Eaton 10-Q 2024-03-31

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 March 31, 2024

Commission file number 000-54863

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						D04 Y0C2
(Address of principal executive offices)															(Zip Code)

															+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)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class									Trading Symbol												Name of each exchange on which registered
Ordinary shares ($0.01 par value)									ETN												New York Stock Exchange

Indicate by check mark whether the registrant (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 399.8 million Ordinary Shares outstanding as of March 31, 2024.

TABLE OF CONTENTS
PART I — FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS			2
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			21
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			30
ITEM 4. CONTROLS AND PROCEDURES			31
PART II — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS			31
ITEM 1A. RISK FACTORS			31
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS			31
ITEM 6. EXHIBITS			32
SIGNATURES			34

PART I — FINANCIAL INFORMATION

EATON CORPORATION plc

CONSOLIDATED STATEMENTS OF INCOME

			Three months ended March 31
(In millions except for per share data)			2024						2023
Net sales			$	5,943					$	5,483
Cost of products sold			3,725						3,599
Selling and administrative expense			1,025						904
Research and development expense			189						179
Interest expense - net			30						50
Other income - net			(26)						(11)
Income before income taxes			1,001						762
Income tax expense			179						123
Net income			822						639
Less net income for noncontrolling interests			(1)						(1)
Net income attributable to Eaton ordinary shareholders			$	821					$	638
Net income per share attributable to Eaton ordinary shareholders
Diluted			$	2.04					$	1.59
Basic			2.05						1.60
Weighted-average number of ordinary shares outstanding
Diluted			401.9						400.5
Basic			399.9						398.5
Cash dividends declared per ordinary share			$	0.94					$	0.86

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

EATON CORPORATION plc

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

			Three months ended March 31
(In millions)			2024						2023
Net income			$	822					$	639
Less net income for noncontrolling interests			(1)						(1)
Net income attributable to Eaton ordinary shareholders			821						638
Other comprehensive income (loss), net of tax
Currency translation and related hedging instruments			(53)						119
Pensions and other postretirement benefits			17						(2)
Cash flow hedges			(4)						15
Other comprehensive income (loss) attributable to Eaton ordinary shareholders			(40)						132
Total comprehensive income attributable to Eaton ordinary shareholders			$	781					$	770

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

EATON CORPORATION plc

CONSOLIDATED BALANCE SHEETS

(In millions)			March 31, 2024						December 31, 2023
Assets
Current assets
Cash			$	473					$	488
Short-term investments			1,969						2,121
Accounts receivable - net			4,674						4,475
Inventory			3,868						3,739
Prepaid expenses and other current assets			870						851
Total current assets			11,853						11,675
Property, plant and equipment
Land and buildings			2,215						2,241
Machinery and equipment			6,577						6,497
Gross property, plant and equipment			8,792						8,738
Accumulated depreciation			(5,234)						(5,208)
Net property, plant and equipment			3,558						3,530
Other noncurrent assets
Goodwill			14,877						14,977
Other intangible assets			4,975						5,091
Operating lease assets			722						648
Deferred income taxes			481						458
Other assets			2,070						2,052
Total assets			$	38,535					$	38,432
Liabilities and shareholders’ equity
Current liabilities
Short-term debt			$	1					$	8
Current portion of long-term debt			994						1,017
Accounts payable			3,400						3,365
Accrued compensat

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Amounts are in millions of dollars or shares 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.

COMPANY OVERVIEW

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

Eaton was founded in 1911 and has been listed on the New York Stock Exchange for more than a century. We reported revenues of $23.2 billion in 2023 and serve customers in more than 160 countries.

RESULTS OF OPERATIONS

Non-GAAP Financial Measures

The following discussion of Consolidated Financial Results includes certain non-GAAP financial measures. These financial measures include adjusted earnings and adjusted earnings per ordinary share, each of which differs from the most directly comparable measure calculated in accordance with generally accepted accounting principles (GAAP). A reconciliation of adjusted earnings and adjusted earnings per ordinary share to the most directly comparable GAAP measure is included in the Consolidated Financial Results table below. Management believes that these financial measures are useful to investors because they provide additional meaningful financial information that should be considered when assessing our business performance and trends, and they allow investors to more easily compare Eaton’s financial performance period to period. Management uses this information in monitoring and evaluating the on-going performance of Eaton.

Acquisition and Divestiture Charges

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

			Three months ended March 31
(In millions except for per share data)			2024						2023
Acquisition integration, divestiture charges and transaction costs			$	17					$	13
Income tax benefit			4						3
Total after income taxes			$	13					$	11
Per ordinary share - diluted			$	0.03					$	0.03

Acquisition integration, divestiture charges and transaction costs in 2024 and 2023 are primarily related to acquisitions completed prior to 2023, including other charges and income to acquire and exit businesses. These charges were included in Cost of products sold, Selling and administrative expense, Research and development expense, or Other income - net. In Business Segment Information in Note 15, the charges were included in Other expense - net.

Restructuring Programs

In the second quarter of 2020, Eaton initiated a multi-year restructuring program to reduce its cost structure and gain efficiencies in its business segments and at corporate in order to initially respond to declining market conditions brought on by the COVID-19 pandemic. Since the inception of the program, the Company incurred expenses of $199 million for workforce reductions and $184 million for plant closing and other costs, resulting in total charges of $382 million through December 31, 2023. This restructuring program was substantially complete at the end of 2023.

During the first quarter of 2024, Eaton implemented a new multi-year restructuring program to accelerate opportunities to optimize its operations and global support structure. These actions will better align the Company's functions to support anticipated growth and drive greater effectiveness throughout the Company. Restructuring charges incurred under this program were $63 million in the first quarter of 2024. This restructuring program is expected to be completed in 2026 and is expected to incur additional expenses related to workforce reductions of $216 million and plant closing and other costs of $96 million, resulting in total estimated charges of $375 million for the entire program. The Company expects mature year benefits of $325 million when the multi-year program is fully implemented.

Additional information related to these restructuring programs is presented in Note 14.

Intangible Asset Amortization Expense

Intangible asset amortization expense is as follows:

			Three months ended March 31
(In millions except for per share data)			2024						2023
Intangible asset amortization expense			$	106					$	124
Income tax benefit			23						27
Total after income taxes			$	84					$	97
Per ordinary share - diluted			$	0.21					$	0.24

Consolidated Financial Results

			Three months ended March 31												Increase (decrease)
(In millions except for per share data)			2024						2023
Net sales			$	5,943					$	5,483					8		%
Gross profit			2,218						1,884						18		%
Percent of net sales			37.3		%				34.4		%
Income before income taxes			1,001						762						31		%
Net income			822						639						29		%
Less net income for noncontrolling interests			(1)						(1)
Net income attributable to Eaton ordinary shareholders			821						638						29		%
Excluding acquisition and divestiture charges, after-tax			13						11
Excluding restructuring program charges, after-tax			49						8
Excluding intangible asset amortization expense, after-tax			84						97
Adjusted earnings			$	966					$	753					28		%
Net income per share attributable to Eaton ordinary shareholders - diluted			$	2.04					$	1.59					28		%
Excluding per share impact of acquisition and divestiture charges, after-tax			0.03						0.03
Excluding per share impact of restructuring program charges, after-tax			0.12						0.02
Excluding per share impact of intangible asset amortization expense, after-tax			0.21						0.24
Adjusted earnings per ordinary share			$	2.40					$	1.88					28		%

Net Sales

Net sales increased 8% in the first quarter of 2024 driven entirely by organic sales. The increase in organic sales was primarily due to strength in commercial & institutional, industrial, and data center end-markets in the Electrical Americas and Electrical Global business segments, strength in sales to commercial OEM and aftermarket in the Aerospace business segment, and strength in the European region in the eMobility business segment.

Gross Profit

Gross profit margin increased from 34.4% in the first quarter of 2023 to 37.3% in the first quarter of 2024 primarily due to higher sales volumes and net price realization, and operating efficiencies in the Electrical Americas and Vehicle business segments, partially offset by higher costs to support growth initiatives in the Electrical Americas and Aerospace business segments, unfavorable product mix in the Aerospace business segment, and lower sales volume in the Vehicle business segment.

Income Taxes

The effective income tax rate for the first quarter of 2024 was expense of 17.9% compared to expense of 16.1% for the first quarter of 2023. The increase in the effective tax rate in the first quarter of 2024 was primarily due to greater levels of income in higher tax jurisdictions, partially offset by a larger impact from the excess tax benefits recognized for employee share-based payments in the quarter.

Net Income

Changes in Net income attributable to Eaton ordinary shareholders and Net income per share attributable to Eaton ordinary shareholders - diluted are summarized as follows:

			Three months ended
(In millions except for per share data)			Dollars						Per share
March 31, 2023			$	638					$	1.59
Business segment results of operations
Operational performance			254						0.61
Foreign currency			(13)						(0.03)
Corporate
Intangible asset amortization expense			13						0.03
Restructuring program charges			(41)						(0.10)
Acquisition and divestiture charges			(2)						—
Other corporate items			(10)						(0.02)
Tax rate impact			(18)						(0.04)
March 31, 2024			$	821					$	2.04

Business Segment Results of Operations

The following is a discussion of Net sales, operating profit (loss) and operating margin by business segment.

Electrical Americas

			Three months ended March 31												Increase (decrease)
(In millions)			2024						2023
Net sales			$	2,690					$	2,294					17		%
Operating profit			$	785					$	525					50		%
Operating margin			29.2		%				22.9		%

Net sales increased 17% in the first quarter of 2024 driven entirely by organic sales growth. The increase in organic sales reflects broad-based strength in end-markets, with particular strength in commercial & institutional, industrial, and data center end-markets.

The operating margin increased from 22.9% in the first quarter of 2023 to 29.2% in the first quarter of 2024 primarily due to higher sales volumes and net price realization, and operating efficiencies, partially offset by higher costs to support growth initiatives.

Electrical Global

			Three months ended March 31												Increase (decrease)
(In millions)			2024						2023
Net sales			$	1,500					$	1,500					—		%
Operating profit			$	274					$	274					—		%
Operating margin			18.3		%				18.3		%

Changes in Net sales are summarized as follows:			Three months ended March 31, 2024
Organic growth			1		%
Foreign currency			(1)		%
Total increase in Net sales			—		%

The increase in organic sales in the first quarter of 2024 was primarily due to strength in commercial & institutional, industrial, and data center end-markets, partially offset by weakness in utility, machine OEM, and residential end-markets. Additionally, the increase in organic sales was primarily due to strength in the Asia Pacific region and the Global Energy Infrastructure Solutions (GEIS) business, partially offset by weakness in the European region.

The operating margin was flat at 18.3% in both the first quarter of 2024 and 2023.

Aerospace

			Three months ended March 31												Increase (decrease)
(In millions)			2024						2023
Net sales			$	871					$	803					9		%
Operating profit			$	201					$	180					12		%
Operating margin			23.1		%				22.5		%

Net sales increased 9% in the first quarter of 2024 driven entirely by organic sales growth. The increase in organic sales was primarily due to broad-based strength across all end markets with particular strength in commercial OEM and aftermarket.

The operating margin increased from 22.5% in the first quarter of 2023 to 23.1% in the first quarter of 2024 primarily due to higher sales volumes and net price realization, and a gain on the sale of a production facility in the first quarter of 2024, partially offset by higher costs to support growth initiatives and unfavorable product mix.

Vehicle

			Three months ended March 31												Increase (decrease)
(In millions)			2024						2023
Net sales			$	724					$	739					(2)		%
Operating profit			$	116					$	107					8		%
Operating margin			16.0		%				14.5		%

Changes in Net sales are summarized as follows:			Three months ended March 31, 2024
Organic growth			(3)		%
Foreign currency			1		%
Total increase in Net sales			(2)		%

The decrease in organic sales in the first quarter of 2024 was primarily due to weakness in the North American region, partially offset by strength in the Asia Pacific region.

The operating margin increased from 14.5% in the first quarter of 2023 to 16.0% in the first quarter of 2024 primarily due to operating efficiencies and net sales price realization, partially offset by lower sales volumes.

eMobility

			Three months ended March 31												Increase (decrease)
(In millions)			2024						2023
Net sales			$	158					$	147					7		%
Operating loss			$	(4)					$	(4)					—		%
Operating margin			(2.7)		%				(2.7)		%

Net sales increased 7% in the first quarter of 2024 driven entirely by organic sales growth. The increase in organic sales reflects strength in the European region, partially offset by weakness in the North American region.

The operating margin was flat at negative 2.7% in both the first quarter of 2024 and 2023.

Corporate Expense

			Three months ended March 31												Increase (decrease)
(In millions)			2024						2023
Intangible asset amortization expense			$	106					$	124					(15)		%
Interest expense - net			30						50						(40)		%
Pension and other postretirement benefits income			(12)						(11)						9		%
Restructuring program charges			63						10						530		%
Other expense - net			184						148						24		%
Total corporate expense			$	371					$	320					16		%

Total corporate expense increased from $320 million in the first quarter of 2023 to $371 million in the first quarter of 2024 primarily due to higher Restructuring program charges and Other expense - net, partially offset by lower Interest expense - net and Intangible asset amortization expense. The increase in Other expense - net is primarily due to higher costs for litigation matters.

LIQUIDITY, CAPITAL RESOURCES, AND FINANCIAL CONDITION

Liquidity and Financial Condition

Eaton’s objective is to finance its business through operating cash flow and an appropriate mix of equity and long-term and short-term debt. By diversifying its debt maturity structure, Eaton reduces liquidity risk.

The Company maintains revolving credit facilities consisting of a $500 million 364-day revolving credit facility that will expire on September 30, 2024 and a $2,500 million five-year revolving credit facility that will expire on October 1, 2027. The revolving credit facilities totaling $3,000 million are used to support commercial paper borrowings and are fully and unconditionally guaranteed by Eaton and certain of its direct and indirect subsidiaries on an unsubordinated, unsecured basis. There were no borrowings outstanding under Eaton’s revolving credit facilities at March 31, 2024. The Company maintains access to the commercial paper markets through its $3,000 million commercial paper program, of which none was outstanding on March 31, 2024.

Over the course of a year, cash, short-term investments, and short-term debt may fluctuate in order to manage global liquidity. As of March 31, 2024 and December 31, 2023, Eaton had cash of $473 million and $488 million, short-term investments of $1,969 million and $2,121 million, and short-term debt of $1 million and $8 million, respectively. Eaton believes it has the operating flexibility, cash flow, cash and short-term investment balances, availability under existing revolving credit facilities, and access to capital markets in excess of the liquidity necessary to meet future operating needs of the business, fund capital expenditures and acquisitions of businesses, as well as scheduled payments of long-term debt.

Eaton was in compliance with each of its debt covenants for all periods presented.

Cash Flows

A summary of cash flows is as follows:

			Three months ended March 31												Change from 2023
(In millions)			2024						2023
Net cash provided by operating activities			$	475					$	335					$	140
Net cash provided by (used in) investing activities			33						(124)						156
Net cash used in financing activities			(536)						(281)						(255)
Effect of currency on cash			13						11						2
Total decrease in cash			$	(15)					$	(59)

Operating Cash Flow

Net cash provided by operating activities increased by $140 million in the first three months of 2024 compared to 2023 primarily due to higher net income in 2024, partially offset by higher working capital balances.

Investing Cash Flow

Net cash provided by investing activities increased by $156 million in the first three months of 2024 compared to 2023 primarily driven by an increase in sales of short-term investments to $150 million in 2024 compared to purchases of short-term investments of $27 million in 2023 and proceeds from the sale of certain facilities in 2024, partially offset by an increase in capital expenditures for property, plant and equipment to $183 million in 2024 from $126 million in 2023.

Financing Cash Flow

Net cash used in financing activities increased by $255 million in the first three months of 2024 compared to 2023 primarily due to no proceeds from borrowings in 2024 compared to proceeds from borrowings of $318 million in 2023, and an increase in repurchase of shares to $138 million in 2024 compared to no repurchase of shares in 2023, partially offset by a decrease in net payments of short-term debt to $7 million in 2024 from $236 million in 2023.

Uses of Cash

Capital Expenditures

Capital expenditures were $183 million and $126 million in the first three months of 2024 and 2023, respectively. The Company plans to increase capital expenditures over the next five years to expand production capacity across various markets to support anticipated growth. As a result, Eaton expects approximately $800 million in capital expenditures in 2024.

Dividends

Cash dividend payments were $368 million and $334 million in the first three months of 2024 and 2023, respectively. Payment of quarterly dividends in the future depends upon the Company’s ability to generate net income and operating cash flows, among other factors, and is subject to declaration by the Eaton Board of Directors. The Company intends to continue to pay quarterly dividends in 2024.

Share Repurchases

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 months ended March 31, 2024, 0.5 million ordinary shares were repurchased under the 2022 program in the open market at a total cost of $138 million. During the three months ended March 31, 2023, no ordinary shares were repurchased. The Company will continue to pursue share repurchases in 2024 depending on market conditions and capital levels.

Acquisition of Businesses

There were no business acquisitions in the first three months of 2024 and 2023. The Company will continue to focus on deploying its capital toward businesses that provide opportunities for higher growth and strong returns, and align with secular trends and its power management strategies.

Debt

The Company manages a number of short-term and long-term debt instruments, including commercial paper. At March 31, 2024, the Company had Short-term debt of $1 million, Current portion of long-term debt of $994 million, and Long-term debt of $8,192 million. The Company believes it has the operating flexibility, cash flow, and access to capital markets to meet scheduled payments of long-term debt.

Supply Chain Finance Program

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. The SCF program does not have a significant impact on the Company’s liquidity as 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. For additional information on the SCF program, see Note 7.

Guaranteed Debt

Issuers, Guarantors and Guarantor Structure

Eaton Corporation has issued senior notes pursuant to indentures dated April 1, 1994 (the 1994 Indenture), November 20, 2012 (the 2012 Indenture), September 15, 2017 (the 2017 Indenture) and August 23, 2022 (as supplemented by the First and Second Supplemental Indentures of the same date and the Third Supplemental Indenture dated May 18, 2023, the 2022 Indenture). The senior notes of Eaton Corporation are registered under the Securities Act of 1933, as amended (the Registered Senior Notes). Eaton Capital Unlimited Company, a subsidiary of Eaton, is the issuer of five outstanding series of debt securities sold in offshore transactions under Regulation S promulgated under the Securities Act (the Eurobonds). The Eurobonds and the Registered Senior Notes (together, the Senior Notes) comprise substantially all of Eaton’s long-term indebtedness.

Substantially all of the Senior Notes (with limited exceptions), together with the credit facilities described above under Liquidity and Financial Condition (the Credit Facilities), are guaranteed by Eaton and 17 of its subsidiaries. Accordingly, they rank equally with each other. However, because these obligations are not secured, they would be effectively subordinated to any existing or future secured indebtedness of Eaton and its subsidiaries. As of March 31, 2024, Eaton has no material, long-term secured debt. The guaranteed Registered Senior Notes are also structurally subordinated to the liabilities of Eaton's subsidiaries that are not guarantors. Except as described below under Future Guarantors, Eaton is not obligated to cause its subsidiaries to guarantee the Registered Senior Notes.

The table set forth in Exhibit 22 filed with the Form 10-K filed on February 23, 2023 (10-K Exhibit 22) details the primary obligors and guarantors with respect to the guaranteed Registered Senior Notes.

Terms of Guarantees of Registered Securities

Payment of principal and interest on the Registered Senior Notes is guaranteed, on an unsecured, unsubordinated basis by the subsidiaries of Eaton set forth in the table referenced in the 10-K Exhibit 22. Each guarantee is full and unconditional, and joint and several. Each guarantor’s guarantee is an unsecured obligation that ranks equally with all its other unsecured and unsubordinated indebtedness. The obligations of each guarantor under its guarantee of the Registered Senior Notes are subject to a customary savings clause or similar provision designed to prevent such guarantee from constituting a fraudulent conveyance or otherwise legally impermissible or voidable obligation.

Though the terms of the indentures vary slightly, generally, each guarantee of the Registered Senior Notes by a guarantor that is a subsidiary of Eaton Corporation provides that it will be automatically and unconditionally released and discharged under certain circumstances, including, but not limited to:

(a)the consummation of certain types of transactions permitted under the applicable indenture, including one that results in such guarantor ceasing to be a subsidiary; and

(b)for Registered Senior Notes issued under the 2022 Indenture, when such guarantor is a guarantor or issuer of indebtedness in an aggregate outstanding principal amount of less than 25% of our total outstanding indebtedness.

Further, each guarantee by a direct or indirect parent of Eaton Corporation (other than Eaton) provides that it will also be released if:

(c)such guarantee (so long as the guarantor is not obligated under any other U.S. debt obligations), becomes prohibited by any applicable law, rule or regulation or by any contractual obligation; or

(d)such guarantee results in material adverse tax consequences to Eaton or any of its subsidiaries (so long as the applicable guarantor is not obligated under any other U.S. debt obligation).

The guarantee of Eaton does not contain any release provisions.

Future Guarantors

The 2012 and 2017 Indentures generally provide that, with certain limited exceptions, any subsidiary of Eaton must become a guarantor if it becomes obligated as borrower or guarantor under any series of debt securities or a syndicated credit facility. Further, the 2012 and 2017 Indentures provide that any entity that becomes a direct or indirect parent entity of Eaton Corporation and holds any material assets, with certain limited exceptions, or owes any material liabilities must become a guarantor. The 2022 Indenture provides only that, with certain limited exceptions, any subsidiary of Eaton must become a guarantor if it becomes obligated as borrower or guarantor under indebtedness with an aggregate outstanding principal amount in excess of 25% of the Parent and its Subsidiaries’ then-outstanding indebtedness.

The 1994 Indenture does not contain provisions with respect to future guarantors.

Summarized Financial Information of Guarantors and Issuers

(In millions)			March 31, 2024						December 31, 2023
Current assets			$	4,991					$	5,006
Noncurrent assets			13,026						13,004
Current liabilities			3,768						3,927
Noncurrent liabilities			9,975						10,012
Amounts due to subsidiaries that are non-issuers and non-guarantors - net			8,682						8,178
(In millions)									Three months ended March 31, 2024
Net sales									$	3,484
Sales to subsidiaries that are non-issuers and non-guarantors									280
Cost of products sold									2,585
Expense from subsidiaries that are non-issuers and non-guarantors - net									109
Net income									220

The financial information presented is that of Eaton Corporation and the Guarantors, which includes Eaton Corporation plc, on a combined basis and the financial information of non-issuer and non-guarantor subsidiaries has been excluded. Intercompany balances and transactions between Eaton Corporation and Guarantors have been eliminated, and amounts due from, amounts due to, and transactions with non-issuer and non-guarantor subsidiaries have been presented separately.

FORWARD-LOOKING STATEMENTS

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