Document and Entity Information
Document and Entity Information shares in Millions | 9 Months Ended |
Sep. 30, 2018shares | |
Document and Entity Information [Abstract] | |
Entity Registrant Name | Eaton Corp plc |
Trading Symbol | ETN |
Entity Central Index Key | 1,551,182 |
Document Type | 10-Q |
Document Period End Date | Sep. 30, 2018 |
Amendment Flag | false |
Document Fiscal Year Focus | 2,018 |
Document Fiscal Period Focus | Q3 |
Current Fiscal Year End Date | --12-31 |
Entity Current Reporting Status | Yes |
Entity Filer Category | Large Accelerated Filer |
Entity Common Stock, Shares Outstanding (in shares) | 433.4 |
CONSOLIDATED STATEMENTS OF INCO
CONSOLIDATED STATEMENTS OF INCOME - USD ($) shares in Millions, $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Income Statement [Abstract] | ||||
Net sales | $ 5,412 | $ 5,211 | $ 16,150 | $ 15,191 |
Cost of products sold | 3,597 | 3,466 | 10,841 | 10,221 |
Selling and administrative expense | 889 | 902 | 2,679 | 2,669 |
Research and development expense | 138 | 147 | 439 | 440 |
Interest expense - net | 67 | 60 | 205 | 181 |
Gain on sale of business | 0 | 1,077 | 0 | 1,077 |
Arbitration decision expense | 275 | 0 | 275 | 0 |
Other expense - net | 7 | 19 | 13 | 24 |
Income before income taxes | 439 | 1,694 | 1,698 | 2,733 |
Income tax expense | 23 | 293 | 184 | 381 |
Net income | 416 | 1,401 | 1,514 | 2,352 |
Less net income for noncontrolling interests | 0 | 0 | 0 | (1) |
Net income attributable to Eaton ordinary shareholders | $ 416 | $ 1,401 | $ 1,514 | $ 2,351 |
Net income per share attributable to Eaton ordinary shareholders | ||||
Diluted (usd per share) | $ 0.95 | $ 3.14 | $ 3.45 | $ 5.24 |
Basic (usd per share) | $ 0.96 | $ 3.16 | $ 3.47 | $ 5.27 |
Weighted-average number of ordinary shares outstanding | ||||
Diluted (shares) | 436.3 | 445.2 | 438.4 | 448.3 |
Basic (shares) | 433.5 | 442.6 | 435.8 | 445.9 |
Cash dividends declared per ordinary share (usd per share) | $ 0.66 | $ 0.6 | $ 1.98 | $ 1.8 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Statement of Comprehensive Income [Abstract] | ||||
Net income | $ 416 | $ 1,401 | $ 1,514 | $ 2,352 |
Less net income for noncontrolling interests | 0 | 0 | 0 | (1) |
Net income attributable to Eaton ordinary shareholders | 416 | 1,401 | 1,514 | 2,351 |
Other comprehensive (loss) income, net of tax | ||||
Currency translation and related hedging instruments | (132) | 195 | (546) | 743 |
Pensions and other postretirement benefits | 40 | 16 | 122 | 53 |
Cash flow hedges | (6) | (12) | (2) | (11) |
Other comprehensive (loss) income attributable to Eaton ordinary shareholders | (98) | 199 | (426) | 785 |
Total comprehensive income attributable to Eaton ordinary shareholders | $ 318 | $ 1,600 | $ 1,088 | $ 3,136 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Millions | Sep. 30, 2018 | Dec. 31, 2017 |
Current assets | ||
Cash | $ 327 | $ 561 |
Short-term investments | 178 | 534 |
Accounts receivable - net | 4,027 | 3,943 |
Inventory | 2,835 | 2,620 |
Prepaid expenses and other current assets | 500 | 679 |
Total current assets | 7,867 | 8,337 |
Land and buildings | 2,470 | 2,491 |
Machinery and equipment | 6,030 | 6,014 |
Gross property, plant and equipment | 8,500 | 8,505 |
Accumulated depreciation | (5,054) | (5,003) |
Net property, plant and equipment | 3,446 | 3,502 |
Other noncurrent assets | ||
Goodwill | 13,385 | 13,568 |
Other intangible assets | 4,949 | 5,265 |
Deferred income taxes | 241 | 253 |
Other assets | 1,740 | 1,698 |
Total assets | 31,628 | 32,623 |
Current liabilities | ||
Short-term debt | 82 | 6 |
Current portion of long-term debt | 426 | 578 |
Accounts payable | 2,165 | 2,166 |
Accrued compensation | 427 | 453 |
Other current liabilities | 2,167 | 1,872 |
Total current liabilities | 5,267 | 5,075 |
Noncurrent liabilities | ||
Long-term debt | 6,737 | 7,167 |
Pension liabilities | 1,160 | 1,226 |
Other postretirement benefits liabilities | 344 | 362 |
Deferred income taxes | 347 | 538 |
Other noncurrent liabilities | 984 | 965 |
Total noncurrent liabilities | 9,572 | 10,258 |
Shareholders’ equity | ||
Eaton shareholders’ equity | 16,754 | 17,253 |
Noncontrolling interests | 35 | 37 |
Total equity | 16,789 | 17,290 |
Total liabilities and equity | $ 31,628 | $ 32,623 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS - USD ($) $ in Millions | 9 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Operating activities | ||
Net income | $ 1,514 | $ 2,352 |
Adjustments to reconcile to net cash provided by operating activities | ||
Depreciation and amortization | 680 | 685 |
Deferred income taxes | (211) | (178) |
Pension and other postretirement benefits expense | 123 | 161 |
Contributions to pension plans | (99) | (447) |
Contributions to other postretirement benefits plans | (26) | (14) |
Deconsolidation, Gain (Loss), Amount, Net Of Tax | 0 | (843) |
Changes in working capital | 62 | (152) |
Other - net | (205) | 223 |
Net cash provided by operating activities | 1,838 | 1,787 |
Investing activities | ||
Capital expenditures for property, plant and equipment | (411) | (351) |
Proceeds from sale of business | 0 | 600 |
Sales (purchases) of short-term investments - net | 329 | (621) |
Payments for settlement of currency exchange contracts not designated as hedges - net | (122) | 0 |
Other - net | (52) | (63) |
Net cash provided by (used in) investing activities | (256) | (435) |
Financing activities | ||
Proceeds from borrowings | 80 | 1,000 |
Payments on borrowings | (486) | (553) |
Cash dividends paid | (864) | (803) |
Exercise of employee stock options | 28 | 59 |
Repurchase of shares | (600) | (789) |
Employee taxes paid from shares withheld | (24) | (21) |
Other - net | (2) | (8) |
Net cash provided by (used in) financing activities | (1,868) | (1,115) |
Effect of currency on cash | 52 | 11 |
Total increase (decrease) in cash | (234) | 248 |
Cash at the beginning of the period | 561 | 543 |
Cash at the end of the period | $ 327 | $ 791 |
BASIS OF PRESENTATION
BASIS OF PRESENTATION | 9 Months Ended |
Sep. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
BASIS OF PRESENTATION | 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 2017 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. During the first quarter of 2018, Eaton re-segmented certain reportable operating segments due to a reorganization of the Company's businesses. The new reportable business segment is eMobility (which includes certain legacy Electrical Products and Vehicle product lines). See Note 14 for additional information related to these segments. Certain prior year amounts have been reclassified to conform to the current year presentation. Revenue Recognition Sales are recognized when control of promised goods or services are transferred to customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. Control is transferred when the customer has the ability to direct the use of and obtain benefits from the goods or services. The majority of the Company’s sales agreements contain performance obligations satisfied at a point in time when control is transferred to the customer. Sales recognized over time are generally accounted for using an input measure to determine progress completed at the end of the period. Sales for service contracts generally are recognized as the services are provided. For agreements with multiple performance obligations, judgment is required to determine whether performance obligations specified in these agreements are distinct and should be accounted for as separate revenue transactions for recognition purposes. In these types of agreements, we generally allocate sales price to each distinct obligation based on the price of each item sold in separate transactions. Payment terms vary by the type and location of the customer and the products or services offered. Generally, the time between when revenue is recognized and payment is due is not significant. Eaton does not evaluate whether the selling price includes a financing interest component for contracts that are less than a year. Sales, value added, and other taxes collected concurrent with revenue are excluded from sales. Shipping and handling costs are treated as fulfillment costs and are included in Cost of products sold. Eaton records reductions to sales for returns, and customer and distributor incentives, primarily comprised of rebates, at the time of the initial sale. Rebates are estimated based on sales terms, historical experience, trend analysis, and projected market conditions in the various markets served. The rebate programs offered vary across businesses due to the numerous markets Eaton serves, but the most common incentives relate to amounts paid or credited to customers for achieving defined volume levels. Returns are estimated at the time of the sale primarily based on historical experience and recorded gross on the Consolidated Balance Sheet. See Note 4 for additional information. Adoption of New Accounting Standards Eaton adopted Accounting Standard Update 2014-09, Revenue from Contracts with Customers, at the start of the first quarter of 2018 using the modified retrospective approach and recorded a cumulative effect adjustment to retained earnings based on the current terms and conditions for open contracts as of January 1, 2018. The adoption of the standard did not have a material impact on the Company’s Consolidated financial statements. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. Consolidated Balance Sheet Balance at December 31, 2017 Adjustments due to ASU 2014-09 Balance at January 1, 2018 Assets Accounts receivable - net $ 3,943 $ (99 ) $ 3,844 Prepaid expenses and other current assets 679 129 808 Deferred income taxes 253 1 254 Liabilities and shareholders' equity Other current liabilities $ 1,872 $ 33 $ 1,905 Eaton shareholders' equity 17,253 (2 ) 17,251 Eaton adopted Accounting Standards Update 2016-16, Intra-Entity Transfers of Assets Other Than Inventory (ASU 2016-16), at the start of the first quarter of 2018. This accounting standard requires companies to recognize the income tax effects of intercompany sales and transfers of assets other than inventory in the period in which the transfer occurs. The previous accounting standard required companies to defer the income tax effects of intercompany transfers of assets by recording a prepaid tax, until such assets were sold to an outside party or otherwise recognized. ASU 2016-16 requires companies to write off any income tax amounts that had been deferred as prepaid taxes from past intercompany transactions, and record deferred tax balances for amounts that have not been recognized, through a cumulative-effect adjustment to retained earnings. Upon adoption, the Company recorded a cumulative-effect adjustment of $199 to reduce retained earnings. Eaton adopted Accounting Standards Update 2017-07, Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (ASU 2017-07), at the start of the first quarter of 2018. The new standard requires companies to present service costs consistent with other employee compensation costs on the income statement and separate from all other elements of pension costs. The retrospective adoption of this standard resulted in an increase in selling and administrative expense with a corresponding decrease in Other expense - net of $2 for the nine months ended September 30, 2018 , and a reduction in selling and administrative expense with a corresponding increase in Other expense - net of $34 for the nine months ended September 30, 2017 . Recently Issued Accounting Pronouncement In February 2016, the FASB issued Accounting Standards Update 2016-02, Leases (Topic 842), (ASU 2016-02). This accounting standard requires that a lessee recognize a lease asset and a lease liability on its balance sheet for all leases, including operating leases, with a term greater than 12 months. ASU 2016-02 will require additional disclosures in the notes to the consolidated financial statements and is effective for annual and interim reporting periods beginning after December 15, 2018. The Company plans to adopt the standard, and related amendments, as of the first quarter of 2019 using the optional transition method that allows for a cumulative-effect adjustment to be recorded at adoption, and will not restate prior periods. A project team has been formed to evaluate and implement the new standard. The project team has been collecting and validating the data required to account for leases under the new standard, and continues to test the functionality of a new lease accounting system being developed by a third-party. In addition, the Company is in the process of identifying and implementing the appropriate changes to business processes and controls to support recognition and disclosure under the new standard. Eaton is evaluating the impact of ASU 2016-02 and expects to recognize a significant lease asset and lease liability for operating leases on the Consolidated Balance Sheet, but does not expect a material impact to the Consolidated Statements of Income or Cash Flows. |
SALE OF A BUSINESS
SALE OF A BUSINESS | 9 Months Ended |
Sep. 30, 2018 | |
Equity Method Investments and Joint Ventures [Abstract] | |
SALE OF A BUSINESS | Note 2. SALE OF A BUSINESS Sale of heavy-duty and medium-duty commercial vehicle automated transmission business On July 31, 2017, Eaton sold a 50% interest in its heavy-duty and medium-duty commercial vehicle automated transmission business for $600 in cash to Cummins, Inc. The new joint venture is named Eaton Cummins Automated Transmission Technologies (ECATT). In 2017, the Company recognized a pre-tax gain of $1,077 , of which $533 related to the pre-tax gain from the $600 proceeds from the sale and $544 related to the Company’s remaining 50% investment in the joint venture being remeasured to fair value. The after-tax gain was $843 . The fair value is based on the price paid to Eaton for the 50% interest sold to Cummins, Inc. and further supported by a discounted cash flow model. Eaton accounts for its investment on the equity method of accounting. |
ACQUISITION INTEGRATION CHARGES
ACQUISITION INTEGRATION CHARGES | 9 Months Ended |
Sep. 30, 2018 | |
Acquisitions Integration Charges [Abstract] | |
ACQUISITION INTEGRATION CHARGES | ACQUISITION INTEGRATION CHARGES Eaton incurs integration charges related to acquired businesses. A summary of these charges follows: Three months ended Nine months ended 2018 2017 2018 2017 Electrical Products $ — $ 1 $ — $ 3 Total acquisition integration charges before income tax — 1 — 3 Income taxes — — — 1 Total after income taxes $ — $ 1 $ — $ 2 Per ordinary share - diluted $ — $ — $ — $ — Business segment acquisition integration charges in 2017 related to the integration of Ephesus Lighting, Inc. (Ephesus), which was acquired in 2015. The charges associated with Ephesus were included in Selling and administrative expense. In Business Segment Information, the charges reduced Operating profit of the related business segment. See Note 14 for additional information about business segments. |
REVENUE RECOGNITION
REVENUE RECOGNITION | 9 Months Ended |
Sep. 30, 2018 | |
Revenue from Contract with Customer [Abstract] | |
REVENUE RECOGNITION | 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. Sales are measured at the amount of consideration the Company expects to be paid in exchange for these products or services. The majority of the Company’s sales agreements contain performance obligations satisfied at a point in time when title and risk and rewards of ownership have transferred to the customer. Sales recognized over time are less than 5% of Eaton’s Consolidated Net Sales. Sales recognized over time are generally accounted for using an input measure to determine progress completed at the end of the period. Sales for service contracts generally are recognized as the services are provided. For agreements with multiple performance obligations, judgment is required to determine whether performance obligations specified in these agreements are distinct and should be accounted for as separate revenue transactions for recognition purposes. In these types of agreements, we generally allocate sales price to each distinct obligation based on the price of each item sold in separate transactions. Due to the nature of the work required to be performed for obligations recognized over time, Eaton estimates total costs by contract. The estimate of total costs are subject to judgment. Estimated amounts are included in the recognized sales price to the extent it is not probable that a significant reversal of cumulative sales will occur. Additionally, contracts can be modified to account for changes in contract specifications, requirements or sale price. The effect of a contract modification on the sales price or adjustments to the measure of completion under the input method are recognized as adjustments to revenue on a cumulative catch-up basis. Payment terms vary by the type and location of the customer and the products or services offered. Generally, the time between when revenue is recognized and when payment is due is not significant. Eaton does not evaluate whether the selling price includes a financing interest component for contracts that are less than a year. Sales, value added, and other taxes collected concurrent with revenue are excluded from sales. Shipping and handling costs are treated as fulfillment costs and are included in Cost of products sold. Eaton records reductions to sales for returns, and customer and distributor incentives, primarily comprised of rebates, at the time of the initial sale. Rebates are estimated based on sales terms, historical experience, trend analysis, and projected market conditions in the various markets served. The rebate programs offered vary across businesses due to the numerous markets Eaton serves, but the most common incentives relate to amounts paid or credited to customers for achieving defined volume levels. Returns are estimated at the time of the sale primarily based on historical experience and are recorded gross on the Condensed Consolidated Balance Sheet. Sales commissions are expensed when the amortization period is less than a year and are generally not capitalized as they are typically earned at the completion of the contract when the customer is invoiced or when the customer pays Eaton. Sales of products and services varies by segment and are discussed in Note 15 of Eaton’s 2017 Form 10-K and in Note 14. In the Electrical Products segment, sales contracts are primarily for electrical components, industrial components, residential products, single phase power quality, emergency lighting, fire detection, wiring devices, structural support systems, circuit protection, and lighting products. These sales contracts are primarily based on a customer’s purchase order followed by our order acknowledgement, and may also include a master supply or distributor agreement. In this segment, performance obligations are generally satisfied at a point in time either when we ship the product from our facility, or when it arrives at the customer’s facility. In the Electrical Systems and Services segment, sales contracts are primarily for power distribution and assemblies, three phase power quality, hazardous duty electrical equipment, intrinsically safe explosion-proof instrumentation, utility power distribution, power reliability equipment, and services. The majority of the sales contracts in this segment contain performance obligations satisfied at a point in time either when we ship the product from our facility, or when it arrives at the customer’s facility; however, certain power distribution and power quality services are recognized over time. Many of the products and services in power distribution and power quality services meet the definition of continuous transfer of control to customers and are recognized over time. These products are engineered to a customer’s design specifications, have no alternative use to Eaton, and are controlled by the customer as evidenced by the customer’s contractual ownership of the work in process or our right to payment for work performed to date plus a reasonable margin. As control is transferring over time, sales are recognized based on the extent of progress towards completion of the obligation. Eaton generally uses an input method to determine the progress completed and sales are recorded proportionally as costs are incurred. Incurred cost represent work performed, which corresponds with, and thereby best depicts, the transfer of control to the customer. In the Hydraulics segment, sales contracts are primarily for hydraulic components and systems for industrial and mobile equipment. These sales contracts are primarily based on a customer’s purchase order. In this segment, performance obligations are generally satisfied at a point in time when we ship the product from our facility. In the Aerospace segment, sales contracts are primarily for aerospace fuel, hydraulics, and pneumatic systems for commercial and military use. These sales contracts are primarily based on a customer’s purchase order, and frequently covered by terms and conditions included in a long-term agreement. In this segment, performance obligations are generally satisfied at a point in time either when we ship the product from our facility, or when it arrives at the customer’s facility. Our military contracts are primarily fixed-price contracts that are not subject to performance-based payments or progress payments from the customer. In the Vehicle segment, sales contracts are primarily for drivetrains, powertrain systems and critical components that reduce emissions and improve fuel economy, stability, performance, and safety of cars, light trucks and commercial vehicles. These sales contracts are primarily based on a customer’s purchase order or a blanket purchase order subject to firm releases, frequently covered by terms and conditions included in a master supply agreement. In this segment, performance obligations are generally satisfied at a point in time either when we ship the product from our facility, or when it arrives at the customer’s facility. In the eMobility segment, sales contracts are primarily for electronic and mechanical components and systems that improves the power management and performance of both on-road and off-road vehicles. These sales contracts are primarily based on a customer’s purchase order. In this segment, performance obligations are generally satisfied at a point in time either when we ship the product from our facility, or when it arrives at the customer’s facility. In limited circumstances, primarily in the Electrical and Vehicle segments, Eaton sells separately-priced warranties that extend the warranty coverage beyond the standard coverage offered on specific products. Sales for these separately-priced warranties are recorded based on their stand-alone selling price and are recognized as revenue over the length of the warranty period. The Company’s six operating segments and the following tables disaggregate sales by lines of businesses, geographic destination, market channel or end market. Three months ended September 30, 2018 Net sales United States Rest of World Total Electrical Products $ 1,055 $ 734 $ 1,789 Electrical Systems and Services 1,000 519 1,519 Hydraulics 301 369 670 Original Equipment Manufacturers Aftermarket, Distribution and End User Aerospace $ 269 $ 209 478 Commercial Passenger and Light Duty Vehicle $ 451 $ 425 876 eMobility 80 Total $ 5,412 Nine months ended September 30, 2018 Net sales United States Rest of World Total Electrical Products $ 3,048 $ 2,279 $ 5,327 Electrical Systems and Services 2,877 1,536 4,413 Hydraulics 907 1,196 2,103 Original Equipment Manufacturers Aftermarket, Distribution and End User Aerospace $ 799 $ 600 1,399 Commercial Passenger and Light Duty Vehicle $ 1,333 $ 1,335 2,668 eMobility 240 Total $ 16,150 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 receivables from customers were $3,566 and $3,399 at September 30, 2018 and December 31, 2017, 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 Condensed Consolidated Balance Sheets on a contract-by-contract basis at the end of each reporting period. Unbilled receivables were $91 and $117 at September 30, 2018 and January 1, 2018, respectively, and are recorded in Prepaid expenses and other current assets. The decrease in unbilled receivables was primarily due to billings to customers for amounts previously recognized as revenue, partially offset by revenue recognized and not yet billed. Changes in the deferred revenue liabilities are as follows: Deferred Revenue Balance at January 1, 2018 $ 227 Customer deposits and billings 696 Revenue recognized in the period (676 ) Translation (6 ) Balance at September 30, 2018 $ 241 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 September 30, 2018 was approximately $5.4 billion . Eaton expects to recognize approximately 88% of this backlog in the next twelve months and the rest thereafter. Impact of new accounting standard In accordance with the new revenue accounting requirements, the impact of the adoption on the financial statement line items within the accompanying financial statements was as follows: Three months ended September 30, 2018 Consolidated Statements of Income As Reported Adjustment Balances without Adoption of ASC 606 Net sales $ 5,412 $ (5 ) $ 5,407 Cost of products sold 3,597 (4 ) 3,593 Income before income taxes 439 (1 ) 438 Income tax expense 23 — 23 Net income 416 (1 ) 415 Net income attributable to Eaton ordinary shareholders $ 416 $ (1 ) $ 415 Nine months ended September 30, 2018 Consolidated Statements of Income As Reported Adjustment Balances without Adoption of ASC 606 Net sales $ 16,150 $ (23 ) $ 16,127 Cost of products sold 10,841 (14 ) 10,827 Income before income taxes 1,698 (9 ) 1,689 Income tax expense 184 (2 ) 182 Net income 1,514 (7 ) 1,507 Net income attributable to Eaton ordinary shareholders $ 1,514 $ (7 ) $ 1,507 September 30, 2018 Condensed Consolidated Balance Sheets As Reported Adjustment Balances without Adoption of ASC 606 Assets Accounts receivable - net $ 4,027 $ 58 $ 4,085 Inventory 2,835 13 2,848 Prepaid expenses and other current assets 500 (105 ) 395 Deferred income taxes 241 (1 ) 240 Liabilities and shareholders’ equity Other current liabilities $ 2,167 $ (30 ) $ 2,137 Eaton shareholders' equity $ 16,789 $ (5 ) $ 16,784 |
RESTRUCTURING CHARGES
RESTRUCTURING CHARGES | 9 Months Ended |
Sep. 30, 2018 | |
Restructuring and Related Activities [Abstract] | |
RESTRUCTURING CHARGES | RESTRUCTURING CHARGES During 2015, Eaton announced its commitment to undertake actions to reduce its cost structure in all business segments and at corporate. The multi-year initiative concluded at the end of 2017. A summary of liabilities related to workforce reductions, plant closings and other associated costs announced as part of this program follows: Workforce reductions Plant closings and other Total Balance at December 31, 2016 $ 113 $ 1 $ 114 Liability recognized 57 59 116 Payments (102 ) (39 ) (141 ) Other adjustments (1 ) (16 ) (17 ) Balance at December 31, 2017 67 5 72 Payments (29 ) (4 ) (33 ) Other adjustments (14 ) — (14 ) Balance at September 30, 2018 $ 24 $ 1 $ 25 |
GOODWILL
GOODWILL | 9 Months Ended |
Sep. 30, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
GOODWILL | GOODWILL Change in the carrying amount of goodwill by segment follows: December 31, Translation September 30, Electrical Products $ 6,678 $ (87 ) $ 6,591 Electrical Systems and Services 4,311 (40 ) 4,271 Hydraulics 1,257 (50 ) 1,207 Aerospace 947 (4 ) 943 Vehicle 294 (2 ) 292 eMobility 81 — 81 Total $ 13,568 $ (183 ) $ 13,385 Eaton re-segmented certain reportable operating segments due to a reorganization of the Company's businesses. The new reportable business segment is eMobility (which includes certain legacy Electrical Products and Vehicle product lines). The Company used the relative fair value method to reallocate goodwill to the associated reporting units. |
RETIREMENT BENEFITS PLANS
RETIREMENT BENEFITS PLANS | 9 Months Ended |
Sep. 30, 2018 | |
Retirement Benefits [Abstract] | |
RETIREMENT BENEFITS PLANS | RETIREMENT BENEFITS PLANS The components of retirement benefits expense follow: United States Non-United States Other postretirement Three months ended September 30 2018 2017 2018 2017 2018 2017 Service cost $ 25 $ 24 $ 16 $ 18 $ 1 $ 1 Interest cost 30 30 13 14 3 4 Expected return on plan assets (63 ) (61 ) (27 ) (24 ) — (1 ) Amortization 24 21 9 13 (4 ) (3 ) 16 14 11 21 — 1 Settlements 13 17 1 4 — — Total expense $ 29 $ 31 $ 12 $ 25 $ — $ 1 United States Non-United States Other postretirement Nine months ended September 30 2018 2017 2018 2017 2018 2017 Service cost $ 75 $ 72 $ 48 $ 53 $ 2 $ 2 Interest cost 91 92 40 41 10 11 Expected return on plan assets (190 ) (183 ) (80 ) (70 ) (2 ) (3 ) Amortization 71 62 29 38 (10 ) (9 ) 47 43 37 62 — 1 Settlements 38 51 1 4 — — Total expense $ 85 $ 94 $ 38 $ 66 $ — $ 1 The components of retirement benefits expense other than service costs are included in Other expense - net. |
LEGAL CONTINGENCIES
LEGAL CONTINGENCIES | 9 Months Ended |
Sep. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
LEGAL CONTINGENCIES | LEGAL CONTINGENCIES Eaton is subject to a broad range of claims, administrative and legal proceedings such as lawsuits that relate to contractual allegations, tax audits, patent infringement, personal injuries, antitrust matters, and employment-related matters. Eaton is also subject to asbestos 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 consolidated financial statements. In December 2011, Pepsi-Cola Metropolitan Bottling Company, Inc. (“Pepsi”) filed an action against (a) Cooper Industries, LLC, Cooper Industries, Ltd., Cooper Holdings, Ltd., Cooper US, Inc., and Cooper Industries plc (collectively, “Cooper”), (b) M&F Worldwide Corp., Mafco Worldwide Corp., Mafco Consolidated Group LLC, and PCT International Holdings, Inc. (collectively, “Mafco”), and (c) the Pneumo Abex Asbestos Claims Settlement Trust (the “Trust”) in Texas state court. Pepsi alleged that it was harmed by a 2011 settlement agreement (“2011 Settlement”) among Cooper, Mafco, and Pneumo Abex, LLC (“Pneumo,” which prior to the 2011 Settlement was a Mafco subsidiary), which settlement resolved litigation that Pneumo had previously brought against Cooper involving, among other things, a guaranty related to Pneumo’s friction products business. In November 2015, after a Texas court ruled that Pepsi's claims should be heard in arbitration, Pepsi filed a demand for arbitration against Cooper, Mafco, the Trust, and Pneumo. Pepsi subsequently dropped claims against all parties except Cooper. An arbitration under the auspices of the American Arbitration Association commenced in October 2017. Pepsi’s experts opined, among other things, that the value contributed to the Trust for a release of the guaranty was below reasonably equivalent value, and that an inability of Pneumo to satisfy future liabilities could result in plaintiffs suing Pepsi under various theories. Cooper submitted various expert reports and, among other things, Cooper’s experts opined that Pepsi had no basis to seek any damages and that Cooper paid reasonably equivalent value for the release of its indemnity obligations under the guaranty. The arbitration proceedings closed in December 2017. On July 11, 2018, the arbitration panel made certain findings and concluded that the value contributed to the Trust did not constitute reasonably equivalent value, but ordered the parties to recalculate the amount that should have been contributed to the Trust as of the date of the 2011 transaction. Based on the findings made by the panel and the recalculation ordered by the panel, Cooper believed that no additional amount should be contributed. Pepsi argued that an additional $347 should be contributed. Cooper and its expert disagreed with Pepsi’s argument and believed that Pepsi’s recalculation was flawed and failed to comply with the instructions of the panel. On August 23, 2018, the panel issued its final award and ordered Cooper to pay $293 to Pneumo Abex. On August 30, 2018, Pepsi sought to confirm the award in Texas state court, which Cooper opposed on October 9, 2018. Cooper further requested that the court vacate the award on various grounds, including that Cooper was prejudiced by the conduct of the proceedings, the panel exceeded its powers, and because the panel denied Cooper a full and fair opportunity to present certain evidence. The court confirmed the award at the confirmation hearing, which was held on October 12, 2018. The Company is considering its options, including an appeal. |
INCOME TAXES
INCOME TAXES | 9 Months Ended |
Sep. 30, 2018 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | INCOME TAXES The effective income tax rate for the third quarter and the first nine months of 2018 was expense of 5.2% and 10.8% compared to expense of 17.3% and 13.9% for the third quarter and first nine months of 2017. The tax rate for the third quarter and first nine months of 2018 includes $69 of tax benefit on the arbitration decision expense which was recorded during the third quarter and is discussed in Note 8. The tax rate for the third quarter and first nine months of 2017 includes $234 of tax expense on the gain related to the sale of a business discussed in Note 2, which closed during the third quarter of 2017. Excluding the one -time impacts of the 2018 arbitration decision and the 2017 sale of a business, the effective income tax rate for both the third quarter and first nine months of 2018 was expense of 12.8% compared to expense of 9.6% and 8.9% for the third quarter and first nine months of 2017. The increase in the effective tax rate in the third quarter and first nine months of 2018 was due to greater levels of income in higher tax jurisdictions. The U.S. Tax Cuts and Jobs Act (“TCJA”) was enacted on December 22, 2017 and the Company recorded a provisional tax benefit amount of $62 in the fourth quarter of 2017 for the remeasurement of deferred tax balances, including valuation allowances related to the realization of deferred tax assets, and the one-time transition tax. The Company continues to analyze aspects of the TCJA, including additional regulations and guidance which may impact the provisional amounts recorded for the remeasurement of deferred tax balances and related valuation allowances, and the one-time transition tax. The Company recorded a $17 tax expense adjustment to the 2017 provisional tax amounts in the third quarter of 2018, primarily related to the one-time transition tax, resulting in a cumulative provisional tax benefit amount of $45 related to the enactment of the TCJA. The Company will finalize its accounting for the 2017 tax impact of the TCJA in the fourth quarter of 2018. During the third quarter of 2018, the United States Internal Revenue Service (“IRS”) completed its examination of the consolidated income tax returns of the Company’s United States subsidiaries for tax years 2011 through 2013 and has proposed adjustments to certain transfer pricing tax positions, including adjustments similar to those proposed and previously disclosed for prior audit periods for products manufactured in the Company’s facilities in Puerto Rico and the Dominican Republic and sold to affiliated companies located in the U.S. The IRS also proposed adjustments involving the recognition of income for several of the Company’s controlled foreign corporations, which is the same issue that has been previously disclosed and is currently in litigation for tax years 2007-2010. The Company intends to pursue its administrative appeals alternatives with respect to each of the IRS adjustments and believes that final resolution of the proposed adjustments will not have a material impact on its consolidated financial statements. During 2010, the Company received a tax assessment of $42 (translated at the September 30, 2018 exchange rate), plus interest and penalties, in Brazil for the tax years 2005 through 2008 that relates to the amortization of certain goodwill generated from the acquisition of third-party businesses and corporate reorganizations. On August 31, 2018, the Company received an unfavorable result at the final tax administrative appeals level, resulting in an alleged tax deficiency of $42 plus $128 of interest and penalties (translated at the September 30, 2018 exchange rate). The Company plans to challenge the assessment in the judicial system, which is expected to take up to 10 years to resolve. During 2014, the Company received a tax assessment of $32 (translated at the September 30, 2018 exchange rate), plus interest and penalties, for the 2009 through 2012 tax years (primarily relating to the same issues concerning the 2005 through 2008 tax years), which the Company is also contesting and remains under review at the final tax administrative appeals level. The Company continues to believe that final resolution of both of the assessments will not have a material impact on its consolidated financial statements. |
EQUITY
EQUITY | 9 Months Ended |
Sep. 30, 2018 | |
Stockholders' Equity Note [Abstract] | |
EQUITY | EQUITY During the nine months ended September 30, 2018 , 7.7 million ordinary shares were repurchased under the 2016 Program in the open market at a total cost of $600 . No ordinary shares were repurchased during the three months ended September 30, 2018 . During the three and nine months ended September 30, 2017 , 4.4 million and 10.7 million ordinary shares, respectively, were repurchased under the 2016 Program in the open market at a total cost of $324 and $789 , respectively. The changes in Shareholders’ equity follow: Eaton shareholders’ equity Noncontrolling interests Total equity Balance at December 31, 2017 $ 17,253 $ 37 $ 17,290 Cumulative-effect adjustment upon adoption of ASU 2014-09 (2 ) — (2 ) Cumulative-effect adjustment upon adoption of ASU 2016-16 (199 ) — (199 ) Net income 1,514 — 1,514 Other comprehensive loss (426 ) — (426 ) Cash dividends paid (864 ) (1 ) (865 ) Issuance of shares under equity-based compensation plans - net 78 — 78 Repurchase of shares (600 ) — (600 ) Changes in noncontrolling interest - net — (1 ) (1 ) Balance at September 30, 2018 $ 16,754 $ 35 $ 16,789 The changes in Accumulated other comprehensive loss follow: Currency translation and related hedging instruments Pensions and other postretirement benefits Cash flow hedges Total Balance at December 31, 2017 $ (2,255 ) $ (1,139 ) $ (10 ) $ (3,404 ) Other comprehensive (loss) income before reclassifications (546 ) 20 (11 ) (537 ) Amounts reclassified from Accumulated other comprehensive loss — 102 9 111 Net current-period Other comprehensive (loss) income (546 ) 122 (2 ) (426 ) Balance at September 30, 2018 $ (2,801 ) $ (1,017 ) $ (12 ) $ (3,830 ) The reclassifications out of Accumulated other comprehensive loss follow: Nine months ended September 30, 2018 Consolidated statements of income classification Amortization of defined benefit pensions and other postretirement benefits items Actuarial loss and prior service cost $ (129 ) 1 Tax benefit 27 Total, net of tax (102 ) Gains and (losses) on cash flow hedges Currency exchange contracts (12 ) Cost of products sold Tax benefit 3 Total, net of tax (9 ) Total reclassifications for the period $ (111 ) 1 These components of Accumulated other comprehensive loss are included in the computation of net periodic benefit cost. See Note 7 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 follows: Three months ended Nine months ended (Shares in millions) 2018 2017 2018 2017 Net income attributable to Eaton ordinary shareholders $ 416 $ 1,401 $ 1,514 $ 2,351 Weighted-average number of ordinary shares outstanding - diluted 436.3 445.2 438.4 448.3 Less dilutive effect of equity-based compensation 2.8 2.6 2.6 2.4 Weighted-average number of ordinary shares outstanding - basic 433.5 442.6 435.8 445.9 Net income per share attributable to Eaton ordinary shareholders Diluted $ 0.95 $ 3.14 $ 3.45 $ 5.24 Basic 0.96 3.16 3.47 5.27 For the third quarter and first nine months of 2018 , 0.5 million and 0.4 million stock options, respectively, 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. For the third quarter and first nine months of 2017 , 0.2 million and 0.6 million stock options, respectively, 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. |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 9 Months Ended |
Sep. 30, 2018 | |
Fair Value Disclosures [Abstract] | |
FAIR VALUE MEASUREMENTS | 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 recognized at fair value, and the fair value measurements used, follows: Total Level 1 Level 2 Level 3 September 30, 2018 Cash $ 327 $ 327 $ — $ — Short-term investments 178 178 — — Net derivative contracts (59 ) — (59 ) — December 31, 2017 Cash $ 561 $ 561 $ — $ — Short-term investments 534 534 — — Net derivative contracts 36 — 36 — 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. No financial instruments were measured using unobservable inputs. Other Fair Value Measurements Long-term debt and the current portion of long-term debt had a carrying value of $7,163 and fair value of $7,137 at September 30, 2018 compared to $7,745 and $8,048 , respectively, at December 31, 2017 . The fair value of Eaton's debt instruments were estimated using prevailing market interest rates on debt with similar creditworthiness, terms and maturities, and are considered a Level 2 fair value measurement. |
DERIVATIVE FINANCIAL INSTRUMENT
DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES | 9 Months Ended |
Sep. 30, 2018 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES | 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, to a lesser extent, 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 Condensed 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 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 effective portion of the gain or loss from the derivative financial instrument is recognized in Accumulated other comprehensive loss 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 effective portion of the gain or loss from the derivative financial instrument is recognized in Accumulated other comprehensive loss 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 that is effective is classified in the same line of the Consolidated Statements of Income as the offsetting loss or gain on the hedged item. The change in fair value of a derivative financial instrument that is not effective as a hedge is immediately recognized in income. 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. Gains and losses associated with commodity hedge contracts are classified in Cost of products sold. Eaton uses 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). Foreign currency denominated debt designated as non-derivative net investment hedging instruments on an after-tax basis was $88 at September 30, 2018 and $88 at December 31, 2017 , and designated on a pre-tax basis was $631 at September 30, 2018 and $652 at December 31, 2017 . Derivative Financial Statement Impacts The fair value of derivative financial instruments recognized in the Condensed Consolidated Balance Sheets follows: Notional amount Other current assets Other noncurrent assets Other current liabilities Other noncurrent liabilities Type of hedge Term September 30, 2018 Derivatives designated as hedges Fixed-to-floating interest rate swaps $ 2,550 $ 1 $ 16 $ 1 $ 62 Fair value 9 months to 16 years Currency exchange contracts 954 12 2 21 5 Cash flow 1 to 36 months Total $ 13 $ 18 $ 22 $ 67 Derivatives not designated as hedges Currency exchange contracts $ 7,616 $ 33 $ 33 1 to 12 months Commodity contracts 13 — 1 1 to 12 months Total $ 33 $ 34 December 31, 2017 Derivatives designated as hedges Fixed-to-floating interest rate swaps $ 2,965 $ 1 $ 41 $ — $ 17 Fair value 6 months to 17 years Currency exchange contracts 924 7 7 22 2 Cash flow 1 to 36 months Total $ 8 $ 48 $ 22 $ 19 Derivatives not designated as hedges Currency exchange contracts $ 3,719 $ 39 $ 19 1 to 12 months Commodity contracts 13 1 — 1 to 12 months Total $ 40 $ 19 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. For the nine months ended September 30, 2018, $122 of cash outflow resulting from the settlement of these derivatives has been classified in investing activities on the Condensed Consolidated Statement of Cash Flows. The cash flow from the settlement of these derivatives has been presented in operating activities in prior periods and have not been restated as such amounts are not material. The impact of derivative instruments to the Consolidated Statement of Income and Comprehensive Income follow: 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 Three months ended 2018 2017 2018 2017 Derivatives designated as cash flow hedges Forward starting floating-to-fixed interest rate swaps $ — $ (10 ) Interest expense - net $ — $ — Interest rate locks — (9 ) Interest expense - net — — Currency exchange contracts (12 ) (6 ) Cost of products sold (4 ) (7 ) Total $ (12 ) $ (25 ) $ (4 ) $ (7 ) Gain (loss) recognized in Location of gain (loss) Gain (loss) reclassified Nine months ended Nine months ended 2018 2017 2018 2017 Derivatives designated as cash Forward starting floating-to-fixed $ — $ (15 ) Interest expense - net $ — $ — Interest rate locks — (9 ) Interest expense - net — — Currency exchange contracts (14 ) (5 ) Cost of products sold (12 ) (12 ) Total $ (14 ) $ (29 ) $ (12 ) $ (12 ) Amounts recognized in net income follow: Three months ended Nine months ended 2018 2017 2018 2017 Derivatives designated as fair value hedges Fixed-to-floating interest rate swaps $ (12 ) $ (4 ) $ (71 ) $ (7 ) Related long-term debt converted to floating interest rates by interest rate swaps 12 4 71 7 $ — $ — $ — $ — Gains and losses described above were recognized in Interest expense - net. |
INVENTORY
INVENTORY | 9 Months Ended |
Sep. 30, 2018 | |
Inventory Disclosure [Abstract] | |
INVENTORY | INVENTORY Inventory is carried at lower of cost or net realizable value. The components of inventory follow: September 30, December 31, Raw materials $ 1,094 $ 953 Work-in-process 531 471 Finished goods 1,210 1,196 Total inventory $ 2,835 $ 2,620 |
BUSINESS SEGMENT INFORMATION
BUSINESS SEGMENT INFORMATION | 9 Months Ended |
Sep. 30, 2018 | |
Segment Reporting [Abstract] | |
BUSINESS SEGMENT INFORMATION | 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. During the first quarter of 2018, Eaton re-segmented certain reportable operating segments due to a reorganization of the Company's businesses. The new reportable business segment is eMobility (which includes certain legacy Electrical Products and Vehicle product lines). The eMobility segment designs, manufactures, markets, and supplies electrical and electronic components and systems that improve the power management and performance of both on-road and off-road vehicles. Products include high voltage inverters, converters, fuses, onboard chargers, circuit protection units, vehicle controls, power distribution, fuel tank isolation valves, and commercial vehicle hybrid systems. The principal markets for the eMobility segment are original equipment manufacturers and aftermarket customers of passenger cars, commercial vehicles, and construction, agriculture, and mining equipment. Eaton’s operating segments are Electrical Products, Electrical Systems and Services, Hydraulics, Aerospace, Vehicle, and eMobility. Operating profit includes the operating profit from intersegment sales. For additional information regarding Eaton’s business segments, see Note 15 to the Consolidated Financial Statements contained in the 2017 Form 10-K. Three months ended Nine months ended 2018 2017 2018 2017 Net sales Electrical Products $ 1,789 $ 1,785 $ 5,327 $ 5,167 Electrical Systems and Services 1,519 1,421 4,413 4,168 Hydraulics 670 634 2,103 1,854 Aerospace 478 438 1,399 1,303 Vehicle 876 858 2,668 2,489 eMobility 80 75 240 210 Total net sales $ 5,412 $ 5,211 $ 16,150 $ 15,191 Segment operating profit Electrical Products $ 343 $ 330 $ 984 $ 915 Electrical Systems and Services 234 196 628 545 Hydraulics 94 80 285 214 Aerospace 105 84 284 244 Vehicle 166 150 464 399 eMobility 10 16 35 40 Total segment operating profit 952 856 2,680 2,357 Corporate Amortization of intangible assets (95 ) (98 ) (289 ) (288 ) Interest expense - net (67 ) (60 ) (205 ) (181 ) Pension and other postretirement benefits expense (3 ) (16 ) (4 ) (38 ) Gain on sale of business — 1,077 — 1,077 Arbitration decision expense (275 ) — (275 ) — Other corporate expense - net (73 ) (65 ) (209 ) (194 ) Income before income taxes 439 1,694 1,698 2,733 Income tax expense 23 293 184 381 Net income 416 1,401 1,514 2,352 Less net income for noncontrolling interests — — — (1 ) Net income attributable to Eaton ordinary shareholders $ 416 $ 1,401 $ 1,514 $ 2,351 |
CONDENSED CONSOLIDATING FINANCI
CONDENSED CONSOLIDATING FINANCIAL STATEMENTS | 9 Months Ended |
Sep. 30, 2018 | |
Condensed Consolidating Financial Information [Abstract] | |
CONDENSED CONSOLIDATING FINANCIAL STATEMENTS | CONDENSED CONSOLIDATING FINANCIAL STATEMENTS The Registered Senior Notes issued by Eaton Corporation are registered under the Securities Act of 1933. Eaton and certain of Eaton's 100% owned direct and indirect subsidiaries (the Guarantors) fully and unconditionally guaranteed (subject, in the case of the Guarantors, other than Eaton, to customary release provisions as described below), on a joint and several basis, the Registered Senior Notes. The following condensed consolidating financial statements are included so that separate financial statements of Eaton, Eaton Corporation and each of the Guarantors are not required to be filed with the Securities and Exchange Commission. The consolidating adjustments primarily relate to eliminations of investments in subsidiaries and intercompany balances and transactions. The condensed consolidating financial statements present investments in subsidiaries using the equity method of accounting. See Note 6 of Eaton's 2017 Form 10-K for additional information related to the Registered Senior Notes. The guarantee of a Guarantor that is not a parent of the issuer will be automatically and unconditionally released and discharged in the event of any sale of the Guarantor or of all or substantially all of its assets, or in connection with the release or termination of the Guarantor as a guarantor under all other U.S. debt securities or U.S. syndicated credit facilities, subject to limitations set forth in the indenture. The guarantee of a Guarantor that is a direct or indirect parent of the issuer will only be automatically and unconditionally released and discharged in connection with the release or termination of such Guarantor as a guarantor under all other debt securities or syndicated credit facilities (in both cases, U.S. or otherwise), subject to limitations set forth in the indenture. During 2018 and 2017, the Company undertook certain steps to restructure ownership of various subsidiaries. The transactions were entirely among wholly-owned subsidiaries under the common control of Eaton. These restructurings have been reflected as of the beginning of the earliest period presented below. CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2018 Eaton Corporation plc Eaton Corporation Guarantors Other subsidiaries Consolidating adjustments Total Net sales $ — $ 1,808 $ 1,814 $ 3,134 $ (1,344 ) $ 5,412 Cost of products sold — 1,417 1,322 2,202 (1,344 ) 3,597 Selling and administrative expense 2 355 197 335 — 889 Research and development expense — 33 37 68 — 138 Interest expense (income) - net — 68 3 (4 ) — 67 Arbitration decision expense — — 275 — — 275 Other expense (income) - net (3 ) 11 4 (5 ) — 7 Equity in loss (earnings) of subsidiaries, net of tax (430 ) (212 ) (915 ) (446 ) 2,003 — Intercompany expense (income) - net 15 33 579 (627 ) — — Income (loss) before income taxes 416 103 312 1,611 (2,003 ) 439 Income tax expense (benefit) — (10 ) (91 ) 124 — 23 Net income (loss) 416 113 403 1,487 (2,003 ) 416 Less net loss (income) for noncontrolling interests — — — — — — Net income (loss) attributable to Eaton ordinary shareholders $ 416 $ 113 $ 403 $ 1,487 $ (2,003 ) $ 416 Other comprehensive income (loss) $ (98 ) $ (10 ) $ (94 ) $ (239 ) $ 343 $ (98 ) Total comprehensive income (loss) attributable to Eaton ordinary shareholders $ 318 $ 103 $ 309 $ 1,248 $ (1,660 ) $ 318 CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2017 Eaton Corporation plc Eaton Corporation Guarantors Other subsidiaries Consolidating adjustments Total Net sales $ — $ 1,695 $ 1,732 $ 3,160 $ (1,376 ) $ 5,211 Cost of products sold — 1,321 1,263 2,255 (1,373 ) 3,466 Selling and administrative expense 3 347 203 349 — 902 Research and development expense — 45 46 56 — 147 Interest expense (income) - net — 62 4 (6 ) — 60 Gain on sale of business — 560 — 517 — 1,077 Other expense (income) - net 23 10 (31 ) 17 — 19 Equity in loss (earnings) of subsidiaries, net of tax (1,575 ) (221 ) (1,768 ) (1,699 ) 5,263 — Intercompany expense (income) - net 148 (39 ) 349 (458 ) — — Income (loss) before income taxes 1,401 730 1,666 3,163 (5,266 ) 1,694 Income tax expense (benefit) — 191 9 94 (1 ) 293 Net income (loss) 1,401 539 1,657 3,069 (5,265 ) 1,401 Less net loss (income) for noncontrolling interests — — — — — — Net income (loss) attributable to Eaton ordinary shareholders $ 1,401 $ 539 $ 1,657 $ 3,069 $ (5,265 ) $ 1,401 Other comprehensive income (loss) $ 199 $ (18 ) $ 202 $ 443 $ (627 ) $ 199 Total comprehensive income (loss) attributable to Eaton ordinary shareholders $ 1,600 $ 521 $ 1,859 $ 3,512 $ (5,892 ) $ 1,600 CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018 Eaton Corporation plc Eaton Corporation Guarantors Other subsidiaries Consolidating adjustments Total Net sales $ — $ 5,306 $ 5,304 $ 9,567 $ (4,027 ) $ 16,150 Cost of products sold — 4,196 3,847 6,824 (4,026 ) 10,841 Selling and administrative expense 8 1,093 575 1,003 — 2,679 Research and development expense — 109 113 217 — 439 Interest expense (income) - net — 203 11 (11 ) 2 205 Arbitration decision expense — — 275 — — 275 Other expense (income) - net (22 ) 25 31 (21 ) — 13 Equity in loss (earnings) of subsidiaries, net of tax (1,531 ) (709 ) (2,652 ) (1,760 ) 6,652 — Intercompany expense (income) - net 31 35 1,623 (1,689 ) — — Income (loss) before income taxes 1,514 354 1,481 5,004 (6,655 ) 1,698 Income tax expense (benefit) — (23 ) (119 ) 327 (1 ) 184 Net income (loss) 1,514 377 1,600 4,677 (6,654 ) 1,514 Less net loss (income) for noncontrolling interests — — — — — — Net income (loss) attributable to Eaton ordinary shareholders $ 1,514 $ 377 $ 1,600 $ 4,677 $ (6,654 ) $ 1,514 Other comprehensive income (loss) $ (426 ) $ (40 ) $ (407 ) $ (1,012 ) $ 1,459 $ (426 ) Total comprehensive income (loss) attributable to Eaton ordinary shareholders $ 1,088 $ 337 $ 1,193 $ 3,665 $ (5,195 ) $ 1,088 CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017 Eaton Corporation plc Eaton Corporation Guarantors Other subsidiaries Consolidating adjustments Total Net sales $ — $ 4,963 $ 5,114 $ 9,199 $ (4,085 ) $ 15,191 Cost of products sold — 3,944 3,753 6,604 (4,080 ) 10,221 Selling and administrative expense 9 1,056 601 1,003 — 2,669 Research and development expense — 139 134 167 — 440 Interest expense (income) - net — 180 15 (14 ) — 181 Gain on sale of a business — 560 — 517 — 1,077 Other expense (income) - net 71 35 (68 ) (14 ) — 24 Equity in loss (earnings) of subsidiaries, net of tax (2,863 ) (554 ) (3,410 ) (3,098 ) 9,925 — Intercompany expense (income) - net 432 (133 ) 1,046 (1,345 ) — — Income (loss) before income taxes 2,351 856 3,043 6,413 (9,930 ) 2,733 Income tax expense (benefit) — 191 28 164 (2 ) 381 Net income (loss) 2,351 665 3,015 6,249 (9,928 ) 2,352 Less net loss (income) for noncontrolling interests — — — (2 ) 1 (1 ) Net income (loss) attributable to Eaton ordinary shareholders $ 2,351 $ 665 $ 3,015 $ 6,247 $ (9,927 ) $ 2,351 Other comprehensive income (loss) $ 785 $ 67 $ 787 $ 1,668 $ (2,522 ) $ 785 Total comprehensive income (loss) attributable to Eaton $ 3,136 $ 732 $ 3,802 $ 7,915 $ (12,449 ) $ 3,136 CONDENSED CONSOLIDATING BALANCE SHEETS SEPTEMBER 30, 2018 Eaton Corporation plc Eaton Corporation Guarantors Other subsidiaries Consolidating adjustments Total Assets Current assets Cash $ 1 $ 36 $ 14 $ 276 $ — $ 327 Short-term investments — — — 178 — 178 Accounts receivable - net — 532 1,430 2,065 — 4,027 Intercompany accounts receivable 5 1,573 1,901 3,194 (6,673 ) — Inventory — 553 789 1,577 (84 ) 2,835 Prepaid expenses and other current assets — 115 35 333 17 500 Total current assets 6 2,809 4,169 7,623 (6,740 ) 7,867 Property, plant and equipment - net — 839 683 1,924 — 3,446 Other noncurrent assets Goodwill — 1,330 6,705 5,350 — 13,385 Other intangible assets — 131 3,091 1,727 — 4,949 Deferred income taxes — 313 — 236 (308 ) 241 Investment in subsidiaries 15,997 9,689 54,498 25,524 (105,708 ) — Intercompany loans receivable 2,622 3,693 6,987 63,179 (76,481 ) — Other assets — 720 172 848 — 1,740 Total assets $ 18,625 $ 19,524 $ 76,305 $ 106,411 $ (189,237 ) $ 31,628 Liabilities and shareholders’ equity Current liabilities Short-term debt $ 4 $ 65 $ — $ 13 $ — $ 82 Current portion of long-term debt — 426 — — — 426 Accounts payable — 459 458 1,248 — 2,165 Intercompany accounts payable 23 1,255 3,756 1,639 (6,673 ) — Accrued compensation — 106 58 263 — 427 Other current liabilities 1 539 594 1,034 (1 ) 2,167 Total current liabilities 28 2,850 4,866 4,197 (6,674 ) 5,267 Noncurrent liabilities Long-term debt — 5,772 953 8 4 6,737 Pension liabilities — 325 87 748 — 1,160 Other postretirement benefits liabilities — 183 90 71 — 344 Deferred income taxes — 1 480 174 (308 ) 347 Intercompany loans payable 1,843 4,585 68,714 1,339 (76,481 ) — Other noncurrent liabilities — 355 265 364 — 984 Total noncurrent liabilities 1,843 11,221 70,589 2,704 (76,785 ) 9,572 Shareholders’ equity Eaton shareholders' equity 16,754 5,453 850 99,475 (105,778 ) 16,754 Noncontrolling interests — — — 35 — 35 Total equity 16,754 5,453 850 99,510 (105,778 ) 16,789 Total liabilities and equity $ 18,625 $ 19,524 $ 76,305 $ 106,411 $ (189,237 ) $ 31,628 CONDENSED CONSOLIDATING BALANCE SHEETS DECEMBER 31, 2017 Eaton Corporation plc Eaton Corporation Guarantors Other subsidiaries Consolidating adjustments Total Assets Current assets Cash $ — $ 183 $ 18 $ 360 $ — $ 561 Short-term investments — — — 534 — 534 Accounts receivable - net — 482 1,376 2,085 — 3,943 Intercompany accounts receivable 8 2,864 5,117 2,715 (10,704 ) — Inventory — 473 737 1,493 (83 ) 2,620 Prepaid expenses and other current assets — 229 145 277 28 679 Total current assets 8 4,231 7,393 7,464 (10,759 ) 8,337 Property, plant and equipment - net — 859 702 1,941 — 3,502 Other noncurrent assets Goodwill — 1,316 6,705 5,547 — 13,568 Other intangible assets — 138 3,206 1,921 — 5,265 Deferred income taxes — 356 6 215 (324 ) 253 Investment in subsidiaries 15,045 9,466 73,737 39,873 (138,121 ) — Intercompany loans receivable 3,122 7,089 2,909 61,427 (74,547 ) — Other assets — 748 166 784 — 1,698 Total assets $ 18,175 $ 24,203 $ 94,824 $ 119,172 $ (223,751 ) $ 32,623 Liabilities and shareholders’ equity Current liabilities Short-term debt $ — $ — $ — $ 6 $ — $ 6 Current portion of long-term debt — 542 36 — — 578 Accounts payable — 533 328 1,305 — 2,166 Intercompany accounts payable 4 4,916 4,381 1,403 (10,704 ) — Accrued compensation — 128 65 260 — 453 Other current liabilities 1 566 317 989 (1 ) 1,872 Total current liabilities 5 6,685 5,127 3,963 (10,705 ) 5,075 Noncurrent liabilities Long-term debt — 6,180 976 9 2 7,167 Pension liabilities — 341 89 796 — 1,226 Other postretirement benefits liabilities — 192 96 74 — 362 Deferred income taxes — — 607 255 (324 ) 538 Intercompany loans payable 917 3,808 68,685 1,137 (74,547 ) — Other noncurrent liabilities — 314 273 378 — 965 Total noncurrent liabilities 917 10,835 70,726 2,649 (74,869 ) 10,258 Shareholders’ equity Eaton shareholders' equity 17,253 6,683 18,971 112,523 (138,177 ) 17,253 Noncontrolling interests — — — 37 — 37 Total equity 17,253 6,683 18,971 112,560 (138,177 ) 17,290 Total liabilities and equity $ 18,175 $ 24,203 $ 94,824 $ 119,172 $ (223,751 ) $ 32,623 CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018 Eaton Corporation plc Eaton Corporation Guarantors Other subsidiaries Consolidating adjustments Total Net cash provided by (used in) operating activities $ (12 ) $ (163 ) $ 394 $ 1,707 $ (88 ) $ 1,838 Investing activities Capital expenditures for property, plant and equipment — (75 ) (74 ) (262 ) — (411 ) Sales (purchases) of short-term — — — 329 — 329 Investments in affiliates — (36 ) — — 36 — Loans to affiliates — (100 ) (84 ) (4,764 ) 4,948 — Repayments of loans from affiliates — 647 957 3,892 (5,496 ) — Proceeds from sale of business — — — — — — Payments for settlement of currency exchange contracts not designated as hedges - net — 11 — (133 ) — (122 ) Other - net — (26 ) 3 (29 ) — (52 ) Net cash provided by (used in) investing activities — 421 802 (967 ) (512 ) (256 ) Financing activities Proceeds from borrowings 4 65 — 11 — 80 Payments on borrowings — (450 ) (35 ) (1 ) — (486 ) Proceeds from borrowings from affiliates 2,671 1,995 182 100 (4,948 ) — Payments on borrowings from affiliates (1,226 ) (2,775 ) (655 ) (840 ) 5,496 — Capital contributions from affiliates — — — 36 (36 ) — Other intercompany financing activities — 777 (687 ) (90 ) — — Cash dividends paid (864 ) — — — — (864 ) Cash dividends paid to affiliates — — — (88 ) 88 — Exercise of employee stock options 28 — — — — 28 Repurchase of shares (600 ) — — — — (600 ) Employee taxes paid from shares withheld — (16 ) (5 ) (3 ) — (24 ) Other - net — (1 ) — (1 ) — (2 ) Net cash provided by (used in) financing activities 13 (405 ) (1,200 ) (876 ) 600 (1,868 ) Effect of currency on cash — — — 52 — 52 Total increase (decrease) in cash 1 (147 ) (4 ) (84 ) — (234 ) Cash at the beginning of the period — 183 18 360 — 561 Cash at the end of the period $ 1 $ 36 $ 14 $ 276 $ — $ 327 CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017 Eaton Corporation plc Eaton Corporation Guarantors Other subsidiaries Consolidating adjustments Total Net cash provided by (used in) operating activities $ 528 $ (228 ) $ 1,063 $ 2,036 $ (1,612 ) $ 1,787 Investing activities Capital expenditures for property, plant and equipment — (63 ) (77 ) (211 ) — (351 ) Cash received from (paid for) acquisitions of affiliates — — (92 ) 92 — — Sales (purchases) of short-term — — (50 ) (571 ) — (621 ) Investments in affiliates (90 ) (108 ) — (90 ) 288 — Return of investments in affiliates — — 20 — (20 ) — Loans to affiliates — (17 ) (283 ) (4,471 ) 4,771 — Repayments of loans from affiliates — 291 384 3,478 (4,153 ) — Proceeds from sale of businesses — 330 — 270 — 600 Other - net — (36 ) 1 (28 ) — (63 ) Net cash provided by (used in) investing activities (90 ) 397 (97 ) (1,531 ) 886 (435 ) Financing activities Proceeds from borrowings — 1,000 — — — 1,000 Payments on borrowings — (250 ) (297 ) (6 ) — (553 ) Proceeds from borrowings from affiliates 1,917 1,873 966 15 (4,771 ) — Payments on borrowings from affiliates (822 ) (2,904 ) (352 ) (75 ) 4,153 — Capital contributions from affiliates — — 90 198 (288 ) — Return of capital to affiliates — — — (20 ) 20 — Other intercompany financing activities — 219 (486 ) 267 — — Cash dividends paid (803 ) — — — — (803 ) Cash dividends paid to affiliates — — (803 ) (809 ) 1,612 — Exercise of employee stock options 59 — — — — 59 Repurchase of shares (789 ) — — — — (789 ) Employee taxes paid from shares withheld — (14 ) (4 ) (3 ) — (21 ) Other - net — (4 ) (1 ) (3 ) — (8 ) Net cash provided by (used in) financing activities (438 ) (80 ) (887 ) (436 ) 726 (1,115 ) Effect of currency on cash — — — 11 — 11 Total increase (decrease) in cash — 89 79 80 — 248 Cash at the beginning of the period 1 92 12 438 — 543 Cash at the end of the period $ 1 $ 181 $ 91 $ 518 $ — $ 791 |
BASIS OF PRESENTATION (Policies
BASIS OF PRESENTATION (Policies) | 9 Months Ended |
Sep. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Accounting | 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 2017 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. During the first quarter of 2018, Eaton re-segmented certain reportable operating segments due to a reorganization of the Company's businesses. The new reportable business segment is eMobility (which includes certain legacy Electrical Products and Vehicle product lines). See Note 14 for additional information related to these segments. |
Reclassifications | Certain prior year amounts have been reclassified to conform to the current year presentation. |
Revenue Recognition, Policy | Revenue Recognition Sales are recognized when control of promised goods or services are transferred to customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. Control is transferred when the customer has the ability to direct the use of and obtain benefits from the goods or services. The majority of the Company’s sales agreements contain performance obligations satisfied at a point in time when control is transferred to the customer. Sales recognized over time are generally accounted for using an input measure to determine progress completed at the end of the period. Sales for service contracts generally are recognized as the services are provided. For agreements with multiple performance obligations, judgment is required to determine whether performance obligations specified in these agreements are distinct and should be accounted for as separate revenue transactions for recognition purposes. In these types of agreements, we generally allocate sales price to each distinct obligation based on the price of each item sold in separate transactions. Payment terms vary by the type and location of the customer and the products or services offered. Generally, the time between when revenue is recognized and payment is due is not significant. Eaton does not evaluate whether the selling price includes a financing interest component for contracts that are less than a year. Sales, value added, and other taxes collected concurrent with revenue are excluded from sales. Shipping and handling costs are treated as fulfillment costs and are included in Cost of products sold. Eaton records reductions to sales for returns, and customer and distributor incentives, primarily comprised of rebates, at the time of the initial sale. Rebates are estimated based on sales terms, historical experience, trend analysis, and projected market conditions in the various markets served. The rebate programs offered vary across businesses due to the numerous markets Eaton serves, but the most common incentives relate to amounts paid or credited to customers for achieving defined volume levels. Returns are estimated at the time of the sale primarily based on historical experience and recorded gross on the Consolidated Balance Sheet. See Note 4 for additional information. |
Adoption of ASU 2014-09 | Adoption of New Accounting Standards Eaton adopted Accounting Standard Update 2014-09, Revenue from Contracts with Customers, at the start of the first quarter of 2018 using the modified retrospective approach and recorded a cumulative effect adjustment to retained earnings based on the current terms and conditions for open contracts as of January 1, 2018. The adoption of the standard did not have a material impact on the Company’s Consolidated financial statements. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. Consolidated Balance Sheet Balance at December 31, 2017 Adjustments due to ASU 2014-09 Balance at January 1, 2018 Assets Accounts receivable - net $ 3,943 $ (99 ) $ 3,844 Prepaid expenses and other current assets 679 129 808 Deferred income taxes 253 1 254 Liabilities and shareholders' equity Other current liabilities $ 1,872 $ 33 $ 1,905 Eaton shareholders' equity 17,253 (2 ) 17,251 |
Adoption of ASU 2016-16 | Eaton adopted Accounting Standards Update 2016-16, Intra-Entity Transfers of Assets Other Than Inventory (ASU 2016-16), at the start of the first quarter of 2018. This accounting standard requires companies to recognize the income tax effects of intercompany sales and transfers of assets other than inventory in the period in which the transfer occurs. The previous accounting standard required companies to defer the income tax effects of intercompany transfers of assets by recording a prepaid tax, until such assets were sold to an outside party or otherwise recognized. ASU 2016-16 requires companies to write off any income tax amounts that had been deferred as prepaid taxes from past intercompany transactions, and record deferred tax balances for amounts that have not been recognized, through a cumulative-effect adjustment to retained earnings. Upon adoption, the Company recorded a cumulative-effect adjustment of $199 to reduce retained earnings. |
Adoption of ASU 2017-07 | Eaton adopted Accounting Standards Update 2017-07, Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (ASU 2017-07), at the start of the first quarter of 2018. The new standard requires companies to present service costs consistent with other employee compensation costs on the income statement and separate from all other elements of pension costs. The retrospective adoption of this standard resulted in an increase in selling and administrative expense with a corresponding decrease in Other expense - net of $2 for the nine months ended September 30, 2018 , and a reduction in selling and administrative expense with a corresponding increase in Other expense - net of $34 for the nine months ended September 30, 2017 . |
Recently Issued Accounting Pronouncements | Recently Issued Accounting Pronouncement In February 2016, the FASB issued Accounting Standards Update 2016-02, Leases (Topic 842), (ASU 2016-02). This accounting standard requires that a lessee recognize a lease asset and a lease liability on its balance sheet for all leases, including operating leases, with a term greater than 12 months. ASU 2016-02 will require additional disclosures in the notes to the consolidated financial statements and is effective for annual and interim reporting periods beginning after December 15, 2018. The Company plans to adopt the standard, and related amendments, as of the first quarter of 2019 using the optional transition method that allows for a cumulative-effect adjustment to be recorded at adoption, and will not restate prior periods. A project team has been formed to evaluate and implement the new standard. The project team has been collecting and validating the data required to account for leases under the new standard, and continues to test the functionality of a new lease accounting system being developed by a third-party. In addition, the Company is in the process of identifying and implementing the appropriate changes to business processes and controls to support recognition and disclosure under the new standard. Eaton is evaluating the impact of ASU 2016-02 and expects to recognize a significant lease asset and lease liability for operating leases on the Consolidated Balance Sheet, but does not expect a material impact to the Consolidated Statements of Income or Cash Flows. |
BASIS OF PRESENTATION (Tables)
BASIS OF PRESENTATION (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Schedule of the Impact of Adoption of ASU 2014-09 | Consolidated Balance Sheet Balance at December 31, 2017 Adjustments due to ASU 2014-09 Balance at January 1, 2018 Assets Accounts receivable - net $ 3,943 $ (99 ) $ 3,844 Prepaid expenses and other current assets 679 129 808 Deferred income taxes 253 1 254 Liabilities and shareholders' equity Other current liabilities $ 1,872 $ 33 $ 1,905 Eaton shareholders' equity 17,253 (2 ) 17,251 In accordance with the new revenue accounting requirements, the impact of the adoption on the financial statement line items within the accompanying financial statements was as follows: Three months ended September 30, 2018 Consolidated Statements of Income As Reported Adjustment Balances without Adoption of ASC 606 Net sales $ 5,412 $ (5 ) $ 5,407 Cost of products sold 3,597 (4 ) 3,593 Income before income taxes 439 (1 ) 438 Income tax expense 23 — 23 Net income 416 (1 ) 415 Net income attributable to Eaton ordinary shareholders $ 416 $ (1 ) $ 415 Nine months ended September 30, 2018 Consolidated Statements of Income As Reported Adjustment Balances without Adoption of ASC 606 Net sales $ 16,150 $ (23 ) $ 16,127 Cost of products sold 10,841 (14 ) 10,827 Income before income taxes 1,698 (9 ) 1,689 Income tax expense 184 (2 ) 182 Net income 1,514 (7 ) 1,507 Net income attributable to Eaton ordinary shareholders $ 1,514 $ (7 ) $ 1,507 September 30, 2018 Condensed Consolidated Balance Sheets As Reported Adjustment Balances without Adoption of ASC 606 Assets Accounts receivable - net $ 4,027 $ 58 $ 4,085 Inventory 2,835 13 2,848 Prepaid expenses and other current assets 500 (105 ) 395 Deferred income taxes 241 (1 ) 240 Liabilities and shareholders’ equity Other current liabilities $ 2,167 $ (30 ) $ 2,137 Eaton shareholders' equity $ 16,789 $ (5 ) $ 16,784 |
ACQUISITION INTEGRATION CHARG_2
ACQUISITION INTEGRATION CHARGES (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Acquisitions Integration Charges [Abstract] | |
Acquisition Integration Charges | Eaton incurs integration charges related to acquired businesses. A summary of these charges follows: Three months ended Nine months ended 2018 2017 2018 2017 Electrical Products $ — $ 1 $ — $ 3 Total acquisition integration charges before income tax — 1 — 3 Income taxes — — — 1 Total after income taxes $ — $ 1 $ — $ 2 Per ordinary share - diluted $ — $ — $ — $ — |
REVENUE RECOGNITION (Tables)
REVENUE RECOGNITION (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Disaggregation of Revenue [Line Items] | |
Schedule of Disaggregation of Sales | Three months ended September 30, 2018 Net sales United States Rest of World Total Electrical Products $ 1,055 $ 734 $ 1,789 Electrical Systems and Services 1,000 519 1,519 Hydraulics 301 369 670 Original Equipment Manufacturers Aftermarket, Distribution and End User Aerospace $ 269 $ 209 478 Commercial Passenger and Light Duty Vehicle $ 451 $ 425 876 eMobility 80 Total $ 5,412 Nine months ended September 30, 2018 Net sales United States Rest of World Total Electrical Products $ 3,048 $ 2,279 $ 5,327 Electrical Systems and Services 2,877 1,536 4,413 Hydraulics 907 1,196 2,103 Original Equipment Manufacturers Aftermarket, Distribution and End User Aerospace $ 799 $ 600 1,399 Commercial Passenger and Light Duty Vehicle $ 1,333 $ 1,335 2,668 eMobility 240 Total $ 16,150 |
Schedule of Changes in Deferred Revenue Liabilities | Changes in the deferred revenue liabilities are as follows: Deferred Revenue Balance at January 1, 2018 $ 227 Customer deposits and billings 696 Revenue recognized in the period (676 ) Translation (6 ) Balance at September 30, 2018 $ 241 |
Schedule of the Impact of Adoption of ASU 2014-09 | Consolidated Balance Sheet Balance at December 31, 2017 Adjustments due to ASU 2014-09 Balance at January 1, 2018 Assets Accounts receivable - net $ 3,943 $ (99 ) $ 3,844 Prepaid expenses and other current assets 679 129 808 Deferred income taxes 253 1 254 Liabilities and shareholders' equity Other current liabilities $ 1,872 $ 33 $ 1,905 Eaton shareholders' equity 17,253 (2 ) 17,251 In accordance with the new revenue accounting requirements, the impact of the adoption on the financial statement line items within the accompanying financial statements was as follows: Three months ended September 30, 2018 Consolidated Statements of Income As Reported Adjustment Balances without Adoption of ASC 606 Net sales $ 5,412 $ (5 ) $ 5,407 Cost of products sold 3,597 (4 ) 3,593 Income before income taxes 439 (1 ) 438 Income tax expense 23 — 23 Net income 416 (1 ) 415 Net income attributable to Eaton ordinary shareholders $ 416 $ (1 ) $ 415 Nine months ended September 30, 2018 Consolidated Statements of Income As Reported Adjustment Balances without Adoption of ASC 606 Net sales $ 16,150 $ (23 ) $ 16,127 Cost of products sold 10,841 (14 ) 10,827 Income before income taxes 1,698 (9 ) 1,689 Income tax expense 184 (2 ) 182 Net income 1,514 (7 ) 1,507 Net income attributable to Eaton ordinary shareholders $ 1,514 $ (7 ) $ 1,507 September 30, 2018 Condensed Consolidated Balance Sheets As Reported Adjustment Balances without Adoption of ASC 606 Assets Accounts receivable - net $ 4,027 $ 58 $ 4,085 Inventory 2,835 13 2,848 Prepaid expenses and other current assets 500 (105 ) 395 Deferred income taxes 241 (1 ) 240 Liabilities and shareholders’ equity Other current liabilities $ 2,167 $ (30 ) $ 2,137 Eaton shareholders' equity $ 16,789 $ (5 ) $ 16,784 |
RESTRUCTURING CHARGES (Tables)
RESTRUCTURING CHARGES (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Restructuring and Related Activities [Abstract] | |
Restructuring Liability Rollforward | A summary of liabilities related to workforce reductions, plant closings and other associated costs announced as part of this program follows: Workforce reductions Plant closings and other Total Balance at December 31, 2016 $ 113 $ 1 $ 114 Liability recognized 57 59 116 Payments (102 ) (39 ) (141 ) Other adjustments (1 ) (16 ) (17 ) Balance at December 31, 2017 67 5 72 Payments (29 ) (4 ) (33 ) Other adjustments (14 ) — (14 ) Balance at September 30, 2018 $ 24 $ 1 $ 25 |
GOODWILL (Tables)
GOODWILL (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Goodwill | Change in the carrying amount of goodwill by segment follows: December 31, Translation September 30, Electrical Products $ 6,678 $ (87 ) $ 6,591 Electrical Systems and Services 4,311 (40 ) 4,271 Hydraulics 1,257 (50 ) 1,207 Aerospace 947 (4 ) 943 Vehicle 294 (2 ) 292 eMobility 81 — 81 Total $ 13,568 $ (183 ) $ 13,385 |
RETIREMENT BENEFIT PLANS (Table
RETIREMENT BENEFIT PLANS (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Retirement Benefits [Abstract] | |
Retirement Benefits Plans Expense | The components of retirement benefits expense follow: United States Non-United States Other postretirement Three months ended September 30 2018 2017 2018 2017 2018 2017 Service cost $ 25 $ 24 $ 16 $ 18 $ 1 $ 1 Interest cost 30 30 13 14 3 4 Expected return on plan assets (63 ) (61 ) (27 ) (24 ) — (1 ) Amortization 24 21 9 13 (4 ) (3 ) 16 14 11 21 — 1 Settlements 13 17 1 4 — — Total expense $ 29 $ 31 $ 12 $ 25 $ — $ 1 United States Non-United States Other postretirement Nine months ended September 30 2018 2017 2018 2017 2018 2017 Service cost $ 75 $ 72 $ 48 $ 53 $ 2 $ 2 Interest cost 91 92 40 41 10 11 Expected return on plan assets (190 ) (183 ) (80 ) (70 ) (2 ) (3 ) Amortization 71 62 29 38 (10 ) (9 ) 47 43 37 62 — 1 Settlements 38 51 1 4 — — Total expense $ 85 $ 94 $ 38 $ 66 $ — $ 1 |
EQUITY (Tables)
EQUITY (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Stockholders' Equity Note [Abstract] | |
Changes in Shareholders' equity | The changes in Shareholders’ equity follow: Eaton shareholders’ equity Noncontrolling interests Total equity Balance at December 31, 2017 $ 17,253 $ 37 $ 17,290 Cumulative-effect adjustment upon adoption of ASU 2014-09 (2 ) — (2 ) Cumulative-effect adjustment upon adoption of ASU 2016-16 (199 ) — (199 ) Net income 1,514 — 1,514 Other comprehensive loss (426 ) — (426 ) Cash dividends paid (864 ) (1 ) (865 ) Issuance of shares under equity-based compensation plans - net 78 — 78 Repurchase of shares (600 ) — (600 ) Changes in noncontrolling interest - net — (1 ) (1 ) Balance at September 30, 2018 $ 16,754 $ 35 $ 16,789 |
Schedule of Accumulated Other Comprehensive Loss | The changes in Accumulated other comprehensive loss follow: Currency translation and related hedging instruments Pensions and other postretirement benefits Cash flow hedges Total Balance at December 31, 2017 $ (2,255 ) $ (1,139 ) $ (10 ) $ (3,404 ) Other comprehensive (loss) income before reclassifications (546 ) 20 (11 ) (537 ) Amounts reclassified from Accumulated other comprehensive loss — 102 9 111 Net current-period Other comprehensive (loss) income (546 ) 122 (2 ) (426 ) Balance at September 30, 2018 $ (2,801 ) $ (1,017 ) $ (12 ) $ (3,830 ) |
Reclassification Out of Accumulated Other Comprehensive Loss | The reclassifications out of Accumulated other comprehensive loss follow: Nine months ended September 30, 2018 Consolidated statements of income classification Amortization of defined benefit pensions and other postretirement benefits items Actuarial loss and prior service cost $ (129 ) 1 Tax benefit 27 Total, net of tax (102 ) Gains and (losses) on cash flow hedges Currency exchange contracts (12 ) Cost of products sold Tax benefit 3 Total, net of tax (9 ) Total reclassifications for the period $ (111 ) 1 These components of Accumulated other comprehensive loss are included in the computation of net periodic benefit cost. See Note 7 for additional information about pension and other postretirement benefits items. |
Calculation of Net Income Per Ordinary Share Attributable to Shareholders | A summary of the calculation of net income per share attributable to Eaton ordinary shareholders follows: Three months ended Nine months ended (Shares in millions) 2018 2017 2018 2017 Net income attributable to Eaton ordinary shareholders $ 416 $ 1,401 $ 1,514 $ 2,351 Weighted-average number of ordinary shares outstanding - diluted 436.3 445.2 438.4 448.3 Less dilutive effect of equity-based compensation 2.8 2.6 2.6 2.4 Weighted-average number of ordinary shares outstanding - basic 433.5 442.6 435.8 445.9 Net income per share attributable to Eaton ordinary shareholders Diluted $ 0.95 $ 3.14 $ 3.45 $ 5.24 Basic 0.96 3.16 3.47 5.27 |
FAIR VALUE MEASUREMENTS (Tables
FAIR VALUE MEASUREMENTS (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Fair Value Disclosures [Abstract] | |
Summary of Financial Instruments Recognized at Fair Value and Fair Value Measurement Used | A summary of financial instruments recognized at fair value, and the fair value measurements used, follows: Total Level 1 Level 2 Level 3 September 30, 2018 Cash $ 327 $ 327 $ — $ — Short-term investments 178 178 — — Net derivative contracts (59 ) — (59 ) — December 31, 2017 Cash $ 561 $ 561 $ — $ — Short-term investments 534 534 — — Net derivative contracts 36 — 36 — |
DERIVATIVE FINANCIAL INSTRUME_2
DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivative Financial Instruments Recognized in Condensed Consolidated Balance Sheet | The fair value of derivative financial instruments recognized in the Condensed Consolidated Balance Sheets follows: Notional amount Other current assets Other noncurrent assets Other current liabilities Other noncurrent liabilities Type of hedge Term September 30, 2018 Derivatives designated as hedges Fixed-to-floating interest rate swaps $ 2,550 $ 1 $ 16 $ 1 $ 62 Fair value 9 months to 16 years Currency exchange contracts 954 12 2 21 5 Cash flow 1 to 36 months Total $ 13 $ 18 $ 22 $ 67 Derivatives not designated as hedges Currency exchange contracts $ 7,616 $ 33 $ 33 1 to 12 months Commodity contracts 13 — 1 1 to 12 months Total $ 33 $ 34 December 31, 2017 Derivatives designated as hedges Fixed-to-floating interest rate swaps $ 2,965 $ 1 $ 41 $ — $ 17 Fair value 6 months to 17 years Currency exchange contracts 924 7 7 22 2 Cash flow 1 to 36 months Total $ 8 $ 48 $ 22 $ 19 Derivatives not designated as hedges Currency exchange contracts $ 3,719 $ 39 $ 19 1 to 12 months Commodity contracts 13 1 — 1 to 12 months Total $ 40 $ 19 |
Amounts Recognized in Accumulated Other Comprehensive Loss | The impact of derivative instruments to the Consolidated Statement of Income and Comprehensive Income follow: 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 Three months ended 2018 2017 2018 2017 Derivatives designated as cash flow hedges Forward starting floating-to-fixed interest rate swaps $ — $ (10 ) Interest expense - net $ — $ — Interest rate locks — (9 ) Interest expense - net — — Currency exchange contracts (12 ) (6 ) Cost of products sold (4 ) (7 ) Total $ (12 ) $ (25 ) $ (4 ) $ (7 ) Gain (loss) recognized in Location of gain (loss) Gain (loss) reclassified Nine months ended Nine months ended 2018 2017 2018 2017 Derivatives designated as cash Forward starting floating-to-fixed $ — $ (15 ) Interest expense - net $ — $ — Interest rate locks — (9 ) Interest expense - net — — Currency exchange contracts (14 ) (5 ) Cost of products sold (12 ) (12 ) Total $ (14 ) $ (29 ) $ (12 ) $ (12 ) |
Amounts recognized in Net Income | Amounts recognized in net income follow: Three months ended Nine months ended 2018 2017 2018 2017 Derivatives designated as fair value hedges Fixed-to-floating interest rate swaps $ (12 ) $ (4 ) $ (71 ) $ (7 ) Related long-term debt converted to floating interest rates by interest rate swaps 12 4 71 7 $ — $ — $ — $ — |
INVENTORY (Tables)
INVENTORY (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Inventory Disclosure [Abstract] | |
Components of Inventory | The components of inventory follow: September 30, December 31, Raw materials $ 1,094 $ 953 Work-in-process 531 471 Finished goods 1,210 1,196 Total inventory $ 2,835 $ 2,620 |
BUSINESS SEGMENT INFORMATION (T
BUSINESS SEGMENT INFORMATION (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Segment Reporting [Abstract] | |
Business Segment Information | Three months ended Nine months ended 2018 2017 2018 2017 Net sales Electrical Products $ 1,789 $ 1,785 $ 5,327 $ 5,167 Electrical Systems and Services 1,519 1,421 4,413 4,168 Hydraulics 670 634 2,103 1,854 Aerospace 478 438 1,399 1,303 Vehicle 876 858 2,668 2,489 eMobility 80 75 240 210 Total net sales $ 5,412 $ 5,211 $ 16,150 $ 15,191 Segment operating profit Electrical Products $ 343 $ 330 $ 984 $ 915 Electrical Systems and Services 234 196 628 545 Hydraulics 94 80 285 214 Aerospace 105 84 284 244 Vehicle 166 150 464 399 eMobility 10 16 35 40 Total segment operating profit 952 856 2,680 2,357 Corporate Amortization of intangible assets (95 ) (98 ) (289 ) (288 ) Interest expense - net (67 ) (60 ) (205 ) (181 ) Pension and other postretirement benefits expense (3 ) (16 ) (4 ) (38 ) Gain on sale of business — 1,077 — 1,077 Arbitration decision expense (275 ) — (275 ) — Other corporate expense - net (73 ) (65 ) (209 ) (194 ) Income before income taxes 439 1,694 1,698 2,733 Income tax expense 23 293 184 381 Net income 416 1,401 1,514 2,352 Less net income for noncontrolling interests — — — (1 ) Net income attributable to Eaton ordinary shareholders $ 416 $ 1,401 $ 1,514 $ 2,351 |
CONDENSED CONSOLIDATING FINAN_2
CONDENSED CONSOLIDATING FINANCIAL STATEMENTS (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Condensed Consolidating Financial Information [Abstract] | |
Condensed Consolidating Financial Statements | CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2018 Eaton Corporation plc Eaton Corporation Guarantors Other subsidiaries Consolidating adjustments Total Net sales $ — $ 1,808 $ 1,814 $ 3,134 $ (1,344 ) $ 5,412 Cost of products sold — 1,417 1,322 2,202 (1,344 ) 3,597 Selling and administrative expense 2 355 197 335 — 889 Research and development expense — 33 37 68 — 138 Interest expense (income) - net — 68 3 (4 ) — 67 Arbitration decision expense — — 275 — — 275 Other expense (income) - net (3 ) 11 4 (5 ) — 7 Equity in loss (earnings) of subsidiaries, net of tax (430 ) (212 ) (915 ) (446 ) 2,003 — Intercompany expense (income) - net 15 33 579 (627 ) — — Income (loss) before income taxes 416 103 312 1,611 (2,003 ) 439 Income tax expense (benefit) — (10 ) (91 ) 124 — 23 Net income (loss) 416 113 403 1,487 (2,003 ) 416 Less net loss (income) for noncontrolling interests — — — — — — Net income (loss) attributable to Eaton ordinary shareholders $ 416 $ 113 $ 403 $ 1,487 $ (2,003 ) $ 416 Other comprehensive income (loss) $ (98 ) $ (10 ) $ (94 ) $ (239 ) $ 343 $ (98 ) Total comprehensive income (loss) attributable to Eaton ordinary shareholders $ 318 $ 103 $ 309 $ 1,248 $ (1,660 ) $ 318 CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2017 Eaton Corporation plc Eaton Corporation Guarantors Other subsidiaries Consolidating adjustments Total Net sales $ — $ 1,695 $ 1,732 $ 3,160 $ (1,376 ) $ 5,211 Cost of products sold — 1,321 1,263 2,255 (1,373 ) 3,466 Selling and administrative expense 3 347 203 349 — 902 Research and development expense — 45 46 56 — 147 Interest expense (income) - net — 62 4 (6 ) — 60 Gain on sale of business — 560 — 517 — 1,077 Other expense (income) - net 23 10 (31 ) 17 — 19 Equity in loss (earnings) of subsidiaries, net of tax (1,575 ) (221 ) (1,768 ) (1,699 ) 5,263 — Intercompany expense (income) - net 148 (39 ) 349 (458 ) — — Income (loss) before income taxes 1,401 730 1,666 3,163 (5,266 ) 1,694 Income tax expense (benefit) — 191 9 94 (1 ) 293 Net income (loss) 1,401 539 1,657 3,069 (5,265 ) 1,401 Less net loss (income) for noncontrolling interests — — — — — — Net income (loss) attributable to Eaton ordinary shareholders $ 1,401 $ 539 $ 1,657 $ 3,069 $ (5,265 ) $ 1,401 Other comprehensive income (loss) $ 199 $ (18 ) $ 202 $ 443 $ (627 ) $ 199 Total comprehensive income (loss) attributable to Eaton ordinary shareholders $ 1,600 $ 521 $ 1,859 $ 3,512 $ (5,892 ) $ 1,600 CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018 Eaton Corporation plc Eaton Corporation Guarantors Other subsidiaries Consolidating adjustments Total Net sales $ — $ 5,306 $ 5,304 $ 9,567 $ (4,027 ) $ 16,150 Cost of products sold — 4,196 3,847 6,824 (4,026 ) 10,841 Selling and administrative expense 8 1,093 575 1,003 — 2,679 Research and development expense — 109 113 217 — 439 Interest expense (income) - net — 203 11 (11 ) 2 205 Arbitration decision expense — — 275 — — 275 Other expense (income) - net (22 ) 25 31 (21 ) — 13 Equity in loss (earnings) of subsidiaries, net of tax (1,531 ) (709 ) (2,652 ) (1,760 ) 6,652 — Intercompany expense (income) - net 31 35 1,623 (1,689 ) — — Income (loss) before income taxes 1,514 354 1,481 5,004 (6,655 ) 1,698 Income tax expense (benefit) — (23 ) (119 ) 327 (1 ) 184 Net income (loss) 1,514 377 1,600 4,677 (6,654 ) 1,514 Less net loss (income) for noncontrolling interests — — — — — — Net income (loss) attributable to Eaton ordinary shareholders $ 1,514 $ 377 $ 1,600 $ 4,677 $ (6,654 ) $ 1,514 Other comprehensive income (loss) $ (426 ) $ (40 ) $ (407 ) $ (1,012 ) $ 1,459 $ (426 ) Total comprehensive income (loss) attributable to Eaton ordinary shareholders $ 1,088 $ 337 $ 1,193 $ 3,665 $ (5,195 ) $ 1,088 CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017 Eaton Corporation plc Eaton Corporation Guarantors Other subsidiaries Consolidating adjustments Total Net sales $ — $ 4,963 $ 5,114 $ 9,199 $ (4,085 ) $ 15,191 Cost of products sold — 3,944 3,753 6,604 (4,080 ) 10,221 Selling and administrative expense 9 1,056 601 1,003 — 2,669 Research and development expense — 139 134 167 — 440 Interest expense (income) - net — 180 15 (14 ) — 181 Gain on sale of a business — 560 — 517 — 1,077 Other expense (income) - net 71 35 (68 ) (14 ) — 24 Equity in loss (earnings) of subsidiaries, net of tax (2,863 ) (554 ) (3,410 ) (3,098 ) 9,925 — Intercompany expense (income) - net 432 (133 ) 1,046 (1,345 ) — — Income (loss) before income taxes 2,351 856 3,043 6,413 (9,930 ) 2,733 Income tax expense (benefit) — 191 28 164 (2 ) 381 Net income (loss) 2,351 665 3,015 6,249 (9,928 ) 2,352 Less net loss (income) for noncontrolling interests — — — (2 ) 1 (1 ) Net income (loss) attributable to Eaton ordinary shareholders $ 2,351 $ 665 $ 3,015 $ 6,247 $ (9,927 ) $ 2,351 Other comprehensive income (loss) $ 785 $ 67 $ 787 $ 1,668 $ (2,522 ) $ 785 Total comprehensive income (loss) attributable to Eaton $ 3,136 $ 732 $ 3,802 $ 7,915 $ (12,449 ) $ 3,136 CONDENSED CONSOLIDATING BALANCE SHEETS SEPTEMBER 30, 2018 Eaton Corporation plc Eaton Corporation Guarantors Other subsidiaries Consolidating adjustments Total Assets Current assets Cash $ 1 $ 36 $ 14 $ 276 $ — $ 327 Short-term investments — — — 178 — 178 Accounts receivable - net — 532 1,430 2,065 — 4,027 Intercompany accounts receivable 5 1,573 1,901 3,194 (6,673 ) — Inventory — 553 789 1,577 (84 ) 2,835 Prepaid expenses and other current assets — 115 35 333 17 500 Total current assets 6 2,809 4,169 7,623 (6,740 ) 7,867 Property, plant and equipment - net — 839 683 1,924 — 3,446 Other noncurrent assets Goodwill — 1,330 6,705 5,350 — 13,385 Other intangible assets — 131 3,091 1,727 — 4,949 Deferred income taxes — 313 — 236 (308 ) 241 Investment in subsidiaries 15,997 9,689 54,498 25,524 (105,708 ) — Intercompany loans receivable 2,622 3,693 6,987 63,179 (76,481 ) — Other assets — 720 172 848 — 1,740 Total assets $ 18,625 $ 19,524 $ 76,305 $ 106,411 $ (189,237 ) $ 31,628 Liabilities and shareholders’ equity Current liabilities Short-term debt $ 4 $ 65 $ — $ 13 $ — $ 82 Current portion of long-term debt — 426 — — — 426 Accounts payable — 459 458 1,248 — 2,165 Intercompany accounts payable 23 1,255 3,756 1,639 (6,673 ) — Accrued compensation — 106 58 263 — 427 Other current liabilities 1 539 594 1,034 (1 ) 2,167 Total current liabilities 28 2,850 4,866 4,197 (6,674 ) 5,267 Noncurrent liabilities Long-term debt — 5,772 953 8 4 6,737 Pension liabilities — 325 87 748 — 1,160 Other postretirement benefits liabilities — 183 90 71 — 344 Deferred income taxes — 1 480 174 (308 ) 347 Intercompany loans payable 1,843 4,585 68,714 1,339 (76,481 ) — Other noncurrent liabilities — 355 265 364 — 984 Total noncurrent liabilities 1,843 11,221 70,589 2,704 (76,785 ) 9,572 Shareholders’ equity Eaton shareholders' equity 16,754 5,453 850 99,475 (105,778 ) 16,754 Noncontrolling interests — — — 35 — 35 Total equity 16,754 5,453 850 99,510 (105,778 ) 16,789 Total liabilities and equity $ 18,625 $ 19,524 $ 76,305 $ 106,411 $ (189,237 ) $ 31,628 CONDENSED CONSOLIDATING BALANCE SHEETS DECEMBER 31, 2017 Eaton Corporation plc Eaton Corporation Guarantors Other subsidiaries Consolidating adjustments Total Assets Current assets Cash $ — $ 183 $ 18 $ 360 $ — $ 561 Short-term investments — — — 534 — 534 Accounts receivable - net — 482 1,376 2,085 — 3,943 Intercompany accounts receivable 8 2,864 5,117 2,715 (10,704 ) — Inventory — 473 737 1,493 (83 ) 2,620 Prepaid expenses and other current assets — 229 145 277 28 679 Total current assets 8 4,231 7,393 7,464 (10,759 ) 8,337 Property, plant and equipment - net — 859 702 1,941 — 3,502 Other noncurrent assets Goodwill — 1,316 6,705 5,547 — 13,568 Other intangible assets — 138 3,206 1,921 — 5,265 Deferred income taxes — 356 6 215 (324 ) 253 Investment in subsidiaries 15,045 9,466 73,737 39,873 (138,121 ) — Intercompany loans receivable 3,122 7,089 2,909 61,427 (74,547 ) — Other assets — 748 166 784 — 1,698 Total assets $ 18,175 $ 24,203 $ 94,824 $ 119,172 $ (223,751 ) $ 32,623 Liabilities and shareholders’ equity Current liabilities Short-term debt $ — $ — $ — $ 6 $ — $ 6 Current portion of long-term debt — 542 36 — — 578 Accounts payable — 533 328 1,305 — 2,166 Intercompany accounts payable 4 4,916 4,381 1,403 (10,704 ) — Accrued compensation — 128 65 260 — 453 Other current liabilities 1 566 317 989 (1 ) 1,872 Total current liabilities 5 6,685 5,127 3,963 (10,705 ) 5,075 Noncurrent liabilities Long-term debt — 6,180 976 9 2 7,167 Pension liabilities — 341 89 796 — 1,226 Other postretirement benefits liabilities — 192 96 74 — 362 Deferred income taxes — — 607 255 (324 ) 538 Intercompany loans payable 917 3,808 68,685 1,137 (74,547 ) — Other noncurrent liabilities — 314 273 378 — 965 Total noncurrent liabilities 917 10,835 70,726 2,649 (74,869 ) 10,258 Shareholders’ equity Eaton shareholders' equity 17,253 6,683 18,971 112,523 (138,177 ) 17,253 Noncontrolling interests — — — 37 — 37 Total equity 17,253 6,683 18,971 112,560 (138,177 ) 17,290 Total liabilities and equity $ 18,175 $ 24,203 $ 94,824 $ 119,172 $ (223,751 ) $ 32,623 CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018 Eaton Corporation plc Eaton Corporation Guarantors Other subsidiaries Consolidating adjustments Total Net cash provided by (used in) operating activities $ (12 ) $ (163 ) $ 394 $ 1,707 $ (88 ) $ 1,838 Investing activities Capital expenditures for property, plant and equipment — (75 ) (74 ) (262 ) — (411 ) Sales (purchases) of short-term — — — 329 — 329 Investments in affiliates — (36 ) — — 36 — Loans to affiliates — (100 ) (84 ) (4,764 ) 4,948 — Repayments of loans from affiliates — 647 957 3,892 (5,496 ) — Proceeds from sale of business — — — — — — Payments for settlement of currency exchange contracts not designated as hedges - net — 11 — (133 ) — (122 ) Other - net — (26 ) 3 (29 ) — (52 ) Net cash provided by (used in) investing activities — 421 802 (967 ) (512 ) (256 ) Financing activities Proceeds from borrowings 4 65 — 11 — 80 Payments on borrowings — (450 ) (35 ) (1 ) — (486 ) Proceeds from borrowings from affiliates 2,671 1,995 182 100 (4,948 ) — Payments on borrowings from affiliates (1,226 ) (2,775 ) (655 ) (840 ) 5,496 — Capital contributions from affiliates — — — 36 (36 ) — Other intercompany financing activities — 777 (687 ) (90 ) — — Cash dividends paid (864 ) — — — — (864 ) Cash dividends paid to affiliates — — — (88 ) 88 — Exercise of employee stock options 28 — — — — 28 Repurchase of shares (600 ) — — — — (600 ) Employee taxes paid from shares withheld — (16 ) (5 ) (3 ) — (24 ) Other - net — (1 ) — (1 ) — (2 ) Net cash provided by (used in) financing activities 13 (405 ) (1,200 ) (876 ) 600 (1,868 ) Effect of currency on cash — — — 52 — 52 Total increase (decrease) in cash 1 (147 ) (4 ) (84 ) — (234 ) Cash at the beginning of the period — 183 18 360 — 561 Cash at the end of the period $ 1 $ 36 $ 14 $ 276 $ — $ 327 CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017 Eaton Corporation plc Eaton Corporation Guarantors Other subsidiaries Consolidating adjustments Total Net cash provided by (used in) operating activities $ 528 $ (228 ) $ 1,063 $ 2,036 $ (1,612 ) $ 1,787 Investing activities Capital expenditures for property, plant and equipment — (63 ) (77 ) (211 ) — (351 ) Cash received from (paid for) acquisitions of affiliates — — (92 ) 92 — — Sales (purchases) of short-term — — (50 ) (571 ) — (621 ) Investments in affiliates (90 ) (108 ) — (90 ) 288 — Return of investments in affiliates — — 20 — (20 ) — Loans to affiliates — (17 ) (283 ) (4,471 ) 4,771 — Repayments of loans from affiliates — 291 384 3,478 (4,153 ) — Proceeds from sale of businesses — 330 — 270 — 600 Other - net — (36 ) 1 (28 ) — (63 ) Net cash provided by (used in) investing activities (90 ) 397 (97 ) (1,531 ) 886 (435 ) Financing activities Proceeds from borrowings — 1,000 — — — 1,000 Payments on borrowings — (250 ) (297 ) (6 ) — (553 ) Proceeds from borrowings from affiliates 1,917 1,873 966 15 (4,771 ) — Payments on borrowings from affiliates (822 ) (2,904 ) (352 ) (75 ) 4,153 — Capital contributions from affiliates — — 90 198 (288 ) — Return of capital to affiliates — — — (20 ) 20 — Other intercompany financing activities — 219 (486 ) 267 — — Cash dividends paid (803 ) — — — — (803 ) Cash dividends paid to affiliates — — (803 ) (809 ) 1,612 — Exercise of employee stock options 59 — — — — 59 Repurchase of shares (789 ) — — — — (789 ) Employee taxes paid from shares withheld — (14 ) (4 ) (3 ) — (21 ) Other - net — (4 ) (1 ) (3 ) — (8 ) Net cash provided by (used in) financing activities (438 ) (80 ) (887 ) (436 ) 726 (1,115 ) Effect of currency on cash — — — 11 — 11 Total increase (decrease) in cash — 89 79 80 — 248 Cash at the beginning of the period 1 92 12 438 — 543 Cash at the end of the period $ 1 $ 181 $ 91 $ 518 $ — $ 791 |
BASIS OF PRESENTATION - Balance
BASIS OF PRESENTATION - Balance Sheet (Details) - USD ($) $ in Millions | Sep. 30, 2018 | Jan. 01, 2018 | Dec. 31, 2017 |
Assets | |||
Accounts receivable - net | $ 4,027 | $ 3,844 | $ 3,943 |
Prepaid expenses and other current assets | 500 | 808 | 679 |
Deferred income taxes | 241 | 254 | 253 |
Liabilities and shareholders' equity | |||
Other current liabilities | 2,167 | 1,905 | 1,872 |
Eaton shareholders' equity | 16,754 | 17,251 | 17,253 |
Calculated under Revenue Guidance in Effect before Topic 606 | |||
Assets | |||
Accounts receivable - net | 4,085 | 3,943 | |
Prepaid expenses and other current assets | 395 | 679 | |
Deferred income taxes | 240 | 253 | |
Liabilities and shareholders' equity | |||
Other current liabilities | $ 2,137 | 1,872 | |
Eaton shareholders' equity | $ 17,253 | ||
ASU 2014-09 | Difference between Revenue Guidance in Effect before and after Topic 606 | |||
Assets | |||
Accounts receivable - net | (99) | ||
Prepaid expenses and other current assets | 129 | ||
Deferred income taxes | 1 | ||
Liabilities and shareholders' equity | |||
Other current liabilities | 33 | ||
Eaton shareholders' equity | $ (2) |
BASIS OF PRESENTATION - Narrati
BASIS OF PRESENTATION - Narrative (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Jan. 01, 2018 | |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Selling and administrative expense | $ 889 | $ 902 | $ 2,679 | $ 2,669 | |
Other income (expense) - net | $ (7) | $ (19) | (13) | (24) | |
Accounting Standards Update 2016-16 [Member] | |||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Cumulative-effect adjustment upon adoption | $ 199 | ||||
Accounting Standards Update 2017-07 [Member] | |||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Selling and administrative expense | (2) | (34) | |||
Other income (expense) - net | $ (2) | $ 34 |
SALE OF A BUSINESS (Details)
SALE OF A BUSINESS (Details) - USD ($) $ in Millions | Jul. 31, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 |
Equity Method Investments and Joint Ventures [Abstract] | |||||
Deconsolidation, Sale Of Interest, Percent | 50.00% | ||||
Proceeds from sale of consolidated subsidiary | $ 600 | $ 0 | $ 600 | ||
Pre-tax gain on sale of consolidated subsidiary and remaining investment in joint venture | $ 0 | $ 1,077 | 0 | 1,077 | |
Pre-tax gain from proceeds of sale of consolidated subsidiary | 533 | ||||
Pre-tax gain related to remaining investment in joint venture being remeasured to fair value | $ 544 | ||||
Equity Method Investment, Ownership Percentage | 50.00% | ||||
Deconsolidation, Gain (Loss), Amount, Net Of Tax | $ 843 | $ 0 | $ (843) |
ACQUISITION AND INTEGRATION CHA
ACQUISITION AND INTEGRATION CHARGES (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Acquisition integration charges [Line Items] | ||||
Acquisition integration charges | $ 0 | $ 1 | $ 0 | $ 3 |
Income taxes | 0 | 0 | 0 | 1 |
Total after income taxes | $ 0 | $ 1 | $ 0 | $ 2 |
Per ordinary share - diluted (dollars per share) | $ 0 | $ 0 | $ 0 | $ 0 |
Electrical Products | ||||
Acquisition integration charges [Line Items] | ||||
Acquisition integration charges | $ 0 | $ 1 | $ 0 | $ 3 |
REVENUE RECOGNITION - Narrative
REVENUE RECOGNITION - Narrative (Details) $ in Millions | 9 Months Ended | ||
Sep. 30, 2018USD ($)segment | Jan. 01, 2018USD ($) | Dec. 31, 2017USD ($) | |
Revenue from Contract with Customer [Abstract] | |||
Sales recognized over time, as a percent of Consolidated Net Sales (less than) | 5.00% | ||
Number of operating segments | segment | 6 | ||
Accounts receivables from customers | $ 3,566 | $ 3,399 | |
Unbilled receivables | 91 | $ 117 | |
Backlog of unsatisfied or partially satisfied obligations | $ 5,400 | ||
Backlog expected to be recognized in the next twelve months (as a percent) | 88.00% |
REVENUE RECOGNITION - Schedule
REVENUE RECOGNITION - Schedule of Disaggregation of Sales (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Disaggregation of Revenue [Line Items] | ||||
Net sales | $ 5,412 | $ 5,211 | $ 16,150 | $ 15,191 |
Electrical Products | ||||
Disaggregation of Revenue [Line Items] | ||||
Net sales | 1,789 | 5,327 | ||
Electrical Products | United States [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Net sales | 1,055 | 3,048 | ||
Electrical Products | Rest of world [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Net sales | 734 | 2,279 | ||
Electrical Systems and Services | ||||
Disaggregation of Revenue [Line Items] | ||||
Net sales | 1,519 | 4,413 | ||
Electrical Systems and Services | United States [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Net sales | 1,000 | 2,877 | ||
Electrical Systems and Services | Rest of world [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Net sales | 519 | 1,536 | ||
Hydraulics | ||||
Disaggregation of Revenue [Line Items] | ||||
Net sales | 670 | 2,103 | ||
Hydraulics | United States [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Net sales | 301 | 907 | ||
Hydraulics | Rest of world [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Net sales | 369 | 1,196 | ||
Aerospace | ||||
Disaggregation of Revenue [Line Items] | ||||
Net sales | 478 | 1,399 | ||
Aerospace | Original Equipment Manufacturers [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Net sales | 269 | 799 | ||
Aerospace | Aftermarket, Distribution and End User [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Net sales | 209 | 600 | ||
Vehicle | ||||
Disaggregation of Revenue [Line Items] | ||||
Net sales | 876 | 2,668 | ||
Vehicle | Commercial [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Net sales | 451 | 1,333 | ||
Vehicle | Passenger and Light Duty [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Net sales | 425 | 1,335 | ||
eMobility | ||||
Disaggregation of Revenue [Line Items] | ||||
Net sales | $ 80 | $ 240 |
REVENUE RECOGNITION - Schedul_2
REVENUE RECOGNITION - Schedule of Changes in Deferred Revenue Liabilities (Details) $ in Millions | 9 Months Ended |
Sep. 30, 2018USD ($) | |
Movement in Deferred Revenue [Roll Forward] | |
Beginning balance | $ 227 |
Customer deposits and billings | 696 |
Revenue recognized in the period | (676) |
Translation | (6) |
Ending balance | $ 241 |
REVENUE RECOGNITION - Schedul_3
REVENUE RECOGNITION - Schedule of the Impact of Adoption of ASU 2014-09 (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Jan. 01, 2018 | Dec. 31, 2017 | |
Consolidated Statements of Income | ||||||
Net sales | $ 5,412 | $ 5,211 | $ 16,150 | $ 15,191 | ||
Cost of products sold | 3,597 | 3,466 | 10,841 | 10,221 | ||
Income before income taxes | 439 | 1,694 | 1,698 | 2,733 | ||
Income tax expense | 23 | 293 | 184 | 381 | ||
Net income | 416 | 1,401 | 1,514 | 2,352 | ||
Net income attributable to Eaton ordinary shareholders | 416 | $ 1,401 | 1,514 | $ 2,351 | ||
Assets | ||||||
Accounts receivable - net | 4,027 | 4,027 | $ 3,844 | $ 3,943 | ||
Inventory | 2,835 | 2,835 | 2,620 | |||
Prepaid expenses and other current assets | 500 | 500 | 808 | 679 | ||
Deferred income taxes | 241 | 241 | 254 | 253 | ||
Liabilities and shareholders’ equity | ||||||
Other current liabilities | 2,167 | 2,167 | $ 1,905 | 1,872 | ||
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest | 16,789 | 16,789 | 17,290 | |||
Difference between Revenue Guidance in Effect before and after Topic 606 | Adjustment | ||||||
Consolidated Statements of Income | ||||||
Net sales | (5) | (23) | ||||
Cost of products sold | (4) | (14) | ||||
Income before income taxes | (1) | (9) | ||||
Income tax expense | 0 | (2) | ||||
Net income | (1) | (7) | ||||
Net income attributable to Eaton ordinary shareholders | (1) | (7) | ||||
Assets | ||||||
Accounts receivable - net | 58 | 58 | ||||
Inventory | 13 | 13 | ||||
Prepaid expenses and other current assets | (105) | (105) | ||||
Deferred income taxes | (1) | (1) | ||||
Liabilities and shareholders’ equity | ||||||
Other current liabilities | (30) | (30) | ||||
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest | (5) | (5) | ||||
Calculated under Revenue Guidance in Effect before Topic 606 | ||||||
Consolidated Statements of Income | ||||||
Net sales | 5,407 | 16,127 | ||||
Cost of products sold | 3,593 | 10,827 | ||||
Income before income taxes | 438 | 1,689 | ||||
Income tax expense | 23 | 182 | ||||
Net income | 415 | 1,507 | ||||
Net income attributable to Eaton ordinary shareholders | 415 | 1,507 | ||||
Assets | ||||||
Accounts receivable - net | 4,085 | 4,085 | 3,943 | |||
Inventory | 2,848 | 2,848 | ||||
Prepaid expenses and other current assets | 395 | 395 | 679 | |||
Deferred income taxes | 240 | 240 | 253 | |||
Liabilities and shareholders’ equity | ||||||
Other current liabilities | 2,137 | 2,137 | $ 1,872 | |||
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest | $ 16,784 | $ 16,784 |
RESTRUCTURING CHARGES - Restruc
RESTRUCTURING CHARGES - Restructuring Roll Forward (Details) - USD ($) $ in Millions | 9 Months Ended | 12 Months Ended |
Sep. 30, 2018 | Dec. 31, 2017 | |
Restructuring Reserve [Roll Forward] | ||
Beginning balance | $ 72 | $ 114 |
Liability recognized | 116 | |
Payments | (33) | (141) |
Other adjustments | (14) | (17) |
Ending balance | 25 | 72 |
Workforce reductions [Member] | ||
Restructuring Reserve [Roll Forward] | ||
Beginning balance | 67 | 113 |
Liability recognized | 57 | |
Payments | (29) | (102) |
Other adjustments | (14) | (1) |
Ending balance | 24 | 67 |
Plant closings and other [Member] | ||
Restructuring Reserve [Roll Forward] | ||
Beginning balance | 5 | 1 |
Liability recognized | 59 | |
Payments | (4) | (39) |
Other adjustments | 0 | (16) |
Ending balance | $ 1 | $ 5 |
GOODWILL (Details)
GOODWILL (Details) $ in Millions | 9 Months Ended |
Sep. 30, 2018USD ($) | |
Goodwill [Roll Forward] | |
Beginning balance | $ 13,568 |
Translation | (183) |
Ending balance | 13,385 |
Electrical Products | |
Goodwill [Roll Forward] | |
Beginning balance | 6,678 |
Translation | (87) |
Ending balance | 6,591 |
Electrical Systems and Services | |
Goodwill [Roll Forward] | |
Beginning balance | 4,311 |
Translation | (40) |
Ending balance | 4,271 |
Hydraulics | |
Goodwill [Roll Forward] | |
Beginning balance | 1,257 |
Translation | (50) |
Ending balance | 1,207 |
Aerospace | |
Goodwill [Roll Forward] | |
Beginning balance | 947 |
Translation | (4) |
Ending balance | 943 |
Vehicle | |
Goodwill [Roll Forward] | |
Beginning balance | 294 |
Translation | (2) |
Ending balance | 292 |
eMobility | |
Goodwill [Roll Forward] | |
Beginning balance | 81 |
Translation | 0 |
Ending balance | $ 81 |
RETIREMENT BENEFIT PLANS (Detai
RETIREMENT BENEFIT PLANS (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Pension plan | United States pension benefit expense | ||||
Retirement benefits plans expense | ||||
Service cost | $ 25 | $ 24 | $ 75 | $ 72 |
Interest cost | 30 | 30 | 91 | 92 |
Expected return on plan assets | (63) | (61) | (190) | (183) |
Amortization | 24 | 21 | 71 | 62 |
Total | 16 | 14 | 47 | 43 |
Settlements | 13 | 17 | 38 | 51 |
Total expense | 29 | 31 | 85 | 94 |
Pension plan | Non-United States pension benefit expense | ||||
Retirement benefits plans expense | ||||
Service cost | 16 | 18 | 48 | 53 |
Interest cost | 13 | 14 | 40 | 41 |
Expected return on plan assets | (27) | (24) | (80) | (70) |
Amortization | 9 | 13 | 29 | 38 |
Total | 11 | 21 | 37 | 62 |
Settlements | 1 | 4 | 1 | 4 |
Total expense | 12 | 25 | 38 | 66 |
Other postretirement benefits expense | ||||
Retirement benefits plans expense | ||||
Service cost | 1 | 1 | 2 | 2 |
Interest cost | 3 | 4 | 10 | 11 |
Expected return on plan assets | 0 | (1) | (2) | (3) |
Amortization | (4) | (3) | (10) | (9) |
Total | 0 | 1 | 0 | 1 |
Settlements | 0 | 0 | 0 | 0 |
Total expense | $ 0 | $ 1 | $ 0 | $ 1 |
LEGAL CONTINGENCIES (Details)
LEGAL CONTINGENCIES (Details) - USD ($) $ in Millions | Aug. 23, 2018 | Jul. 11, 2018 |
Commitments and Contingencies Disclosure [Abstract] | ||
Loss Contingency, Damages Sought, Value | $ 347 | |
Pneumo Abex Case | ||
Loss Contingencies [Line Items] | ||
Amount awarded to other party | $ 293 |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) $ in Millions | Aug. 31, 2018 | Sep. 30, 2018 | Dec. 31, 2017 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2014 | Dec. 31, 2010 |
Income Tax Contingency [Line Items] | ||||||||
Effective tax rate (as percent) | 5.20% | 17.30% | 10.80% | 13.90% | ||||
Income tax expense | $ 23 | $ 293 | $ 184 | $ 381 | ||||
Effective tax rate before one-time tax impacts (as percent) | 12.80% | 9.60% | 12.80% | 8.90% | ||||
TCJA tax benefit related to remeasurement of deferred tax assets | $ 62 | |||||||
TCJA tax expense (benefit) | $ 17 | $ (45) | ||||||
Foreign Tax Authority | Tax Years 2009 through 2012 | ||||||||
Income Tax Contingency [Line Items] | ||||||||
Tax assessment | $ 32 | |||||||
Foreign Tax Authority | Brazil | Tax Years 2005 through 2008 | ||||||||
Income Tax Contingency [Line Items] | ||||||||
Tax assessment | $ 42 | $ 42 | ||||||
Penalties and interest expense | $ 128 | |||||||
Expected resolution period | 10 years | |||||||
Automated Transmission Business | ||||||||
Income Tax Contingency [Line Items] | ||||||||
Income tax expense | $ 234 | $ 234 | ||||||
Pneumo Abex Case | ||||||||
Income Tax Contingency [Line Items] | ||||||||
Income tax expense | $ (69) | $ (69) |
EQUITY - Changes in Shareholder
EQUITY - Changes in Shareholders's Equity (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Jan. 01, 2018 | |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Balance at December 31, 2017 | $ 17,290 | ||||
Net income | $ 416 | $ 1,401 | 1,514 | $ 2,352 | |
Other comprehensive loss | (98) | $ 199 | (426) | $ 785 | |
Cash dividends paid | (865) | ||||
Issuance of shares under equity-based compensation plans - net | 78 | ||||
Repurchase of shares | (600) | ||||
Changes in noncontrolling interest - net | (1) | ||||
Balance at September 30, 2018 | 16,789 | 16,789 | |||
Eaton shareholders’ equity | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Balance at December 31, 2017 | 17,253 | ||||
Net income | 1,514 | ||||
Other comprehensive loss | (426) | ||||
Cash dividends paid | (864) | ||||
Issuance of shares under equity-based compensation plans - net | 78 | ||||
Repurchase of shares | (600) | ||||
Changes in noncontrolling interest - net | 0 | ||||
Balance at September 30, 2018 | 16,754 | 16,754 | |||
Noncontrolling interests | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Balance at December 31, 2017 | 37 | ||||
Net income | 0 | ||||
Other comprehensive loss | 0 | ||||
Cash dividends paid | (1) | ||||
Issuance of shares under equity-based compensation plans - net | 0 | ||||
Repurchase of shares | 0 | ||||
Changes in noncontrolling interest - net | (1) | ||||
Balance at September 30, 2018 | $ 35 | $ 35 | |||
Cumulative-effect adjustment upon adoption of ASU 2014-09 | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Cumulative-effect adjustment upon adoption of ASU 2014-09 | $ (2) | ||||
Cumulative-effect adjustment upon adoption of ASU 2014-09 | Eaton shareholders’ equity | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Cumulative-effect adjustment upon adoption of ASU 2014-09 | (2) | ||||
Cumulative-effect adjustment upon adoption of ASU 2014-09 | Noncontrolling interests | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Cumulative-effect adjustment upon adoption of ASU 2014-09 | 0 | ||||
Cumulative-effect adjustment upon adoption of ASU 2016-16 | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Cumulative-effect adjustment upon adoption of ASU 2014-09 | (199) | ||||
Cumulative-effect adjustment upon adoption of ASU 2016-16 | Eaton shareholders’ equity | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Cumulative-effect adjustment upon adoption of ASU 2014-09 | (199) | ||||
Cumulative-effect adjustment upon adoption of ASU 2016-16 | Noncontrolling interests | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Cumulative-effect adjustment upon adoption of ASU 2014-09 | $ 0 | ||||
2016 Program | |||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | |||||
Ordinary shares purchased (in shares) | 0 | 4,400,000 | 7,700,000 | 10,700,000 | |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Repurchase of shares | $ (324) | $ (600) | $ (789) |
EQUITY - Changes in Accumulated
EQUITY - Changes in Accumulated Other Comprehensive (Loss) Income (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||||
Other comprehensive (loss) income before reclassifications | $ (537) | |||
Amounts reclassified from Accumulated other comprehensive loss | 111 | |||
Other comprehensive (loss) income attributable to Eaton ordinary shareholders | $ (98) | $ 199 | (426) | $ 785 |
Currency translation and related hedging instruments | ||||
AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||||
Beginning balance | (2,255) | |||
Other comprehensive (loss) income before reclassifications | (546) | |||
Amounts reclassified from Accumulated other comprehensive loss | 0 | |||
Other comprehensive (loss) income attributable to Eaton ordinary shareholders | (546) | |||
Ending balance | (2,801) | (2,801) | ||
Pensions and other postretirement benefits | ||||
AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||||
Beginning balance | (1,139) | |||
Other comprehensive (loss) income before reclassifications | 20 | |||
Amounts reclassified from Accumulated other comprehensive loss | 102 | |||
Other comprehensive (loss) income attributable to Eaton ordinary shareholders | 122 | |||
Ending balance | (1,017) | (1,017) | ||
Cash flow hedges | ||||
AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||||
Beginning balance | (10) | |||
Other comprehensive (loss) income before reclassifications | (11) | |||
Amounts reclassified from Accumulated other comprehensive loss | 9 | |||
Other comprehensive (loss) income attributable to Eaton ordinary shareholders | (2) | |||
Ending balance | (12) | (12) | ||
Total AOCI | ||||
AOCI Attributable to Parent, Net of Tax [Roll Forward] | ||||
Beginning balance | (3,404) | |||
Ending balance | $ (3,830) | $ (3,830) |
EQUITY - Reclassifications Out
EQUITY - Reclassifications Out of Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | ||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | |||||
Other expense - net | $ (7) | $ (19) | $ (13) | $ (24) | |
Cost of products sold | (3,597) | (3,466) | (10,841) | (10,221) | |
Income tax expense (benefit) | (23) | (293) | (184) | (381) | |
Net income attributable to Eaton ordinary shareholders | $ 416 | $ 1,401 | 1,514 | $ 2,351 | |
Reclassification out of Accumulated Other Comprehensive Income | |||||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | |||||
Net income attributable to Eaton ordinary shareholders | (111) | ||||
Reclassification out of Accumulated Other Comprehensive Income | Amortization of defined benefit pensions and other postretirement benefits items | |||||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | |||||
Other expense - net | [1] | (129) | |||
Income tax expense (benefit) | 27 | ||||
Net income attributable to Eaton ordinary shareholders | (102) | ||||
Reclassification out of Accumulated Other Comprehensive Income | Gains and (losses) on cash flow hedges | |||||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | |||||
Cost of products sold | (12) | ||||
Income tax expense (benefit) | 3 | ||||
Net income attributable to Eaton ordinary shareholders | $ (9) | ||||
[1] | These components of Accumulated other comprehensive loss are included in the computation of net periodic benefit cost. See Note 7 for additional information about pension and other postretirement benefits items. |
EQUITY - Calculation of Net Inc
EQUITY - Calculation of Net Income per Ordinary Share (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Calculation of net income per ordinary share attributable to ordinary shareholders | ||||
Net income attributable to Eaton ordinary shareholders | $ 416 | $ 1,401 | $ 1,514 | $ 2,351 |
Weighted-average number of ordinary shares outstanding - diluted (shares) | 436.3 | 445.2 | 438.4 | 448.3 |
Less dilutive effect of equity-based compensation (shares) | 2.8 | 2.6 | 2.6 | 2.4 |
Weighted-average number of ordinary shares outstanding - basic (shares) | 433.5 | 442.6 | 435.8 | 445.9 |
Net income per share attributable to Eaton ordinary shareholders | ||||
Diluted (usd per share) | $ 0.95 | $ 3.14 | $ 3.45 | $ 5.24 |
Basic (usd per share) | $ 0.96 | $ 3.16 | $ 3.47 | $ 5.27 |
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 0.5 | 0.2 | 0.4 | 0.6 |
FAIR VALUE MEASUREMENTS - Summa
FAIR VALUE MEASUREMENTS - Summary of Financial Instruments at Fair Value (Details) - USD ($) $ in Millions | Sep. 30, 2018 | Dec. 31, 2017 | Sep. 30, 2017 | Dec. 31, 2016 |
Fair Value, Assets Measured on Recurring Basis, Financial Statement Captions [Line Items] | ||||
Cash | $ 327 | $ 561 | $ 791 | $ 543 |
Short-term investments | 178 | 534 | ||
Net derivative contracts | (59) | 36 | ||
Level 1 [Member] | ||||
Fair Value, Assets Measured on Recurring Basis, Financial Statement Captions [Line Items] | ||||
Cash | 327 | 561 | ||
Short-term investments | 178 | 534 | ||
Net derivative contracts | 0 | 0 | ||
Level 2 [Member] | ||||
Fair Value, Assets Measured on Recurring Basis, Financial Statement Captions [Line Items] | ||||
Cash | 0 | 0 | ||
Short-term investments | 0 | 0 | ||
Net derivative contracts | (59) | 36 | ||
Level 3 [Member] | ||||
Fair Value, Assets Measured on Recurring Basis, Financial Statement Captions [Line Items] | ||||
Cash | 0 | 0 | ||
Short-term investments | 0 | 0 | ||
Net derivative contracts | $ 0 | $ 0 |
FAIR VALUE MEASUREMENTS - Other
FAIR VALUE MEASUREMENTS - Other Fair Value Measurements (Details) - Level 2 [Member] - USD ($) $ in Millions | Sep. 30, 2018 | Dec. 31, 2017 |
Other Fair Value Measurements [Line Items] | ||
Carrying value of long-term debt and current portion of long-term debt | $ 7,163 | $ 7,745 |
Fair value of long-term debt and current portion of long-term debt | $ 7,137 | $ 8,048 |
DERIVATIVE FINANCIAL INSTRUME_3
DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES - Derivative Financial Instrument Recognized in the Consolidated Balance sheet (Details) - USD ($) $ in Millions | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | |
Derivatives, Fair Value [Line Items] | |||
Foreign Currency Note Payable, Noncurrent, after-tax | $ 88 | $ 88 | |
Foreign Currency Note Payable, Noncurrent, pre-tax | $ 631 | 652 | |
Derivatives not designated as hedges | |||
Percentage of intercompany balance sheet exposure | 100.00% | ||
Payments for settlement of currency exchange contracts not designated as hedges - net | $ (122) | $ 0 | |
Other current assets [Member] | |||
Derivatives designated as hedges | |||
Derivative asset designated as hedging instrument | 13 | 8 | |
Derivatives not designated as hedges | |||
Derivative instruments not designated as hedging instruments, asset, at fair value | 33 | 40 | |
Other noncurrent assets [Member] | |||
Derivatives designated as hedges | |||
Derivative asset designated as hedging instrument | 18 | 48 | |
Other current liabilities [Member] | |||
Derivatives designated as hedges | |||
Derivative liability designated as hedging instrument | 22 | 22 | |
Derivatives not designated as hedges | |||
Derivative instruments not designated as hedging instruments, liability, at fair value | 34 | 19 | |
Other noncurrent liabilities [Member] | |||
Derivatives designated as hedges | |||
Derivative liability designated as hedging instrument | 67 | 19 | |
Currency exchange contracts [Member] | Other current assets [Member] | |||
Derivatives not designated as hedges | |||
Derivative instruments not designated as hedging instruments, asset, at fair value | 33 | 39 | |
Currency exchange contracts [Member] | Other current liabilities [Member] | |||
Derivatives not designated as hedges | |||
Derivative instruments not designated as hedging instruments, liability, at fair value | 33 | 19 | |
Commodity contracts [Member] | Other current assets [Member] | |||
Derivatives not designated as hedges | |||
Derivative instruments not designated as hedging instruments, asset, at fair value | 0 | 1 | |
Commodity contracts [Member] | Other current liabilities [Member] | |||
Derivatives not designated as hedges | |||
Derivative instruments not designated as hedging instruments, liability, at fair value | 1 | 0 | |
Derivatives designated as hedges [Member] | Fair value hedging [Member] | Fixed-to-floating interest rate swaps [Member] | |||
Derivatives designated as hedges | |||
Notional amount | 2,550 | 2,965 | |
Derivatives designated as hedges [Member] | Fair value hedging [Member] | Fixed-to-floating interest rate swaps [Member] | Other current assets [Member] | |||
Derivatives designated as hedges | |||
Derivative asset designated as hedging instrument | 1 | 1 | |
Derivatives designated as hedges [Member] | Fair value hedging [Member] | Fixed-to-floating interest rate swaps [Member] | Other noncurrent assets [Member] | |||
Derivatives designated as hedges | |||
Derivative asset designated as hedging instrument | 16 | 41 | |
Derivatives designated as hedges [Member] | Fair value hedging [Member] | Fixed-to-floating interest rate swaps [Member] | Other current liabilities [Member] | |||
Derivatives designated as hedges | |||
Derivative liability designated as hedging instrument | 1 | 0 | |
Derivatives designated as hedges [Member] | Fair value hedging [Member] | Fixed-to-floating interest rate swaps [Member] | Other noncurrent liabilities [Member] | |||
Derivatives designated as hedges | |||
Derivative liability designated as hedging instrument | 62 | 17 | |
Derivatives designated as hedges [Member] | Cash Flow Hedging [Member] | Currency exchange contracts [Member] | |||
Derivatives designated as hedges | |||
Notional amount | 954 | 924 | |
Derivatives designated as hedges [Member] | Cash Flow Hedging [Member] | Currency exchange contracts [Member] | Other current assets [Member] | |||
Derivatives designated as hedges | |||
Derivative asset designated as hedging instrument | 12 | 7 | |
Derivatives designated as hedges [Member] | Cash Flow Hedging [Member] | Currency exchange contracts [Member] | Other noncurrent assets [Member] | |||
Derivatives designated as hedges | |||
Derivative asset designated as hedging instrument | 2 | 7 | |
Derivatives designated as hedges [Member] | Cash Flow Hedging [Member] | Currency exchange contracts [Member] | Other current liabilities [Member] | |||
Derivatives designated as hedges | |||
Derivative liability designated as hedging instrument | 21 | 22 | |
Derivatives designated as hedges [Member] | Cash Flow Hedging [Member] | Currency exchange contracts [Member] | Other noncurrent liabilities [Member] | |||
Derivatives designated as hedges | |||
Derivative liability designated as hedging instrument | 5 | 2 | |
Derivatives not designated as hedges [Member] | Currency exchange contracts [Member] | |||
Derivatives designated as hedges | |||
Notional amount | 7,616 | 3,719 | |
Derivatives not designated as hedges [Member] | Commodity contracts [Member] | |||
Derivatives designated as hedges | |||
Notional amount | $ 13 | $ 13 | |
Minimum [Member] | Derivatives designated as hedges [Member] | Fair value hedging [Member] | Fixed-to-floating interest rate swaps [Member] | |||
Derivatives, Fair Value [Line Items] | |||
Derivative, term of contract | 9 months | 6 months | |
Minimum [Member] | Derivatives designated as hedges [Member] | Cash Flow Hedging [Member] | Currency exchange contracts [Member] | |||
Derivatives, Fair Value [Line Items] | |||
Derivative, term of contract | 1 month | 1 month | |
Minimum [Member] | Derivatives not designated as hedges [Member] | Currency exchange contracts [Member] | |||
Derivatives, Fair Value [Line Items] | |||
Derivative, term of contract | 1 month | 1 month | |
Minimum [Member] | Derivatives not designated as hedges [Member] | Commodity contracts [Member] | |||
Derivatives, Fair Value [Line Items] | |||
Derivative, term of contract | 1 month | 1 month | |
Maximum [Member] | Derivatives designated as hedges [Member] | Fair value hedging [Member] | Fixed-to-floating interest rate swaps [Member] | |||
Derivatives, Fair Value [Line Items] | |||
Derivative, term of contract | 16 years | 17 years | |
Maximum [Member] | Derivatives designated as hedges [Member] | Cash Flow Hedging [Member] | Currency exchange contracts [Member] | |||
Derivatives, Fair Value [Line Items] | |||
Derivative, term of contract | 36 months | 36 months | |
Maximum [Member] | Derivatives not designated as hedges [Member] | Currency exchange contracts [Member] | |||
Derivatives, Fair Value [Line Items] | |||
Derivative, term of contract | 12 months | 12 months | |
Maximum [Member] | Derivatives not designated as hedges [Member] | Commodity contracts [Member] | |||
Derivatives, Fair Value [Line Items] | |||
Derivative, term of contract | 12 months | 12 months |
DERIVATIVE FINANCIAL INSTRUME_4
DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES - Amounts Recognized in Accumulated Other Comprehensive Income (Details) - Cash flow hedges [Member] - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Interest expense - net [Member] | Forward Starting Floating-to-Fixed Interest Rate Swap [Domain] | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Gain (loss) recognized in other comprehensive (loss) income | $ 0 | $ (10) | $ 0 | $ (15) |
Gain (loss) reclassified from Accumulated other comprehensive loss | 0 | 0 | 0 | 0 |
Interest expense - net [Member] | Interest Rate Locks [Member] | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Gain (loss) recognized in other comprehensive (loss) income | 0 | (9) | 0 | (9) |
Gain (loss) reclassified from Accumulated other comprehensive loss | 0 | 0 | 0 | 0 |
Cost of products sold [Member] | Currency exchange contracts [Member] | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Gain (loss) recognized in other comprehensive (loss) income | (12) | (6) | (14) | (5) |
Gain (loss) reclassified from Accumulated other comprehensive loss | (4) | (7) | (12) | (12) |
Cost of products sold or Interest expense - net [Member] | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Gain (loss) recognized in other comprehensive (loss) income | (12) | (25) | (14) | (29) |
Gain (loss) reclassified from Accumulated other comprehensive loss | $ (4) | $ (7) | $ (12) | $ (12) |
DERIVATIVE FINANCIAL INSTRUME_5
DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES - Amounts Recognized in Net Income (Details) - Interest expense - net [Member] - Fair value hedging [Member] - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Amounts recognized in net income | $ 0 | $ 0 | $ 0 | $ 0 |
Fixed-to-floating interest rate swaps [Member] | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Amounts recognized in net income | (12) | (4) | (71) | (7) |
Related long-term debt converted to floating interest rates by interest rate swaps [Member] | ||||
Derivative Instruments, Gain (Loss) [Line Items] | ||||
Amounts recognized in net income | $ 12 | $ 4 | $ 71 | $ 7 |
INVENTORY (Details)
INVENTORY (Details) - USD ($) $ in Millions | Sep. 30, 2018 | Dec. 31, 2017 |
Inventory Disclosure [Abstract] | ||
Raw materials | $ 1,094 | $ 953 |
Work-in-process | 531 | 471 |
Finished goods | 1,210 | 1,196 |
Total inventory | $ 2,835 | $ 2,620 |
BUSINESS SEGMENT INFORMATION (D
BUSINESS SEGMENT INFORMATION (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Business Segment Information | ||||
Net sales | $ 5,412 | $ 5,211 | $ 16,150 | $ 15,191 |
Corporate | ||||
Interest expense - net | 67 | 60 | 205 | 181 |
Pension and other postretirement benefits expense | (123) | (161) | ||
Pre-tax gain on sale of consolidated subsidiary and remaining investment in joint venture | 0 | 1,077 | 0 | 1,077 |
Arbitration decision expense | 275 | 0 | 275 | 0 |
Other corporate expense - net | 7 | 19 | 13 | 24 |
Income before income taxes | 439 | 1,694 | 1,698 | 2,733 |
Income tax expense | 23 | 293 | 184 | 381 |
Net income | 416 | 1,401 | 1,514 | 2,352 |
Less net income for noncontrolling interests | 0 | 0 | 0 | (1) |
Net income attributable to Eaton ordinary shareholders | 416 | 1,401 | 1,514 | 2,351 |
Electrical Products | ||||
Business Segment Information | ||||
Net sales | 1,789 | 5,327 | ||
Electrical Systems and Services | ||||
Business Segment Information | ||||
Net sales | 1,519 | 4,413 | ||
Hydraulics | ||||
Business Segment Information | ||||
Net sales | 670 | 2,103 | ||
Aerospace | ||||
Business Segment Information | ||||
Net sales | 478 | 1,399 | ||
Vehicle | ||||
Business Segment Information | ||||
Net sales | 876 | 2,668 | ||
eMobility | ||||
Business Segment Information | ||||
Net sales | 80 | 240 | ||
Total business segments [Member] | ||||
Business Segment Information | ||||
Net sales | 5,412 | 5,211 | 16,150 | 15,191 |
Segment operating profit | 952 | 856 | 2,680 | 2,357 |
Total business segments [Member] | Electrical Products | ||||
Business Segment Information | ||||
Net sales | 1,789 | 1,785 | 5,327 | 5,167 |
Segment operating profit | 343 | 330 | 984 | 915 |
Total business segments [Member] | Electrical Systems and Services | ||||
Business Segment Information | ||||
Net sales | 1,519 | 1,421 | 4,413 | 4,168 |
Segment operating profit | 234 | 196 | 628 | 545 |
Total business segments [Member] | Hydraulics | ||||
Business Segment Information | ||||
Net sales | 670 | 634 | 2,103 | 1,854 |
Segment operating profit | 94 | 80 | 285 | 214 |
Total business segments [Member] | Aerospace | ||||
Business Segment Information | ||||
Net sales | 478 | 438 | 1,399 | 1,303 |
Segment operating profit | 105 | 84 | 284 | 244 |
Total business segments [Member] | Vehicle | ||||
Business Segment Information | ||||
Net sales | 876 | 858 | 2,668 | 2,489 |
Segment operating profit | 166 | 150 | 464 | 399 |
Total business segments [Member] | eMobility | ||||
Business Segment Information | ||||
Net sales | 80 | 75 | 240 | 210 |
Segment operating profit | 10 | 16 | 35 | 40 |
Corporate [Member] | ||||
Corporate | ||||
Amortization of intangible assets | (95) | (98) | (289) | (288) |
Interest expense - net | (67) | (60) | (205) | (181) |
Pension and other postretirement benefits expense | (3) | (16) | (4) | (38) |
Pre-tax gain on sale of consolidated subsidiary and remaining investment in joint venture | 0 | 1,077 | 0 | 1,077 |
Arbitration decision expense | (275) | 0 | (275) | 0 |
Other corporate expense - net | $ (73) | $ (65) | $ (209) | $ (194) |
CONDENSED CONSOLIDATING FINAN_3
CONDENSED CONSOLIDATING FINANCIAL STATEMENTS - Narrative (Details) | Sep. 15, 2017 | Nov. 14, 2013 |
Condensed Consolidating Financial Information [Abstract] | ||
Eaton and certain other 100% owned subsidiaries guarantee of Senior Debt | 100.00% | 100.00% |
CONDENSED CONSOLIDATING FINAN_4
CONDENSED CONSOLIDATING FINANCIAL STATEMENTS - Consolidating Statements of Comprehensive Income (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Consolidating Statements of Comprehensive Income, Captions [Line Items] | ||||
Net sales | $ 5,412 | $ 5,211 | $ 16,150 | $ 15,191 |
Cost of products sold | 3,597 | 3,466 | 10,841 | 10,221 |
Selling and administrative expense | 889 | 902 | 2,679 | 2,669 |
Research and development expense | 138 | 147 | 439 | 440 |
Interest expense (income) - net | 67 | 60 | 205 | 181 |
Gain on sale of business | 0 | 1,077 | 0 | 1,077 |
Arbitration decision expense | 275 | 0 | 275 | 0 |
Other expense - net | 7 | 19 | 13 | 24 |
Equity in loss (earnings) of subsidiaries, net of tax | 0 | 0 | 0 | 0 |
Intercompany expense (income) - net | 0 | 0 | 0 | 0 |
Income before income taxes | 439 | 1,694 | 1,698 | 2,733 |
Income tax expense (benefit) | 23 | 293 | 184 | 381 |
Net income | 416 | 1,401 | 1,514 | 2,352 |
Less net loss (income) for noncontrolling interests | 0 | 0 | 0 | (1) |
Net income attributable to Eaton ordinary shareholders | 416 | 1,401 | 1,514 | 2,351 |
Other comprehensive income (loss) | (98) | 199 | (426) | 785 |
Total comprehensive income attributable to Eaton ordinary shareholders | 318 | 1,600 | 1,088 | 3,136 |
Guarantors | ||||
Consolidating Statements of Comprehensive Income, Captions [Line Items] | ||||
Net sales | 1,814 | 1,732 | 5,304 | 5,114 |
Cost of products sold | 1,322 | 1,263 | 3,847 | 3,753 |
Selling and administrative expense | 197 | 203 | 575 | 601 |
Research and development expense | 37 | 46 | 113 | 134 |
Interest expense (income) - net | 3 | 4 | 11 | 15 |
Gain on sale of business | 0 | 0 | ||
Arbitration decision expense | 275 | 275 | ||
Other expense - net | 4 | (31) | 31 | (68) |
Equity in loss (earnings) of subsidiaries, net of tax | (915) | (1,768) | (2,652) | (3,410) |
Intercompany expense (income) - net | 579 | 349 | 1,623 | 1,046 |
Income before income taxes | 312 | 1,666 | 1,481 | 3,043 |
Income tax expense (benefit) | (91) | 9 | (119) | 28 |
Net income | 403 | 1,657 | 1,600 | 3,015 |
Less net loss (income) for noncontrolling interests | 0 | 0 | 0 | 0 |
Net income attributable to Eaton ordinary shareholders | 403 | 1,657 | 1,600 | 3,015 |
Other comprehensive income (loss) | (94) | 202 | (407) | 787 |
Total comprehensive income attributable to Eaton ordinary shareholders | 309 | 1,859 | 1,193 | 3,802 |
Other subsidiaries | ||||
Consolidating Statements of Comprehensive Income, Captions [Line Items] | ||||
Net sales | 3,134 | 3,160 | 9,567 | 9,199 |
Cost of products sold | 2,202 | 2,255 | 6,824 | 6,604 |
Selling and administrative expense | 335 | 349 | 1,003 | 1,003 |
Research and development expense | 68 | 56 | 217 | 167 |
Interest expense (income) - net | (4) | (6) | (11) | (14) |
Gain on sale of business | 517 | 517 | ||
Arbitration decision expense | 0 | 0 | ||
Other expense - net | (5) | 17 | (21) | (14) |
Equity in loss (earnings) of subsidiaries, net of tax | (446) | (1,699) | (1,760) | (3,098) |
Intercompany expense (income) - net | (627) | (458) | (1,689) | (1,345) |
Income before income taxes | 1,611 | 3,163 | 5,004 | 6,413 |
Income tax expense (benefit) | 124 | 94 | 327 | 164 |
Net income | 1,487 | 3,069 | 4,677 | 6,249 |
Less net loss (income) for noncontrolling interests | 0 | 0 | 0 | (2) |
Net income attributable to Eaton ordinary shareholders | 1,487 | 3,069 | 4,677 | 6,247 |
Other comprehensive income (loss) | (239) | 443 | (1,012) | 1,668 |
Total comprehensive income attributable to Eaton ordinary shareholders | 1,248 | 3,512 | 3,665 | 7,915 |
Consolidating adjustments | ||||
Consolidating Statements of Comprehensive Income, Captions [Line Items] | ||||
Net sales | (1,344) | (1,376) | (4,027) | (4,085) |
Cost of products sold | (1,344) | (1,373) | (4,026) | (4,080) |
Selling and administrative expense | 0 | 0 | 0 | 0 |
Research and development expense | 0 | 0 | 0 | 0 |
Interest expense (income) - net | 0 | 0 | 2 | 0 |
Gain on sale of business | 0 | 0 | ||
Arbitration decision expense | 0 | 0 | ||
Other expense - net | 0 | 0 | 0 | 0 |
Equity in loss (earnings) of subsidiaries, net of tax | 2,003 | 5,263 | 6,652 | 9,925 |
Intercompany expense (income) - net | 0 | 0 | 0 | 0 |
Income before income taxes | (2,003) | (5,266) | (6,655) | (9,930) |
Income tax expense (benefit) | 0 | (1) | (1) | (2) |
Net income | (2,003) | (5,265) | (6,654) | (9,928) |
Less net loss (income) for noncontrolling interests | 0 | 0 | 0 | 1 |
Net income attributable to Eaton ordinary shareholders | (2,003) | (5,265) | (6,654) | (9,927) |
Other comprehensive income (loss) | 343 | (627) | 1,459 | (2,522) |
Total comprehensive income attributable to Eaton ordinary shareholders | (1,660) | (5,892) | (5,195) | (12,449) |
Eaton Corporation plc | ||||
Consolidating Statements of Comprehensive Income, Captions [Line Items] | ||||
Net sales | 0 | 0 | 0 | 0 |
Cost of products sold | 0 | 0 | 0 | 0 |
Selling and administrative expense | 2 | 3 | 8 | 9 |
Research and development expense | 0 | 0 | 0 | 0 |
Interest expense (income) - net | 0 | 0 | 0 | 0 |
Gain on sale of business | 0 | 0 | ||
Arbitration decision expense | 0 | 0 | ||
Other expense - net | (3) | 23 | (22) | 71 |
Equity in loss (earnings) of subsidiaries, net of tax | (430) | (1,575) | (1,531) | (2,863) |
Intercompany expense (income) - net | 15 | 148 | 31 | 432 |
Income before income taxes | 416 | 1,401 | 1,514 | 2,351 |
Income tax expense (benefit) | 0 | 0 | 0 | 0 |
Net income | 416 | 1,401 | 1,514 | 2,351 |
Less net loss (income) for noncontrolling interests | 0 | 0 | 0 | 0 |
Net income attributable to Eaton ordinary shareholders | 416 | 1,401 | 1,514 | 2,351 |
Other comprehensive income (loss) | (98) | 199 | (426) | 785 |
Total comprehensive income attributable to Eaton ordinary shareholders | 318 | 1,600 | 1,088 | 3,136 |
Eaton Corporation | ||||
Consolidating Statements of Comprehensive Income, Captions [Line Items] | ||||
Net sales | 1,808 | 1,695 | 5,306 | 4,963 |
Cost of products sold | 1,417 | 1,321 | 4,196 | 3,944 |
Selling and administrative expense | 355 | 347 | 1,093 | 1,056 |
Research and development expense | 33 | 45 | 109 | 139 |
Interest expense (income) - net | 68 | 62 | 203 | 180 |
Gain on sale of business | 560 | 560 | ||
Arbitration decision expense | 0 | 0 | ||
Other expense - net | 11 | 10 | 25 | 35 |
Equity in loss (earnings) of subsidiaries, net of tax | (212) | (221) | (709) | (554) |
Intercompany expense (income) - net | 33 | (39) | 35 | (133) |
Income before income taxes | 103 | 730 | 354 | 856 |
Income tax expense (benefit) | (10) | 191 | (23) | 191 |
Net income | 113 | 539 | 377 | 665 |
Less net loss (income) for noncontrolling interests | 0 | 0 | 0 | 0 |
Net income attributable to Eaton ordinary shareholders | 113 | 539 | 377 | 665 |
Other comprehensive income (loss) | (10) | (18) | (40) | 67 |
Total comprehensive income attributable to Eaton ordinary shareholders | $ 103 | $ 521 | $ 337 | $ 732 |
CONDENSED CONSOLIDATING FINAN_5
CONDENSED CONSOLIDATING FINANCIAL STATEMENTS - Condensed Consolidating Balance Sheets (Details) - USD ($) $ in Millions | Sep. 30, 2018 | Jan. 01, 2018 | Dec. 31, 2017 | Sep. 30, 2017 | Dec. 31, 2016 |
Current assets | |||||
Cash | $ 327 | $ 561 | $ 791 | $ 543 | |
Short-term investments | 178 | 534 | |||
Accounts receivable - net | 4,027 | $ 3,844 | 3,943 | ||
Intercompany accounts receivable | 0 | 0 | |||
Inventory | 2,835 | 2,620 | |||
Prepaid expenses and other current assets | 500 | 808 | 679 | ||
Total current assets | 7,867 | 8,337 | |||
Property, plant and equipment - net | 3,446 | 3,502 | |||
Other noncurrent assets | |||||
Goodwill | 13,385 | 13,568 | |||
Other intangible assets | 4,949 | 5,265 | |||
Deferred income taxes | 241 | 254 | 253 | ||
Investment in subsidiaries | 0 | 0 | |||
Intercompany loans receivables | 0 | 0 | |||
Other assets | 1,740 | 1,698 | |||
Total assets | 31,628 | 32,623 | |||
Current liabilities | |||||
Short-term debt | 82 | 6 | |||
Current portion of long-term debt | 426 | 578 | |||
Accounts payable | 2,165 | 2,166 | |||
Intercompany accounts payable | 0 | 0 | |||
Accrued compensation | 427 | 453 | |||
Other current liabilities | 2,167 | 1,905 | 1,872 | ||
Total current liabilities | 5,267 | 5,075 | |||
Noncurrent liabilities | |||||
Long-term debt | 6,737 | 7,167 | |||
Pension liabilities | 1,160 | 1,226 | |||
Other postretirement benefits liabilities | 344 | 362 | |||
Deferred income taxes | 347 | 538 | |||
Intercompany loans payable | 0 | 0 | |||
Other noncurrent liabilities | 984 | 965 | |||
Total noncurrent liabilities | 9,572 | 10,258 | |||
Shareholders’ equity | |||||
Eaton shareholders' equity | 16,754 | $ 17,251 | 17,253 | ||
Noncontrolling interests | 35 | 37 | |||
Total equity | 16,789 | 17,290 | |||
Total liabilities and equity | 31,628 | 32,623 | |||
Consolidating adjustments | |||||
Current assets | |||||
Cash | 0 | 0 | 0 | 0 | |
Short-term investments | 0 | 0 | |||
Accounts receivable - net | 0 | 0 | |||
Intercompany accounts receivable | (6,673) | (10,704) | |||
Inventory | (84) | (83) | |||
Prepaid expenses and other current assets | 17 | 28 | |||
Total current assets | (6,740) | (10,759) | |||
Property, plant and equipment - net | 0 | 0 | |||
Other noncurrent assets | |||||
Goodwill | 0 | 0 | |||
Other intangible assets | 0 | 0 | |||
Deferred income taxes | (308) | (324) | |||
Investment in subsidiaries | (105,708) | (138,121) | |||
Intercompany loans receivables | (76,481) | (74,547) | |||
Other assets | 0 | 0 | |||
Total assets | (189,237) | (223,751) | |||
Current liabilities | |||||
Short-term debt | 0 | 0 | |||
Current portion of long-term debt | 0 | 0 | |||
Accounts payable | 0 | 0 | |||
Intercompany accounts payable | (6,673) | (10,704) | |||
Accrued compensation | 0 | 0 | |||
Other current liabilities | (1) | (1) | |||
Total current liabilities | (6,674) | (10,705) | |||
Noncurrent liabilities | |||||
Long-term debt | 4 | 2 | |||
Pension liabilities | 0 | 0 | |||
Other postretirement benefits liabilities | 0 | 0 | |||
Deferred income taxes | (308) | (324) | |||
Intercompany loans payable | (76,481) | (74,547) | |||
Other noncurrent liabilities | 0 | 0 | |||
Total noncurrent liabilities | (76,785) | (74,869) | |||
Shareholders’ equity | |||||
Eaton shareholders' equity | (105,778) | (138,177) | |||
Noncontrolling interests | 0 | 0 | |||
Total equity | (105,778) | (138,177) | |||
Total liabilities and equity | (189,237) | (223,751) | |||
Other subsidiaries | |||||
Current assets | |||||
Cash | 276 | 360 | 518 | 438 | |
Short-term investments | 178 | 534 | |||
Accounts receivable - net | 2,065 | 2,085 | |||
Intercompany accounts receivable | 3,194 | 2,715 | |||
Inventory | 1,577 | 1,493 | |||
Prepaid expenses and other current assets | 333 | 277 | |||
Total current assets | 7,623 | 7,464 | |||
Property, plant and equipment - net | 1,924 | 1,941 | |||
Other noncurrent assets | |||||
Goodwill | 5,350 | 5,547 | |||
Other intangible assets | 1,727 | 1,921 | |||
Deferred income taxes | 236 | 215 | |||
Investment in subsidiaries | 25,524 | 39,873 | |||
Intercompany loans receivables | 63,179 | 61,427 | |||
Other assets | 848 | 784 | |||
Total assets | 106,411 | 119,172 | |||
Current liabilities | |||||
Short-term debt | 13 | 6 | |||
Current portion of long-term debt | 0 | 0 | |||
Accounts payable | 1,248 | 1,305 | |||
Intercompany accounts payable | 1,639 | 1,403 | |||
Accrued compensation | 263 | 260 | |||
Other current liabilities | 1,034 | 989 | |||
Total current liabilities | 4,197 | 3,963 | |||
Noncurrent liabilities | |||||
Long-term debt | 8 | 9 | |||
Pension liabilities | 748 | 796 | |||
Other postretirement benefits liabilities | 71 | 74 | |||
Deferred income taxes | 174 | 255 | |||
Intercompany loans payable | 1,339 | 1,137 | |||
Other noncurrent liabilities | 364 | 378 | |||
Total noncurrent liabilities | 2,704 | 2,649 | |||
Shareholders’ equity | |||||
Eaton shareholders' equity | 99,475 | 112,523 | |||
Noncontrolling interests | 35 | 37 | |||
Total equity | 99,510 | 112,560 | |||
Total liabilities and equity | 106,411 | 119,172 | |||
Guarantors | |||||
Current assets | |||||
Cash | 14 | 18 | 91 | 12 | |
Short-term investments | 0 | 0 | |||
Accounts receivable - net | 1,430 | 1,376 | |||
Intercompany accounts receivable | 1,901 | 5,117 | |||
Inventory | 789 | 737 | |||
Prepaid expenses and other current assets | 35 | 145 | |||
Total current assets | 4,169 | 7,393 | |||
Property, plant and equipment - net | 683 | 702 | |||
Other noncurrent assets | |||||
Goodwill | 6,705 | 6,705 | |||
Other intangible assets | 3,091 | 3,206 | |||
Deferred income taxes | 0 | 6 | |||
Investment in subsidiaries | 54,498 | 73,737 | |||
Intercompany loans receivables | 6,987 | 2,909 | |||
Other assets | 172 | 166 | |||
Total assets | 76,305 | 94,824 | |||
Current liabilities | |||||
Short-term debt | 0 | 0 | |||
Current portion of long-term debt | 0 | 36 | |||
Accounts payable | 458 | 328 | |||
Intercompany accounts payable | 3,756 | 4,381 | |||
Accrued compensation | 58 | 65 | |||
Other current liabilities | 594 | 317 | |||
Total current liabilities | 4,866 | 5,127 | |||
Noncurrent liabilities | |||||
Long-term debt | 953 | 976 | |||
Pension liabilities | 87 | 89 | |||
Other postretirement benefits liabilities | 90 | 96 | |||
Deferred income taxes | 480 | 607 | |||
Intercompany loans payable | 68,714 | 68,685 | |||
Other noncurrent liabilities | 265 | 273 | |||
Total noncurrent liabilities | 70,589 | 70,726 | |||
Shareholders’ equity | |||||
Eaton shareholders' equity | 850 | 18,971 | |||
Noncontrolling interests | 0 | 0 | |||
Total equity | 850 | 18,971 | |||
Total liabilities and equity | 76,305 | 94,824 | |||
Eaton Corporation | |||||
Current assets | |||||
Cash | 36 | 183 | 181 | 92 | |
Short-term investments | 0 | 0 | |||
Accounts receivable - net | 532 | 482 | |||
Intercompany accounts receivable | 1,573 | 2,864 | |||
Inventory | 553 | 473 | |||
Prepaid expenses and other current assets | 115 | 229 | |||
Total current assets | 2,809 | 4,231 | |||
Property, plant and equipment - net | 839 | 859 | |||
Other noncurrent assets | |||||
Goodwill | 1,330 | 1,316 | |||
Other intangible assets | 131 | 138 | |||
Deferred income taxes | 313 | 356 | |||
Investment in subsidiaries | 9,689 | 9,466 | |||
Intercompany loans receivables | 3,693 | 7,089 | |||
Other assets | 720 | 748 | |||
Total assets | 19,524 | 24,203 | |||
Current liabilities | |||||
Short-term debt | 65 | 0 | |||
Current portion of long-term debt | 426 | 542 | |||
Accounts payable | 459 | 533 | |||
Intercompany accounts payable | 1,255 | 4,916 | |||
Accrued compensation | 106 | 128 | |||
Other current liabilities | 539 | 566 | |||
Total current liabilities | 2,850 | 6,685 | |||
Noncurrent liabilities | |||||
Long-term debt | 5,772 | 6,180 | |||
Pension liabilities | 325 | 341 | |||
Other postretirement benefits liabilities | 183 | 192 | |||
Deferred income taxes | 1 | 0 | |||
Intercompany loans payable | 4,585 | 3,808 | |||
Other noncurrent liabilities | 355 | 314 | |||
Total noncurrent liabilities | 11,221 | 10,835 | |||
Shareholders’ equity | |||||
Eaton shareholders' equity | 5,453 | 6,683 | |||
Noncontrolling interests | 0 | 0 | |||
Total equity | 5,453 | 6,683 | |||
Total liabilities and equity | 19,524 | 24,203 | |||
Eaton Corporation plc | |||||
Current assets | |||||
Cash | 1 | 0 | $ 1 | $ 1 | |
Short-term investments | 0 | 0 | |||
Accounts receivable - net | 0 | 0 | |||
Intercompany accounts receivable | 5 | 8 | |||
Inventory | 0 | 0 | |||
Prepaid expenses and other current assets | 0 | 0 | |||
Total current assets | 6 | 8 | |||
Property, plant and equipment - net | 0 | 0 | |||
Other noncurrent assets | |||||
Goodwill | 0 | 0 | |||
Other intangible assets | 0 | 0 | |||
Deferred income taxes | 0 | 0 | |||
Investment in subsidiaries | 15,997 | 15,045 | |||
Intercompany loans receivables | 2,622 | 3,122 | |||
Other assets | 0 | 0 | |||
Total assets | 18,625 | 18,175 | |||
Current liabilities | |||||
Short-term debt | 4 | 0 | |||
Current portion of long-term debt | 0 | 0 | |||
Accounts payable | 0 | 0 | |||
Intercompany accounts payable | 23 | 4 | |||
Accrued compensation | 0 | 0 | |||
Other current liabilities | 1 | 1 | |||
Total current liabilities | 28 | 5 | |||
Noncurrent liabilities | |||||
Long-term debt | 0 | 0 | |||
Pension liabilities | 0 | 0 | |||
Other postretirement benefits liabilities | 0 | 0 | |||
Deferred income taxes | 0 | 0 | |||
Intercompany loans payable | 1,843 | 917 | |||
Other noncurrent liabilities | 0 | 0 | |||
Total noncurrent liabilities | 1,843 | 917 | |||
Shareholders’ equity | |||||
Eaton shareholders' equity | 16,754 | 17,253 | |||
Noncontrolling interests | 0 | 0 | |||
Total equity | 16,754 | 17,253 | |||
Total liabilities and equity | $ 18,625 | $ 18,175 |
CONDENSED CONSOLIDATING FINAN_6
CONDENSED CONSOLIDATING FINANCIAL STATEMENTS - Condensed Consolidating Statements of Cash Flows (Details) - USD ($) $ in Millions | Jul. 31, 2017 | Sep. 30, 2018 | Sep. 30, 2017 |
Condensed Consolidating Statements of Cash Flows, Captions [Line Items] | |||
Net cash provided by (used in) operating activities | $ 1,838 | $ 1,787 | |
Investing activities | |||
Capital expenditures for property, plant and equipment | (411) | (351) | |
Cash received from (paid for) acquisitions of affiliates | 0 | ||
Sales (purchases) of short-term investments - net | 329 | (621) | |
Investments in affiliates | 0 | 0 | |
Return of capital contributions from affiliates | 0 | ||
Loans to affiliates | 0 | 0 | |
Repayments of loans from affiliates | 0 | 0 | |
Proceeds from sale of business | $ 600 | 0 | 600 |
Payments for settlement of currency exchange contracts not designated as hedges - net | (122) | 0 | |
Other - net | (52) | (63) | |
Net cash provided by (used in) investing activities | (256) | (435) | |
Financing activities | |||
Proceeds from borrowings | 80 | 1,000 | |
Payments on borrowings | (486) | (553) | |
Proceeds from borrowings from affiliates | 0 | 0 | |
Payments on borrowings from affiliates | 0 | 0 | |
Capital contributions from affiliates | 0 | 0 | |
Return of capital contributions to affiliates | 0 | ||
Other intercompany financing activities | 0 | 0 | |
Cash dividends paid | (864) | (803) | |
Payments of Distributions to Affiliates | 0 | 0 | |
Exercise of employee stock options | 28 | 59 | |
Repurchase of shares | (600) | (789) | |
Payments Related to Tax Withholding for Share-based Compensation | (24) | (21) | |
Other - net | (2) | (8) | |
Net cash provided by (used in) financing activities | (1,868) | (1,115) | |
Effect of currency on cash | 52 | 11 | |
Total increase (decrease) in cash | (234) | 248 | |
Cash at the beginning of the period | 561 | 543 | |
Cash at the end of the period | 327 | 791 | |
Consolidating adjustments | |||
Condensed Consolidating Statements of Cash Flows, Captions [Line Items] | |||
Net cash provided by (used in) operating activities | (88) | (1,612) | |
Investing activities | |||
Capital expenditures for property, plant and equipment | 0 | 0 | |
Cash received from (paid for) acquisitions of affiliates | 0 | ||
Sales (purchases) of short-term investments - net | 0 | 0 | |
Investments in affiliates | 36 | 288 | |
Return of capital contributions from affiliates | (20) | ||
Loans to affiliates | 4,948 | 4,771 | |
Repayments of loans from affiliates | (5,496) | (4,153) | |
Proceeds from sale of business | 0 | 0 | |
Payments for settlement of currency exchange contracts not designated as hedges - net | 0 | ||
Other - net | 0 | 0 | |
Net cash provided by (used in) investing activities | (512) | 886 | |
Financing activities | |||
Proceeds from borrowings | 0 | 0 | |
Payments on borrowings | 0 | 0 | |
Proceeds from borrowings from affiliates | (4,948) | (4,771) | |
Payments on borrowings from affiliates | 5,496 | 4,153 | |
Capital contributions from affiliates | (36) | (288) | |
Return of capital contributions to affiliates | 20 | ||
Other intercompany financing activities | 0 | 0 | |
Cash dividends paid | 0 | 0 | |
Payments of Distributions to Affiliates | 88 | 1,612 | |
Exercise of employee stock options | 0 | 0 | |
Repurchase of shares | 0 | 0 | |
Payments Related to Tax Withholding for Share-based Compensation | 0 | 0 | |
Other - net | 0 | 0 | |
Net cash provided by (used in) financing activities | 600 | 726 | |
Effect of currency on cash | 0 | 0 | |
Total increase (decrease) in cash | 0 | 0 | |
Cash at the beginning of the period | 0 | 0 | |
Cash at the end of the period | 0 | 0 | |
Guarantors | |||
Condensed Consolidating Statements of Cash Flows, Captions [Line Items] | |||
Net cash provided by (used in) operating activities | 394 | 1,063 | |
Investing activities | |||
Capital expenditures for property, plant and equipment | (74) | (77) | |
Cash received from (paid for) acquisitions of affiliates | (92) | ||
Sales (purchases) of short-term investments - net | 0 | (50) | |
Investments in affiliates | 0 | 0 | |
Return of capital contributions from affiliates | 20 | ||
Loans to affiliates | (84) | (283) | |
Repayments of loans from affiliates | 957 | 384 | |
Proceeds from sale of business | 0 | 0 | |
Payments for settlement of currency exchange contracts not designated as hedges - net | 0 | ||
Other - net | 3 | 1 | |
Net cash provided by (used in) investing activities | 802 | (97) | |
Financing activities | |||
Proceeds from borrowings | 0 | 0 | |
Payments on borrowings | (35) | (297) | |
Proceeds from borrowings from affiliates | 182 | 966 | |
Payments on borrowings from affiliates | (655) | (352) | |
Capital contributions from affiliates | 0 | 90 | |
Return of capital contributions to affiliates | 0 | ||
Other intercompany financing activities | (687) | (486) | |
Cash dividends paid | 0 | 0 | |
Payments of Distributions to Affiliates | 0 | (803) | |
Exercise of employee stock options | 0 | 0 | |
Repurchase of shares | 0 | 0 | |
Payments Related to Tax Withholding for Share-based Compensation | (5) | (4) | |
Other - net | 0 | (1) | |
Net cash provided by (used in) financing activities | (1,200) | (887) | |
Effect of currency on cash | 0 | 0 | |
Total increase (decrease) in cash | (4) | 79 | |
Cash at the beginning of the period | 18 | 12 | |
Cash at the end of the period | 14 | 91 | |
Other subsidiaries | |||
Condensed Consolidating Statements of Cash Flows, Captions [Line Items] | |||
Net cash provided by (used in) operating activities | 1,707 | 2,036 | |
Investing activities | |||
Capital expenditures for property, plant and equipment | (262) | (211) | |
Cash received from (paid for) acquisitions of affiliates | 92 | ||
Sales (purchases) of short-term investments - net | 329 | (571) | |
Investments in affiliates | 0 | (90) | |
Return of capital contributions from affiliates | 0 | ||
Loans to affiliates | (4,764) | (4,471) | |
Repayments of loans from affiliates | 3,892 | 3,478 | |
Proceeds from sale of business | 0 | 270 | |
Payments for settlement of currency exchange contracts not designated as hedges - net | (133) | ||
Other - net | (29) | (28) | |
Net cash provided by (used in) investing activities | (967) | (1,531) | |
Financing activities | |||
Proceeds from borrowings | 11 | 0 | |
Payments on borrowings | (1) | (6) | |
Proceeds from borrowings from affiliates | 100 | 15 | |
Payments on borrowings from affiliates | (840) | (75) | |
Capital contributions from affiliates | 36 | 198 | |
Return of capital contributions to affiliates | (20) | ||
Other intercompany financing activities | (90) | 267 | |
Cash dividends paid | 0 | 0 | |
Payments of Distributions to Affiliates | (88) | (809) | |
Exercise of employee stock options | 0 | 0 | |
Repurchase of shares | 0 | 0 | |
Payments Related to Tax Withholding for Share-based Compensation | (3) | (3) | |
Other - net | (1) | (3) | |
Net cash provided by (used in) financing activities | (876) | (436) | |
Effect of currency on cash | 52 | 11 | |
Total increase (decrease) in cash | (84) | 80 | |
Cash at the beginning of the period | 360 | 438 | |
Cash at the end of the period | 276 | 518 | |
Eaton Corporation plc | |||
Condensed Consolidating Statements of Cash Flows, Captions [Line Items] | |||
Net cash provided by (used in) operating activities | (12) | 528 | |
Investing activities | |||
Capital expenditures for property, plant and equipment | 0 | 0 | |
Cash received from (paid for) acquisitions of affiliates | 0 | ||
Sales (purchases) of short-term investments - net | 0 | 0 | |
Investments in affiliates | 0 | (90) | |
Return of capital contributions from affiliates | 0 | ||
Loans to affiliates | 0 | 0 | |
Repayments of loans from affiliates | 0 | 0 | |
Proceeds from sale of business | 0 | 0 | |
Payments for settlement of currency exchange contracts not designated as hedges - net | 0 | ||
Other - net | 0 | 0 | |
Net cash provided by (used in) investing activities | 0 | (90) | |
Financing activities | |||
Proceeds from borrowings | 4 | 0 | |
Payments on borrowings | 0 | 0 | |
Proceeds from borrowings from affiliates | 2,671 | 1,917 | |
Payments on borrowings from affiliates | (1,226) | (822) | |
Capital contributions from affiliates | 0 | 0 | |
Return of capital contributions to affiliates | 0 | ||
Other intercompany financing activities | 0 | 0 | |
Cash dividends paid | (864) | (803) | |
Payments of Distributions to Affiliates | 0 | 0 | |
Exercise of employee stock options | 28 | 59 | |
Repurchase of shares | (600) | (789) | |
Payments Related to Tax Withholding for Share-based Compensation | 0 | 0 | |
Other - net | 0 | 0 | |
Net cash provided by (used in) financing activities | 13 | (438) | |
Effect of currency on cash | 0 | 0 | |
Total increase (decrease) in cash | 1 | 0 | |
Cash at the beginning of the period | 0 | 1 | |
Cash at the end of the period | 1 | 1 | |
Eaton Corporation | |||
Condensed Consolidating Statements of Cash Flows, Captions [Line Items] | |||
Net cash provided by (used in) operating activities | (163) | (228) | |
Investing activities | |||
Capital expenditures for property, plant and equipment | (75) | (63) | |
Cash received from (paid for) acquisitions of affiliates | 0 | ||
Sales (purchases) of short-term investments - net | 0 | 0 | |
Investments in affiliates | (36) | (108) | |
Return of capital contributions from affiliates | 0 | ||
Loans to affiliates | (100) | (17) | |
Repayments of loans from affiliates | 647 | 291 | |
Proceeds from sale of business | 0 | 330 | |
Payments for settlement of currency exchange contracts not designated as hedges - net | 11 | ||
Other - net | (26) | (36) | |
Net cash provided by (used in) investing activities | 421 | 397 | |
Financing activities | |||
Proceeds from borrowings | 65 | 1,000 | |
Payments on borrowings | (450) | (250) | |
Proceeds from borrowings from affiliates | 1,995 | 1,873 | |
Payments on borrowings from affiliates | (2,775) | (2,904) | |
Capital contributions from affiliates | 0 | 0 | |
Return of capital contributions to affiliates | 0 | ||
Other intercompany financing activities | 777 | 219 | |
Cash dividends paid | 0 | 0 | |
Payments of Distributions to Affiliates | 0 | 0 | |
Exercise of employee stock options | 0 | 0 | |
Repurchase of shares | 0 | 0 | |
Payments Related to Tax Withholding for Share-based Compensation | (16) | (14) | |
Other - net | (1) | (4) | |
Net cash provided by (used in) financing activities | (405) | (80) | |
Effect of currency on cash | 0 | 0 | |
Total increase (decrease) in cash | (147) | 89 | |
Cash at the beginning of the period | 183 | 92 | |
Cash at the end of the period | $ 36 | $ 181 |