Eaton First Quarter Operating Earnings Per Share of $0.88, Above Midpoint of Guidance

Date: April 29, 2016

Record First Quarter Operating Cash Flow of $371 Million

Restructuring Program Proceeding as Planned

2016 Operating Earnings Per Share Guidance Affirmed


DUBLIN, Ireland ... Power management company Eaton Corporation plc (NYSE:ETN) today announced that operating earnings per share were $0.88 for the first quarter of 2016, down 13 percent from the first quarter of 2015. Operating earnings exclude acquisition integration charges, which were negligible in the first quarter of 2016 and were $11 million in the first quarter of 2015. Sales in the first quarter of 2016 were $4.8 billion, 8 percent lower than the same period in 2015. Net income and operating earnings for the first quarter of 2016 were $404 million.

Alexander M. Cutler, Eaton chairman and chief executive officer, said, “Our first quarter results are a solid start to the year, coming in near the top end of our guidance range.

“Our 8 percent sales decline in the first quarter consisted of a 6 percent decline in organic sales and an additional 2 percent from negative currency translation,” said Cutler. “Our organic sales in the quarter came in modestly higher than our guidance.

“We had strong cash flow in the first quarter, generating operating cash flow of $371 million, a record for the first quarter,” said Cutler. “We returned substantial cash to our shareholders during the quarter, raising our quarterly dividend in February by 4 percent and repurchasing $100 million of our shares.

“Our restructuring program is proceeding well,” said Cutler. “We spent $63 million in the first quarter, slightly less than we had forecast at the start of the year. Our expected savings in 2016 from restructuring actions remains the same as our earlier estimate.

“Our segment margins were 13.9 percent, and excluding the restructuring costs incurred in the quarter, 15.1 percent,” said Cutler.

“We still expect a decline in organic revenue in 2016 of between 2 and 4 percent,” said Cutler. “We now believe the impact from negative currency translation in 2016 will be less than the $400 million we estimated at the start of the year. Our current estimate is that negative currency translation for the year is likely to be about $200 million.

“We anticipate operating earnings per share for the second quarter of 2016 to be between $1.00 and $1.10,” said Cutler. “We are maintaining our guidance for full year operating earnings per share of between $4.15 and $4.45.”

Business Segment Results

Sales for the Electrical Products segment were $1.7 billion, down 1 percent from 2015. Organic sales grew slightly while negative currency translation was 1 percent. Operating profits were $271 million, up 2 percent over the first quarter of 2015.

“Our operating margins in the first quarter were 16.1 percent, and excluding restructuring costs of $17 million, 17.1 percent,” said Cutler. “Our bookings in the first quarter in the Electrical Products segment were up 2 percent over the first quarter a year ago. Orders grew in the Americas and EMEA, while orders in APAC registered a small decline.”

Sales for the Electrical Systems and Services segment were $1.3 billion, down 7 percent from the first quarter of 2015. Organic sales were down 5 percent and currency translation was negative 2 percent. Segment operating profits, excluding acquisition integration charges of $1 million, were $160 million, down 15 percent from the first quarter of 2015.

“As we expected, organic sales declined in the first quarter reflecting the softness we saw in bookings during the second half of 2015,” said Cutler. “Our operating margins were 11.9 percent, and excluding restructuring costs of $10 million, 12.7 percent. Bookings in the first quarter were down 2 percent from the first quarter of 2015, driven by a double-digit decline in orders from APAC.”

Hydraulics segment sales were $551 million, down 17 percent from the first quarter of 2015. Organic sales in the quarter declined 14 percent and currency translation was negative 3 percent. Operating profits in the first quarter were $41 million, down 39 percent from the first quarter of 2015.

“The hydraulics markets in the first quarter of 2016 were down, reflecting the continued downturns in global agricultural equipment, the global oil and gas industry, and the Chinese construction equipment market,” said Cutler. “Our operating margins were 7.4 percent, and excluding restructuring costs of $16 million, 10.3 percent. Our bookings in the quarter were down 10 percent from the first quarter of 2015.”

Aerospace segment sales were $445 million, down 4 percent from the first quarter of 2015. Organic sales declined 3 percent and negative currency translation was 1 percent. Operating profits in the first quarter were $80 million, up 4 percent over the first quarter of 2015.

“Our operating margins in the quarter were 18.0 percent, and excluding restructuring costs of $4 million, 18.9 percent,” said Cutler. “Bookings in the quarter rose 6 percent compared to the first quarter of 2015. Commercial and military transport aircraft were the largest drivers of the bookings increase.”

The Vehicle segment posted sales of $795 million, down 17 percent compared to the first quarter of 2015. Organic sales declined 13 percent and negative currency translation was 4 percent. The segment reported operating profits in the first quarter of $118 million, down 28 percent from the first quarter of 2015.

“Our operating margins in the quarter were 14.8 percent, and excluding restructuring costs of $12 million, 16.4 percent,” said Cutler.

“North American Class 8 truck production declined 19 percent in the first quarter compared to the first quarter of 2015,” said Cutler. “We now expect full-year 2016 production to be 230,000 units.”

Eaton is a power management company with 2015 sales of $20.9 billion. Eaton provides energy-efficient solutions that help our customers effectively manage electrical, hydraulic and mechanical power more efficiently, safely and sustainably. Eaton has approximately 97,000 employees and sells products to customers in more than 175 countries.

Notice of conference call: Eaton’s conference call to discuss its first quarter results is available to all interested parties as a live audio webcast today at 10 a.m. United States Eastern time via a link on the center of Eaton’s home page. This news release can be accessed under its headline on the home page. Also available on the website prior to the call will be a presentation on first quarter results, which will be covered during the call.

This news release contains forward-looking statements concerning second quarter 2016 operating earnings per share, full year 2016 operating earnings per share, 2016 organic revenue growth, the effects of currency translation, and the costs and benefits of planned restructuring actions. These statements should be used with caution and are subject to various risks and uncertainties, many of which are outside the company’s control. The following factors could cause actual results to differ materially from those in the forward-looking statements: unanticipated changes in the markets for the company’s business segments; unanticipated downturns in business relationships with customers or their purchases from us; competitive pressures on sales and pricing; unanticipated changes in the cost of material and other production costs, or unexpected costs that cannot be recouped in product pricing; the introduction of competing technologies; unexpected technical or marketing difficulties; unexpected claims, charges, litigation or dispute resolutions; strikes or other labor unrest; the performance of recent acquisitions; unanticipated difficulties integrating acquisitions; new laws and governmental regulations; interest rate changes; changes in tax laws or tax regulations; stock market and currency fluctuations; and unanticipated deterioration of economic and financial conditions in the United States and around the world. We do not assume any obligation to update these forward-looking statements.

Financial Results

The company’s comparative financial results for the three months ended March 31, 2016



Contact
Contact Scott R. Schroeder, Media Relations, +1 (440) 523-5150
Don Bullock, Investor Relations, +1 (440) 523-5127