Eaton(ETN) - 2025 Q2 - Quarterly Report

PART I — FINANCIAL INFORMATION Financial Statements Eaton reported net sales of $13.4 billion and net income of $1.95 billion for H1 2025, with total assets reaching $40.5 billion and operating cash flow decreasing to $1.16 billion Note 2. Acquisitions of Businesses Eaton strategically acquired Fibrebond Corporation for $1.45 billion to enhance its Electrical Americas segment and has agreements to acquire Ultra PCS for $1.55 billion and Resilient Power Systems Inc - Acquired Fibrebond Corporation for $1.45 billion, a designer of modular power enclosures for data centers, reported within the Electrical Americas segment[23] Preliminary Purchase Price Allocation for Fibrebond (April 1, 2025) | (In millions) | Amount | | :--- | :--- | | Total identifiable net assets | $878 | | Goodwill | $572 | | Total consideration, net of cash received | $1,450 | - Announced agreements to acquire Ultra PCS for $1.55 billion (Aerospace segment) and Resilient Power Systems Inc (Electrical Americas segment)[28][29] Note 3. Revenue Recognition Total net sales reached $13.4 billion in H1 2025, with Electrical Americas contributing $6.36 billion, and a $17.5 billion order backlog as of June 30, 2025 Net Sales by Business Segment (Six Months Ended June 30, in millions) | (In millions) | 2025 | 2024 | | :--- | :--- | :--- | | Electrical Americas | $6,360 | $5,567 | | Electrical Global | $3,362 | $3,105 | | Aerospace | $2,059 | $1,826 | | Vehicle | $1,280 | $1,447 | | eMobility | $343 | $348 | | Total net sales | $13,404 | $12,293 | - Total order backlog was approximately $17.5 billion at June 30, 2025, with 70% expected for delivery in the next twelve months[34] Note 8. Debt In May 2025, Eaton issued €500 million of 3.625% Euro Notes due 2035 and $500 million of 4.45% Senior Notes due 2030 to raise capital - On May 9, 2025, issued €500 million ($564 million) of 3.625% Euro Notes due 2035[42] - On the same date, issued $500 million of 4.45% Senior Notes due 2030[43] Note 12. Shareholders' Equity Eaton repurchased 4.2 million shares for $1.306 billion in H1 2025 under a renewed $9.0 billion three-year share repurchase program - The Board of Directors renewed the share repurchase program on February 27, 2025, authorizing up to $9.0 billion in repurchases over a three-year period[53] Share Repurchase Activity | Period | Shares Repurchased (millions) | Total Cost (millions) | | :--- | :--- | :--- | | Q2 2025 | 2.3 | $698 | | H1 2025 | 4.2 | $1,306 | | Q2 2024 | 1.9 | $600 | | H1 2024 | 2.3 | $738 | Note 15. Restructuring Charges Eaton's multi-year restructuring program, initiated in Q1 2024, incurred $42 million in H1 2025, with total estimated charges of $475 million by 2026 - A multi-year restructuring program started in Q1 2024 is expected to be completed in 2026 with total estimated charges of $475 million[71] Restructuring Program Charges (Before Tax, in millions) | (In millions) | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Total Charges | $24 | $15 | $42 | $78 | Note 16. Business Segment Information Total segment operating profit increased to $3.2 billion in H1 2025, with Electrical Americas contributing $1.89 billion and eMobility reporting an operating loss of $15 million Segment Operating Profit (Six Months Ended June 30, in millions) | (In millions) | 2025 | 2024 | | :--- | :--- | :--- | | Electrical Americas | $1,891 | $1,644 | | Electrical Global | $653 | $578 | | Aerospace | $466 | $407 | | Vehicle | $209 | $246 | | eMobility | ($15) | ($2) | | Total segment operating profit | $3,204 | $2,873 | Consolidated Statements of Income Highlights | (In millions except for per share data) | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :--- | :--- | :--- | | Net sales | $13,404 | $12,293 | | Income before income taxes | $2,363 | $2,195 | | Net income attributable to Eaton ordinary shareholders | $1,945 | $1,814 | | Diluted EPS | $4.96 | $4.52 | Consolidated Balance Sheet Highlights | (In millions) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash & Short-term investments | $584 | $2,080 | | Goodwill | $15,790 | $14,713 | | Total assets | $40,507 | $38,381 | | Total debt (Short-term + Long-term) | $10,996 | $9,152 | | Total equity | $18,647 | $18,531 | Condensed Consolidated Statements of Cash Flows Highlights | (In millions) | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $1,156 | $1,421 | | Net cash used in investing activities | ($490) | ($511) | | Net cash used in financing activities | ($697) | ($839) | | Total decrease in cash | ($157) | $52 | Management's Discussion and Analysis of Financial Condition and Results of Operations Q2 2025 net sales grew 11% to $7.0 billion with 8% organic growth, driven by energy transition and digitalization megatrends, while adjusted EPS increased 8% to $2.95 Company Overview and Portfolio Changes Eaton capitalizes on electrification and digitalization megatrends, strategically expanding its portfolio through acquisitions like Fibrebond, Exertherm, Ultra PCS, and Resilient Power Systems Inc - The company is capitalizing on megatrends of energy transition, electrification, and digitalization, with a focus on data center, utility, industrial, commercial, aerospace, and mobility markets[79] - Recent portfolio additions include Fibrebond Corporation (data center enclosures), Exertherm (thermal monitoring), and a stake in NordicEPOD AS (data center power modules)[82] Results of Operations Q2 2025 net sales increased 11% to $7.0 billion with 8% organic growth, while adjusted EPS grew 8% to $2.95 despite a slight decline in net income Q2 2025 vs Q2 2024 Consolidated Financial Results | (In millions except for per share data) | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Net sales | $7,028 | $6,350 | 11% | | Net income attributable to shareholders | $982 | $993 | (1)% | | Adjusted earnings | $1,155 | $1,096 | 5% | | Diluted EPS | $2.51 | $2.48 | 1% | | Adjusted EPS | $2.95 | $2.73 | 8% | Changes in Net Sales (Q2 2025) | Component | Contribution | | :--- | :--- | | Organic growth | 8% | | Acquisitions of businesses | 2% | | Foreign currency | 1% | | Total increase in Net sales | 11% | Business Segment Results of Operations Q2 2025 saw strong sales growth in Electrical Americas (16%), Electrical Global (9%), and Aerospace (13%), while Vehicle sales declined 8% and eMobility reported an operating loss Q2 2025 Segment Performance vs Q2 2024 | Segment | Net Sales ($M) | % Change | Operating Profit ($M) | % Change | | :--- | :--- | :--- | :--- | :--- | | Electrical Americas | $3,350 | 16% | $987 | 15% | | Electrical Global | $1,753 | 9% | $353 | 16% | | Aerospace | $1,080 | 13% | $240 | 17% | | Vehicle | $663 | (8)% | $113 | (13)% | | eMobility | $182 | (4)% | ($10) | (600)% | - Strong demand from data center end-markets was a key growth driver for both the Electrical Americas and Electrical Global segments[98][102] - The Vehicle segment's performance was negatively impacted by weakness in the North American truck market[109] Liquidity, Capital Resources, and Financial Condition Eaton maintains strong liquidity with $3.0 billion in credit facilities, issued over $1 billion in new debt, and used $1.45 billion for acquisitions and $1.31 billion for share repurchases in H1 2025 - Maintains $3.0 billion in revolving credit facilities to support its $3.0 billion commercial paper program, of which $1.11 billion was outstanding at June 30, 2025[118] Cash Flow Summary (Six Months Ended June 30, in millions) | (In millions) | 2025 | 2024 | | :--- | :--- | :--- | | Net cash from operating activities | $1,156 | $1,421 | | Net cash used in investing activities | ($490) | ($511) | | Net cash used in financing activities | ($697) | ($839) | - Major uses of cash in H1 2025 included $1.45 billion for acquisitions, $1.31 billion for share repurchases, and $818 million for dividends[120][127][128] Quantitative and Qualitative Disclosures About Market Risk No material changes in market risk exposures have occurred since December 31, 2024 - There have been no material changes in exposures to market risk since December 31, 2024[142] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting in Q2 2025 - Management, including the CEO and CFO, concluded that Eaton's disclosure controls and procedures were effective as of June 30, 2025[143] - There were no changes in internal control over financial reporting during Q2 2025 that had a material effect[145] PART II — OTHER INFORMATION Legal Proceedings Information regarding current legal proceedings is detailed in Note 10 of the condensed consolidated financial statements - Information regarding the Company's current legal proceedings is presented in Note 10 of the Notes to the condensed consolidated financial statements[147] Risk Factors No material changes have occurred in the risk factors previously described in the 2024 Form 10-K - There have been no material changes from the risk factors described in the 2024 Form 10-K[148] Unregistered Sales of Equity Securities and Use of Proceeds In Q2 2025, Eaton repurchased 2.3 million ordinary shares for $698 million, with $8.1 billion remaining under the authorized program Share Repurchases in Q2 2025 | Month | Shares Purchased | Average Price Paid | Total Cost (millions) | | :--- | :--- | :--- | :--- | | April | 529,612 | $271.38 | ~$144 | | May | 1,356,649 | $307.41 | ~$417 | | June | 411,777 | $333.51 | ~$137 | | Total | 2,298,038 | $303.79 | $698 | Other Information No director or officer adopted, amended, or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q2 2025 - During Q2 2025, no director or officer of the Company adopted, amended or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement"[150] Exhibits This section provides a comprehensive list of all exhibits filed with the Form 10-Q, including corporate governance, debt, and certification documents