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Eaton Third Quarter Operating Earnings Up 48 Percent Over 2012

This earnings release includes certain non-GAAP financial measures. These financial measures include 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's financial performance period to period. Management uses this information in monitoring and evaluating the on-going performance of Eaton and each business segment.

Note 1. ACQUISITIONS OF BUSINESSES

In 2012, Eaton acquired businesses in separate transactions. The Consolidated Statements of Income include the results of these businesses from the dates of the transactions. These transactions 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

 

Note 2. 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
2013   2012     2013   2012     2013   2012
Acquisition integration charges
Electrical Products $ 9 $ 1 $ 301 $ 172 $ 310 $

173

 

Electrical Systems and Services 10 1 231 111 241 112
Hydraulics 8 5 89 93 97 98
Aerospace 64 49 64 49
Vehicle     161   144   161   144  
Total business segments 27 7 $ 846   $ 569   $ 873   $ 576  
Corporate 9   1  
Total acquisition integration charges $ 36   $ 8  
 
Transaction costs
Corporate $ 2   $ 19  
Total transaction costs $ 2   $ 19  
 

Total acquisition integration charges and transaction costs before income taxes

$ 38   $ 27  
Total after income taxes $ 26 $ 18
Per ordinary share - diluted $ 0.05 $ 0.05
 
        Nine months ended September 30
2013   2012     2013   2012     2013   2012
Acquisition integration charges
Electrical Products $ 24 $ 1 $ 814 $ 462 $ 838 $

463

 

Electrical Systems and Services 26 8 668 278 694 286
Hydraulics 28 9 271 325 299 334
Aerospace 193 168 193 168
Vehicle     465   472   465   472  
Total business segments 78 18 $ 2,411   $ 1,705   $ 2,489   $ 1,723  
Corporate 21   2  
Total acquisition integration charges $ 99   $ 20  
 
Transaction costs
Corporate $ 9   $ 26  
Total transaction costs $ 9   $ 26  
 

Total acquisition integration charges and transaction costs before income taxes

$ 108   $ 46  
Total after income taxes $ 73 $ 30
Per common share - diluted $ 0.15 $ 0.09
 

Business segment integration charges in 2013 were related primarily to the integrations of Cooper and Polimer Kaucuk Sanayi ve Pazarlama. Business segment integration charges in 2012 were related primarily to the integrations of Internormen Technology Group, Jeil Hydraulics, Polimer Kaucuk Sanayi ve Pazarlama and E. Begerow GmbH & Co. KG. 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.

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