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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, 20222023
Commission file number 000-54863
EATON CORPORATION plc
(Exact name of registrant as specified in its charter)
Ireland98-1059235
(State or other jurisdiction of incorporation or organization)(IRS Employer Identification Number)
Eaton House,30 Pembroke Road,Dublin 4,IrelandD04 Y0C2
(Address of principal executive offices)(Zip Code)
+3531637 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 classTrading SymbolName of each exchange on which registered
Ordinary shares ($0.01 par value)ETNNew 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 399.0398.6 million Ordinary Shares outstanding as of March 31, 2022.2023.


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PART I — FINANCIAL INFORMATION

ITEM 1.FINANCIAL STATEMENTS.

EATON CORPORATION plc
CONSOLIDATED STATEMENTS OF INCOME
Three months ended
March 31
Three months ended
March 31
(In millions except for per share data)(In millions except for per share data)20222021(In millions except for per share data)20232022
Net salesNet sales$4,843 $4,692 Net sales$5,483 $4,843 
Cost of products soldCost of products sold3,269 3,184 Cost of products sold3,599 3,269 
Selling and administrative expenseSelling and administrative expense790 795 Selling and administrative expense904 790 
Research and development expenseResearch and development expense165 148 Research and development expense179 165 
Interest expense - netInterest expense - net32 38 Interest expense - net50 32 
Gain on sale of businessGain on sale of business24 — Gain on sale of business— 24 
Other income - netOther income - net(8)(11)Other income - net(11)(8)
Income before income taxesIncome before income taxes619 538 Income before income taxes762 619 
Income tax expenseIncome tax expense86 79 Income tax expense123 86 
Net incomeNet income533 459 Net income639 533 
Less net income for noncontrolling interestsLess net income for noncontrolling interests(1)(1)Less net income for noncontrolling interests(1)(1)
Net income attributable to Eaton ordinary shareholdersNet income attributable to Eaton ordinary shareholders$532 $458 Net income attributable to Eaton ordinary shareholders$638 $532 
Net income per share attributable to Eaton ordinary shareholdersNet income per share attributable to Eaton ordinary shareholdersNet income per share attributable to Eaton ordinary shareholders
DilutedDiluted$1.33 $1.14 Diluted$1.59 $1.33 
BasicBasic1.33 1.15 Basic1.60 1.33 
Weighted-average number of ordinary shares outstandingWeighted-average number of ordinary shares outstandingWeighted-average number of ordinary shares outstanding
DilutedDiluted401.8 400.9 Diluted400.5 401.8 
BasicBasic399.2 398.3 Basic398.5 399.2 
Cash dividends declared per ordinary shareCash dividends declared per ordinary share$0.81 $0.76 Cash dividends declared per ordinary share$0.86 $0.81 

The accompanying notes are an integral part of these condensed consolidated financial statements.
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EATON CORPORATION plc
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Three months ended
March 31
Three months ended
March 31
(In millions)(In millions)20222021(In millions)20232022
Net incomeNet income$533 $459 Net income$639 $533 
Less net income for noncontrolling interestsLess net income for noncontrolling interests(1)(1)Less net income for noncontrolling interests(1)(1)
Net income attributable to Eaton ordinary shareholdersNet income attributable to Eaton ordinary shareholders532 458 Net income attributable to Eaton ordinary shareholders638 532 
Other comprehensive income (loss), net of taxOther comprehensive income (loss), net of taxOther comprehensive income (loss), net of tax
Currency translation and related hedging instrumentsCurrency translation and related hedging instruments(62)(172)Currency translation and related hedging instruments119 (62)
Pensions and other postretirement benefitsPensions and other postretirement benefits77 47 Pensions and other postretirement benefits(2)77 
Cash flow hedgesCash flow hedges101 95 Cash flow hedges15 101 
Other comprehensive income (loss) attributable to Eaton
ordinary shareholders
116 (30)
Other comprehensive income attributable to Eaton
ordinary shareholders
Other comprehensive income attributable to Eaton
ordinary shareholders
132 116 
Total comprehensive income attributable to Eaton
ordinary shareholders
Total comprehensive income attributable to Eaton
ordinary shareholders
$648 $428 Total comprehensive income attributable to Eaton
ordinary shareholders
$770 $648 

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

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EATON CORPORATION plc
CONSOLIDATED BALANCE SHEETS
(In millions)(In millions)March 31,
2022
December 31,
2021
(In millions)March 31,
2023
December 31,
2022
AssetsAssets  Assets  
Current assetsCurrent assets  Current assets  
CashCash$237 $297 Cash$235 $294 
Short-term investmentsShort-term investments268 271 Short-term investments289 261 
Accounts receivable - netAccounts receivable - net3,667 3,297 Accounts receivable - net4,239 4,076 
InventoryInventory3,317 2,969 Inventory3,604 3,430 
Prepaid expenses and other current assetsPrepaid expenses and other current assets705 677 Prepaid expenses and other current assets772 685 
Total current assetsTotal current assets8,194 7,511 Total current assets9,138 8,746 
Property, plant and equipmentProperty, plant and equipmentProperty, plant and equipment
Land and buildingsLand and buildings2,245 2,227 Land and buildings2,174 2,129 
Machinery and equipmentMachinery and equipment5,685 5,591 Machinery and equipment6,021 5,885 
Gross property, plant and equipmentGross property, plant and equipment7,930 7,818 Gross property, plant and equipment8,195 8,013 
Accumulated depreciationAccumulated depreciation(4,832)(4,754)Accumulated depreciation(4,989)(4,867)
Net property, plant and equipmentNet property, plant and equipment3,098 3,064 Net property, plant and equipment3,206 3,146 
Other noncurrent assetsOther noncurrent assetsOther noncurrent assets
GoodwillGoodwill14,955 14,751 Goodwill14,894 14,796 
Other intangible assetsOther intangible assets6,012 5,855 Other intangible assets5,386 5,485 
Operating lease assetsOperating lease assets449 442 Operating lease assets579 570 
Deferred income taxesDeferred income taxes388 392 Deferred income taxes340 330 
Other assetsOther assets2,112 2,012 Other assets1,975 1,940 
Total assetsTotal assets$35,208 $34,027 Total assets$35,517 $35,014 
Liabilities and shareholders’ equityLiabilities and shareholders’ equity  Liabilities and shareholders’ equity  
Current liabilitiesCurrent liabilities  Current liabilities  
Short-term debtShort-term debt$1,116 $13 Short-term debt$87 $324 
Current portion of long-term debtCurrent portion of long-term debt1,728 1,735 Current portion of long-term debt10 
Accounts payableAccounts payable2,867 2,797 Accounts payable3,118 3,072 
Accrued compensationAccrued compensation331 501 Accrued compensation350 467 
Other current liabilitiesOther current liabilities2,214 2,166 Other current liabilities2,524 2,488 
Total current liabilitiesTotal current liabilities8,256 7,212 Total current liabilities6,087 6,360 
Noncurrent liabilitiesNoncurrent liabilities  Noncurrent liabilities  
Long-term debtLong-term debt6,763 6,831 Long-term debt8,701 8,321 
Pension liabilitiesPension liabilities831 872 Pension liabilities651 649 
Other postretirement benefits liabilitiesOther postretirement benefits liabilities260 263 Other postretirement benefits liabilities174 177 
Operating lease liabilitiesOperating lease liabilities342 337 Operating lease liabilities466 459 
Deferred income taxesDeferred income taxes635 559 Deferred income taxes537 530 
Other noncurrent liabilitiesOther noncurrent liabilities1,465 1,502 Other noncurrent liabilities1,417 1,444 
Total noncurrent liabilitiesTotal noncurrent liabilities10,296 10,364 Total noncurrent liabilities11,946 11,580 
Shareholders’ equityShareholders’ equity  Shareholders’ equity  
Ordinary shares (399.0 million outstanding in 2022 and 398.8 million in 2021)
Ordinary shares (398.6 million outstanding in 2023 and 397.8 million in 2022)Ordinary shares (398.6 million outstanding in 2023 and 397.8 million in 2022)
Capital in excess of par valueCapital in excess of par value12,427 12,449 Capital in excess of par value12,502 12,512 
Retained earningsRetained earnings7,707 7,594 Retained earnings8,757 8,468 
Accumulated other comprehensive lossAccumulated other comprehensive loss(3,517)(3,633)Accumulated other comprehensive loss(3,814)(3,946)
Shares held in trustShares held in trust(1)(1)Shares held in trust— (1)
Total Eaton shareholders’ equityTotal Eaton shareholders’ equity16,620 16,413 Total Eaton shareholders’ equity17,449 17,038 
Noncontrolling interestsNoncontrolling interests36 38 Noncontrolling interests36 38 
Total equityTotal equity16,656 16,451 Total equity17,485 17,075 
Total liabilities and equityTotal liabilities and equity$35,208 $34,027 Total liabilities and equity$35,517 $35,014 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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EATON CORPORATION plc
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended
March 31
Three months ended
March 31
(In millions)(In millions)20222021(In millions)20232022
Operating activitiesOperating activities  Operating activities  
Net incomeNet income$533 $459 Net income$639 $533 
Adjustments to reconcile to net cash provided by operating activitiesAdjustments to reconcile to net cash provided by operating activities  Adjustments to reconcile to net cash provided by operating activities  
Depreciation and amortizationDepreciation and amortization244 208 Depreciation and amortization238 244 
Deferred income taxesDeferred income taxes15 (39)Deferred income taxes17 15 
Pension and other postretirement benefits expensePension and other postretirement benefits expense14 Pension and other postretirement benefits expense
Contributions to pension plansContributions to pension plans(32)(243)Contributions to pension plans(29)(32)
Contributions to other postretirement benefits plansContributions to other postretirement benefits plans(6)(6)Contributions to other postretirement benefits plans(5)(6)
Gain on sale of businessGain on sale of business(24)— Gain on sale of business— (24)
Changes in working capitalChanges in working capital(785)(108)Changes in working capital(498)(785)
Other - netOther - net91 (25)Other - net(31)91 
Net cash provided by operating activitiesNet cash provided by operating activities42 260 Net cash provided by operating activities335 42 
Investing activitiesInvesting activities  Investing activities  
Capital expenditures for property, plant and equipmentCapital expenditures for property, plant and equipment(115)(119)Capital expenditures for property, plant and equipment(126)(115)
Cash paid for acquisitions of businesses, net of cash acquired(612)(1,700)
Cash paid for acquisition of a business, net of cash acquiredCash paid for acquisition of a business, net of cash acquired— (612)
Proceeds from sales of property, plant and equipmentProceeds from sales of property, plant and equipment
Investments in associate companiesInvestments in associate companies(17)(80)Investments in associate companies— (17)
Purchases of short-term investments - netPurchases of short-term investments - net(1)(280)Purchases of short-term investments - net(27)(1)
Payments for settlement of currency exchange contracts not designated as hedges - net— (17)
Proceeds from settlement of currency exchange contracts not designated as hedges - netProceeds from settlement of currency exchange contracts not designated as hedges - net41 — 
Other - netOther - net(17)(5)Other - net(14)(21)
Net cash used in investing activitiesNet cash used in investing activities(762)(2,201)Net cash used in investing activities(124)(762)
Financing activitiesFinancing activities  Financing activities  
Proceeds from borrowingsProceeds from borrowings— 1,798 Proceeds from borrowings318 — 
Payments on borrowingsPayments on borrowings(4)(3)Payments on borrowings(3)(4)
Short-term debt, netShort-term debt, net1,105 463 Short-term debt, net(236)1,105 
Cash dividends paidCash dividends paid(320)(300)Cash dividends paid(334)(320)
Exercise of employee stock optionsExercise of employee stock options21 Exercise of employee stock options17 
Repurchase of sharesRepurchase of shares(86)(59)Repurchase of shares— (86)
Employee taxes paid from shares withheldEmployee taxes paid from shares withheld(50)(37)Employee taxes paid from shares withheld(40)(50)
Other - netOther - net(1)(8)Other - net(1)(1)
Net cash provided by financing activities652 1,875 
Net cash provided by (used in) financing activitiesNet cash provided by (used in) financing activities(281)652 
Effect of currency on cashEffect of currency on cash(11)Effect of currency on cash11 
Less: Increase in cash classified as held for sale— (7)
Decrease in cash(60)(84)
Total decrease in cashTotal decrease in cash(59)(60)
Cash at the beginning of the periodCash at the beginning of the period297 438 Cash at the beginning of the period294 297 
Cash at the end of the periodCash at the end of the period$237 $354 Cash at the end of the period$235 $237 

The accompanying notes are an integral part of these condensed consolidated financial statements.
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EATON CORPORATION plc
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Amounts are in millions 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.
Note 1.BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of Eaton Corporation plc (Eaton or the Company) have been prepared in accordance with generally accepted accounting principles for interim financial information, the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by United States generally accepted accounting principles (US GAAP) for complete financial statements. However, in the opinion of management, all adjustments (consisting of normal recurring accruals) have been made that are necessary for a fair presentation of the condensed consolidated financial statements for the interim periods.
This Form 10-Q should be read in conjunction with the consolidated financial statements and related notes included in Eaton’s 20212022 Form 10-K. The interim period results are not necessarily indicative of the results to be expected for the full year. Management has evaluated subsequent events through the date this Form 10-Q was filed with the Securities and Exchange Commission.
Certain prior year amounts have been reclassified to conform to the current year presentation.
Adoption of New Accounting Standard
Eaton adopted Accounting Standards Update 2022-04, Liabilities - Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations, in the first quarter of 2023. The standard requires disclosure of certain information about the Company's supply chain finance program, including key terms and a rollforward of confirmed amounts payable. The adoption of the standard did not have a material impact on the condensed consolidated financial statements.
Note 2.ACQUISITIONS AND DIVESTITURE OF BUSINESSES
Acquisition of Tripp Lite
On March 17, 2021, Eaton acquired Tripp Lite for $1.65 billion, net of cash received. Tripp Lite is a leading supplier of power quality products and connectivity solutions including single-phase uninterruptible power supply systems, rack power distribution units, surge protectors, and enclosures for data centers, industrial, medical, and communications markets in the Americas. Tripp Lite is reported within the Electrical Americas business segment.
The acquisition of Tripp Lite has been accounted for using the acquisition method of accounting which requires the assets acquired and liabilities assumed be recognized at their respective fair values on the acquisition date. During the measurement period which ended in March 2022, opening balance sheet adjustments were made to finalize Eaton's fair value estimates based on the final valuations received, which are summarized in the table below. The measurement period adjustments did not have a material impact to the Consolidated Statements of Income.
(In millions)Preliminary AllocationMeasurement Period AdjustmentsFinal
Allocation
Short-term investments$$— $
Accounts receivable94 (1)93 
Inventory184 (5)179 
Prepaid expenses and other current assets(1)
Property, plant and equipment(5)
Other intangible assets630 (26)604 
Other assets— 
Accounts payable(13)— (13)
Other current liabilities(32)(2)(34)
Other noncurrent liabilities(157)(10)(167)
Total identifiable net assets723 (48)675 
Goodwill928 48 976 
Total consideration, net of cash received$1,651 $— $1,651 
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Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and represents the anticipated synergies of acquiring Tripp Lite. Goodwill recognized as a result of the acquisition is not deductible for tax purposes. The estimated fair values of the customer relationships, trademarks and technology intangible assets of $539 million, $33 million and $32 million, respectively, were determined using either the relief-from-royalty model or the multi-period excess earnings model, which are discounted cash flow models that rely on the Company's estimates. These estimates require judgment of future revenue growth rates, future margins, and the applicable weighted-average cost of capital used to discount those estimated cash flows. The weighted-average cost of capital is an estimate of the overall after-tax rate of return required by equity and debt market holders of a business enterprise. The estimated useful lives for customer relationships, trademarks and technology intangible assets were 20 years, 15 years, and 5 years, respectively. See Note 6 for additional information about goodwill.
Eaton's 2021 Condensed Consolidated Financial Statements include Tripp Lite’s results of operations, including sales of $26 million, from the date of acquisition through March 31, 2021.
Acquisition of Mission Systems
On June 1, 2021, Eaton acquired Mission Systems for $2.80 billion, net of cash received. Mission Systems is a leading manufacturer of air-to-air refueling systems, environmental systems, and actuation primarily for defense markets. Mission Systems is reported within the Aerospace business segment.
The acquisition of Mission Systems has been accounted for using the acquisition method of accounting which requires the assets acquired and liabilities assumed be recognized at their respective fair values on the acquisition date. There has not been a material change from the estimated fair values of the assets acquired and liabilities assumed presented in Note 2 to the Consolidated Financial Statements in the 2021 Form 10-K. Draft third-party valuations for Other intangible assets and Property, plant and equipment have been received. These preliminary estimates will be finalized in the second quarter of 2022 when our review of the third-party valuations are completed, further information becomes available and additional analyses are performed, and these differences could have a material impact on Eaton's preliminary purchase price allocation.
Sale of Hydraulics business
On August 2, 2021, Eaton completed the sale of the Hydraulics business to Danfoss A/S. As a result of the sale, the Company received $3.1 billion, net of cash sold,S and recognized a pre-tax gain of $617 million in 2021. According to the terms of the sales agreement, theThe Company finalized negotiations of post-closing adjustments with Danfoss A/S during the first quarter of 2022. As a result of these negotiations, the Companyand recognized an additional pre-tax gain of $24 million. The business had salesmillion in the first quarter of $1.3 billion2022 and received cash of $22 million in 2021 through the datesecond quarter of the sale.
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2022 from Danfoss A/S to fully settle all post-closing adjustments.
Acquisition of Royal Power Solutions
On January 5, 2022, Eaton acquired Royal Power Solutions for $612$610 million, net of cash received. Royal Power Solutions is a U.S. based manufacturer of high-precision electrical connectivity components used in electric vehicle, energy management, industrial and mobility markets. Royal Power Solutions is reported within the eMobility business segment.
The acquisition of Royal Power Solutions has been accounted for using the acquisition method of accounting which requires the assets acquired and liabilities assumed be recognized at their respective fair values on the acquisition date. The table below summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed on the acquisition date. These preliminary estimates will continue to be revised during the measurement period as third-party valuations are received and finalized, further information becomes available and additional analyses are performed, and these differences could have a material impact on Eaton's preliminary purchase price allocation.
(In millions)January 5, 2022
Accounts receivable$36 
Inventory43 
Prepaid expenses and other current assets
Property, plant and equipment25 
Other intangible assets306 
Other assets21 
Accounts payable(24)
Other current liabilities(10)
Other noncurrent liabilities(70)
Total identifiable net assets328 
Goodwill284 
Total consideration, net of cash received$612 
Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and represents the anticipated synergies of acquiring Royal Power Solutions. Goodwill recognized as a result of the acquisition is not deductible for tax purposes. Other intangible assets of $306 million are expected to include customer relationships, trademarks and technology. Given the timing of the acquisition, Eaton utilized a benchmarking approach based on similar acquisitions to determine the preliminary fair values for intangible assets. See Note 6 for additional information about goodwill.
Eaton's 2022 Condensed Consolidated Financial Statements include Royal Power Solutions' results of operations, including segment operating profit of $5 million on sales of $38 million, from the date of acquisition through March 31, 2022.

Acquisition of a 50%
stake in Jiangsu Huineng Electric Co., Ltd’s circuit breaker business
On July 1, 2022, Eaton acquired a 50 percent stake in Jiangsu Huineng Electric Co., Ltd’s circuit breaker business, which manufactures and markets low-voltage circuit breakers in China. Eaton accounts for this investment on the equity method of accounting and is reported within the Electrical Global business segment.
Acquisition of a 49% stake in Jiangsu Ryan Electrical Co. Ltd.
On April 23, 2023, Eaton acquired a 49 percent stake in Jiangsu Ryan Electrical Co. Ltd., a manufacturer of power distribution and sub-transmission transformers in China. Eaton will account for this investment on the equity method of accounting and will report it within the Electrical Global business segment.
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Note 3.    REVENUE RECOGNITION
Sales are recognized when obligations under the terms of the contract are satisfied and control of promised goods or services have transferred to our customers. Control is transferred when the customer has the ability to direct the use of and obtain benefits from the goods or services. Sales are measured at the amount of consideration the Company expects to be paid in exchange for these products or services.
The following table provides disaggregated sales by lines of businesses, geographic destination, market channel or end market, as applicable, for the Company's operating segments:
Three months ended
March 31
Three months ended
March 31
(In millions)(In millions)20222021(In millions)20232022
Electrical AmericasElectrical AmericasElectrical Americas
ProductsProducts$603 $520 Products$716 $603 
SystemsSystems1,288 1,102 Systems1,578 1,288 
TotalTotal$1,891 $1,622 Total$2,294 $1,891 
Electrical GlobalElectrical GlobalElectrical Global
ProductsProducts$876 $713 Products$882 $876 
SystemsSystems561 540 Systems618 561 
TotalTotal$1,437 $1,253 Total$1,500 $1,437 
Hydraulics
United States$— $222 
Rest of World— 339 
Total$— $561 
AerospaceAerospaceAerospace
Original Equipment ManufacturersOriginal Equipment Manufacturers$293 $208 Original Equipment Manufacturers$314 $293 
AftermarketAftermarket221 146 Aftermarket264 221 
Industrial and OtherIndustrial and Other204 165 Industrial and Other225 204 
TotalTotal$718 $519 Total$803 $718 
VehicleVehicleVehicle
CommercialCommercial$402 $342 Commercial$448 $402 
Passenger and Light DutyPassenger and Light Duty269 312 Passenger and Light Duty291 269 
TotalTotal$671 $654 Total$739 $671 
eMobilityeMobility$126 $83 eMobility$147 $126 
Total net salesTotal net sales$4,843 $4,692 Total net sales$5,483 $4,843 

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The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables (revenue recognized exceeds amount billed to the customer), and deferred revenue (advance payments and billings in excess of revenue recognized). Accounts receivable from customers were $3,216$3,726 million and $2,896$3,581 million at March 31, 20222023 and December 31, 2021,2022, respectively. Amounts are billed as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals or upon achievement of contractual milestones. These assets and liabilities are reported on the Consolidated Balance Sheets on a contract-by-contract basis at the end of each reporting period. Unbilled receivables were $194$251 million and $187$233 million at March 31, 20222023 and December 31, 2021,2022, respectively, and are recorded in Prepaid expenses and other current assets. The increase in unbilled receivables reflects higher revenue recognized from increased business activity in 2022.2023.
Changes in the deferred revenue liabilities are as follows:
(In millions)Deferred Revenue
Balance at January 1, 2023$508 
Customer deposits and billings514 
Revenue recognized in the period(421)
Translation
Balance at March 31, 2023$605 
(In millions)Deferred Revenue
Balance at January 1, 2022$422 
Customer deposits and billings342 
Revenue recognized in the period(334)
Translation(2)
Balance at March 31, 2022$428 
(In millions)Deferred Revenue
Balance at January 1, 2021$257 
Customer deposits and billings276 
Revenue recognized in the period(262)
Translation and other(3)
Balance at March 31, 2021$268 
Deferred revenue liabilities of $401$586 million and $395$489 million as of March 31, 20222023 and December 31, 2021,2022, respectively, were included in Other current liabilities with the remaining balance presented in Other noncurrent liabilities.
A significant portion of open orders placed with Eaton are by original equipment manufacturers or distributors. These open orders are not considered firm as they have been historically subject to releases by customers. In measuring backlog of unsatisfied or partially satisfied obligations, only the amount of orders to which customers are firmly committed are included. Using this criterion, total backlog at March 31, 20222023 was approximately $9.3$12.3 billion. At March 31, 2022,2023, approximately 87%82% of this backlog is targeted for delivery to customers in the next twelve months and the rest thereafter.

Note 4. CREDIT LOSSES FOR RECEIVABLES
Receivables are exposed to credit risk based on the customers’ ability to pay which is influenced by, among other factors, their financial liquidity position. Eaton’s receivables are generally short-term in nature with a majority outstanding less than 90 days.
Eaton performs ongoing credit evaluation of its customers and maintains sufficient allowances for potential credit losses. The Company evaluates the collectability of its receivables based on the length of time the receivable is past due, and any anticipated future write-off based on historic experience adjusted for market conditions. The Company's segments, supported by our global credit department, perform the credit evaluation and monitoring process to estimate and manage credit risk. The process includes an evaluation of credit losses for both the overall segment receivable and specific customer balances. The process also includes review of customer financial information and credit ratings, approval and monitoring of customer credit limits, and an assessment of market conditions. The Company may also require prepayment from customers to mitigate credit risk. Receivable balances are written off against an allowance for credit losses after a final determination of collectability has been made.
Accounts receivable are net of an allowance for credit losses of $42$39 million and $31 million at March 31, 20222023 and December 31, 2021.2022, respectively. The change in the allowance for credit losses includes expense and net write-offs, none of which are significant.

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Note 5.    INVENTORY
Inventory is carried at lower of cost or net realizable value. The components of inventory are as follows:
(In millions)(In millions)March 31,
2022
December 31,
2021
(In millions)March 31,
2023
December 31,
2022
Raw materialsRaw materials$1,219 $1,096 Raw materials$1,407 $1,275 
Work-in-processWork-in-process783 620 Work-in-process916 781 
Finished goodsFinished goods1,315 1,253 Finished goods1,281 1,375 
Total inventoryTotal inventory$3,317 $2,969 Total inventory$3,604 $3,430 

Note 6.    GOODWILL
Changes in the carrying amount of goodwill by segment are as follows:
(In millions)January 1,
2022
AdditionsTranslationMarch 31,
2022
Electrical Americas$7,417 $$$7,428 
Electrical Global4,183 (65)4,120 
Aerospace2,781 (36)2,753 
Vehicle290 — — 290 
eMobility80 284 — 364 
Total$14,751 $299 $(95)$14,955 
The 2022 additions to goodwill relate primarily to the anticipated synergies of acquiring Royal Power Solutions. The allocation of the purchase price from this acquisition is preliminary and will be completed during the measurement period.
(In millions)January 1, 2023TranslationMarch 31, 2023
Electrical Americas$7,402 $$7,411 
Electrical Global3,929 58 3,987 
Aerospace2,844 30 2,873 
Vehicle287 288 
eMobility334 — 334 
Total$14,796 $98 $14,894 

Note 7.    SUPPLY CHAIN FINANCE PROGRAM
The Company negotiates payment terms directly with its suppliers for the purchase of goods and services. In addition, 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. If a supplier elects to participate in the SCF program, the supplier decides which invoices are sold to the financial institution and the Company has no economic interest in a supplier’s decision to sell an invoice. 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. The amounts due to the financial institution for suppliers that participate in the SCF program are included in Accounts payable on the Consolidated Balance Sheets, and the associated payments are included in operating activities on the Condensed Consolidated Statements of Cash Flows.
The changes in SCF obligations are as follows:
(In millions)SCF Obligations
Balance at January 1, 2023$208 
Invoices confirmed during the period297 
Invoices paid during the period(234)
Translation12 
Balance at March 31, 2023$283 

Note 8.    DEBT
On March 3, 2023, a subsidiary of Eaton issued Euro denominated notes (2023 Euro Notes) in a private issuance with a face value of €300 million ($318 million). The floating rate notes are due June 3, 2024 with interest payable quarterly based on the three-month Euro Interbank Offered Rate plus 25 basis points. The 2023 Euro Notes are fully and unconditionally guaranteed on an unsubordinated, unsecured basis by Eaton. The 2023 Euro Notes contain a change of control provision which requires the Company to make an offer to purchase all or any part of the 2023 Euro Notes at a purchase price of 100.5% of the principal amount plus accrued and unpaid interest. The 2023 Euro Notes are subject to customary non-financial covenants.
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Note 7.9.    RETIREMENT BENEFITS PLANS
The components of retirement benefits expense (income) are as follows:
United States
pension benefit expense (income)
Non-United States
pension benefit expense (income)
Other postretirement
benefits expense (income)
United States
pension benefit expense (income)
Non-United States
pension benefit expense (income)
Other postretirement
benefits expense (income)
Three months ended March 31Three months ended March 31
(In millions)(In millions)202220212022202120222021(In millions)202320222023202220232022
Service costService cost$$10 $16 $19 $— $— Service cost$$$11 $16 $— $— 
Interest costInterest cost20 17 12 10 Interest cost36 20 21 12 
Expected return on plan assetsExpected return on plan assets(53)(56)(31)(30)— — Expected return on plan assets(49)(53)(30)(31)— — 
AmortizationAmortization10 12 19 (2)(1)Amortization12 (4)(2)
(17)(19)18 — (7)(17)(2)— 
SettlementsSettlements14 14 — — — — Settlements14 — — — 
Total expense (income)Total expense (income)$(3)$(5)$$18 $— $Total expense (income)$$(3)$$$(2)$— 
The components of retirement benefits expense (income) other than service costs are included in Other income - net.
During 2020, the Company announced it was freezing its United States pension plans for its non-union employees. The freeze was effective January 1, 2021 for non-union U.S. employees whose retirement benefit was determined under a cash balance formula and is effective January 1, 2026 for non-union U.S. employees whose retirement benefit is determined under a final average pay formula.
During the first quarter of 2023 and 2022, the Company recognized settlement losses from lump-sum distributions of $10 million and $14 million, andrespectively. During the first quarter of 2022, the Company remeasured certain pension plans as a result of lump-sum distributions exceeding or expected to exceed the sum of service and interest costs for the year. These remeasurements resulted in increases of $32 million in pension assets, decreases of $15 million in pension liabilities, and decreasesan increase of $47 million in funded status and corresponding decrease in Accumulated other comprehensive loss.
The componentsloss in the first quarter of retirement benefits expense (income) other than service costs are included in Other income - net.
2022.
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Note 8.10.     LEGAL CONTINGENCIES
Eaton is subject to a broad range of claims, administrative and legal proceedings such as lawsuits that relate to contractual allegations and indemnity claims, tax audits, patent infringement, personal injuries, antitrust matters, and employment-related matters. Eaton is also subject to asbestoslegal claims from historic products which may have contained asbestos. Insurance may cover some of the costs associated with these claims and proceedings. Although it is not possible to predict with certainty the outcome or cost of these matters, the Company believes they will not have a material adverse effect on the Condensed Consolidated Financial Statements.
 
Note 9.11.     INCOME TAXES
The effective income tax rate for the first quarter of 20222023 was expense of 13.9%16.1% compared to expense of 14.7%13.9% for the first quarter of 2021.2022. The decreaseincrease in the effective tax rate in the first quarter of 20222023 was primarily due to greater levels of income in higher tax jurisdictions and a smaller impact from the excess tax benefits recognized for employee share-based payments in the first quarter of 2022.quarter.
Brazil Tax Years 2005-2012
The Company has two Brazilian tax cases primarily relating to the amortization of certain goodwill generated from the acquisition of third-party businesses and corporate reorganizations. One case involves tax years 2005-2008 (Case 1), and the other involves tax years 2009-2012 (Case 2). Case 2 is proceeding on a more accelerated timeline than Case 1. For Case 2, the Company received a tax assessment in 2014 that included interest and penalties. In November 2019, the Company received an unfavorable result at the final tax administrative appeals level, resulting in an alleged tax deficiency of $29 million plus $107 million of interest and penalties (translated at the March 31, 2022 exchange rate). The Company is challenging this assessment in the judicial system and, on April 18, 2022, received an unfavorable decision at the first judicial level. On April 27, 2022, the Company filed a motion for clarification relating to that decision, which is currently pending with the court. The Company intends to continue its challenge of this assessment in the judicial system, including appealing the April 18, 2022 decision, if necessary.
As previously disclosed for Case 1, the Company received a separate tax assessment alleging a tax deficiency of $35 million plus $115 million of interest and penalties (translated at the March 31, 2022 exchange rate), which the Company is challenging in the judicial system. This case is still pending resolution at the first judicial level.
Both cases are expected to take several years to resolve through the Brazilian judicial system and require provision of certain assets as security for the alleged deficiencies. As of March 31, 2022, the Company pledged Brazilian real estate assets with net book value of $22 million and provided additional security in the form of bank secured bonds totaling $113 million and a cash deposit of $20 million (translated at the March 31, 2022 exchange rate).
The Company believes that the final resolution of both of the assessments will not have a material impact on its condensed consolidated financial statements. The ultimate outcome of these matters cannot be predicted with certainty given the complex nature of tax controversies. Should the ultimate outcome of these matters deviate from our reasonable expectations, they may have a material adverse impact on the Company’s condensed consolidated financial statements. However, Eaton believes that its interpretations of tax laws and application of tax laws to its facts are correct.
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Note 12. EQUITY
Note 10. EQUITYThe changes in Shareholders’ equity are as follows:
Ordinary sharesCapital in excess of par valueRetained earningsAccumulated other comprehensive lossShares held in trustTotal Eaton shareholders' equityNoncontrolling interestsTotal equity
(In millions)SharesDollars
Balance at January 1, 2023397.8 $$12,512 $8,468 $(3,946)$(1)$17,038 $38 $17,075 
Net income— — — 638 — — 638 639 
Other comprehensive income, net of tax132 132 — 132 
Cash dividends paid and accrued— — — (348)— — (348)(4)(352)
Issuance of shares under equity-based
   compensation plans
0.7 — (11)(1)— (11)— (11)
Changes in noncontrolling interest of
   consolidated subsidiaries - net
— — — — — — — 
Balance at March 31, 2023398.6 $$12,502 $8,757 $(3,814)$— $17,449 $36 $17,485 
Ordinary sharesCapital in excess of par valueRetained earningsAccumulated other comprehensive lossShares held in trustTotal Eaton shareholders' equityNoncontrolling interestsTotal equity
(In millions)SharesDollars
Balance at January 1, 2022398.8 $$12,449 $7,594 $(3,633)$(1)$16,413 $38 $16,451 
Net income— — — 532 — — 532 533 
Other comprehensive income, net of tax116 116 — 116 
Cash dividends paid and accrued— — — (331)— — (331)(2)(333)
Issuance of shares under equity-based
   compensation plans
0.8 — (22)(2)— — (24)— (24)
Changes in noncontrolling interest of
   consolidated subsidiaries - net
— — — — — — — (1)(1)
Repurchase of shares(0.6)— — (86)— — (86)— (86)
Balance at March 31, 2022399.0 $$12,427 $7,707 $(3,517)$(1)$16,620 $36 $16,656 
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, 2023, no ordinary shares were repurchased. During the three months ended March 31, 2022, 0.6 million ordinary shares were repurchased under the 2022 program in the open market at a total cost of $86 million. During the three months ended March 31, 2021, 0.5 million ordinary shares were repurchased under the 2019 Program in the open market at a total cost of $59 million.
The changes in Shareholders’ equity are as follows:
Ordinary sharesCapital in excess of par valueRetained earningsAccumulated other comprehensive lossShares held in trustTotal Eaton shareholders' equityNoncontrolling interestsTotal equity
(In millions)SharesDollars
Balance at January 1, 2022398.8 $$12,449 $7,594 $(3,633)$(1)$16,413 $38 $16,451 
Net income— — — 532 — — 532 533 
Other comprehensive income, net of tax116 116 — 116 
Cash dividends paid and accrued— — — (331)— — (331)(2)(333)
Issuance of shares under equity-based compensation plans0.8 — (22)(2)— — (24)— (24)
Changes in noncontrolling interest of consolidated subsidiaries - net— — — — — — — (1)(1)
Repurchase of shares(0.6)— — (86)— — (86)— (86)
Balance at March 31, 2022399.0 $$12,427 $7,707 $(3,517)$(1)$16,620 $36 $16,656 
Ordinary sharesCapital in excess of par valueRetained earningsAccumulated other comprehensive lossShares held in trustTotal Eaton shareholders' equityNoncontrolling interestsTotal equity
(In millions)SharesDollars
Balance at January 1, 2021398.1 $$12,329 $6,794 $(4,195)$(2)$14,930 $43 $14,973 
Net income— — — 458 — — 458 459 
Other comprehensive loss, net of tax(30)(30)— (30)
Cash dividends paid and accrued— — — (309)— — (309)— (309)
Issuance of shares under equity-based compensation plans0.9 — (1)— — — 
Changes in noncontrolling interest of consolidated subsidiaries - net— — — — — — — (2)(2)
Repurchase of shares(0.5)— — (59)— — (59)— (59)
Balance at March 31, 2021398.5 $$12,335 $6,883 $(4,225)$(2)$14,995 $42 $15,037 
The changes in Accumulated other comprehensive loss are as follows:
(In millions)(In millions)Currency translation and related hedging instrumentsPensions and other postretirement benefitsCash flow
hedges
Total(In millions)Currency translation and related hedging instrumentsPensions and other postretirement benefitsCash flow
hedges
Total
Balance at January 1, 2022$(2,617)$(986)$(30)$(3,633)
Balance at January 1, 2023Balance at January 1, 2023$(3,264)$(810)$129 $(3,946)
Other comprehensive income (loss) before
reclassifications
Other comprehensive income (loss) before
reclassifications
(62)47 102 87 Other comprehensive income (loss) before
reclassifications
121 (11)26 136 
Amounts reclassified from Accumulated other
comprehensive loss (income)
Amounts reclassified from Accumulated other
comprehensive loss (income)
— 30 (1)29 Amounts reclassified from Accumulated other
comprehensive loss (income)
(1)(11)(4)
Net current-period Other comprehensive
income (loss)
Net current-period Other comprehensive
income (loss)
(62)77 101 116 Net current-period Other comprehensive
income (loss)
119 (2)15 132 
Balance at March 31, 2022$(2,679)$(909)$71 $(3,517)
Balance at March 31, 2023Balance at March 31, 2023$(3,145)$(813)$144 $(3,814)
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The reclassifications out of Accumulated other comprehensive loss are as follows:
(In millions)(In millions)Three months ended March 31, 2022Consolidated statements
of income classification
(In millions)Three months ended March 31, 2023Consolidated Statements
of Income classification
Gains and (losses) on net investment hedges (amount excluded
from effectiveness testing)
Gains and (losses) on net investment hedges (amount excluded
from effectiveness testing)
Currency exchange contractsCurrency exchange contracts$Interest expense - net
Tax expenseTax expense— 
Total, net of taxTotal, net of tax
Amortization of defined benefit pensions and other
postretirement benefits items
Amortization of defined benefits pensions and other
postretirement benefits items
Amortization of defined benefits pensions and other
postretirement benefits items
Actuarial loss and prior service costActuarial loss and prior service cost$(32)1Actuarial loss and prior service cost(8)1
Tax benefitTax benefitTax benefit— 
Total, net of taxTotal, net of tax(30)Total, net of tax(8)
Gains and (losses) on cash flow hedgesGains and (losses) on cash flow hedgesGains and (losses) on cash flow hedges
Floating-to-fixed interest rate swapsFloating-to-fixed interest rate swapsInterest expense - net
Currency exchange contractsCurrency exchange contracts11 Net sales and Cost of products sold
Commodity contractsCost of products sold
Tax expenseTax expense— Tax expense(3)
Total, net of taxTotal, net of taxTotal, net of tax11 
Total reclassifications for the periodTotal reclassifications for the period$(29)Total reclassifications for the period$
1 These components of Accumulated other comprehensive loss are included in the computation of net periodic benefit cost. See Note 79 for additional information about pension and other postretirement benefits items.
Net Income Per Share Attributable to Eaton Ordinary Shareholders
A summary of the calculation of net income per share attributable to Eaton ordinary shareholders is as follows:
Three months ended
March 31
Three months ended
March 31
(In millions except for per share data)(In millions except for per share data)20222021(In millions except for per share data)20232022
Net income attributable to Eaton ordinary shareholdersNet income attributable to Eaton ordinary shareholders$532 $458 Net income attributable to Eaton ordinary shareholders$638 $532 
Weighted-average number of ordinary shares outstanding - dilutedWeighted-average number of ordinary shares outstanding - diluted401.8 400.9 Weighted-average number of ordinary shares outstanding - diluted400.5 401.8 
Less dilutive effect of equity-based compensationLess dilutive effect of equity-based compensation2.6 2.6 Less dilutive effect of equity-based compensation2.0 2.6 
Weighted-average number of ordinary shares outstanding - basicWeighted-average number of ordinary shares outstanding - basic399.2 398.3 Weighted-average number of ordinary shares outstanding - basic398.5 399.2 
Net income per share attributable to Eaton ordinary shareholdersNet income per share attributable to Eaton ordinary shareholdersNet income per share attributable to Eaton ordinary shareholders
DilutedDiluted$1.33 $1.14 Diluted$1.59 $1.33 
BasicBasic1.33 1.15 Basic1.60 1.33 
For the first quarter of 2023 and 2022, all stock options were included in the calculation of diluted net income per share attributable to Eaton ordinary shareholders because they were all dilutive. For the first quarter of 2021, 0.1 million of stock options were excluded from the calculation of diluted net income per share attributable to Eaton ordinary shareholders because the exercise price of the options exceeded the average market price of the ordinary shares during the period and their effect, accordingly, would have been antidilutive.

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Note 11.13.     FAIR VALUE MEASUREMENTS
Fair value is measured based on an exit price, representing the amount that would be received to sell an asset or paid to satisfy a liability in an orderly transaction between market participants. Fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, a fair value hierarchy is established, which categorizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices in active markets; (Level 2) inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
A summary of financial instruments and contingent consideration recognized at fair value, and the fair value measurements used, is as follows:
(In millions)(In millions)TotalLevel 1Level 2Level 3(In millions)TotalLevel 1Level 2Level 3
March 31, 2022    
March 31, 2023March 31, 2023    
CashCash$237 $237 $— $— Cash$235 $235 $— $— 
Short-term investmentsShort-term investments268 268 — — Short-term investments289 289 — — 
Net derivative contractsNet derivative contracts44 — 44 — Net derivative contracts44 — 44 — 
Contingent consideration from acquisition of Green Motion(57)— — (57)
Contingent future payments from acquisition of Green MotionContingent future payments from acquisition of Green Motion(45)— — (45)
December 31, 2021    
December 31, 2022December 31, 2022    
CashCash$297 $297 $— $— Cash$294 $294 $— $— 
Short-term investmentsShort-term investments271 271 — — Short-term investments261 261 — — 
Net derivative contractsNet derivative contracts41 — 41 — Net derivative contracts29 — 29 — 
Contingent consideration from acquisition of Green Motion(57)— — (57)
Contingent future payments from acquisition of Green MotionContingent future payments from acquisition of Green Motion(44)— — (44)
Eaton values its financial instruments using an industry standard market approach, in which prices and other relevant information is generated by market transactions involving identical or comparable assets or liabilities.
On March 22, 2021, Eaton acquired Green Motion SA, a leading designer and manufacturer of electric vehicle charging hardware and related software based in Switzerland. Green Motion SA was acquired for $106 million, including $49 million of cash paid at closing and an initial estimate of $57 million of estimatedfor the fair value of contingent future consideration based on 2023 and 2024 revenue performance. The fair value of contingent consideration liabilities is estimated by discounting contingent payments expected to be made, and may increase or decrease based on changes in revenue estimates and discount rates, with a maximum possible undiscounted value of $109$112 million. As of March 31, 2023, the fair value of the contingent future payments has been reduced to $45 million based primarily on anticipated reductions in projected 2023 revenue compared to the initial estimate.
Other Fair Value Measurements
Long-term debt and the current portion of long-term debt had a carrying value of $8,491$8,709 million and fair value of $8,709$8,181 million at March 31, 20222023 compared to $8,566$8,331 million and $9,232$7,625 million, respectively, at December 31, 2021.2022. The fair value of Eaton's debt instruments werewas estimated using prevailing market interest rates on debt with similar creditworthiness, terms and maturities and is considered a Level 2 fair value measurement.

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Note 12.14.     DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES
In the normal course of business, Eaton is exposed to certain risks related to fluctuations in interest rates, currency exchange rates and commodity prices. The Company uses various derivative and non-derivative financial instruments, primarily interest rate swaps, currency forward exchange contracts, currency swaps and commodity contracts to manage risks from these market fluctuations. The instruments used by Eaton are straightforward, non-leveraged instruments. The counterparties to these instruments are financial institutions with strong credit ratings. Eaton maintains control over the size of positions entered into with any one counterparty and regularly monitors the credit rating of these institutions. Such instruments are not purchased and sold for trading purposes.
Derivative financial instruments are accounted for at fair value and recognized as assets or liabilities in the Consolidated Balance Sheets. Accounting for the gain or loss resulting from the change in the fair value of the derivative financial instrument depends on whether it has been designated and is effective, as part of a hedging relationship, is effective and if so, as to the nature of the hedging activity. Eaton formally documents all relationships between derivative financial instruments accounted for as designated hedges and the hedged item, as well as its risk-management objective and strategy for undertaking the hedge transaction. This process includes linking derivative financial instruments to a recognized asset or liability, specific firm commitment, forecasted transaction, or net investment in a foreign operation. These financial instruments can be designated as:
Hedges of the change in the fair value of a recognized fixed-rate asset or liability, or the firm commitment to acquire such an asset or liability (a fair value hedge); for these hedges, the gain or loss from the derivative financial instrument, as well as the offsetting loss or gain on the hedged item attributable to the hedged risk, are recognized in income during the period of change in fair value.
Hedges of the variable cash flows of a recognized variable-rate asset or liability, or the forecasted acquisition of such an asset or liability (a cash flow hedge); for these hedges, the gain or loss from the derivative financial instrument is recognized in Accumulated other comprehensive income and reclassified to income in the same period when the gain or loss on the hedged item is included in income.
Hedges of the currency exposure related to a net investment in a foreign operation (a net investment hedge); for these hedges, the gain or loss from the derivative financial instrument is recognized in Accumulated other comprehensive income and reclassified to income in the same period when the gain or loss related to the net investment in the foreign operation is included in income.
The gain or loss from a derivative financial instrument designated as a hedge is classified in the same line of the Consolidated Statements of Income as the offsetting loss or gain on the hedged item. The cash flows resulting from these financial instruments are classified in operating activities on the Condensed Consolidated Statements of Cash Flows.
For derivatives that are not designated as a hedge, any gain or loss is immediately recognized in income. The majority of derivatives used in this manner relate to risks resulting from assets or liabilities denominated in a foreign currency and certain commodity contracts that arise in the normal course of business.
Eaton uses currency exchange contracts and certain of its debt denominated in foreign currency to hedge portions of its net investments in foreign operations against foreign currency exposure (net investment hedges). ForeignThe Company uses the spot rate method to assess hedge effectiveness when currency denominated debt designated as non-derivativeexchange contracts are used in net investment hedges. Under this method, changes in the spot exchange rate are recognized in Accumulated other comprehensive loss. Changes related to the forward rate are excluded from the hedging instruments hadrelationship and the forward points are amortized to Interest expense - net on a carrying valuestraight-line basis over the term of the contract. The cash flows resulting from these currency exchange contracts are classified in investing activities on an after-tax basisthe Condensed Consolidated Statements of $2,819 million at March 31, 2022 and $2,880 million at December 31, 2021.Cash Flows.

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Derivative Financial Statement Impacts
The fair value of derivative financial instruments recognized in the Consolidated Balance Sheets is as follows:
(In millions)(In millions)Notional
amount
Other
 current
assets
Other
noncurrent
assets
Other
current
liabilities
Other
noncurrent
liabilities
Type of
hedge
Term(In millions)Notional
amount
Other
 current
assets
Other
noncurrent
assets
Other
current
liabilities
Other
noncurrent
liabilities
Type of
hedge
Term
March 31, 2022      
March 31, 2023March 31, 2023      
Derivatives designated as hedgesDerivatives designated as hedges      Derivatives designated as hedges      
Forward starting floating-to-fixed
interest rate swaps
$1,700 $— $45 $— $33 Cash flow10 to 30 years
Currency exchange contractsCurrency exchange contracts$1,138 $49 $$14 $Cash flow1 to 34 months
Commodity contractsCommodity contracts48 — — Cash flow1 to 12 months
Currency exchange contractsCurrency exchange contracts587 — — — Net investment3 months
TotalTotal $53 $$15 $  
Derivatives not designated as hedgesDerivatives not designated as hedges      
Currency exchange contractsCurrency exchange contracts$4,977 $22 $14  1 to 12 months
December 31, 2022December 31, 2022      
Derivatives designated as hedgesDerivatives designated as hedges      
Currency exchange contractsCurrency exchange contracts1,248 21 — 12 Cash flow1 to 36 monthsCurrency exchange contracts$1,240 $35 $$17 $Cash flow1 to 36 months
Commodity contractsCommodity contracts58 — — — Cash flow1 to 12 monthsCommodity contracts64 — — Cash flow1 to 12 months
TotalTotal $26 $45 $12 $38   Total $39 $$19 $  
Derivatives not designated as hedgesDerivatives not designated as hedges      Derivatives not designated as hedges      
Currency exchange contractsCurrency exchange contracts$4,664 $42 $20  1 to 12 monthsCurrency exchange contracts$4,683 $30 $14  1 to 12 months
Commodity contracts41  1 month
Total $44 $21   
December 31, 2021      
Derivatives designated as hedges      
Fixed-to-floating interest rate
swaps
$1,800 $22 $29 $— $— Fair value8 months to 13 years
Forward starting floating-to-fixed
interest rate swaps
1,350 — 38 — 79 Cash flow11 to 31 years
Currency exchange contracts1,212 17 11 Cash flow1 to 36 months
Commodity contracts50 — — Cash flow1 to 12 months
Total $41 $69 $12 $82   
Derivatives not designated as hedges      
Currency exchange contracts$5,285 $34 $ 1 to 12 months
Commodity contracts62  1 month
Total $35 $10   
The currency exchange contracts shown in the table above as derivatives not designated as hedges are primarily contracts entered into to manage currency volatility or exposure on intercompany receivables, payables and loans. While Eaton does not elect hedge accounting treatment for these derivatives, Eaton targets managing 100% of the intercompany balance sheet exposure to minimize the effect of currency volatility related to the movement of goods and services in the normal course of its operations. This activity represents the great majority of these currency exchange contracts. The cash flows resulting from the settlement of these derivatives have been classified in investing activities in the Condensed Consolidated StatementStatements of Cash Flows.
Foreign currency denominated debt designated as non-derivative net investment hedging instruments had a carrying value on an after-tax basis of $3,092 million at March 31, 2023 and $2,711 million at December 31, 2022.
As of March 31, 2022,2023, the volume of outstanding commodity contracts that were entered into to hedge forecasted transactions:
CommodityMarch 31, 20222023Term
AluminumMillions of pounds1 to 12 months
Copper107 Millions of pounds1 to 12 months
Gold1,4181,690 Troy ounces1 to 12 months
Silver560,367510,167 Troy ounces1 to 12 months
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The following amounts were recorded on the Consolidated Balance Sheets related to fixed-to-floating interest rate swaps:
(In millions)Carrying amount of the hedged
assets (liabilities)
Cumulative amount of fair value hedging adjustment included in the carrying amount of the hedged
asset (liabilities) (a)
Location on Consolidated Balance SheetsMarch 31, 2022December 31, 2021March 31, 2022December 31, 2021
Long-term debt$(2,413)$(2,413)$(70)$(84)
(In millions)Carrying amount of the hedged
assets (liabilities)
Cumulative amount of fair value hedging adjustment included in the carrying amount of the hedged
asset (liabilities) (a)
Location on Consolidated Balance SheetsMarch 31, 2023December 31, 2022March 31, 2023December 31, 2022
Long-term debt$(713)$(713)$(47)$(48)
(a) At March 31, 20222023 and December 31, 2021,2022, these amounts include the cumulative liability amount of fair value hedging adjustments remaining for which the hedge accounting has been discontinued of $70$47 million and $33$48 million, respectively.
The impact of cash flow and fair value hedging activities to the Consolidated Statements of Income is as follows:
Three months ended March 31, 2022Three months ended March 31, 2023
(In millions)(In millions)Net salesCost of products soldInterest expense - net(In millions)Net salesCost of products soldInterest expense - net
Amounts from Consolidated Statements of IncomeAmounts from Consolidated Statements of Income$4,843 $3,269 $32 Amounts from Consolidated Statements of Income$5,483 $3,599 $50 
Gain (loss) on derivatives designated as cash flow hedgesGain (loss) on derivatives designated as cash flow hedgesGain (loss) on derivatives designated as cash flow hedges
Forward starting floating-to-fixed interest rate swapsForward starting floating-to-fixed interest rate swaps
Hedged itemHedged item$— $— $(3)
Derivative designated as hedging instrumentDerivative designated as hedging instrument— — 
Currency exchange contractsCurrency exchange contractsCurrency exchange contracts
Hedged itemHedged item$$(3)$— Hedged item$$(15)$— 
Derivative designated as hedging instrumentDerivative designated as hedging instrument(2)— Derivative designated as hedging instrument(2)15 — 
Commodity contracts
Hedged item$— $(1)$— 
Derivative designated as hedging instrument— — 
Gain (loss) on derivatives designated as fair value hedges
Fixed-to-floating interest rate swaps
Hedged item$— $— $
Derivative designated as hedging instrument— — (8)
Three months ended March 31, 2021Three months ended March 31, 2022
(In millions)(In millions)Net salesCost of products soldInterest expense - net(In millions)Net salesCost of products soldInterest expense - net
Amounts from Consolidated Statements of IncomeAmounts from Consolidated Statements of Income$4,692 $3,184 $38 Amounts from Consolidated Statements of Income$4,843 $3,269 $32 
Gain (loss) on derivatives designated as cash flow hedgesGain (loss) on derivatives designated as cash flow hedgesGain (loss) on derivatives designated as cash flow hedges
Currency exchange contractsCurrency exchange contractsCurrency exchange contracts
Hedged itemHedged item$$$— Hedged item$$(3)$— 
Derivative designated as hedging instrumentDerivative designated as hedging instrument(3)(1)— Derivative designated as hedging instrument(2)— 
Commodity contractsCommodity contractsCommodity contracts
Hedged itemHedged item$— $(2)$— Hedged item$— $(1)$— 
Derivative designated as hedging instrumentDerivative designated as hedging instrument— — Derivative designated as hedging instrument— — 
Gain (loss) on derivatives designated as fair value hedgesGain (loss) on derivatives designated as fair value hedgesGain (loss) on derivatives designated as fair value hedges
Fixed-to-floating interest rate swapsFixed-to-floating interest rate swapsFixed-to-floating interest rate swaps
Hedged itemHedged item$— $— $19 Hedged item$— $— $
Derivative designated as hedging instrumentDerivative designated as hedging instrument— — (19)Derivative designated as hedging instrument— — (8)

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The impact of derivatives not designated as hedges to the Consolidated Statements of Income is as follows:
Gain (loss) recognized in Consolidated Statements of IncomeConsolidated Statements of Income classification
Three months ended
March 31
(In millions)20232022
Gain (loss) on derivatives not designated as hedges 
Currency exchange contracts$11 $(8)Interest expense - net
Commodity contracts— 
Other expense (income) - net and Cost of products sold (a)
Total$11 $(7)
(a) In the second quarter of 2022, Eaton changed the presentation of gains and losses associated with derivative contracts for commodities that are not designated as hedges from Cost of product sold to Other expense (income) - net on the Consolidated Statements of Income. Prior period amounts have not been reclassified as they are not material.
Gain (loss) recognized in Consolidated Statements of IncomeConsolidated Statements of Income classification
Three months ended
March 31
(In millions)20222021
Gain (loss) on derivatives not designated as hedges 
Currency exchange contracts$(8)$(63)Interest expense - net
Commodity ContractsCost of products sold
Total$(7)$(61)
The impact of derivative and non-derivative instruments designated as hedges to the Consolidated Statements of Income and Comprehensive Income is as follows:
Gain (loss) recognized in
other comprehensive
income (loss)
Location of gain (loss)
reclassified from
Accumulated other
comprehensive loss
Gain (loss) reclassified
from Accumulated other
comprehensive loss
Three months ended
March 31
Three months ended
March 31
(In millions)2023202220232022
Derivatives designated as cash
   flow hedges
Forward starting floating-to-fixed
   interest rate swaps
$— $124 Interest expense - net$$— 
Currency exchange contracts31 — Net sales and Cost of products sold11 — 
Commodity contractsCost of products sold— 
Derivatives designated as net
   investment hedges
Currency exchange contracts
   Effective portion(14)— Gain (loss) on sale of business— — 
   Amount excluded from effectiveness
      testing
— Interest expense - net— 
Non-derivative designated as net
   investment hedges
Foreign currency denominated debt(63)62 Gain (loss) on sale of business— — 
Total$(39)$191 $15 $
Gain (loss) recognized in
other comprehensive
(loss) income
Location of gain (loss)
reclassified from
Accumulated other
comprehensive loss
Gain (loss) reclassified
from Accumulated other
comprehensive loss
Three months ended
March 31
Three months ended
March 31
(In millions)2022202120222021
Derivatives designated as cash
   flow hedges
Forward starting floating-to-fixed
interest rate swaps
$124 $129 Interest expense - net$— $— 
Currency exchange contracts— (13)Net sales and Cost of products sold— (4)
Commodity contractsCost of products sold
Non-derivative designated as net
   investment hedges
Foreign currency denominated debt62 144 Interest expense - net— — 
Total$191 $263 $$(2)
The pre-tax portion of the fair value of currency exchange contracts designated as net investment hedges included in Accumulated other comprehensive loss were net losses of $14 million at March 31, 2023. The pre-tax portion of the fair value of the forward points included in Accumulated other comprehensive loss were net gains of $4 million at March 31, 2023.
At March 31, 2022,2023, a gain of $14$38 million of estimated unrealized net gains or losses associated with our cash flow hedges were expected to be reclassified to income from Accumulated other comprehensive loss within the next twelve months. These reclassifications relate to our designated foreign currency and commodity hedges that will mature in the next 12 months.


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Note 13.15.     RESTRUCTURING CHARGES
In the second quarter of 2020, Eaton decided to undertakeinitiated a multi-year restructuring program to reduce its cost structure and gain efficiencies in its business segments and at corporate in order to respond to declining market conditions brought on by the COVID-19 pandemic. Since the inception of the program, the Company has incurred charges of $310$335 million. These restructuring activities are expected to incur additional expenses of $40 millionbe completed in 2022 primarily comprised of plant closing and other costs, resulting in2023 with total estimated charges of $350 million cumulatively for the entire program. The remaining charges in 2023 are expected to relate primarily to plant closing and other costs.
A summary of restructuring program charges is as follows:
Three months ended
March 31
(In millions except for per share data)20222021
Workforce reductions$$
Plant closing and other13 14 
Total before income taxes18 16 
Income tax benefit
Total after income taxes$14 $12 
Per ordinary share - diluted$0.03 $0.03 
Three months ended
March 31
(In millions except for per share data)20232022
Workforce reductions$$
Plant closing and other13 
Total before income taxes10 18 
Income tax benefit
Total after income taxes$$14 
Per ordinary share - diluted$0.02 $0.03 

Restructuring program charges related to the following segments:
Three months ended
March 31
(In millions)20222021
Electrical Americas$$
Electrical Global
Aerospace
Vehicle
Corporate
Total$18 $16 
Three months ended
March 31
(In millions)20232022
Electrical Americas$$
Electrical Global
Aerospace
Vehicle
Corporate
Total$10 $18 

A summary of liabilities related to workforce reductions, plant closing and other associated costs is as follows:
(In millions)Workforce reductionsPlant closing and otherTotal
Balance at January 1, 2020$— $— $— 
  Liability recognized172 42 214 
  Payments, utilization and translation(33)(39)(72)
Balance at December 31, 2020139 142 
  Liability recognized21 57 78 
  Payments, utilization and translation(64)(52)(116)
Balance at December 31, 202196 104 
Liability recognized, net1
(13)47 33 
  Payments, utilization and translation(45)(51)(96)
Balance at December 31, 202238 41 
Liability recognized10 
Payments(5)(8)(13)
Balance at March 31, 2023$35 $$38 
(In millions)Workforce reductionsPlant closing and otherTotal
Balance at January 1, 2020$— $— $— 
  Liability recognized172 42 214 
  Payments, utilization and translation(33)(39)(72)
Balance at December 31, 2020$139 $$142 
  Liability recognized21 57 78 
  Payments, utilization and translation(64)(52)(116)
Balance at December 31, 2021$96 $$104 
  Liability recognized13 18 
  Payments, utilization and translation(12)(14)(26)
Balance at March 31, 2022$89 $$96 
1The restructuring program liability was adjusted by $30 million in 2022 related to true-ups for completed workforce reductions and the decision not to close a facility in the Vehicle segment that was previously included in the program.
These restructuring program charges were included in Cost of products sold, Selling and administrative expense, Research and development expense, or Other income - net, as appropriate. In Business Segment Information, these restructuring program charges are treated as Corporate items. See Note 1416 for additional information about business segments.
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Note 14.16.     BUSINESS SEGMENT INFORMATION
Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated on a regular basis by the chief operating decision maker, or decision making group, in deciding how to allocate resources to an individual segment and in assessing performance. Eaton's operating segments are Electrical Americas, Electrical Global, Aerospace, Vehicle, and eMobility. On August 2, 2021, Eaton completed the sale of the Hydraulics business. Operating profit includes the operating profit from intersegment sales. For additional information regarding Eaton's business segments, see Note 17 to the Consolidated Financial Statements contained in the 20212022 Form 10-K.
Three months ended
March 31
(In millions)20222021
Net sales
Electrical Americas$1,891 $1,622 
Electrical Global1,437 1,253 
Hydraulics— 561 
Aerospace718 519 
Vehicle671 654 
eMobility126 83 
Total net sales$4,843 $4,692 
Segment operating profit (loss)
Electrical Americas$361 $332 
Electrical Global279 213 
Hydraulics— 84 
Aerospace159 96 
Vehicle113 113 
eMobility(3)(7)
Total segment operating profit909 831 
Corporate
Intangible asset amortization expense(128)(92)
Interest expense - net(32)(38)
Pension and other postretirement benefits income19 14 
Restructuring program charges(18)(16)
Other expense - net(131)(161)
Income before income taxes619 538 
Income tax expense86 79 
Net income533 459 
Less net income for noncontrolling interests(1)(1)
Net income attributable to Eaton ordinary shareholders$532 $458 
Three months ended
March 31
(In millions)20232022
Net sales
Electrical Americas$2,294 $1,891 
Electrical Global1,500 1,437 
Aerospace803 718 
Vehicle739 671 
eMobility147 126 
Total net sales$5,483 $4,843 
Segment operating profit (loss)
Electrical Americas$525 $361 
Electrical Global274 279 
Aerospace180 159 
Vehicle107 113 
eMobility(4)(3)
Total segment operating profit1,082 909 
Corporate
Intangible asset amortization expense(124)(128)
Interest expense - net(50)(32)
Pension and other postretirement benefits income11 19 
Restructuring program charges(10)(18)
Other expense - net(148)(131)
Income before income taxes762 619 
Income tax expense123 86 
Net income639 533 
Less net income for noncontrolling interests(1)(1)
Net income attributable to Eaton ordinary shareholders$638 $532 


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ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
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 improving the quality of life and protecting the environment for people everywhere. We are guided by our commitment to do business right, to operate sustainably and to help our customers manage power – today and well into the future. By capitalizing on the global growth trends of electrification and digitalization, we're accelerating the planet's transition to renewable energy, helping to solve the world's most urgent power management challenges, and doing what's best for our stakeholders and all of society.
Eaton’s businesses are well-positioned to take advantage of secular growth trends related to the energy transition from fossil fuels to renewables. We are responding to these trends by innovating solutions that transform the electrical power value chain, investing in electrical vehicle markets, increasing our focus on electrification, and employing digital technologies for power management. The Company’s innovations are expected to enable the integration of renewables and sustainability solutions, with new types of equipment, services, and software. These strategic focus areas are an important part of our response to climate change.
Additionally, over the past several years, Eaton has completed a number of transactions to add higher growth, better margin businesses to its portfolio. These portfolio updates have the Company better aligned with secular growth trends and well positioned for expected further growth. These changes to our portfolio of businesses along with double digit organic sales growth and operational performance has led to 20% growth in our net income per share in the first quarter of 2023 compared to the first quarter of 2022.
Founded in 1911, Eaton has been2023 marks Eaton's 100th anniversary of being listed on the New York Stock Exchange for nearly a century.Exchange. We reported revenues of $19.6$20.8 billion in 20212022 and serve customers in more than 170 countries.
Portfolio Changes
The Company continues to actively manage its portfolio of businesses to deliver on its strategic objectives. The Company is focused on deploying its capital toward businesses that provide opportunities for above-market growth, strong returns, and align with secular trends and its power management strategies. During 20212022 and 2022,2023, Eaton has completed a number of transactionscontinued to selectively add businesses to strengthen its portfolio.
Acquisitions of businesses and investments in associate companiesDate of acquisitionBusiness segment
Tripp LiteMarch 17, 2021Electrical Americas
A leading supplier of power quality products and connectivity solutions including single-phase uninterruptible power supply systems, rack power distribution units, surge protectors, and enclosures for data centers, industrial, medical, and communications markets in the Americas.
Green Motion SAMarch 22, 2021Electrical Global
A leading designer and manufacturer of electric vehicle charging hardware and related software.
HuanYu High TechMarch 29, 2021Electrical Global
A 50 percent stake in HuanYu High Tech, a subsidiary of HuanYu Group that manufactures and markets low-voltage circuit breakers and contactors in China, and throughout the Asia-Pacific region.
Mission SystemsJune 1, 2021Aerospace
A leading manufacturer of air-to-air refueling systems, environmental systems, and actuation primarily for defense markets.
Jiangsu YiNeng Electric's busway businessJune 25, 2021Electrical Global
A 50 percent stake in Jiangsu YiNeng Electric's busway business which manufactures and markets busway products in China.
Royal Power SolutionsJanuary 5, 2022eMobility
A manufacturer of high-precision electrical connectivity components used in electric vehicle, energy management, industrial and mobility markets.
Divestiture ofJiangsu Huineng Electric Co., Ltd’s circuit breaker businessDate of divestitureJuly 1, 2022Business segmentElectrical Global
Hydraulics
A 50 percent stake in Jiangsu Huineng Electric Co., Ltd's circuit breaker business which manufactures and markets low-voltage circuit breakers in China.
Jiangsu Ryan Electrical Co. Ltd.August 2, 2021April 23, 2023HydraulicsElectrical Global
A 49 percent stake in Jiangsu Ryan Electrical Co. Ltd., a manufacturer of power distribution and sub-transmission transformers in China.
Additional information related to acquisitions and divestiture of businesses is presented in Note 2.

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Restructuring
In the second quarter of 2020, Eaton decided to undertake a multi-year restructuring program to reduce its cost structure and gain efficiencies in its business segments and at corporate in order to respond to declining market conditions brought on by the COVID-19 pandemic. Since the inception of the program, the Company has incurred charges of $310 million. These restructuring activities are expected to incur additional expenses of $40 million in 2022 primarily comprised of plant closing and other costs, resulting in total estimated charges of $350 million for the entire program. The projected mature year savings from these restructuring actions are expected to be $250 million when fully implemented in 2023. Additional information related to this restructuring is presented in Note 13.
Summary of Results of Operations
A summary of Eaton’s Net sales, Net income attributable to Eaton ordinary shareholders, and Net income per share attributable to Eaton ordinary shareholders - diluted is as follows:
Three months ended
March 31
(In millions except for per share data)20222021
Net sales$4,843 $4,692 
Net income attributable to Eaton ordinary shareholders532 458 
Net income per share attributable to Eaton ordinary shareholders - diluted$1.33 $1.14 

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 exclude certain transactions, allowingprovide 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)20222021
Acquisition integration, divestiture charges and transaction costs$29 $46 
Gain on the sale of the Hydraulics business(24)— 
Total before income taxes46 
Income tax benefit
Total after income taxes$$37 
Per ordinary share - diluted$0.01 $0.09 
Three months ended
March 31
(In millions except for per share data)20232022
Acquisition integration, divestiture charges and transaction costs$13 $29 
Gain on the sale of the Hydraulics business— (24)
Total before income taxes13 
Income tax benefit
Total after income taxes$11 $
Per ordinary share - diluted$0.03 $0.01 
Acquisition integration, divestiture charges and transaction costs in 2023 and 2022 are primarily related to the acquisitionsacquisition of Royal Power Solutions Souriau-Sunbank Connection Technologies, Green Motion, Tripp Lite, and Mission Systems,other acquisitions completed prior to 2022, and other charges and income to acquire and exit businesses. Charges in 2021 are primarily related to the divestiture of the Hydraulics business, the acquisitions of Tripp Lite, Mission Systems, Souriau-Sunbank Connection Technologies, and Ulusoy Elektrik Imalat Taahhut ve Ticaret A.S., and other charges to 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 14,16, the charges were included in Other expense - net.
Restructuring
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 respond to declining market conditions brought on by the COVID-19 pandemic. Since the inception of the program, the Company has incurred charges of $335 million. These restructuring activities are expected to be completed in 2023 with total estimated charges of $350 million cumulatively for the entire program and projected mature year savings of $250 million when fully implemented. The remaining charges in 2023 are expected to relate primarily to plant closing and other costs. Additional information related to this restructuring is presented in Note 15.
Intangible Asset Amortization Expense
Intangible asset amortization expense is as follows:
Three months ended
March 31
(In millions except for per share data)20232022
Intangible asset amortization expense$124 $128 
Income tax benefit27 29 
Total after income taxes$97 $99 
Per ordinary share - diluted$0.24 $0.25 

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Intangible Asset Amortization Expense
Intangible asset amortization expense is as follows:
Three months ended
March 31
(In millions except for per share data)20222021
Intangible asset amortization expense$128 $92 
Income tax benefit29 22 
Total after income taxes$99 $70 
Per ordinary share - diluted$0.25 $0.18 

Consolidated Financial Results
Three months ended
March 31
Increase (decrease)Three months ended
March 31
Increase (decrease)
(In millions except for per share data)(In millions except for per share data)20222021(In millions except for per share data)2023Increase (decrease)
Net salesNet sales$4,843 $4,692 %Net sales$5,483 $4,843 13 %
Gross profitGross profit1,574 1,508 %Gross profit1,884 1,574 20 %
Percent of net salesPercent of net sales32.5 %32.1 %Percent of net sales34.4 %32.5 %
Income before income taxesIncome before income taxes619 538 15 %Income before income taxes762 619 23 %
Net incomeNet income533 459 16 %Net income639 533 20 %
Less net income for noncontrolling interestsLess net income for noncontrolling interests(1)(1)Less net income for noncontrolling interests(1)(1)
Net income attributable to Eaton ordinary shareholdersNet income attributable to Eaton ordinary shareholders532 458 16 %Net income attributable to Eaton ordinary shareholders638 532 20 %
Excluding acquisition and divestiture charges, after-taxExcluding acquisition and divestiture charges, after-tax37 Excluding acquisition and divestiture charges, after-tax11 
Excluding restructuring program charges, after-taxExcluding restructuring program charges, after-tax14 12 Excluding restructuring program charges, after-tax14 
Excluding intangible asset amortization expense, after-taxExcluding intangible asset amortization expense, after-tax99 70 Excluding intangible asset amortization expense, after-tax97 99 
Adjusted earningsAdjusted earnings$649 $577 12 %Adjusted earnings$753 $649 16 %
Net income per share attributable to Eaton ordinary shareholders - dilutedNet income per share attributable to Eaton ordinary shareholders - diluted$1.33 $1.14 17 %Net income per share attributable to Eaton ordinary shareholders - diluted$1.59 $1.33 20 %
Excluding per share impact of acquisition and divestiture charges, after-taxExcluding per share impact of acquisition and divestiture charges, after-tax0.01 0.09 Excluding per share impact of acquisition and divestiture charges, after-tax0.03 0.01 
Excluding per share impact of restructuring program charges, after-taxExcluding per share impact of restructuring program charges, after-tax0.03 0.03 Excluding per share impact of restructuring program charges, after-tax0.02 0.03 
Excluding per share impact of intangible asset amortization expense, after-taxExcluding per share impact of intangible asset amortization expense, after-tax0.25 0.18 Excluding per share impact of intangible asset amortization expense, after-tax0.24 0.25 
Adjusted earnings per ordinary shareAdjusted earnings per ordinary share$1.62 $1.44 13 %Adjusted earnings per ordinary share$1.88 $1.62 16 %
Net Sales
Changes in Net sales are summarized as follows:Three months ended
March 31
20222023
Organic growth1015 %
Acquisitions of businesses%
Divestiture of business(12)%
Foreign currency(1)(2)%
Total increase (decrease) in Net sales313 %
Organic sales increased 10%15% in the first quarter of 2022 due2023 due to broad-based strength in end-markets of the Electrical Americas and Electrical Global business segments, strength in sales to commercial OEM and the impact of the continued recovery of commercial aviation from the reduction of travel restrictions from the COVID-19 pandemicaftermarket in the Aerospace business segment.Despite strong growth, many of our businesses continue to be impacted by supply chain disruptions or shortages, inflation, labor shortages,segment, and plant shutdowns associated with lockdowns in various cities around the globe.
The acquisitions of Tripp Lite, Mission Systems,higher sales volumes including inflationary pricing recovery for both Vehicle and Royal Power Solutions increased sales in the first quarter of 2022, while the divestiture of the HydraulicseMobility business reduced sales.segments.
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Gross Profit
Gross profit margin increased from 32.1% in the first quarter of 2021 to 32.5% in the first quarter of 2022 to 34.4% in the first quarter of 2023 primarily due to higher organic sales. Gross profit also improved due to the net impact of the acquisition of Tripp Litesales volumes including inflationary pricing recovery. Conversely, wage and Royal Power Solutionscommodity inflation, and the divestiture of the Hydraulics business. Conversely, commodity and logistics inflationoperating inefficiencies had an unfavorable impact on gross margin, during the first quarter of 2022, despite offsetting pricingprice actions.
Income Taxes
The effective income tax rate for the first quarter of 20222023 was expense of 13.9%16.1% compared to expense of 14.7%13.9% for the first quarter of 2021.2022. The decreaseincrease in the effective tax rate in the first quarter of 20222023 was primarily due to greater levels of income in higher tax jurisdictions and a smaller impact from the excess tax benefits recognized for employee share-based payments in the first quarterquarter.
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Table of 2022.Contents
Net Income
Net income attributable to Eaton ordinary shareholders of $532 millionChanges in the first quarter of 2022 increased 16% compared to Net income attributable to Eaton ordinary shareholders of $458 million in the first quarter of 2021. The increase in the first quarter of 2022 was primarily due to higher gross profit and lower acquisition and divestiture charges, partially offset by higher intangible asset amortization expense.
Net income per ordinary share increased to $1.33 in the first quarter of 2022 compared to $1.14 in the first quarter of 2021. The increase in Net income per ordinary share in the first quarter of 2022 was due to higher Net income attributable to Eaton ordinary shareholders and the impact of the Company's share repurchases over the past year.
Adjusted Earnings
Adjusted earnings of $649 million in the first quarter of 2022 increased 12% compared to Adjusted earnings of $577 million in the first quarter of 2021. The increase in Adjusted earnings in the first quarter of 2022 was primarily due to higher Net income per share attributable to Eaton ordinary shareholders adjusted for acquisition and divestiture charges, restructuring program charges, and intangible asset amortization expense.
Adjusted earnings per ordinary share increased to $1.62 in the first quarter of 2022 compared to $1.44 in the first quarter of 2021. The increase in Adjusted earnings per ordinary share in the first quarter of 2022 was due to higher Adjusted earnings and the impact of the Company's share repurchases over the past year.- diluted are summarized as follows:
Three months ended
(In millions except for per share data)DollarsPer share
March 31, 2022$532 $1.33 
  Business segment results of operations
    Performance160 0.40 
    Foreign currency(13)(0.03)
  Corporate
    Intangible asset amortization expense0.01 
    Restructuring program charges0.01 
    Acquisition and divestiture charges(7)(0.02)
    Other corporate items(29)(0.07)
  Tax rate impact(13)(0.03)
March 31, 2023$638 $1.59 
Business Segment Results of Operations
The following is a discussion of Net sales, operating profit and operating margin by business segment.
Electrical Americas
Three months ended
March 31
Increase (decrease)Three months ended
March 31
Increase (decrease)
(In millions)(In millions)20222021(In millions)2023Increase (decrease)
Net salesNet sales$1,891 $1,622 17 %Net sales$2,294 $1,891 21 %
Operating profitOperating profit$361 $332 %Operating profit$525 $361 45 %
Operating marginOperating margin19.1 %20.5 %Operating margin22.9 %19.1 %
Changes in Net sales are summarized as follows:Three months ended
March 31
2022
Organic growth10 %
Acquisition of Tripp Lite%
Total increase (decrease) in Net sales17 %
Net sales increased 21% in the first quarter of 2023 compared to the first quarter of 2022 due to a 22% increase in organic sales with a small offset from negative currency translation. The increase in organic sales reflects broad-based strength in end-markets, with particular strength in commercial & institutional, utility, and data center end-markets.
The operating margin increased from 19.1% in the first quarter of 2022 to 22.9% in the first quarter of 2023 primarily due to higher sales volumes including inflationary pricing recovery, partially offset by wage and commodity inflation.
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Electrical Global
Three months ended
March 31
Increase (decrease)
(In millions)20232022
Net sales$1,500 $1,437 %
Operating profit$274 $279 (2)%
Operating margin18.3 %19.4 %
Changes in Net sales are summarized as follows:Three months ended
March 31
2023
Organic growth%
Divestiture(1)%
Foreign currency(3)%
Total increase in Net sales%
The increase in organic sales in the first quarter of 2022 reflects broad-based2023 was primarily due to strength in end-markets, with particular strength in residentialutility, data center and industrial.distributed IT end-markets.
The operating margin decreased from 20.5% in the first quarter of 2021 to 19.1%19.4% in the first quarter of 2022 to 18.3% in the first quarter of 2023 primarily due to operating inefficiencies from ongoing, but improving, supply chain constraints and higher costs to support growth initiatives, partially offset by higher sales volumes including inflationary pricing recovery.
Aerospace
Three months ended
March 31
Increase (decrease)
(In millions)20232022
Net sales$803 $718 12 %
Operating profit$180 $159 13 %
Operating margin22.5 %22.1 %
Changes in Net sales are summarized as follows:Three months ended
March 31
2023
Organic growth13 %
Foreign currency(1)%
Total increase in Net sales12 %
The increase in organic sales in the first quarter of 2023 was primarily due to strength in sales to commercial OEM and aftermarket.
The operating margin increased from 22.1% in the first quarter of 2022 to 22.5% in the first quarter of 2023 primarily due to higher sales volumes including inflationary pricing recovery, partially offset by commodity and wage inflation.
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Vehicle
Three months ended
March 31
Increase (decrease)
(In millions)20232022
Net sales$739 $671 10 %
Operating profit$107 $113 (5)%
Operating margin14.5 %16.8 %
Changes in Net sales are summarized as follows:Three months ended
March 31
2023
Organic growth11 %
Foreign currency(1)%
Total increase in Net sales10 %
The increase in organic sales in the first quarter of 2023 was primarily due to strength in the North America truck and light vehicle markets, South American truck, bus and agriculture markets, and European light vehicle markets.
The operating margin decreased from 16.8% in the first quarter of 2022 to 14.5% in the first quarter of 2023 primarily due to commodity and logisticswage inflation, supply chain disruptions, and increased costs for growth related investments,operating inefficiencies, partially offset by higher sales volumes including inflationary pricing recovery.
eMobility
Three months ended
March 31
Increase (decrease)
(In millions)20232022
Net sales$147 $126 17 %
Operating loss$(4)$(3)(33)%
Operating margin(2.7)%(2.4)%
Changes in Net sales are summarized as follows:Three months ended
March 31
2023
Organic growth18 %
Foreign currency(1)%
Total increase in Net sales17 %
The increase in organic sales in the first quarter of 2023 was due to strength in North American and European markets primarily due to robust demand for electric vehicles.
The operating margin decreased from negative 2.4% in the acquisitionfirst quarter of Tripp Lite.2022 to negative 2.7% in the first quarter of 2023 primarily due to manufacturing start-up costs associated with new electric vehicle programs, and wage and commodity inflation, partially offset by higher sales volumes including inflationary pricing recovery.
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Electrical GlobalCorporate Expense
Three months ended
March 31
Increase (decrease)
(In millions)20222021
Net sales$1,437 $1,253 15 %
Operating profit$279 $213 31 %
Operating margin19.4 %17.0 %
Changes in Net sales are summarized as follows:Three months ended
March 31
2022
Organic growth18 %
Foreign currency(3)%
Total increase (decrease) in Net sales15 %
Three months ended
March 31
Increase (decrease)
(In millions)20232022
Intangible asset amortization expense$124 $128 (3)%
Interest expense - net50 32 56 %
Pension and other postretirement benefits income(11)(19)(42)%
Restructuring program charges10 18 (44)%
Other expense - net148 131 13 %
Total corporate expense$320 $290 10 %
The increase in organic salesTotal corporate expense was $320 million in the first quarter of 2022 was primarily due2023 compared to broad-based strength in end-markets, with particular strength in commercial and industrial markets, including oil and gas.
The operating margin increased from 17.0% in the first quarter of 2021 to 19.4% in the first quarter of 2022 primarily due to higher organic sales.
Hydraulics
On August 2, 2021, Eaton completed the sale of the Hydraulics business segment. For the three months ended March 31, 2021, the Hydraulics segment generated net sales of $561 million and operating profit of $84 million.
Aerospace
Three months ended
March 31
Increase (decrease)
(In millions)20222021
Net sales$718 $519 38 %
Operating profit$159 $96 66 %
Operating margin22.1 %18.5 %
Changes in Net sales are summarized as follows:Three months ended
March 31
2022
Organic growth15 %
Acquisition of Mission Systems25 %
Foreign currency(2)%
Total increase (decrease) in Net sales38 %
The increase in organic sales in the first quarter of 2022 was primarily due to the continued recovery of commercial aviation from the reduction of travel restrictions from the COVID-19 pandemic.
The operating margin increased from 18.5% in the first quarter of 2021 to 22.1% in the first quarter of 2022 primarily due to higher organic sales volumes and favorable product mix.
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Vehicle
Three months ended
March 31
Increase (decrease)
(In millions)20222021
Net sales$671 $654 %
Operating profit$113 $113 — %
Operating margin16.8 %17.3 %
Changes in Net sales are summarized as follows:Three months ended
March 31
2022
Organic growth%
Total increase (decrease) in Net sales%
The increase in organic sales in the first quarter of 2022 was primarily due to strength in the North American truck aftermarket and the South American truck, bus and agriculture markets, partially offset by weakness in global light vehicle markets.
The operating margin decreased from 17.3% in the first quarter of 2021 to 16.8% in the first quarter of 2022 primarily due to commodity and logistics inflation, partially offset by higher organic sales.
eMobility
Three months ended
March 31
Increase (decrease)
(In millions)20222021
Net sales$126 $83 52 %
Operating profit (loss)$(3)$(7)57 %
Operating margin(2.4)%(8.4)%
Changes in Net sales are summarized as follows:Three months ended
March 31
2022
Organic growth%
Acquisition of Royal Power Solutions46 %
Foreign currency(1)%
Total increase (decrease) in Net sales52 %
The increase in organic sales in the first quarter of 2022 was primarily due to strength in North America truck and off road markets.
The operating margin increased from negative 8.4% in the first quarter of 2021 to negative 2.4% in the first quarter of 2022 primarily due to the acquisition of Royal Power Solutions.
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Corporate Expense
Three months ended
March 31
Increase (decrease)
(In millions)20222021
Intangible asset amortization expense$128 $92 39 %
Interest expense - net32 38 (16)%
Pension and other postretirement benefits income(19)(14)36 %
Restructuring program charges18 16 13 %
Other expense - net131 161 (19)%
Total corporate expense$290 $293 (1)%
Total corporate expense was $290 million in the first quarter of 2022 compared to Total corporate expense of $293 million in the first quarter of 2021.2022. The decreaseincrease in Total corporate expenseexpense for the first quarter of 20222023 was primarily due to lower Other expense - net, lowerhigher Interest expense - net and higher Pension and other postretirement benefits income, partially offset by higher Intangible asset amortization expense.Other expense - net. The decreaseincrease in Other expense - net is primarily due to the 2022 gain on sale of the Hydraulics business discussed in Note 2 and lower acquisition and divestiture charges.2.

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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.
On March 3, 2023, a subsidiary of Eaton issued Euro denominated notes (2023 Euro Notes) in a private issuance with a face value of €300 million ($318 million). The floating rate notes are due June 3, 2024 with interest payable quarterly based on the three-month Euro Interbank Offered Rate plus 25 basis points. Proceeds from the Euro Notes were used to pay down outstanding U.S. dollar commercial paper. The 2023 Euro Notes are fully and unconditionally guaranteed on an unsubordinated, unsecured basis by Eaton. The 2023 Euro Notes contain a change of control provision which requires the Company to make an offer to purchase all or any part of the 2023 Euro Notes at a purchase price of 100.5% of the principal amount plus accrued and unpaid interest. The 2023 Euro Notes are subject to customary non-financial covenants.
The Company maintains revolving credit facilities consisting of a $500 million 364-day revolving credit facility that will expire on October 3, 20222, 2023 and a $2,000$2,500 million five-year revolving credit facility that will expire on October 4, 2026.1, 2027. The revolving credit facilities totaling $2,500$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, 2022.2023. The Company maintains access to the commercial paper markets through its $2,500$3,000 million commercial paper program, of which $1,096$59 million was outstanding on March 31, 2022.2023, used primarily to manage fluctuations in working capital.
Eaton received proceeds of $3.1 billion fromIn 2022, the sale of its Hydraulics business in 2021. The Company paid $4.45 billion to acquire Tripp Lite and Mission Systems in 2021, and $612$610 million to acquire Royal Power Solutions in 2022.and received cash of $22 million from Danfoss A/S to fully settle all post-closing adjustments from the sale of the Hydraulics business.
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, 20222023 and December 31, 2021,2022, Eaton had cash of $237$235 million and $297$294 million, short-term investments of $268$289 million and $271$261 million, and short-term debt of $1,116$87 million and $13$324 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
Three months ended March 31
(In millions)(In millions)20222021Change
from 2021
(In millions)20232022Change
from 2022
Net cash provided by operating activitiesNet cash provided by operating activities$42 $260 $(218)Net cash provided by operating activities$335 $42 $293 
Net cash used in investing activitiesNet cash used in investing activities(762)(2,201)1,439 Net cash used in investing activities(124)(762)638 
Net cash provided by financing activities652 1,875 (1,223)
Net cash provided by (used in) financing activitiesNet cash provided by (used in) financing activities(281)652 (933)
Effect of currency on cashEffect of currency on cash(11)19 Effect of currency on cash11 
Increase in cash classified as held for sale— (7)
Total decrease in cashTotal decrease in cash$(60)$(84)Total decrease in cash$(59)$(60)
Operating Cash Flow
Net cash provided by operating activities decreasedincreased by $218$293 million in the first three months of 20222023 compared to 2021. The decrease in net cash provided by operating activities in the first three months of 2022 was primarily due to higherlower working capital balances to support the Company’s organic growth,and higher net income in 2023, partially offset by lower pension contributions in 2022 due to a $200 million contribution to Eaton's U.S. qualified pension plan in 2021, cash received from the termination of interest rate swaps in 2022, and higher net income in 2022.
Investing Cash Flow
Net cash used in investing activities decreased by $1,439$638 million in the first three months of 20222023 compared to 2021. The decrease in the use of cash in the first three months of 2022 was primarily driven by no cash paid for business acquisitions in 20222023 compared to cash paid for business acquisitions of $612 million compared to cash paid in 2021 for business acquisitions2022.
27

Table of $1,700 million, and net purchases of short-term investments of $1 million in 2022 compared to $280 million in 2021.Contents
Financing Cash Flow
Net cash provided byused in financing activities decreasedincreased by $1,223$933 million in the first three months of 20222023 compared to 2021. The decrease in the source of cash in the first three months of 2022 was primarily due to no proceeds from borrowings in 2022 compared to proceeds from borrowingsnet payments of $1,798short-term debt of $236 million in 2021, partially offset by2023 compared to net proceeds of short-term debt of $1,105 million in 2022, partially offset by higher proceeds from borrowings of $318 million in 2023 compared to $463no proceeds from borrowings in 2022, and no repurchase of shares in 2023 compared to repurchase of shares of $86 million in 2021.
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2022.
Uses of Cash
Capital Expenditures
Capital expenditures were $115$126 million and $119$115 million in the first three months of 20222023 and 2021,2022, respectively. Eaton expects approximately $650$700 million in capital expenditures in 2022.2023.
Dividends
Cash dividend payments were $320$334 million and $300$320 million in the first three months of 2023 and 2022, and 2021, respectively. On February 23, 2022, Eaton's Board of Directors declared a quarterly dividend of $0.81 per ordinary share, a 7% increase over the dividend paid in the fourth quarter of 2021. 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 2022.2023.
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. InDuring the first three months ofended March 31, 2023, no ordinary shares were repurchased. During the three months ended March 31, 2022, 0.6 million ordinary shares were repurchased under the 2022 program in the open market at a total cost of $86 million. In the first three months of 2021, 0.5At March 31, 2023, there is $4,714 million ordinary shares were repurchasedstill available for share repurchases under the 2019 Program in the open market at a total cost of $59 million.2022 Program. The Company will continue to pursue share repurchases in 20222023 depending on market conditions and capital levels.
Acquisition of Businesses
The Company paid cash of $612 million and $1,700 million to acquire businessesa business in the first three months of 2022 and 2021, respectively.2022. There were no business acquisitions in the first three months of 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, 2022,2023, the Company had Short-term debt of $1,116$87 million, Current portion of long-term debt of $1,728$8 million, and Long-term debt of $6,763$8,701 million.
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Supply Chain Finance Program
The Company negotiates payment terms directly with its suppliers for the purchase of goods and services. In addition, aA 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. If a supplier elects to participate in the SCF program, the supplier decides which invoices are sold to the financial institution and the Company has no economic interest in a supplier’s decision to sell an invoice. 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. The amounts due to the financial institution for suppliers that participate inFor additional information on the SCF program, are included in Accounts payable on the Company’s Consolidated Balance Sheets, and the associated payments are included in operating activities on the Condensed Consolidated Statementssee Note 7.

28

Table of Cash Flows. At  March 31, 2022 and December 31, 2021, Accounts payable included $168 million and $151 million, respectively, payable to suppliers that have elected to participate in the SCF program.Contents
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) and, September 15, 2017 (the 2017 Indenture) and August 23, 2022 (as supplemented by the First and Second Supplemental Indentures of the same date, the 2022 Indenture). The senior notes of Eaton Corporation are registered under the Securities Act of 1933, as amended (the Registered Senior Notes). Eaton Corporation is also the issuer of one outstanding series of privately placed debt securities (the PPNs), and Eaton Capital Unlimited Company, anothera subsidiary of Eaton, is the issuer of fourfive outstanding series of debt securities sold in offshore transactions under Regulation S promulgated under the Securities Act (the Eurobonds). The PPNs, 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, for example, see Note 8 of the Financial Statements included herewith), together with the credit facilities described above under Liquidity and Financial Condition and Liquidity (the Credit Facilities), are guaranteed by Eaton and 1817 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, 2022,2023, 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 24, 202123, 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 is 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.
Generally,Though the terms of the indentures vary slightly, generally, each guarantee of the Registered Senior Notes by a guarantor other thanthat is a subsidiary of Eaton Corporation provides that it will be automatically and unconditionally released and discharged upon:under certain circumstances, including, but not limited to:
(a)the consummation of any transactioncertain types of transactions permitted under the applicable indenture, resultingincluding one that results in such guarantor ceasing to be a subsidiary, such as a sale to a third party;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), becomingbecomes prohibited by any applicable law, rule or regulation or by any contractual obligation; or
(c)(d)such guarantee resultingresults 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); or.
(d)such guarantor becoming a controlled foreign corporation within the meaning Section 957(a) of the Internal Revenue Code (a CFC), or an entity the material assets of which is limited to equity interests of a CFC.
Notwithstanding the foregoing, each guarantee by a direct or indirect parent of Eaton Corporation (other than Eaton) provides that it will be released only under the circumstances described in subparagraphs (b) and (c) above.
The guarantee of Eaton does not contain any release provisions.
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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.
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Summarized Financial Information of Guarantors and Issuers
(In millions)March 31,
2022
December 31,
2021
Current assets$3,264 $3,032 
Noncurrent assets11,578 11,553 
Current liabilities4,944 3,950 
Noncurrent liabilities8,349 8,461 
Amounts due to subsidiaries that are non-issuers and non-guarantors - net16,621 18,006 
Three months ended
March 31
(In millions)2022
Net sales$2,550 
Sales to subsidiaries that are non-issuers and non-guarantors215 
Cost of products sold2,125 
Expense from subsidiaries that are non-issuers and non-guarantors - net89 
Net income42 
(In millions)March 31,
2023
December 31,
2022
Current assets$3,206 $3,363 
Noncurrent assets12,919 12,938 
Current liabilities2,634 2,948 
Noncurrent liabilities10,378 10,047 
Amounts due to subsidiaries that are non-issuers and non-guarantors - net16,565 16,285 
(In millions)Three months ended March 31, 2023
Net sales$3,144 
Sales to subsidiaries that are non-issuers and non-guarantors256 
Cost of products sold2,505 
Expense from subsidiaries that are non-issuers and non-guarantors - net164 
Net income28 
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 our acquisition strategy, litigation, 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: the course of the COVID-19 pandemic, including government responses thereto and the rate of global economic recovery therefrom; 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; 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, 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.

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ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
There have been no material changes in exposures to market risk since December 31, 2021.2022.
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ITEM 4.CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures - Pursuant to SEC Rule 13a-15, an evaluation was performed under the supervision and with the participation of Eaton’s management, including Craig Arnold - Principal Executive Officer; and Thomas B. Okray - Principal Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures. Based on that evaluation, management concluded that Eaton’s disclosure controls and procedures were effective as of March 31, 2022.2023.
Disclosure controls and procedures are designed to ensure that information required to be disclosed in Eaton’s reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in Eaton’s reports filed under the Exchange Act is accumulated and communicated to management, including Eaton’s Principal Executive Officer and Principal Financial Officer, to allow timely decisions regarding required disclosure.
During the first quarter of 2022,2023, there was no change in Eaton’s internal control over financial reporting that materially affected, or is reasonably likely to materially affect, internal control over financial reporting. Management is currently evaluating the impact of businesses acquired in the past twelve months on Eaton's internal control over financial reporting.


PART II — OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS.
Information regarding the Company's current legal proceedings is presented in Note 810 of the Notes to the condensed consolidated financial statements.

ITEM 1A.RISK FACTORS.
“Item 1A. Risk Factors” in Eaton's 20212022 Form 10-K includes a discussion of the Company's risk factors. There have been no material changes from the risk factors described in the 20212022 Form 10-K, except as follows:
Eaton uses a variety of raw materials and components in its businesses, and significant shortages, price increases or supplier insolvencies, or similar challenges for our customers could adversely impact our results of operations.
Eaton's major requirements for raw materials are described in Item 1 “Raw Materials” of our Form 10-K for the year ended December 31, 2021. Shortages have affected the prices Eaton's businesses are charged as global economies recover from the COVID-19 pandemic.
Additionally, some of our suppliers of component parts and logistics have increased their prices in response to increases in their costs of raw materials, energy and/or labor. If we are unable to increase prices commensurately with increased costs without compromising the competitive position of our products and services, our results could be negatively impacted. These economic conditions have also impacted customers in certain of our end markets, potentially affecting short-term demand for some of our products. These conditions may be exacerbated by Russia's invasion of Ukraine and the related economic and other retaliatory measures taken by the United States, the European Union and other nations. While Russia's invasion of Ukraine has not had a material impact on Eaton’s results to date, it is impossible to determine its outcome, or how it will affect global macroeconomic conditions generally in the future. Should these trends continue or worsen, the Company and/or some of our customers may be impacted, which could have a material adverse impact on our operating results.
10-K.
33


ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
(c) Issuer's Purchases of Equity Securities
During the first quarter of 2022, 0.6 million ordinary2023, there were no shares were repurchased in the open market at a total cost of $86 million. These shares were repurchased under the program approved by the Board on February 23, 2022 (the 2022 Program). A summary of the shares repurchased in the first quarter of 2022 is as follows:
MonthTotal number
of shares
purchased
Average
price paid
per share
Total number of
shares purchased as
part of publicly
announced
plans or programs
Approximate dollar value of shares that may yet be purchased under the plans or programs (in millions)
January— $— — $1,972 
February— $— — $5,000 
March584,539 $147.22 584,539 $4,914 
Total584,539 $147.22 584,539 

repurchased.
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ITEM 6.EXHIBITS.
Eaton Corporation plc
First Quarter 20222023 Report on Form 10-Q
3 (i)
3 (ii)
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
4.10
4.11Pursuant to Regulation S-K Item 601(b)(4), Eaton agrees to furnish to the SEC, upon request, a copy of the instruments defining the rights of holders of its long-term debt other than those set forth in Exhibits (4.2 - 4.7) hereto
10.1
5-Year Revolving Credit Agreement, dated as of October 4, 2021,3, 2022, among Eaton Corporation, plc, Eaton Corporation, Eaton Capital Unlimited, the guarantors from time to time party thereto, the several lenders from time to time parties thereto, Citibank, N.A., as Administrative Agent, Citibank, N.A., JPMorgan Chase Bank, N.A., and BofA Securities, Inc., BNP Paribas Securities Corp., Deutsche Bank Securities Inc. and Morgan Stanley Senior Funding, Inc., as joint lead arrangers and joint bookrunners, JPMorgan Chase Bank, N.A., as syndication agent and Bank of America, N.A., BNP Paribas, Deutsche Bank AG New York Branch and Morgan Stanley Senior Funding, Inc., as documentation agents, incorporated by reference to Exhibit 99.1 to The Form 8-K filed by the registrant on October 8, 2021.agent.
10.2
364-Day Revolving Credit Agreement, dated as of October 4, 2021,3, 2022, among Eaton Corporation, plc, Eaton Corporation, Eaton Capital Unlimited, the guarantors from time to time party thereto, the several lenders from time to time parties thereto, Citibank, N.A., as Administrative Agent, Citibank, N.A., JPMorgan Chase Bank, N.A., and BofA Securities, Inc., BNP Paribas Securities Corp., Deutsche Bank Securities Inc. and Morgan Stanley Senior Funding, Inc., as joint lead arrangers and joint bookrunners, JPMorgan Chase Bank, N.A., as syndication agent and Bank of America, N.A., BNP Paribas, Deutsche Bank AG New York Branch and Morgan Stanley Senior Funding, Inc., as documentation agents, incorporated by reference to Exhibit 99.2 to The Form 8-K filed by the registrant on October 8, 2021.agent.
22
31.1
31.2
32.1
32.2
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101.SCHXBRL Taxonomy Extension Schema Document *
101.CALXBRL Taxonomy Extension Calculation Linkbase Document *
101.DEFXBRL Taxonomy Extension Label Definition Document *
101.LABXBRL Taxonomy Extension Label Linkbase Document *
101.PREXBRL Taxonomy Extension Presentation Linkbase Document *
104Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

*Submitted electronically herewith.
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Table of Contents
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
  EATON CORPORATION plc
  Registrant
Date:May 3, 20222, 2023By:/s/ Thomas B. Okray
Thomas B. Okray
  Principal Financial Officer
  (On behalf of the registrant and as Principal Financial Officer)

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