 ©
2012 Eaton Corporation. All rights reserved.
Eaton Corporation Update
Richard H. Fearon –
Vice Chairman and Chief Financial and Planning Officer
October 8, 2012
Filed
by
Eaton
Corporation
pursuant
to
Rule
425
under
the
Securities
Act
of
1933
and
deemed
filed
pursuant
to
Rule
14a-6(b)
under
the
Securities
Exchange
Act
of
1934
Subject
Company:
Cooper
Industries
plc;
Eaton
Corporation
Filer’s
SEC
File
No.:
1-1396
Date:
October
8,
2012 |
 2
©
2012 Eaton Corporation. All rights reserved.
(1)
Currently
named
Eaton
Corporation
Limited
but
expected
to
be
re-registered
as
Eaton
Corporation
plc
prior
to
the
consummation
of
the
transaction.
NO
OFFER
OR
SOLICITATION
This
communication
is
not
intended
to
and
does
not
constitute
an
offer
to
sell
or
the
solicitation
of
an
offer
to
subscribe
for
or
buy
or
an
invitation
to
purchase
or
subscribe
for
any
securities
or
the
solicitation
of
any
vote
or
approval
in
any
jurisdiction
pursuant
to
the
acquisition
or
otherwise,
nor
shall
there
be
any
sale,
issuance
or
transfer
of
securities
in
any
jurisdiction
in
contravention
of
applicable
law.
No
offer
of
securities
shall
be
made
except
by
means
of
a
prospectus
meeting
the
requirements
of
Section
10
of
the
Securities
Act
of
1933,
as
amended.
IMPORTANT
ADDITIONAL
INFORMATION
WILL
BE
FILED
WITH
THE
SEC
A
registration
statement
on
Form
S-4
has
been
filed
with
the
SEC,
which
includes
the
Joint
Proxy
Statement
of
Eaton
Corporation
(“Eaton”)
and
Cooper
Industries
plc
(“Cooper”)
that
also
constitutes
a
Prospectus
of
Eaton
Corporation
plc
(1)
.
The
registration
statement
was
declared
effective
on
September
7,
2012.
Eaton
and
Cooper
have
mailed
to
their
respective
shareholders
(and
to
Cooper
Equity
Award
Holders
for
information
only)
the
definitive
Joint
Proxy
Statement/Prospectus
(including
the
Scheme)
in
connection
with
the
transaction.
Investors
and
shareholders
are
urged
to
read
the
Joint
Proxy
Statement/Prospectus
(including
the
Scheme)
and
other
relevant
documents
filed
or
to
be
filed
with
the
SEC
carefully
because
they
contain
or
will
contain
important
information
about
Eaton,
Cooper,
Eaton
Corporation
plc,
the
transaction
and
related
matters.
Investors
and
security
holders
may
obtain
free
copies
of
the
definitive
Joint
Proxy
Statement/Prospectus
(including
the
Scheme)
and
other
documents
filed
with
the
SEC
by
Eaton
Corporation
plc,
Eaton
and
Cooper
through
the
website
maintained
by
the
SEC
at
www.sec.gov.
In
addition,
investors
and
shareholders
may
obtain
free
copies
of
the
definitive
Joint
Proxy
Statement/Prospectus
(including
the
Scheme)
and
other
documents
filed
by
Eaton
and
Eaton
Corporation
plc
with
the
SEC
by
contacting
Eaton
Investor
Relations
at
Eaton
Corporation,
1111
Superior
Avenue,
Cleveland,
OH
44114
or
by
calling
(888)
328-6647,
and
may
obtain
free
copies
of
the
definitive
Joint
Proxy
Statement/Prospectus
(including
the
Scheme)
and
other
documents
filed
by
Cooper
by
contacting
Cooper
Investor
Relations
at
c/o
Cooper
US,
Inc.,
P.O.
Box
4446,
Houston,
Texas
77210
or
by
calling
(713)
209-8400.
STATEMENT
REQUIRED
BY
THE
IRISH
TAKEOVER
RULES
The
directors
of
Eaton
Corporation
accept
responsibility
for
the
information
contained
in
this
communication.
To
the
best
of
the
knowledge
and
belief
of
the
directors
of
Eaton
Corporation
(who
have
taken
all
reasonable
care
to
ensure
such
is
the
case),
the
information
contained
in
this
communication
is
in
accordance
with
the
facts
and
does
not
omit
anything
likely
to
affect
the
import
of
such
information.
Persons
interested
in
1%
or
more
of
any
relevant
securities
in
Eaton
or
Cooper
may
from
the
date
of
this
communication
have
disclosure
obligations
under
Rule
8.3
of
the
Irish
Takeover
Panel
Act,
1997,
Takeover
Rules
2007
(as
amended). |
 3
©
2012 Eaton Corporation. All rights reserved.
Forward Looking Statements
This presentation may contain forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995 concerning Eaton, Eaton
Global plc, the acquisition and other transactions contemplated by the Transaction Agreement, our acquisition financing, our long-term
credit rating and our revenues and operating earnings. These statements or
disclosures 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 or Eaton Global plc, 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,”
“plan,”
“could,”
“estimate,”
“expect,”
“forecast,”
“guidance,”
“intend,”
“may,”
“possible,”
“potential,”
“predict,”
“project”
or other similar words, phrases or expressions. These forward-looking
statements are subject to various risks and uncertainties, many of which are
outside of our control. Therefore, you should not place undue reliance on such statements. Factors that could cause
actual
results
to
differ
materially
from
those
in
the
forward-looking
statements
include
adverse
regulatory
decisions;
failure
to
satisfy
other
closing
conditions with respect to the Acquisition; the risks that the new businesses will
not be integrated successfully or that we will not realize estimated cost
savings and synergies; our ability to refinance the bridge loan on favorable terms and maintain our current long-term credit rating; unanticipated
changes in the markets for our business segments; unanticipated downturns in
business relationships with customers or their purchases from Eaton;
competitive
pressures
on
our
sales
and
pricing;
increases
in
the
cost
of
material,
energy
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;
new
laws
and
governmental
regulations.
The
foregoing
list
of
factors
is
not
exhaustive.
You
should
carefully
consider the foregoing factors and the other risks and uncertainties that affect
our business described in our Annual Report on Form 10-K, Quarterly
Reports
on
Form
10-Q,
Current
Reports
on
Form
8-K
and
other
documents
filed
from
time
to
time
with
the
SEC.
We
do
not
assume
any
obligation
to
update these forward-looking statements.
No statement in this presentation is intended to constitute a profit forecast for
any period, nor should any statements be interpreted to mean that
earnings
or
earnings
per
share
will
necessarily
be
greater
or
lesser
than
those
for
the
relevant
preceding
financial
periods
for
Eaton. |
 4
©
2012 Eaton Corporation. All rights reserved.
Eaton Corporation –
A Premier Diversified Power
Management Company
•
A balanced power management company
•
Eaton’s acquisition of Cooper Industries
•
2012 outlook |
 5
©
2012 Eaton Corporation. All rights reserved.
Eaton provides energy efficient solutions using
electrical, mechanical, and fluid technologies
Cities &
Buildings
Transportation
Industrial &
Machinery
Information
Technology
Energy &
Utilities
Infrastructure
Our products & services deliver reliability, efficiency, and safety for:
…helping to bridge the gap between rapidly rising demand for energy
and naturally constrained sources of supply with sustainable solutions
|
 6
©
2012 Eaton Corporation. All rights reserved.
Hydraulics
Electrical
Aerospace
Truck
Automotive
International Developed
U.S.
International Emerging
Today we have a global footprint across the five
business segments…
2011 Sales by Region
2011 Sales by Business |
 7
©
2012 Eaton Corporation. All rights reserved.
…and our businesses are balanced across the
economic cycle
$2.2B in Revenues
Electrical Service, Defense,
Filtration, Aerospace Aftermarket
$3.6B in Revenues
Commercial Aerospace,
Nonresidential Construction,
Large Data Centers
$4.7B in Revenues
Hydraulics, Industrial Controls,
Medium Duty Truck,
Mid-sized Data Centers
$5.5B in Revenues
Residential Electric,
Single Phase Power Quality,
Heavy Duty Truck, Automotive
2011 Global Sales by Cycle |
 8
©
2012 Eaton Corporation. All rights reserved.
EBS embodies the values and processes that bind
the company and have enabled our success
•
Growth
•
Robust strategic planning
process for growth and
profitability
•
Outgrowing end markets
through innovation
•
Identifying higher growth markets
•
Established acquisition strategy
and processes
•
Profitability
•
Operational excellence
•
Global scale
•
Efficient functional support
•
Capital Efficiency
•
Effective working capital
management
•
Capital expenditures
targeted to support
growth
•
Foundation
•
Doing business right
•
Employee development
•
Customer focus
•
Supplier partnerships
A powerful combination of proven
foundation elements, tools, and processes,
EBS is at the heart of our strategy for being
a premier diversified industrial |
 9
©
2012 Eaton Corporation. All rights reserved.
Executing our strategy has resulted in an
upward shift in profitability
Innovative new products
Margin accretive acquisitions
Leveraging
the
Eaton
Business
System
Targeted restructuring
Profitability Drivers |
 10
©
2012 Eaton Corporation. All rights reserved.
Total Shareholder Return: Eaton vs. S&P
and DI Indices (2000 –
Sept 2012)
Cumulative Shareholder Returns
50
100
150
200
250
300
350
400
450
500
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Sep-
12
Eaton
S&P 500
S&P 1500 Mach
DI Group
PDI Group
ODI Group
2000 –
Sept 2012
CAGR*
Return
Index
12.2%
9.6%
8.3%
2.7%
9.1%
6.6%
Note –
DI Group represents an equal weighted index of ABB, DHR, DOV, EMR, GE, HON, IR,
ITW, MMM, PH, SI, SPW, TXT, UTX; *CAGR = Calculated using the End Point
Methodology Source Data: Capital IQ |
 11
©
2012 Eaton Corporation. All rights reserved.
Powerful megatrends will help drive our markets
to grow at a multiple of global GDP
Electrical
Hydraulics
Aerospace
Truck
Automotive
23
By the numbers:
…Percentage
decrease
in
electricity
demand
possible
through
the
application
of
energy
efficient
equipment
and
demand
management
services
100
…Percentage
increase
in
agricultural
output
by
2050
necessary
in
developing
countries
to
feed
the
global
population
30
…Percentage
decrease
in
fuel
consumption
of
next
generation
single-aisle
aircraft
planned
by
2020
20
…Percentage
decrease
in
fuel
consumption
by
model
year
2018
resulting
from
the
first
ever
U.S.
emissions
standards
for
heavy-duty
trucks
90
…Percentage
increase
in
proposed
Corporate
Average
Fuel
Economy
(CAFE)
standards
by
2025
for
passenger
cars
Source: United Nations, IATA, NHTSA, Eaton analysis |
 12
©
2012 Eaton Corporation. All rights reserved.
Eaton Corporation –
A Premier Diversified Power
Management Company
•
A balanced power management company
•
Eaton’s acquisition of Cooper Industries
•
2012 outlook |
 13
©
2012 Eaton Corporation. All rights reserved.
Acquisitions have played a large role in growing
our electrical business
Electrical Group
Acquisitions
Year
Acq’d
Sales
Market Participation
Regional Strength
Power Control
& Distribution
Power
Quality
Lighting &
Safety
Americas
EMEA
Asia-
Pacific
Cutler Hammer
1978
$0.6B
Westinghouse DCBU
1994
$1.0 B
Delta Electrical
2003
$0.3 B
Powerware
2004
$0.8 B
MGE Small Systems
2007
$0.2 B
Moeller
2008
$1.5 B
Phoenixtec
2008
$0.5 B
Cooper
2012
$5.4 B
28
other
Electrical
acquisitions
since
1990 |
 14
©
2012 Eaton Corporation. All rights reserved.
Transaction overview for Eaton’s acquisition of
Cooper Industries
Combined
company
•
Premier power management company with 2011 sales of $21.5B
•
Under the leadership of Eaton management
•
Named Eaton Corporation Plc and will continue to trade on NYSE as ETN
•
Incorporated in Ireland
Consideration
•
Cooper shareholders will receive $39.15 in cash and 0.77479 ETN Plc
shares, reflecting a 29% equity premium to the closing price on May 18
•
Eaton shareholders will receive 1 ETN Plc share
Financing
•
Fully committed bridge financing in place
Financial
benefits
•
$375M operating synergies, with >80% realized by year 3, and $160M
global
cash
management
and
resultant
tax
benefits
in
the
mature
year
(1)
•
Significantly accretive to Eaton’s earnings
Timing
•
Expect
closing
2
half
of
2012
•
Conditional on customary regulatory and shareholder approvals
(1)
The
financial
benefits
statements
have
been
reported
on
in
accordance
with
the
Irish
Takeover
Code.
Please
see
the
offer
announcement
dated
May
21,
2012
for
further
details.
nd |
 Cooper
has a wide range of complementary electrical businesses
•
Cooper Power Systems
•
$1.3 B sales
•
Market leader in
distribution grid
protection
•
Crouse-Hinds
•
$1.0 B sales
•
Global
leader
in
electrical
solutions
for
harsh
and
hazardous
environments
•
Safety
•
$600 M sales
•
Leading European
provider of emergency
lighting and video
security
Electrical Products ($2.5 B sales)
•
Lighting
•
$1.1 B sales
•
Strong LED
platform
driving growth
•
Bussmann:
•
$650 M sales
•
Global leader
in
circuit protection
•
B-Line Support structures
•
$400 M sales
•
Global provider
of
structural
systems
and
wire
management
solutions
•
Wiring devices
•
$350 M sales
•
Electrical devices
for
commercial
and
residential
power
distribution
Energy and Safety Solutions ($2.9 B sales)
15 |
 ©
2012 Eaton Corporation. All rights reserved.
*
*
*
*
*
*
*
*
*
*
* |
 17
©
2012 Eaton Corporation. All rights reserved.
•
Broad portfolio of complementary products
•
Market segment expansion:
•
Upstream into power solutions encompassing primary and
secondary distribution, grid automation, and smart grid
•
Downstream into lighting, lighting controls, and wiring devices
•
Expands our solutions with all channels
•
Well positioned to address long-term global requirements
•
Aging grid
•
Increased spending on energy & infrastructure
•
Protecting people, equipment and data
The strategic rationale for this acquisition is
compelling -
I |
 18
©
2012 Eaton Corporation. All rights reserved.
•
Aligns with our customer segment focus in oil & gas, mining,
energy efficiency and alternative energy
•
Adds breadth to our global geographic exposure
•
Attractive business in EMEA
•
Strong oil & gas industry positioning globally
•
Complementary component and utility business in APAC
•
Offers improved cash management flexibility for the
corporation
The strategic rationale for this acquisition is
compelling -
II |
 Our
integrated operating company capabilities (EBS)
will
drive
significant
synergies
(1)
($M)
2013
2014
2015
2016
Pre-tax operating synergies
Sales synergies
10
35
70
115
Cost-out synergies
65
140
240
260
Total operating synergies
75
175
310
375
Global cash management and resultant tax benefits
160
160
160
160
Acquisition integration costs, pre-tax
90
75
35
-
•
$260M in cost out synergies with over 90% complete by 2015
•
$200M in acquisition integration charges with ~80% incurred through 2014
Integration plans
Synergies
(1)
The financial benefits statements have been reported on in accordance with the
Irish Takeover Code. Please see the offer announcement dated May 21,
2012 for further details. 19 |
 20
©
2012 Eaton Corporation. All rights reserved.
The
acquisition
is
accretive
to
earnings
(1)
($)
2013
2014
2015
2016
Operating EPS Accretion
(1)
(0.10)
0.35
0.45
0.55
Cash Operating EPS Accretion
(1,2)
0.40
0.65
0.75
0.85
Accretion
(1)
EPS accretion numbers do not represent a profit forecast as defined in the Irish
Takeover Code (2)
Cash Operating EPS excludes incremental amortization of intangibles arising from
purchase accounting |
 21
©
2012 Eaton Corporation. All rights reserved.
Eaton Corporation –
A Premier Diversified Power
Management Company
•
A balanced power management company
•
Eaton’s acquisition of Cooper Industries
•
2012 outlook |
 22
©
2012 Eaton Corporation. All rights reserved.
We project growth of 3% -
4% in our markets in 2012…
2012E
Total
2012E
U.S.
Non
U.S.
Electrical Americas Index
8
9
5
Electrical ROW Index
(3)
n/a
(3)
Hydraulics Index
3
8
(1)
Aerospace Index
4
1
8
Truck Index
2
11
(4)
Automotive Index
3
10
1
Eaton Consolidated Index
3.5%
8%
(1)% |
 23
©
2012 Eaton Corporation. All rights reserved.
…leading to another year of record margins
2011
2012E
2015 Target
Electrical Americas
14.6%
16.5%
17%
Electrical ROW
9.4%
9.0%
14%
Hydraulics
15.6%
16.0%
17%
Aerospace
14.8%
15.0%
17%
Truck
18.4%
19.0%
20%
Automotive
12.0%
12.0%
13%
Eaton Consolidated
14.2%
14.5% -
15.0%
16% -
17% |
 24
©
2012 Eaton Corporation. All rights reserved.
2012 Guidance
January
Guidance
February
Guidance
April
Guidance
July
Guidance
Market Growth of 3.5%
$800M
$800M
$800M
$560M
Market Outgrowth of 40%
$320M
$320M
$320M
$225M
Net Acquisition Revenue
$90M
$315M
$365M
$365M
Sales Decrease from FOREX
$(550)M
$(550)M
$(300)M
$(500)M
Incremental Margin
28%
28%
28%
29%
Tax Rate
17% -
19%
17% -
19%
16% -
18%
14% -
16%
Operating EPS
$4.15 -
$4.55
$4.20 -
$4.60
$4.30 -
$4.70
$4.20 -
$4.50
Fully Diluted EPS
$4.10 -
$4.50
$4.13 -
$4.53
$4.23 -
$4.63
$4.09 -
$4.39
Operating Cash Flow
$1.7B to $1.8B
$1.7B to $1.8B
$1.7B to $1.8B
$1.7B to $1.8B
Free Cash Flow
$1.1B to $1.2B
$1.1B to $1.2B
$1.1B to $1.2B
$1.1B to $1.2B
The operating EPS and Fully Diluted EPS guidance provided in July constitute a
profit forecast for the purposes of the Irish Takeover Code and reports on
those forecasts as required by the Irish Takeover Code will be mailed to Cooper shareholders
with the joint proxy statement / prospectus. |
 25
©
2012 Eaton Corporation. All rights reserved.
Our acquisition of Cooper Industries
remains on track
•
Proxy filed with SEC and shareholder vote
scheduled for October 26, 2012
•
U.S. HSR approval in early July, Canadian
Competition Bureau, South Korea and Turkey
approval received in September
•
Revolving finance facilities upsized to $2B, and
$600 million of term debt issued |
 |
 Eaton
Corporation Reconciliation of Non-GAAP Financial Information
2Q
2012
All numbers $M except per share numbers
Reconciliation of net income to operating earnings
2003
2004
2005
2006
2007
2008
2009
2010
2011
1Q 2012
2Q 2012
Low
High
Net income from continuing operations
356
$
626
$
783
$
897
$
959
$
1,055
$
383
$
929
$
1,350
$
311
$
382
$
Net income from discontinued operations
30
22
22
53
35
3
-
-
-
-
-
Net Income
386
648
805
950
994
1,058
383
929
1,350
311
382
Acquisition integration charges (after-tax)
24
27
24
27
42
51
54
27
10
2
10
Operating earnings
410
$
675
$
829
$
977
$
1,036
$
1,109
$
437
$
956
$
1,360
$
313
$
392
$
Net income per share -
diluted
1.28
$
2.07
$
2.62
$
3.11
$
3.31
$
3.26
$
1.14
$
2.73
$
3.93
$
0.91
$
1.12
$
4.09
$
4.39
$
Per share impact of unusual items (after tax)
0.08
0.08
0.07
0.09
0.14
0.16
0.16
0.08
0.03
0.01
0.03
0.11
0.11
Operating earnings per common share
1.36
$
2.15
$
2.69
$
3.20
$
3.45
$
3.42
$
1.30
$
2.81
$
3.96
$
0.92
$
1.15
$
4.20
$
4.50
$
Reconciliation of segment operating profit to segment operating profit excluding
restructuring charges 2003
2004
2005
2006
2007
2008
2009
2010
2011
1Q 2012
2Q 2012
Segment operating profit
763
$
1,123
$
1,374
$
1,468
$
1,668
$
1,805
$
950
$
1,700
$
2,260
$
544
$
592
$
Acquisition integration charges (pre-tax)
36
41
36
40
64
76
80
40
14
3
8
Segment operating profit excluding restructuring
799
$
1,164
$
1,410
$
1,508
$
1,732
$
1,881
$
1,030
$
1,740
$
2,274
$
547
$
600
$
Reconciliation of segment operating margin to segment operating margin excluding
restructuring charges Segment operating margin
9.8%
11.8%
12.7%
12.0%
12.8%
11.7%
8.0%
12.4%
14.1%
13.7%
14.6%
Acquisition integration charges
0.4%
0.4%
0.3%
0.3%
0.5%
0.5%
0.7%
0.3%
0.1%
0.1%
0.1%
Segment operating margin excluding restructuring
10.2%
12.2%
13.0%
12.3%
13.3%
12.2%
8.7%
12.7%
14.2%
13.8%
14.7%
Reconciliation of net income margin to after tax operating margin
Net income margin
5.0%
6.8%
7.4%
7.8%
7.6%
6.9%
3.2%
6.8%
8.4%
7.9%
9.4%
Acquisition integration charges
0.3%
0.3%
0.2%
0.2%
0.3%
0.3%
0.5%
0.2%
0.1%
0.1%
0.2%
After tax operating margin
5.3%
7.1%
7.6%
8.0%
7.9%
7.2%
3.7%
7.0%
8.5%
8.0%
9.6%
2012 Guidance |
 Reconciliation of net income to EBIT and EBITDA
2003
2004
2005
2006
2007
2008
2009
2010
2011
1Q 2012
2Q 2012
Net income from continuing operations
356
$
626
$
783
$
897
$
959
$
1,055
$
383
$
929
$
1,350
$
311
$
382
$
Net income from discontinued operations
30
22
22
53
35
3
-
-
-
-
-
Net income
386
648
805
950
994
1,058
383
929
1,350
311
382
Income tax
122
133
191
77
97
73
(82)
99
201
57
37
Net interest expense
87
78
90
104
146
157
150
136
118
28
30
Other expense (income)
(5)
28
(27)
(72)
(43)
(30)
(9)
(1)
(38)
3
8
EBIT (including acquisition integration)
590
$
887
$
1,059
$
1,059
$
1,194
$
1,258
$
442
$
1,163
$
1,631
$
399
$
457
$
Depreciation & amortization
394
400
409
434
439
571
573
551
556
140
138
EBITDA (including acquisition integration)
984
$
1,287
$
1,468
$
1,493
$
1,633
$
1,829
$
1,015
$
1,714
$
2,187
$
539
$
595
$
Reconciliation of EBIT and EBITDA to EBIT excluding restructuring and EBITDA
excluding restructuring 2003
2004
2005
2006
2007
2008
2009
2010
2011
1Q 2012
2Q 2012
EBIT (including acquisition integration)
590
$
887
$
1,059
$
1,059
$
1,194
$
1,258
$
442
$
1,163
$
1,631
$
399
$
457
$
Acquisition integration charges (pre-tax)
37
41
36
40
64
77
82
40
14
3
8
EBIT (excluding restructuring)
627
$
928
$
1,095
$
1,099
$
1,258
$
1,335
$
524
$
1,203
$
1,645
$
402
$
465
$
EBITDA (including acquisition integration)
984
$
1,287
$
1,468
$
1,493
$
1,633
$
1,829
$
1,015
$
1,714
$
2,187
$
539
$
595
$
Acquisition integration charges (pre-tax)
37
41
36
40
64
77
82
40
14
3
8
EBITDA (excluding restructuring)
1,021
$
1,328
$
1,504
$
1,533
$
1,697
$
1,906
$
1,097
$
1,754
$
2,201
$
542
$
603
$
Reconciliation of operating cash flow to free cash flow
2003
2004
2005
2006
2007
2008
2009
2010
2011
1Q 2012
2Q 2012
Operating cash flow
874
$
838
$
1,135
$
1,431
$
1,158
$
1,441
$
1,408
$
1,282
$
1,248
$
(98)
$
469
$
1,700
$
1,800
$
Capital expenditures
273
330
363
360
354
448
195
394
568
105
126
600
600
Free cash flow
601
$
508
$
772
$
1,071
$
804
$
993
$
1,213
$
888
$
680
$
(203)
$
343
$
1,100
$
1,200
$
2012 Guidance |
 Reconciliation of Eaton
Electrical Americas operating profit to operating profit excluding restructuring 2006
2007
2008
2009
2010
2011
1Q 2012
2Q 2012
Electrical operating profit (including restructuring)
448
$
534
$
630
$
518
$
529
$
605
$
162
$
190
$
Acquisition integration charges (pre-tax)
2
-
4
4
2
8
1
2
Electrical operating profit (excluding restructuring)
450
$
534
$
634
$
522
$
531
$
613
$
163
$
192
$
Reconciliation of Eaton Electrical Rest of World operating profit to operating profit excluding
restructuring 2006
2007
2008
2009
2010
2011
1Q 2012
2Q 2012
Electrical operating profit (including restructuring)
26
$
45
$
233
$
107
$
264
$
278
$
53
$
52
$
Acquisition integration charges (pre-tax)
5
12
43
60
33
2
1
3
Electrical operating profit (excluding restructuring)
31
$
57
$
276
$
167
$
297
$
280
$
54
$
55
$
Reconciliation of Eaton Hydraulics operating profit to operating profit excluding restructuring
2005
2006
2007
2008
2009
2010
2011
1Q 2012
2Q 2012
Hydraulic operating profit (including restructuring)
153
$
221
$
265
$
285
$
51
$
279
$
438
$
109
$
123
$
Acquisition integration charges (pre-tax)
6
11
12
6
3
1
4
1
3
Hydraulic operating profit (excluding restructuring)
159
$
232
$
277
$
291
$
54
$
280
$
442
$
110
$
126
$
Reconciliation of Eaton Aerospace operating profit to operating profit excluding restructuring
2005
2006
2007
2008
2009
2010
2011
1Q 2012
2Q 2012
Aerospace operating profit (including restructuring)
157
$
182
$
233
$
283
$
245
$
220
$
244
$
60
$
59
$
Acquisition integration charges (pre-tax)
1
12
39
20
12
4
-
-
-
Aerospace operating profit (excluding restructuring)
158
$
194
$
272
$
303
$
257
$
224
$
244
$
60
$
59
$
Reconciliation of Eaton Truck operating profit to operating profit excluding restructuring
2005
2006
2007
2008
2009
2010
2011
1Q 2012
2Q 2012
Truck operating profit (including restructuring)
453
$
448
$
357
$
315
$
39
$
245
$
486
$
116
$
120
$
Acquisition integration charges (pre-tax)
4
5
-
-
-
-
-
Truck operating profit (excluding restructuring)
457
$
453
$
357
$
315
$
39
$
245
$
486
$
116
$
120
$
Reconciliation of Eaton Automotive operating profit to operating profit excluding restructuring
2005
2006
2007
2008
2009
2010
2011
1Q 2012
2Q 2012
Automotive operating profit (including restructuring)
236
$
143
$
234
$
59
$
(10)
$
163
$
209
$
44
$
48
$
Acquisition integration charges (pre-tax)
4
5
1
3
1
-
-
-
-
Automotive operating profit (excluding restructuring)
240
$
148
$
235
$
62
$
(9)
$
163
$
209
$
44
$
48
$ |
 Methodology for
calculations used in the presentations Return on equity = trailing 4 quarters net income /
average trailing 5 quarters shareholder's equity Return on invested capital = (EBIT - taxes)
/ average (total debt + equity) Return on sales = net income / sales
Total return = stock price appreciation + dividend yield
Net debt to total capital = (total debt - cash & equivalents) / (total debt - cash &
equivalents + equity) Cash flow coverage ratio = (pre-tax income + depreciation +
amortization + interest expense) / interest expense Segment net working capital (including
acquisitions) = accounts receivable + inventory - accounts payable. All amounts average over the year.
DSO = average of quarterly DSO; quarterly DSO = quarter end accounts receivable / quarter sales * 90
days DOH = average of quarterly DOH; quarterly DOH = quarter end inventory / quarter COGS * 90
days DPO = average of quarterly DPO; quarterly DPO = quarter end accounts payable / quarter COGS
* 90days Cash conversion cycle = DSO + DOH - DPO
Free cash flow = cash flow from operations - capital expenditures |