruments are not purchased and sold for trading purposes.
Derivative financial instruments are accounted for at fair value and recognized as assets or liabilities in the Consolidated Balance Sheets. Accounting for the gain or loss resulting from the change in the fair value of the derivative financial instrument depends on whether it has been designated as part of a hedging relationship, is effective and the nature of the hedging activity. Eaton formally documents all relationships between derivative financial instruments accounted for as designated hedges and the hedged item, as well as its risk-management objective and strategy for undertaking the hedge transaction. This process includes linking derivative financial instruments to a recognized asset or liability, specific firm commitment, forecasted transaction, or net investment in a foreign operation. These financial instruments can be designated as:
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 gain or loss from the derivative financial instrument is recognized in Accumulated other comprehensive income 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 gain or loss from the derivative financial instrument is recognized in Accumulated other comprehensive income 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.
The gain or loss from a derivative financial instrument designated as a hedge is classified in the same line of the Consolidated Statements of Income as the offsetting loss or gain on the hedged item. The cash flows resulting from these financial instruments are classified in operating activities on the Condensed Consolidated Statements of Cash Flows.
For derivatives that are not designated as a hedge, any gain or loss is immediately recognized in income. The majority of derivatives used in this manner relate to risks resulting from assets or liabilities denominated in a foreign currency and certain commodity contracts that arise in the normal course of business.
15

Eaton uses currency exchange contracts and certain of its debt denominated in foreign currency to hedge portions of its net investments in foreign operations against foreign currency exposure (net investment hedges). The Company uses the spot rate method to assess hedge effectiveness when currency exchange contracts are used in net investment hedges. Under this method, changes in the spot exchange rate are recognized in Accumulated other comprehensive loss. Changes related to the forward rate are excluded from the hedging relationship and the forward points are amortized to Interest expense - net on a straight-line basis over the term of the contract. The cash flows resulting from these currency exchange contracts are classified in investing activities on the Condensed Consolidated Statements of Cash Flows.
Derivative Financial Statement Impacts
The fair value of derivative financial instruments recognized in the Consolidated Balance Sheets is as follows:
(In millions)Notional
amount
Other
 current
assets
Other
noncurrent
assets
Other
current
liabilities
Other
noncurrent
liabilities
Type of
hedge
Term
June 30, 2023      
Derivatives designated as hedges      
Currency exchange contracts$990 $52 $2 $16 $3 Cash flow
1 to 31 months
Commodity contracts27 1  1  Cash flow
1 to 12 months
Currency exchange contracts557 3    Net investment
3 months
Total $55 $2 $17 $3   
Derivatives not designated as hedges      
Currency exchange contracts$4,891 $19 $10  
1 to 7 months
December 31, 2022      
Derivatives designated as hedges      
Currency exchange contracts$1,240 $35 $2 $17 $9 Cash flow
1 to 36 months
Commodity contracts64 4  2  Cash flow
1 to 12 months
Total $39 $2 $19 $9   
Derivatives not designated as hedges      
Currency exchange contracts$4,683 $30 $14  
1 to 12 months
The currency exchange contracts shown in the table above as derivatives not designated as hedges are primarily contracts entered into to manage currency volatility or exposure on intercompany receivables, payables and loans. While Eaton does not elect hedge accounting treatment for these derivatives, Eaton targets managing 100% of the intercompany balance sheet exposure to minimize the effect of currency volatility related to the movement of goods and services in the normal course of its operations. This activity represents the great majority of these currency exchange contracts. The cash flows resulting from the settlement of these derivatives have been classified in investing activities in the Condensed Consolidated Statements of Cash Flows.
Foreign currency denominated debt designated as non-derivative net investment hedging instruments had a carrying value on an after-tax basis of $3,092 million at June 30, 2023 and $2,711 million at December 31, 2022.
As of June 30, 2023, the volume of outstanding commodity contracts that were entered into to hedge forecasted transactions:
CommodityJune 30, 2023Term
Aluminum4 Millions of pounds
1 to 11 months
Copper3 Millions of pounds
1 to 7 months
Gold1,587 Troy ounces
1 to 12 months
Silver289,724 Troy ounces
1 to 7 months
16

The following amounts were recorded on the Consolidated Balance Sheets related to fixed-to-floating interest rate swaps:
(In millions)Carrying amount of the hedged
assets (liabilities)
Cumulative amount of fair value hedging adjustment included in the carrying amount of the hedged
asset (liabilities) (a)
Location on Consolidated Balance SheetsJune 30, 2023December 31, 2022June 30, 2023December 31, 2022