Operating Cash Flow Excluding Legal Settlements a Record $943
Million
Record Segment Operating Margins
Power management company Eaton Corporation plc (NYSE:ETN) today
announced that operating earnings per share, which exclude charges
of $0.03 per share to integrate recent acquisitions, were a record
$1.29 for the third quarter of 2014, up 15 percent over the third
quarter of 2013. Sales in the third quarter of 2014 were $5.7
billion, 2 percent above the same period in 2013. Sales growth
consisted of 3 percent growth in core sales offset by 1 percent of
negative foreign exchange. Operating earnings for the third quarter
of 2014, excluding pre-tax charges of $19 million to integrate
recent acquisitions, were $616 million, an increase of 15 percent
over 2013.
Alexander M. Cutler, Eaton chairman and chief executive officer,
said, “We had a very strong quarter, setting numerous performance
records at both the segment and corporate level. Third quarter
results came in near the high end of our guidance for the quarter.
Our segment operating margins, which exclude acquisition
integration charges, were a record 16.0 percent as productivity
gains and effective cost control more than offset the impact of
modestly lower-than-expected revenues.
“Our third quarter bookings in both of our Electrical segments
again showed good growth, as did orders in our Aerospace segment,”
said Cutler. “Reflecting the continued slower growth in our markets
outside North America, we now estimate our markets in 2014 are
likely to grow 2 percent, down from our prior estimate of 3
percent.
“Excluding the payments made to resolve the litigation we
settled in the second quarter, our operating cash flow in the third
quarter was $943 million, a quarterly record,” said Cutler. “During
the quarter we repurchased $225 million of our shares. We have
spent $324 million on share repurchases this year.
“We anticipate operating earnings per share for the fourth
quarter of 2014, which exclude an estimated $32 million of charges
to integrate our recent acquisitions, to be between $1.15 and
$1.25,” said Cutler. “We are maintaining the midpoint of our full
year 2014 guidance. Strong productivity growth and tight expense
control are offsetting the impact of negative foreign exchange and
lower market growth. Our updated guidance for 2014 operating
earnings per share, which exclude an estimated $154 million in
acquisition integration charges, and which are also adjusted for
the impact of the Aerospace divestitures and the legal settlements,
is between $4.55 and $4.65, an increase of 11 percent compared to
last year.”
Business Segment Results
Sales for the Electrical Products segment were a record $1.9
billion, up 3 percent over 2013. Operating profits were $330
million. Excluding acquisition integration charges of $8 million
during the quarter, operating profits were a record $338 million,
up 9 percent over the third quarter of 2013.
“Electrical Products had strong operating margins, coming in at
18.0 percent,” said Cutler. “Our bookings in the third quarter were
up 5 percent over the third quarter a year ago, continuing our
strong momentum this year.”
Sales for the Electrical Systems and Services segment were a
record $1.7 billion, up 1 percent over third quarter of 2013. The
segment reported operating profits of $238 million. Excluding
acquisition integration charges of $4 million during the quarter,
operating profits were $242 million.
“The rebound in Electrical Systems and Services operating
margins to 14.6 percent reflects significant progress on the
initiatives we laid out at the beginning of the quarter,” said
Cutler. “Bookings in the third quarter were up 3 percent over the
third quarter of 2013.”
Hydraulics segment sales were $733 million, down 1 percent from
the third quarter of 2013. Operating profits in the third quarter
were $84 million. Excluding acquisition integration charges of $2
million, operating profits were $86 million, a decrease of 11
percent.
“The Hydraulics markets in the third quarter of 2014 were about
the same as in the second quarter of 2014, with pockets of strength
in industrial applications offset by weakness in agricultural
equipment globally and construction equipment in China,” said
Cutler. “Our bookings in the quarter decreased 6 percent compared
to the third quarter of 2013.”
Aerospace segment sales were $454 million, up 1 percent over the
third quarter of 2013. Sales growth consisted of 6 percent core
growth and 1 percent growth from foreign exchange, offset by a 6
percent reduction from the second quarter divestitures. Operating
profits in the third quarter were $72 million, up 13 percent over
the third quarter of 2013.
“Our Aerospace margins of 15.9 percent in the third quarter
reflected strong operating performance and the benefits of higher
aftermarket shipments,” said Cutler. “Bookings in the quarter rose
12 percent, driven by increased OEM orders.”
The Vehicle segment posted sales of $1.0 billion, up 5 percent
compared to the third quarter of 2013. The segment reported
operating profits in the third quarter of $176 million, up 9
percent compared to the third quarter of 2013.
“North American markets were particularly strong in the quarter
while South American markets continued to be weak,” said Cutler.
“We now expect the NAFTA Class 8 truck market to be 295,000 in
2014, up from our prior estimate of 290,000.”
Eaton is a power management company with 2013 sales of $22.0
billion. Eaton provides energy-efficient solutions that help our
customers effectively manage electrical, hydraulic and mechanical
power more efficiently, safely and sustainably. Eaton has
approximately 103,000 employees and sells products to customers in
more than 175 countries. For more information, visit
www.eaton.com.
Notice of conference call: Eaton’s conference call to discuss
its third quarter results is available to all interested parties as
a live audio webcast today at 10 a.m. United States Eastern time
via a link on the center of Eaton’s home page. This news release
can be accessed under its headline on the home page. Also available
on the website prior to the call will be a presentation on third
quarter results, which will be covered during the call.
This news release contains forward-looking statements concerning
fourth quarter 2014 operating earnings per share, full year 2014
operating earnings per share, and the performance of our worldwide
markets. These statements should be used with caution and are
subject to various risks and uncertainties, many of which are
outside the company’s control. The following factors could cause
actual results to differ materially from those in the
forward-looking statements: unanticipated changes in the markets
for the company’s business segments; unanticipated downturns in
business relationships with customers or their purchases from us;
competitive pressures on sales and pricing; increases in the cost
of material 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; the performance of
recent acquisitions; unanticipated difficulties integrating
acquisitions; new laws and governmental regulations; interest rate
changes; stock market and currency fluctuations; and unanticipated
deterioration of economic and financial conditions in the United
States and around the world. We do not assume any obligation to
update these forward-looking statements.
Financial Results
The company’s comparative financial results for the three months
and nine months ended September 30, 2014 are available on the
company’s website, www.eaton.com.
EATON CORPORATION plc CONSOLIDATED STATEMENTS OF
INCOME
Three months endedSeptember 30
Nine months endedSeptember 30 (In millions except for per share
data) 2014 2013 2014 2013
Net sales $ 5,728 $ 5,607 $ 16,987
$ 16,519 Cost of products sold 3,916 3,883 11,799 11,488
Selling and administrative expense 961 967 2,907 2,885 Litigation
settlements — — 644 — Research and development expense 163 166 493
479 Interest expense - net 56 63 173 209 Other (income) expense -
net (10 ) 7 (181 ) 3
Income before income
taxes 642 521 1,152 1,455 Income tax expense (benefit) 37
7 (66 ) 64
Net income 605 514 1,218
1,391 Less net income for noncontrolling interests (3 ) (4 ) (6 )
(9 )
Net income attributable to Eaton ordinary shareholders
$ 602 $ 510 $ 1,212 $ 1,382
Net income per ordinary share Diluted $ 1.26 $ 1.07 $ 2.53 $
2.90 Basic 1.27 1.08 2.55 2.92
Weighted-average number of
ordinary shares outstanding Diluted 477.2 477.2 478.2 476.2
Basic 474.8 474.0 475.5 473.1
Cash dividends declared per
ordinary share $ 0.49 $ 0.42 $ 1.47 $ 1.26
Reconciliation of net income
attributable to Eaton ordinary shareholders to operating
earnings
Net income attributable to Eaton ordinary shareholders $ 602 $ 510
$ 1,212 $ 1,382 Excluding acquisition integration charges and
transaction costs (after-tax) 14 26 81 73
Operating earnings $ 616 $ 536 $ 1,293
$ 1,455 Net income per ordinary share -
diluted $ 1.26 $ 1.07 $ 2.53 $ 2.90
Excluding per share impact of acquisition
integration charges and transaction costs (after-tax)
0.03 0.05 0.17 0.15
Operating
earnings per ordinary share $ 1.29 $ 1.12 $ 2.70
$ 3.05
See accompanying notes.
EATON CORPORATION plc BUSINESS SEGMENT INFORMATION
Three months endedSeptember 30
Nine months endedSeptember 30 (In millions) 2014 2013 2014 2013
Net sales Electrical Products $ 1,875 $ 1,817 $ 5,433 $
5,235 Electrical Systems and Services 1,655 1,639 4,807 4,784
Hydraulics 733 739 2,302 2,267 Aerospace 454 448 1,404 1,328
Vehicle 1,011 964 3,041 2,905
Total
net sales $ 5,728 $ 5,607 $ 16,987 $
16,519
Segment operating profit Electrical
Products $ 330 $ 301 $ 880 $ 814 Electrical Systems and Services
238 231 601 668 Hydraulics 84 89 286 271 Aerospace 72 64 203 193
Vehicle 176 161 482 465
Total
segment operating profit 900 846 2,452 2,411
Corporate Litigation settlements — — (644 ) — Amortization
of intangible assets (107 ) (110 ) (326 ) (325 ) Interest expense -
net (56 ) (63 ) (173 ) (209 ) Pension and other postretirement
benefits expense (31 ) (55 ) (114 ) (136 ) Inventory step-up
adjustment — — — (34 ) Other corporate expense - net (64 ) (97 )
(43 ) (252 )
Income before income taxes 642 521 1,152 1,455
Income tax expense (benefit) 37 7 (66 ) 64
Net income 605 514 1,218 1,391 Less net income for
noncontrolling interests (3 ) (4 ) (6 ) (9 )
Net income
attributable to Eaton ordinary shareholders $ 602 $ 510
$ 1,212 $ 1,382
See accompanying notes.
EATON
CORPORATION plc CONDENSED CONSOLIDATED BALANCE SHEETS
September 30,2014 December 31,2013 (In millions)
Assets Current assets Cash $ 655 $ 915 Short-term
investments 335 794 Accounts receivable - net 3,972 3,648 Inventory
2,498 2,382 Deferred income taxes 581 577 Prepaid expenses and
other current assets 390 415 Total current assets 8,431
8,731 Property, plant and equipment - net 3,702 3,833
Other noncurrent assets Goodwill 14,088 14,495 Other intangible
assets 6,739 7,186 Deferred income taxes 241 240 Other assets 1,038
1,006 Total assets $ 34,239 $ 35,491
Liabilities and shareholders’ equity Current liabilities
Short-term debt $ 1 $ 13 Current portion of long-term debt 412 567
Accounts payable 2,038 1,960 Accrued compensation 424 461 Other
current liabilities 2,111 1,913 Total current liabilities
4,986 4,914 Noncurrent liabilities Long-term debt
8,587 8,969 Pension liabilities 1,170 1,465 Other postretirement
benefits liabilities 675 668 Deferred income taxes 1,035 1,313
Other noncurrent liabilities 1,141 1,299 Total noncurrent
liabilities 12,608 13,714 Shareholders’ equity Eaton
shareholders’ equity 16,587 16,791 Noncontrolling interests 58
72 Total equity 16,645 16,863 Total liabilities and
equity $ 34,239 $ 35,491
See accompanying notes.
EATON CORPORATION plcNOTES TO THE THIRD QUARTER 2014
EARNINGS RELEASE
Amounts are in millions of dollars unless indicated otherwise
(per share data assume dilution).
This earnings release includes certain non-GAAP financial
measures. These financial measures include operating cash flows
excluding litigation settlement payments, operating earnings,
operating earnings per ordinary share, and operating profit before
acquisition integration charges and transaction costs for each
business segment as well as corporate expense, each of which
excludes amounts that differ from the most directly comparable
measure calculated in accordance with generally accepted accounting
principles (GAAP). A reconciliation of each of these financial
measures to the most directly comparable GAAP measure is included
in this earnings release. Management believes that these financial
measures are useful to investors because they exclude transactions
of an unusual nature, allowing investors to more easily compare
Eaton Corporation plc's (Eaton or the Company) financial
performance and liquidity period to period. Management uses this
information in monitoring and evaluating the on-going performance
of Eaton and each business segment.
Note 1. LEGAL CONTINGENCIES
On October 5, 2006, ZF Meritor LLC and Meritor Transmission
Corporation (collectively, Meritor) filed an action against Eaton
in the United States District Court for Delaware. The action sought
damages, which would be trebled under United States antitrust laws,
as well as injunctive relief and costs. The suit alleged that Eaton
engaged in anti-competitive conduct against Meritor in the sale of
heavy-duty truck transmissions in North America. On June 23,
2014, Eaton announced it signed a settlement agreement with Meritor
in the amount of $500 that resolved the lawsuit and removed the
uncertainty of a trial and appeal process. On July 16, 2014,
Eaton paid Meritor the $500.
Frisby Corporation, now known as Triumph Actuation Systems, LLC,
and other claimants (collectively, Triumph) asserted claims
alleging, among other things, unfair competition, defamation,
malicious prosecution, deprivation of civil rights, and antitrust
in the Hinds County Circuit Court of Mississippi in 2004 and in the
Federal District Court of North Carolina in 2011. Eaton had
asserted claims against Triumph regarding improper use of trade
secrets and these claims were dismissed by the Hinds County Circuit
Court. On June 18, 2014, Eaton announced it signed a
settlement agreement with Triumph in the amount of $147.5 that
resolved all claims and lawsuits and removed the uncertainty of a
trial and appeal process. On July 8, 2014, Eaton paid Triumph
the $147.5.
During the third quarter of 2014, operating cash flows of $289
would have been $943 excluding $654 of payments made during the
third quarter of 2014 for Meritor, Triumph, and related litigation
settled during the second quarter of 2014.
Note 2. ACQUISITIONS AND SALES OF BUSINESSES
Eaton's most recently acquired businesses, and the related
annual sales prior to acquisition, are summarized below:
Acquired businesses
Date oftransaction
Businesssegment
Annual sales Cooper Industries plc (Cooper)
November 30,
Electrical
$5,409
A diversified global manufacturer of
electrical products and systems, with brands including Bussmann
electrical and electronic fuses; Crouse-Hinds and CEAG
explosion-proof electrical equipment; Halo and Metalux lighting
fixtures; and Kyle and McGraw-Edison power systems products.
2012
Products;ElectricalSystems andServices
for 2011
Rolec Comercial e Industrial S.A.
September 28,
Electrical
$85 for the
A Chilean manufacturer of integrated power assemblies and low- and
medium-voltage switchgear, and a provider of engineering services
serving mining and other heavy industrial applications in Chile and
Peru.
2012
Systems andServices
12 monthsendedSeptember 30,2012
Jeil Hydraulics Co., Ltd.
July 6,
Hydraulics
$189
A Korean manufacturer of track drive motors, swing drive motors,
main control valves and remote control valves for the construction
equipment market.
2012
for 2011
Polimer Kaucuk Sanayi ve Pazarlama A.S.
June 1,
Hydraulics
$335
A Turkish manufacturer of hydraulic and industrial hose for
construction, mining, agriculture, oil and gas, manufacturing, food
and beverage, and chemicals markets. This business sells its
products under the SEL brand name.
2012
for 2011
Gycom Electrical Low-Voltage Power Distribution, Control and
Automation
June 1,
Electrical
$24
A Swedish electrical low-voltage power distribution, control and
automation components business.
2012
Systems andServices
for 2011
See Note 3 for information about acquisition integration charges
and transaction costs related to these acquisitions.
Sale of Aerospace Power Distribution Management Solutions and
Integrated Cockpit Solutions
On January 20, 2014, Eaton announced it entered into an
agreement to sell the Aerospace Power Distribution Management
Solutions and Integrated Cockpit Solutions businesses to Safran for
$270. The sale closed on May 9, 2014 and resulted in a pre-tax gain
of $154.
Sale of Apex Tool Group, LLC
In July 2010, Cooper formed a joint venture, named Apex Tool
Group, LLC (Apex), with Danaher Corporation (Danaher). On October
10, 2012, Cooper and Danaher announced they had entered into a
definitive agreement to sell Apex to Bain Capital for approximately
$1.6 billion, subject to post-closing adjustments. On February 1,
2013, the sale of Apex was completed.
Note 3. ACQUISITION INTEGRATION CHARGES AND TRANSACTION
COSTS
Eaton incurs integration charges and transaction costs related
to acquired businesses. A summary of these charges follows:
Acquisitionintegration charges
andtransaction costs
Operating profitas reported
Operating profitexcluding
acquisitionintegration charges
Three months ended September 30 2014 2013 2014
2013 2014 2013
Acquisition integration charges
Electrical Products $ 8 $ 9 $ 330 $ 301 $ 338 $ 310 Electrical
Systems and Services 4 10 238 231 242 241 Hydraulics 2 8 84 89 86
97 Aerospace — — 72 64 72 64 Vehicle — — 176
161 176 161 Total business segments 14 27 $ 900
$ 846 $ 914 $ 873 Corporate 5 9
Total acquisition integration charges 19 36
Transaction costs Corporate — 2 Total
transaction costs — 2
Total acquisition integration charges
andtransaction costs before income taxes
$ 19 $ 38 Total after income taxes $ 14 $ 26 Per
ordinary share - diluted $ 0.03 $ 0.05
Acquisitionintegration charges
andtransaction costs
Operating profitas reported
Operating profitexcluding
acquisitionintegration charges
Nine months ended September 30 2014 2013 2014
2013 2014 2013
Acquisition integration charges
Electrical Products $ 49 $ 24 $ 880 $ 814 $ 929 $ 838 Electrical
Systems and Services 43 26 601 668 644 694 Hydraulics 11 28 286 271
297 299 Aerospace — — 203 193 203 193 Vehicle — — 482
465 482 465 Total business segments 103 78 $
2,452 $ 2,411 $ 2,555 $ 2,489 Corporate 19
21 Total acquisition integration charges 122
99
Transaction costs Corporate — 9
Total transaction costs — 9
Total acquisition integration charges
andtransaction costs before income taxes
$ 122 $ 108 Total after income taxes $ 81 $ 73 Per
ordinary share - diluted $ 0.17 $ 0.15
Business segment integration charges in 2014 were related
primarily to the integration of Cooper. Business segment
integration charges in 2013 were related primarily to the
integrations of Cooper and Polimer Kaucuk Sanayi ve Pazarlama.
These charges were included in Cost of products sold or Selling and
administrative expense, as appropriate. In Business Segment
Information, the charges reduced Operating profit of the related
business segment.
Corporate integration charges in 2014 and 2013 were related to
the acquisition of Cooper. These charges were included in Selling
and administrative expense. In Business Segment Information, the
charges were included in Other corporate expense - net.
Acquisition-related transaction costs, such as investment
banking, legal, other professional fees, and costs associated with
change in control agreements, are not included as a component of
consideration transferred in an acquisition but are expensed as
incurred. Acquisition-related transaction costs in 2013 were
related to the acquisition of Cooper. These charges were included
in Selling and administrative expense, Interest expense - net and
Other (income) expense - net. In Business Segment Information, the
charges were included in Interest expense - net and Other corporate
expense - net.
See Note 2 for additional information about business
acquisitions.
Note 4. RETIREMENT BENEFITS PLANS
The components of retirement benefits expense follow:
Pensionbenefit expense
Other postretirementbenefits expense
Three months ended September 30 2014 2013 2014
2013 Service cost $ 47 $ 48 $ 4 $ 5 Interest cost 62 57 9 10
Expected return on plan assets (86 ) (77 ) (1 ) (2 ) Amortization
30 40 1 3 53 68 13 16 Settlement loss
14 23 — — Total expense $ 67 $
91 $ 13 $ 16
Pensionbenefit expense
Other postretirementbenefits expense
Nine months ended September 30 2014 2013 2014 2013 Service cost $
138 $ 142 $ 13 $ 15 Interest cost 187 170 28 27 Expected return on
plan assets (259 ) (232 ) (4 ) (5 ) Amortization 90 120
5 10 156 200 42 47 Settlement loss 62
39 — — Total expense $ 218 $ 239
$ 42 $ 47
Note 5. INCOME TAXES
The effective income tax rate for the third quarter of 2014 was
expense of 6% compared to expense of 1% for the third quarter of
2013. The effective income tax rate for the first nine months of
2014 was a benefit of 6% compared to expense of 4% for the first
nine months of 2013. Excluding the litigation settlements and
related legal costs, as well as the gain on the sale of Eaton's
Aerospace Power Distribution Management Solutions and Integrated
Cockpit Solutions businesses, all of which occurred in the second
quarter of 2014, the effective income tax rate would have been
expense of 6% for the first nine months of 2014 compared to 4% for
the first nine months of 2013. The increase in the effective income
tax rate in third quarter and the first nine months of 2014,
excluding the previously mentioned litigation settlements, related
costs and gain on the sale of businesses, is primarily due to the
expiration of the U.S. research and experimentation tax credit plus
greater levels of income in higher tax jurisdictions, including the
United States, partially offset by enhanced utilization of foreign
tax credits in the U.S. and favorable impacts associated with the
acquisition of Cooper. See Note 1 and Note 2 for additional
information about legal contingencies and the sales of businesses,
respectively.
Eaton Corporation plcMedia RelationsScott Schroeder, +1
440-523-5150scottrschroeder@eaton.comorInvestor RelationsDonald
Bullock, +1 440-523-5127
Grafico Azioni Eaton (NYSE:ETN)
Storico
Da Set 2024 a Ott 2024
Grafico Azioni Eaton (NYSE:ETN)
Storico
Da Ott 2023 a Ott 2024