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Eaton Third Quarter Operating Earnings Up 48 Percent Over 2012

Corporate integration charges in 2013 and 2012 were related primarily 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, and other professional fees are not included as a component of consideration transferred in an acquisition but are expensed as incurred. Acquisition-related transaction costs in 2013 and 2012 were related to the acquisition of Cooper. These charges were included in Selling and administrative expense, Interest expense - net and Other corporate expense - net. In Business Segment Information the charges were included in Interest expense - net and Other corporate expense - net.

See Note 1 for additional information about Cooper and other business acquisitions.

Note 3. RETIREMENT BENEFITS PLANS

The components of retirement benefits expense follow:

        Three months ended September 30

Pensionbenefit expense

   

Other postretirementbenefits expense

2013   2012 2013   2012
Service cost $ 48 $ 41 $ 5 $ 5
Interest cost 57 51 10 10
Expected return on plan assets (77 ) (64 ) (2 ) (2 )
Amortization 40   33   3   3  
68 61 16 16
Settlement loss 23   8      
Total expense $ 91   $ 69   $ 16   $ 16  
 
        Nine months ended September 30

Pensionbenefit expense

   

Other postretirementbenefits expense

2013   2012 2013   2012
Service cost $ 142 $ 123 $ 15 $ 13
Interest cost 170 156 27 29
Expected return on plan assets (232 ) (192 ) (5 ) (5 )
Amortization 120   99   10   10  
200 186 47 47
Settlement loss 39   19      
Total expense $ 239   $ 205   $ 47   $ 47  
 

Note 4. INCOME TAXES

The effective income tax rate for the third quarter of 2013 was 1.4% compared to 7.7% for the third quarter of 2012 and 4.4% for the first nine months of 2013 compared to 10.6% for the first nine months of 2012. The lower effective tax rate in the third quarter of 2013 was primarily attributable to tax effects associated with the acquisition of Cooper. The lower effective tax rate in the first nine months of 2013 was attributable to the item noted above, the recording of the entire 2012 U.S. research and experimentation credit in the first quarter of 2013, the reinstatement in 2013 of the U.S. research and experimentation credit and enhanced utilization of foreign tax credits in the U.S.

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