ETN - Earnings call transcript Q1 2020

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Operator

Ladies and gentlemen, thank you for standing by. And welcome to the Eaton First Quarter Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] And as a reminder, today’s call is being recorded.

turn Vice over President to Yan your like Senior Jin, of now the to conference host, I’d Investor Relations. ahead. go Please

Yan Jin

Fearon, Good CEO; quarter safe, me Arnold, your XXXX families Senior Financial right? Eaton’s call. I Thank With joining Yan healthy and Chief you of Chairman Vice earnings today and our I’m and that us first Relations. Chairman for you Craig and Vice Eaton’s today Officer. for stay Rick are hope Investor and and all morning. President Jin, Planning also stay

including the today, the agenda opening performance quarter. Our remarks by highlighting first company’s Craig, in

done have comments. we questions at calls, end in As we’ll be taking our past Craig’s of the

website release release both presentation for The and accessible at replay. of the today and will we’ll Please the website have is call available note webcast include on measures. the A through our non-GAAP that and reconciliations on this to press press go www.eaton.com. presentation our been posted be

like would forward-looking statements. related the therefore, our are, to will results and company today I expected that future to including of statements remind you comments

Our range from presentation. uncertainties in risks related projections our are actual release that of earnings in X-K described our and They’re to a also may results and differ due materially outlined filing. wide our forecasted

to I With turn over that, Craig. it will

Craig Arnold

Appreciate it. Yan. Thanks,

employees, of our Eaton addressing stakeholders, the is Let me COVID-XX our customers, start providing our communities on Page and X, certainly key and how general. by an impact I’d like our to overview in begin with shareholders of our

Yes.

managing pleased team I’d couldn’t more how with well through is crisis. is I the thing first say The our be

of by the priority. of to the practices now safety you COVID-XX. our are eliminating has employee As continues top familiar been Most of around be with best very spread our always, and the

say COVID-XX response our what expect playbook. system including and a part of created learned management At we the and China. that offices and adopted Eaton has even it compliance. saw they we were I’d We team our we how pandemic become around activated stood world, and Eaton, of them, of up and This from early commonplace. what playbook and factories before exactly most in ensure business them specifies all, the we’ve We

to around continue also the world. serve We customers

you’re our deemed of very with exceptions. critical as the products of aware, open As be remain a most a been infrastructure. our to have global factories part result, And few

seeing weak in We however, some our lower are, of utilization and end markets. demand

temporary closures And so couple in of some we have facilities. had a

when to organic especially infrastructure proud it’s and sure doing government work our around that opportunities, also increases continues to the communities make I’d think take to positioned employees be support and I’m we priority. growth And caregivers. on coming. advantage well our note that do of are we’re We to the in And that of our all expenditures comes, want world top the it including

We’ve donated Eaton equipment.

and cash We’re And capabilities using we’re equipment, in appropriate support cost profit margins, our produce to management decremental strong taking of those slides, solid as we’ve by personal next couple finally, reduction and the to also to charitable detail cash I’ll and our COVID-XX. impacted flow. additive giving protective the manufacturing actions liquidity ensure increased

Allow Page are shape. me on both actually with flow liquidity in and cash to X, begin great and

billion of As had XX, hand of cash $X access of and million we to multiyear March undrawn short-term on $XXX and facilities. investments bank

our use them don’t expect bank XXXX. on and drawn to never we’ve facilities, during fact, In we

touch rack with and been with our system ability are [ph] in We if have needed. comfortable bankers our

market, paper access have also to obviously. commercial the We

small do of we have In is which million, one debt end $XXX of QX. XXXX, maturity due the relatively at

adjusted that trailing X.X debt EBITDA at to noted end March our point the times. was a As I’ve month of XX reference, of only

be represents to billion. range think we And our ourselves flow, of I this billion midpoint of it cash flow to in. original guidance, cash forecast, and XXXX lower than terms we expect we’re as saw. economic while shows our is performance in flow our strong a find you of with whatever $X.X billion the in in now And environment $X.X resilient $X.X updating cash And free

Our cash nearly dividend. scenario dividend paid than in continue of that but years, in see would to any we not more XXX change. flow may you is to the and Eaton maintain sufficient has business invest aware, our to don’t and a Many which be for

our the we leaving from by sale. as and even the end using QX, from leverage. of billion much Hydraulics with during $X.X lower the us of receive As you’re of $X.X proceeds And the planned, expect sale aware, to shares of Lighting year, higher repurchased also cash billion we the liquidity

sheet, balance repurchase optionality and strong remains intact. M&A share additional really a with So our for

We more stock of yield continue X.X% provides a attractive the given a X%. to very than free think return our and yield dividend cash flow that

and We’re equally measures Page cost containment of We summarized decremental in of actions focused to on these quickly top deliver our priorities, we’ve one on moved that some ensuring we margins attractive put X. place. is

leadership First, reduction took by one to the team, base salaries in the in our reduction the cut, was first XX% they first XX% and and taken QX. really the biggest

And by place agreed these XX% in their for then actions they actually fund later into but COVID-XX. QX, could relief than will comes be our of recovery if impacted for an These Board those are cash in Directors and retainer the also forecast funds to expected. for employee extended a reduction of go QX,

our And we’ve but We most put XXXX critical place until next reduced planned as you salaried We’ve the leave year. taken merit a also compensation. of that expenses, of elimination the or and few a in imagine, can increase roles, dramatically all for hiring number delayed reduction, a significant for actions incentive freezes workforce. unpaid other discretionary of include

challenge greatest of work shouldering necessary but the with with difficult with to we bigger the responsibility ensure naturally shared All of steps burden. sacrifice, or approach those piece as us needs we a that

the significant in you’ll updated And see as CapEx in it’s pretty slides, Lastly, few we’ve guidance eliminated reduction. a nonessential a CapEx.

a for that while that new to past. It’s the emerged stronger frankly, company. Eaton fully is say do all expect economic we managed around. in me has of we’ve us, pandemic time something as the severe this quite through declines always And Let

Moving of to due charts, turn you $X.XX saw, QX per on GAAP COVID-XX. our of results. and charge $X.XX, as earnings estimate set X. the an $X.XX were quarterly divestitures. and earnings the basis share our I’ll per by reduced impact a for Page where traditional to acquisition share, to excluding of $X.XX Adjusted

$X.XX bit estimated world. the early is more a the into than impact spread China as This of beyond the that in impact really March of rest COVID-XX we’ve the

that a anticipated you’ll in million. And we or is some this our $XXX than $XX approximately that we X% investor we organically, estimated meeting, at COVID-XX in from early original two that March includes And an COVID-XX. X% our decline million additional X% more Our sales be guidance revenue $XXX of $X.X shortfall billion or were down indicated March. impact recall would which million of

Segment unplanned the heavily XX.X%, were charges margins being decision note But made restructuring as down businesses downturn. also this slightly impacted this rightsize the additional XXXX. QX and I’d that to we that includes of some economic are by to from begin

XXXX. And equal the to we outstanding for the sale $X.X beginning shares events at of close in repurchased of Hydraulics $X.X of closed shares to quarter. Lighting end at expect XXXX. billion, the deployed billion we the announced We of X.X% Danfoss notable We $X.X Other sale billion. our business the the to which for of

And QX I’ll a kind note highlights and on just summarize X, we here. Page our of performance, few

level at related First, corporate acquisitions all recognizing we’re rather than practice level. segment charges and historical and to changing our divestitures are in the now

in not overall well for at model company. the We the of So easier segments. example, makes to as segments gain, it on would corporate, this you one forecast and Lighting think for as the be our

by X.X%. by acquisitions a QX, sales more impact X%, during sales X.X% was divestitures. offset lowered Negative increased by currency which Second, from also than

and deliver margins Finally, this actively of what the XX% continued is our to us enabled team to decremental costs, quarter. in manage

So we of this results environment. again, very once set particular is this in see, a strong

Page X. to Moving

X%, of new a as from COVID-XX were Americas X% sales of the decline divestiture by impacted decline We currency and segment. of X%. in X% Electrical And summary quarterly our revenues negative Revenues result have Lighting. a organic down the a

if As from to driven March. XX.X%, were commercial Lighting utility due the the in was by end up basis exclude is Strength X%. you QX of chart, organic markets. points impact, and the the COVID-XX and can see mostly XX revenues construction noted impact Lighting early you and in by favorable Operating on this the business the increased margins to divestiture

X% a up XX-month on rolling Excluding orders basis. were Lighting,

orders decent pretty overall. So

Given the now forward. we’re reporting Services Products Systems going on rolling Electrical & resegmentation, which XX-month into and basis orders Americas, a Electrical combines

offset strength and by be also the in And markets. In utility industrial residential centers markets in and really the saw data true this quarter, Electrical for Global will weakness segment. we

segment. entire decline for Next of Global have X%, driven this were Revenues our this most down X% out China. really on a the QX Page with we of And of X, decline impact coming results organically. Electrical COVID-XX the and by was

We X%. also of and negative impact have from growth Ulusoy X% currency acquisition a the

In would than segment. to number that does Orders that oil here centers. data gas basis. this restructuring declined this X% markets. point the imagine, we by you And global this XX-month rolling margins charges we’re a decline, in points itself, more include XX declined on in basis in that Operating as I And significant quarter growth was offset and saw XX.X%. increased taking were out planned not

XX, Hydraulics segment. summarize our we Page On

You’ll Filtration in reported Golf this Aerospace recall the March, resegmentation now and of part announced Grip business. the that now segment only with a the are Hydraulics includes as segment.

Danfoss at they’re for the things to once look to XXXX, again and we on expect track. remaining strategic this of emphasize continue very close that like end to them, the I’d business of sale deal a

includes X%. organic XX%, were COVID-XX impact decline and decline, QX, this X% For number the negative estimated currency revenues of down and to due XX% an

down margins market. orders were in XX.X%, year-over-year quarter weakness points Operating global equipment and mobile XXX really basis continued for XX% by improved to the and driven

estimate segment. the result due Moving saw COVID-XX, of of Souriau. to negative our we We Aerospace results this up X% summarize with of as XX, for the and organic growth. decline Revenues increase acquisition XX% we certainly, Page were to a X% XX% a

fighters in declined and the decline a acquisition commercial transport. basis as and declined still Organic underlying primarily due in particular aftermarket, quarter, orders obviously was XX.X%, margins in business. you military came imagine, XXX but in rolling strong, weakness, the points strength Operating margins the in lower military can at this XX-month we X% to saw basis. so Souriau, on And of which very to

at XX%, our Turning to estimated impact of look organic. organic we decline, was X%. Included some negative that the Revenues revenue Page a here declined COVID-XX We had vehicle XX. segment. XX% in which

Fluid currency. X% negative divestiture a and had impacted the addition, from business of Conveyance Automotive impact we In the X% by revenue

lower of I’d eight decline was And Class result of some revenue and say here production in down vehicle QX which really that the weakness it’s XX%. XX%. where down largest continued global part was OEM production, light expected, markets the from was

margins XX.X%. and fixed than declined a XXX margins in team despite to proactively out As both were point our as is noted, discretionary also I’d here volume, points operating manage to less significant continued decremental basis reduction costs. XX%

now we be COVID-XX, nearly forecast lower to Given from Class our eight down XX% XXX,XXX units, XXX,XXX units, expect than original XXXX. NAFTA of production

Page the And XX. last on segment is eMobility

down XX%, organic XX%, were an impact from had including a we revenues and X% Here, with estimated negative down impact revenues currency. X% COVID-XX, with

engine result this on with to on internal of new combustion as declined wins electric margins Operating well X.X%, associated start-up as manufacturing volume costs legacy a is vehicle and reduction program. platforms

but XX, QX our don’t a position the year and moment. have due withdrawing we were Page in and from we clarity pandemic, wish of on I And I’ll to at the we’re summarize COVID-XX begin we uncertainty that provide to XXXX by XXXX full our guidance. lastly, economic just forecast stating level that revenue outlook the

be for are obviously, I that the down And April, XX%, number running and and than for but businesses will inside than June XX%. be the to impacted month more month revenues certain. I May But stronger, and worse be would would early of add better running it’s of of approximately that somewhat the month-to-date some tell too of that. that vehicle of aerospace slightly to clearly, expect would electrical

decremental visibility free in better and on as guidance, margins flow have our depicted. do We cash

actions year. decremental cost Like of full targeting of cost we’re the control for downturns, QX on We’re XX% and a extraordinarily focused number to margins XX% We’ve prior taken control. already. XX% for

quarter needed. quarter have if we in decremental QX. to expect, the We to quite contingency in volume importantly, as the the see And largest biggest the expect margins higher is impact more do that plans charge. be do we’ll we’d place restructuring well This where as frankly,

the $XXX of $XX at at $X.X $X.X approximately billion, prior Our now is flow down guidance CapEx forecast from now billion our And our billion year guidance million. for cash million, midpoint. the $X.X to free

we also cash February. maintaining conversion we And to remain which our flow strong. continue to in dividend, by free So expect X% increased we’re

recognize remain focused cash saying just flow, of by uncertainty by me kind COVID-XX Let always impact, as close created overall economic that company, we its the and that while on we’ve we which generating strong done. a the

a focused around long implementing strategy over on certainly into transform earnings. and delivers, Eaton company growth, higher We’re the our term, how long-term higher we that more consistent margins

So with to stop I will opening here, Yan turn it those back for I’ll comments, Q&A. and over

Yan Jin

Thanks, Craig.

session the the have see queue questions. with do I of a Q&A today, our individuals begin in that call we of we Before number

ones in limit So your only constraint today, given one your an opportunity corporation. hour the our you question to time for one please and Thank for follow-up. only

it guys turn operator over the I will give With instruction. to who you will that,

Operator

Instructions] of Jeff the come from Research. first you. go [Operator going is line Vertical ahead. Thank from question Sprague Please Our to

Jeff Sprague

you address see some that How how actions much taking I was through? the in on to kind and that the gave of a you’re you And actions color more you Craig, rolling temporary? employee of wondering other if could words, us do detail is decrementals. little compensation. In specific manage

So follow-up, permanent. maybe bit ask And the a too, restructuring couple right times, kind is related that mentioned more now, I’ll right? of and that little structural of a sounds just you

of those head you a and color our can us to how on little give So more unpack those? just items two around kind get

Craig Arnold

company deal just our inside I question. appreciate really certainly those benefits get we begin over Maybe window million And a excess of you’re have today thank the or saying by as years through four that, I’ll profitability every at economic the the better that really as our kind aware, in at you. of of well are three in in in fixed cost with. point Jeff, last $XXX spent Yes, we and around structural company. business to playing

well, structural And we $XX restructuring away every million to independent programs generally costs, today, aware our - don’t year, spending restructuring worth are And of of as as P&L. targeted run you’re happens restructuring. through companies, go costs economic we other on and million magnitude, of at like come don’t Jeff, we’re back And $XX what we those order front. that the

facing through And we we think we have to in as playbook that have are than restructuring the discussed can a past, we shelf periods restructuring in the continue do where we programs weakness, where have around on so that simply we opportunities. find we as periods in slide And about economic and economic weakness more ourselves a anticipate. managing little we more bit

in fixed to COVID-XX, those deal structural likelihood, of that we those going and and initiatives dealing some as once that businesses. company pull downturns again inside so longer-term to what you’re costs our think in a more those are with of all And about in with result of perhaps find restructuring as we’ll, is businesses accelerate

I And one the focused an P&L, as about continue at, that we’re will run important we of of comparison to running business the it’s so basis, and and part that basis. think at on think company think itself looking stuff the we mentioned, is that we it’s this ongoing and it point, on on, just through a the things you as

Jeff Sprague

million million or So there’s spending normal to just amount? the you’re elevated $XX though, $XX be to clear, so an

Craig Arnold

restructuring, our in we And out expect to that obviously, but spending are restructuring elevated in results spend - been than restructuring, we of even part reason We additional our QX dollars the and even the for planned. And full did would results that called stronger. that we an have would QX, we’ve more amount. - spend year, was for did to,

Jeff Sprague

you. Thank Right.

Operator

question Thank you. line is come from Capital Please go going ahead. And Deane our the Markets. to from RBC next of Dray

Deane Dray

Thank you. Good morning, everyone.

Craig Arnold

Deane. Hi,

Deane Dray

color the today I visibility. appreciate limited all given

up You’re giving cash is actually pretty and the guidance, which stepping flow impressive. free

you you separate April is are think comment ability of the COVID-XX? down quarter, attributing how being XX%? much attributing to April being impact that to for XX%, down much how much this you How the For on since to the you’ve are shown first the COVID-XX April

Craig Arnold

that it’s from of take as and of end rest mean, XXX% really hitting no think I tied think to mean, we’ll reduction I get of reason you we quarter. isn’t to position But where to a if sit and we I I assume the probably pandemic in company better prior to world. at that Deane, there’s the today, parse to be COVID-XX. kind a frankly, a how to the look the - becoming of performing prior COVID-XX, the was quite that

in quite were company very shape. actually we The was good and performing well,

for reason no COVID-XX. that absolutely tied to isn’t of XXX% there’s to reduction us so And that believe

you’re have the COVID-XX. have aware, factories, some tied shut down is that customers well world of to as As governments our really of and around all economies closed

Deane Dray

interested just on your confidence That’s that side. positioned? coming most? Any government early all increased in do that And Craig, on on seen an helpful. And before. spending having there I certainly We’ve to particular this you businesses the expand you the infrastructure how look, that was your think comment are benefit think is degree would be you going you of

Craig Arnold

questions, say we’ve I’d getting we’re appreciate Yes. that mean, I been ready. here the I Deane. is before. What

We today hurricanes they these through, with to kind to living a set whether been really have result as that created a we’ve where of or playbook deal stimulus that prepared it’s come. have we as an of economic other be up we’ve organization plans events

wait most our it’s and signs with early, getting coming certainly, infrastructure But of eventually of spending at starting those we’re our in China. plan, certainly when but in an electrical business. benefit will think U.S. point, ready. core of do and company this immensely, see it benefits the comes, it early we’re believe, it We have will We have kind we’ll the and to see to

Deane Dray

just know And comment. precision in keeping them lastly, your a ears and had the burning, things were in having say to Eaton’s about as I call WESCO vendor. full last really but a just manufacturing, Great. if for chain the don’t terms nice of supply

you the team. to congrats and So

Craig Arnold

that. you. Thank Appreciate

all and a have We running. them doing WESCO our strong keep to with of up and can and very with partnership distributors we we’re everything

Operator

Thank you.

from then Please the come go from question Goldman Ritchie of line next ahead. Joe Our will Sachs.

Joe Ritchie

structural, a are temporary today you. to starting nature. thank maybe I’m I Craig, mouth, you about don’t your so words can in plans plans morning, that sounds well. outlined address it everyone. like seem temporary more Hey, off, just you restructuring versus guys Maybe the hope just thinking in I Good the all lot that. put but - of like you want

And like a more the talked of some about that accelerate then would maybe secondly, footprint plan why the time now past? rationalization opportune be to you’ve in

Craig Arnold

would we what that things our Yeah. as way is about we The expect restructuring, general, I the structural time businesses. question, about each about that our mean, to our have so we the any talking do of we in we’re, restructuring do changes. I flex to of one Joe. and for well in part, appreciate the as talk always most function think businesses we support

things the to structural the manufacturing your company. is changes, in restructuring, footprint, a changes levels costs to places different world. focused natural we us, And around on go And work costs, and so there’s footprint, really support expectation for do as making where like And volume looking flex economic as us down. the manufacturing structural mechanism and our our up point, for the to at

some about plans than on would clearly, in anticipated. items out already thing intend decision that a is announcements. would I that, making would internal around by We’ve of focused in originally intend only our we do to say we do were in And XXXX that those XXXX. front never to a made of what plan accelerate what executing we have get - we We to and communication more the

pull event than have But economic we to the I more on contraction will tell you, that accelerate goes anticipated, or in though, ideas. is the worse in and this ability longer we

that have plan we laid a we’ve now, out. right So

environment feel We’re more doing about that do good And if it. calls the for we accelerate can we originally the even that we more than anticipated. what and fact

Joe Ritchie

you XX% second the in Craig. XX% XX% the have guys to helpful, Maybe margins of decremental end, That’s outlined to right, year. that quarter, for

So some on that’s be well. there’s as to got of going type scenario planning

things question be do you we actually turn And type my about of what at what So kind out higher guys a kind than a than I are decremental XX% anticipate, for are decrementals downturn guess you XX% year? where for point, of worse to little is those today? to bit the thinking if are

Craig Arnold

said guidance. guidance environment we many provide what And living have that is where are as markets say of don’t either. around enough now and seen, right I’d just certainty our in you’ve And we clarity providing to we’re that Yes. our customers not an

ground to So provide kind customers a willing when either. in guidance to tough the in aren’t and weigh us for put of stake the

only would today under I have the is decrementals And I our look we remained what We’ve would flows strong. planning. does assure with scenario to what look rest on tell so the can cash cash all, done flow planning done respect every flow that scenario what And scenario, like. cash you, say that first of not you like,

In we capital, fact, as even that conditions. many working cases, improve liquidate to would continue certain under in

guidance, we possibilities. an of when quarter. number internal we’re that plan with do in the forecast that kind assured We But be we out will to different believe of point, the a range possibilities, the to have rest of that weakest not going at but QX this the respect provide lays and

like. forecasting, a more to be as in we the of QX hopefully And to have give that get that, longer to more. will year end event in But position is you the being better going to of currently than we or do what protracted downturn, the indication the look we’re ability that we a

probably because year. of we’re just know not XX Joe, kind give to the position doesn’t question in for being from view away of revenue days hopefully, answer you so. your But we’re I a do maybe kind to a directly, that So of able

Operator

ahead. [Melius Research] question next from line of will go our And Scott you. Please Davis come Thank the

Scott Davis

and Rick. Craig Hi. morning, Good

Craig Arnold

Hi.

Richard Fearon

Scott. Morning,

Scott Davis

color. appreciate the I

I’d mean, what’s sense know we to but I are I healthy, get your smaller financial think distributors like things distributors your one the of their health? big of, and the a sense of

Craig Arnold

any Yes. I’d at don’t distributor Scott, point, kind this of we of as juncture anticipate kind issues this At this work say through we that downturn.

know, deemed and most continued to the being of certainly about world mostly, impacted the will that governments goods everybody essential continue deliver one else. you good services to projects be around and distributors executed. As by is things like our They be

But at - this I’d say any juncture, distributors. most it’s change health seen in not of our we’ve of the material

We’re this really a obviously it really add distributors going of juncture, at economic would But monitoring closely. as there’s are this nothing that that be the we imperiled that result to smaller somehow could suggest downturn. particular

Richard Fearon

seen it’s significant that in. from the invoices Scott, look the at as they’re days Rick. distributors, might haven’t I payments that in I we paying these deterioration add any their

Scott Davis

as than out, about be bit already helpful. or here think decremental our follow-up, parked model could And being then margins really I are your get average That’s a probably to imagine going I just toughest calling one would older think a because Okay. to you’re the just higher that I the parked. super the is planes based when forecast that Aerospace on

little there you at we least do and ballpark a bit something the can you’re bigger? that you should in feel model forecasting Or the somewhat broader? decrementals And be - any have expect of what can comfortable confidence? Is it internally

Craig Arnold

what I but we year would I extraordinarily anticipate mean to appreciate look, absolutely No, the just modeled clear, look I to like. have question, the mean, Scott, we be

decrementals what decrementals around terms assumptions absolutely decrementals a the look year. like of the QX, for for year, be. possibilities we’ve those we’ve range the And would in the the what look in why the like modeled year that’s what for for given embedded we think of full range So

challenging talking intents quarter, most right, we’re have XX% in all a terms for in world. the will of QX, be a about governments all and be, activity clearly not shut which attractive very the the down that decremental purposes, around will QX quarter, and

in And quarter, saying think deliver decremental. so we can even a we XX% that we’re

The balance, absolutely think the that the modeled. year we in laid is QX be half we’re on very some for correct. because than than in be very better back absolutely We And the that plan to going the higher decrementals you’re have comfortable, we’ve range Aerospace better that think of we businesses. we of be. would decrementals can But decrementals the is a comfortable But out. with possibilities than other the

Scott Davis

luck Okay. of That’s of very helpful. guys. best

Craig Arnold

Thank you.

Operator

to the go line question Thank of from ahead. Please Duignan Ann we’re you. JPMorgan. from And going have a

Ann Duignan

good more Thank morning. details quantify the us both could you. Can you of performance you you business Hi, the of electrical growth saw data businesses. some quantify give that center Maybe on the in the the the or in size areas centers maybe fall other in longer and the some term, versus strength to the off modeling times five quarter like like, us of something weakness think weaker data continuing about beyond like oil just gas, help in in continuing QX.

would be So you gratefully us give can any appreciated. help

Craig Arnold

the because were quite hitting positive did the certainly, center the just mid-double-digit you say, a outliers great the quarter, in up, Ann, on strong in job, two side, think of data orders quarter. I let’s

continues think And So center data to I market very the strong the market. in performance data be center strong.

strengthens use at it use and data once just, prospects think kind the work anything, of technology the case of the again, the for I in general, from data center market the growth in long-term if home, And home general. of for

And data expected in that even so And we the are economic downturn. very in with our quarter. attractive the centers pleased quite in of midst to remain performance market this own we’d

experiencing by the we’re the spending. obviously extraordinarily by low of most markets the today are certainly on hard their pretty reductions gas as of side oil certainly hit as those you the and going other the appropriately capital what’s being and oil major On prices And noted, equation, companies reducing well.

bookends U.S. or if kind true, core those pretty you going what’s of at our by business. what’s of happening what’s two the you’re on much outside looking happening that do today are the I inside U.S. But at way, think think is markets pattern the the you look And in electrical whether about of in

Ann Duignan

And you in for and the orders would price data upside? the did just us, size times like center to you as decline

Craig Arnold

about I about April we of sales think today, terms some we XX%. fact when specifically that Yes. of down, in I’d if in sales say it’s talked bigger. magnitude month the is what the April you in the order talked And experienced of about are

And inside we’re than of worse Crouse-Hinds category that, of be better say would that. some businesses in than seeing are weakness I average some the company. than are where the more would

Richard Fearon

But only gas. factor XX% was oil to that useful this in downturn, Ann, coming into and it’s Crouse COVID of also about

a from time had acquisition. been that’s So it Cooper the reduction at the what of

Craig Arnold

to Cooper. never the really recover levels it we the we time acquired market saw Yes, the at that at, was

absolutely right, The company or ago. five four Rick. it have So less the been, years impact than is say, you’re on let’s would

totally We’re delays. project seeing

that delays and the market. we’ve in date to oil project the really gas seen happened, And particularly,

frankly, fact haven’t, quite in delays. point, seen but have We this we seen at significant cancellations

Ann Duignan

Okay, I’ll there. leave it. I thank you. appreciate

Craig Arnold

you. Thank

Operator

question to of our Then from is Coe Nigel Wolfe go from come Research. the Please line going ahead. next

Nigel Coe

home progress Thanks. And next update the Good around the you can to guys. Obviously, talk about process, What moving deal steps Hi, morning, and maybe maybe be I’m wondering, close. of globe? gents. or given sharper the us the getting nice in of you of can just Hydraulic kind quarter. sale? major the in able restrictions terms of closed make just the through terms timing

Craig Arnold

confident, we’re that say about, deal that as certainly will the close. I’d we talk Yes.

expect the can see as as material outs And have do of earlier, did with January, really we issues. the the doesn’t file close contract In financing end regulatory for the at announced the we we a in As purchase you contract, or to agreement deal the SEC. buyer late the year.

they’re everything for makes than that, very the that at beginning. the transaction today did But I the as sense the it accelerate in them think in of And importantly touch we’re with team strategically, to closure as Danfoss. they well. even as can doing And this much more much

much remain the Obviously, to term. have through very approval of they It the so near committed the go deal them, to now. regulatory will extraordinarily very in beneficial And fit process, and strong to you remains a both we’re working still it for overall. the strategically strategic the in and through be believe and to which the long merits still deal Danfoss

of deal this that the can to what sit, regulatory been we to we’ll the it where year. date. remains close, to And from process. is But end approval and And on does we wait tell everything point, impact track. expect is if at you anything, to at and we current this indication all COVID-XX see There’s estimate extent, this have of fully the no by that from point, a

Nigel Coe

slowdown That’s coming great accelerate optimal But recession? then open you been that my footprint of of obviously point. question still very you plans as progress and Eaton’s this those some but made you’ve the the fact And And on Craig. to footprint would is hear, this not at follow-on footprint. really out to use reposition great this crisis about this

Craig Arnold

the we’ve the ability recovery, through we downturn obviously have thought how And could is that depth the plans of restructure forward restructuring programs, pull to the forward company. some kind to the pull I’d of the the of we the question, around option answer And Yes. upon downturn, juncture, there. Nigel, of depending say that way and that at I’d this shape the

organization make we As we’ve our talk those announcements internally clearly we’ll with about said as well, it externally. would before

plan some are we’re actions. today, restructuring fairly these needed where And from to clearly event with that a we confident but with of options and the there, outlined we that assumptions in comfortable those respect accelerate have fairly to, - the - So using could company. feel we that we that we sit the we a

Nigel Coe

very color. best Thank of great and That’s luck. you much

Craig Arnold

Thanks.

Operator

Bank Then line the our of will Oldman next come go question of ahead. Please America. from Andrew from

David Ridley-Lane

maybe Can is restructuring Ridley-Lane timeline And of one in the a in first This Andrew. broadly, of these sort the the are benefit guess, size quarter? year payback? of you actions David Sure. on I took you for

Craig Arnold

Yes.

out we we of we ongoing served better going that we call couple programs, decision as make served, the the these if are And every things that a be on anticipate ago question, to do of onetime them doing made restructuring you that that be basis. thought systematically ongoing be the but a items costs as year. that the did because restructuring an appreciate with years decision structural things better them One to we company, undertake would that would year do we don’t it deal we’ve and every

order operations through to once a But a magnitude, we’re item. our my we it do Clearly, intend $XX opening million this as $XX run more normally to separate call not million year. mentioned that again, commentary, size as in and And is going I it year. to of onetime we what to do out at to

would where to as ever the running a we of of through it on kind taking the it’s as it’s departure pattern way if to would point we’re we’ve company got Now from multiple if than do ordinary large long different perhaps a in very we or that. run spent sizable we not the the we historically, course had a intend the But to plan just operations. years, what consider margin, it’s significant over

David Ridley-Lane

meaningful are to in the margin then line? raw benefit going you gross lower And for a costs on XXXX be Okay. material

Craig Arnold

whether about most aluminum, this far And year. we absolutely raw materials the we in And prices neither would steel favorable about the we experienced they’re Yes, in hope date really turned years, over we or way that’s think a of talked we’ve that so to drag positive so. that have certainly, many copper, that silver, key the commodity acquire, general net have net as certainly cost is earnings. cases, to

well. to pass come To the extent down, customers up, is costs in to those costs expectation over also that the would to down come are we they going they the that marketplace. that extent time, intend And as the on

again, term nor net But commodity net long And EPS. so a once in that the about lower it’s the we prices today. over negative of it is not clearly terms we’re way think seeing a positive

David Ridley-Lane

much. very you Thank

Craig Arnold

you. Thank

Operator

Gordon to Please come of from next Inch is the John from Then go going Haskett. our line question ahead.

John Inch

I Good you. everybody. unfortunately, dropped, Thank earlier. morning, got

something from to release going just much wondering of I presuming you’ve and capital we and buffer I kind to puts a expectation. said, about So am guys bit two the talk expect already earnings working preponderance working Rick. that That of two the you over I’m the maybe five, covered, capital. the mean, would cash can Craig how is nine to shift little But lower and not year? cash if hopefully this takes flow on

numbers could fall higher? Any this And I’m you so. out higher cash of secondly, go do expect conversion, sense much on on those year? income the to assuming cash adjusted how conversion

Richard Fearon

I’d Yes, John. your be address to questions, happy

consider. just all, of First few a points data to

about our it’s less think inventory, sales. capital, payables, about working you XX% classic of receivables, If

come $XXX And pull commented down, have as been. that above higher past, million same to out much that what you so as And commented year inventory came they as sales we’ve working have capital. we’ve the $XXX this in into million than should we as the been. levels should with time, At they

you’re now push future real at in and is imperative company a the And so that particular. fallen what has real looking inventories situation pull down to there is a activity a off, within

an magnitude, at of would at XXXX, if same inventories was order Just DOH been $XXX have end DOH you million to our the as end March give of lower. of the the

the so And opportunity in biggest DOH. is

pull have The second a opportunity receivables, to the case managing that where day that in. out we pushed every well. a that downturn, confidence will is pretty as - we’ve and they we’re in we normally But actually is in X, back

at that. We’re working very hard

March, I and that’s just cash ‘XX, think in on flow going flow ‘XX in believe then make at that and we a if is ‘XX, our look we was helpful further let’s improved free came there. cash And and at can XX%. progress from I perspective progress little free that say bit history, just our to have better days another than looked to planned you ‘XX we in payables, made

were the XXXX, was at up down looked in decremental ‘XX related, same we cash another ‘XX only capital And at And profits. ‘XX. those improvements market, the our offset were in in And of and ‘XX also you again, were was the XXXX X%. it’s and working in fact, time, XX%. the XXXX, They really XX% XXXX liquidating managing decrementals. to free to decrementals in flow working had decremental But down that a decline pretty If down to capital attractive.

So and working it’s a pulling combination of out. capital decrementals managing

last these capital amount kinds of your ratio your typically, due you downturns question, to of conversion to that working the cash liquidate. And John, in improves

conversion would better our do And so compared on to that expect in much we XXXX. would we cash XXXX free

John Inch

the of excess the the you closed kind XXX at equilibrium you Rick, That terms knife say, of guess more would right? makes of inventories you to are I bit it’s of in an a kind future, a sense. of XXX the quarter? had, And that as falling out they

Richard Fearon

Yes, that’s the problem.

John Inch

of Did much that? it get burned off

Richard Fearon

we then And future much. Not much. had fall Not sales No. off.

make in think it as get back QX. as the end I that working the by QX we’ll of know this adding don’t lot is will rising. world of we really, improve, if we’ll progress to so And a something volume we’re hard. really And where in we to think forecasters I back starts But constrain like begins QX, QX. to and inventory most continue entirely

Craig Arnold

of sign that just quarter were most until And I’d up way only just the unfolded, outside our doing add the of businesses China mid-March.

just is weeks inventory saw And takes ability this it off out. so driven this of and quarter, two which - the of get last what’s this It we the really some to in excess time. fall our

worth And an problem. so fixing you’re if XX you from days inventory, think you days’ of about inventory it, XX in general, about have away if

John Inch

just more initiatives I’m few meeting, the past cost-saving makes chain provided kind Totally ever and And establish Perhaps has those quick you sense. the kind we review being would at the one. abundant that Craig, communicated? analyst of any weeks backdrop No. opportunities. some And wondering to opportunities. perhaps supply one of of maybe formal if efficiency just or or or alluded to see targets

Craig Arnold

I’m sorry, said when supply you specifically? say, chain, you supply And mean? chain, say you

John Inch

around your chain. right, - Yes, that’s your supply around

opportunity, the just the quite lot chain become made you a your opportunities. efficiency but supply actually opportunity. at I’m think of that’s a and topic presentation, about someone a part curious downturn it as wasn’t if I No, you of comment. asked analyst during meeting, there’s an

Craig Arnold

doing within ongoing are supply the effectively the chain I’d enterprise. across the more have large those initiatives to we more do across and we’re visibility bring tell of the scale company to there company opportunities And you, believe general, leverage things that are and been ongoing. the in and

have we in And where and I’d urgency the into ways everything, in there’s to downturn. around of the economic a that sense around the of of same that which the the that bucket we’re the put scale the obviously that But just opportunities during lot an downturn, way - more getting I It’s accelerate we’re continuous of I company. attention put of would would the in context say of leveraging running kind the a ongoing economic improvement category company. the greater

John Inch

Makes much. very sense. Thanks

Craig Arnold

Thank you.

Operator

Our come next of the Suisse. to line is from Please question ahead. from Credit going go John Walsh

John Walsh

good Hi, morning.

Craig Arnold

Morning.

John Walsh

a one. quick guess I

You your highlighted liquidity strong position.

think actually actions like we close do on that? mentioned you can or Hydraulics? that - you repurchase, You acquisitions. that would hold before share Or Should actually until are you something

Craig Arnold

what as what typically, thing say is aren’t there John, of of to about think valuations lot first the transactions would economic reality for downturns, takes of And while of decline, I’d we during set and a in in the worth. tend that is done I general assets as in, are Yes. kind say, kind to it terms a

that And of in that so deals would tend find a I for lot reason. general, during say you don’t economic downturns to done

the and and we tell to work will at I you pipeline, you we - But continue to that as look continue opportunities. look

be I tuck-in things sense from kind that us most make where at. tend think transactions, looking the that’s of of what and the of we’re type for speaking, we to sit most the today, practically

will say, price, found something We close, in if at transaction the But we bridge certainly we finance would company the to, right, we enough right we flow we if confidence can that confidence have think take we enough transaction. the we to needed really cash that things was I do strategic no, that certainly, of would loans. the and could the in

of to let’s sale Hydraulics. the say, where got the cash point we flow the So from,

And quite cash came balance year all the for this of we’ll generate the in. frankly, that

that’s once when way we deal financing really comes, going a opportunity think It’s recognizing that of the enough think flexibility we discipline. to it. do again, maintain we’re So have we our that about to kind

stock near alternative. would we as deal every right And well. strategic, certainly to found We an financing in We’re certainly something at really enough flexibility not going compete do like back is our the option that no, term. the got have was to with price, to overreach. an But buying has it we even as that feel if clearly

John Walsh

that’s share but And companies sounds actually that I decide going Great. no or they’re just suspend the asked the to we’ve do not repo, it here. case some heard question like longer

that You so would do chose? to be you if able

Craig Arnold

our commentary, mean, is share said that in we’ll what us liquidity quite opening generate is we are a cash our generate, the to up don’t on our we still as We and for well on bad. given repurchases absolutely and don’t flow amazingly flows free in I see of a build remains need cash because in as lot cash Yes. and economic bunch and cash around balance a periods consistent weakness, the sheet. let we cash of in I and of my said optionality the And flow times still M&A strong. table good

so And the that option still us. on for table is

John Walsh

construction you bit little And Great. a on touched then markets.

some COVID-XX an exacerbate kind pocket construction. use new slowing the of level, high word to some on Or cycle. companies the you’re the event. of We’ve viewing if wondering, as if of air had kind Just disruptions

seeing you’re of that of on anything Just vertical your commercial kind business?

Craig Arnold

Yes.

differently without in. the the affected in doubt, some I part, shape too the think of will our will really which and to and most be that be perhaps businesses cases, depending early call. different market different for upon mean, I the of there’ll a think segments it’s business we’re recovery I look

lot call the to a different side what we as I Aerospace. debate just going and speculation around But frankly, economic of it are sort mean, they look early on than I businesses is the COVID-XX to downturn through kind and of there’s other quite looked think, these before. it of point, to this at extent too say

a prices they’re today, to to basis. reason therapeutic at this we world to vaccine a and global assume gas a discussion being there’s around the return strong, what a economy trend the oil were quite we the before and that we go-forward that event doesn’t there’s oil and where no been have the fundamentals markets of level point growth. get once on lot that the with happens think But at around with Certainly

John Walsh

Great. Thank you.

Operator

the ahead. going our of Barclays. Please Then come question is line you. go Thank to from from next Julian Mitchell

John Welsh

at look Welsh Hey, Julian. taking is closer Electrical John morning. This for a Maybe Global.

in You you bit specifically, to you’re talk sort this declines But and attributed a mentioned a return in Asia that of you’re Americas how or April quarter growth the region seeing some signs what sort about of Electrical obviously. maybe some seeing using kind and segment? China as can were the you’re the that normalization to of of maybe read and whether of to

Craig Arnold

month see is like the at to very appreciate come levels probably China a see we not it did, much heard fact, did specific, recovery question. but prior March, in experience was clear downturn, I that companies necessarily in have I where the in back what to the from in our of we China think China. And economic the other Yes. you’ve Julian,

China factories in Our all are open.

terms in capacity. available today We our have of full capacity

Some be of they the to weaker markets end were before continue than downturn. economic the

world, But approached I unified. the a China more assuming this in particular we was China like economic if do We the base case. of much It can be our event positive that tell experience that have extraordinarily that you in we’re way would rest was believe positive and more the than different.

kind And in came economy fashion. a so more and up you found all unified the down much of were that in companies

And and for was industry. good that fundamentally business

And to what that’s China. the will way case. that’s think probably disparate more what base the of gradual, the of return in our than on growth nature experiencing haphazard countries, taken in more kind have the place world be around Given other we’re and we we

John Welsh

plans. of kind total follow-up of downturn programs focus bit of more a Got Is significant that in is sort in Or of be of time restructuring it. a on company some there then maybe and we Thank some a off-the-shelf restructuring kind for market? of the some downturn you. those there just a Is on Aerospace, targeted Aerospace? be a could first it the on to here of given at outlook? end for And here focus a longer the

Craig Arnold

structural in fair will see economic are face businesses and I be say, the that No, focused will that would perhaps biggest think to Yes. it those businesses we Julian, biggest the that issues. downturn likely those

going pretty gas we we’re downturns, economic assume significant are in that whether the you the markets, assume across our to through doing company. industries more and that things a that’s to And activities or are extent can Aerospace addition focusing restructuring can broadly around those so oil you in that that the businesses,

John Welsh

you. Thank Okay.

Yan Jin

you all. Thank Okay, good.

our appreciate the ask do call, end question. and everybody We we reached have of dialing and in

available day. As today. always, address you Chip a your Thank Bye. I Have all and us be calls. to joining for will good follow-up

Operator

That you. AT&T for participation Teleconference. today. for our conclude Thank will using you Executive conference for your Thank

may now You disconnect.

Eaton (ETN) 30 Apr 202020 Q1 Earnings call transcript