Eaton Corporation plc

05/05/2026 | Press release | Distributed by Public on 05/05/2026 10:23

Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Amounts are in millions of dollars or shares unless indicated otherwise (per share data assume dilution). Columns and rows may not add and the sum of components may not equal total amounts reported due to rounding.
COMPANY OVERVIEW
Eaton Corporation plc (Eaton or the Company) is an intelligent power management company dedicated to protecting the environment and improving the quality of life for people everywhere. We make products for the data center, utility, industrial, commercial, machine building, residential, aerospace and mobility markets. We are capitalizing on the megatrends of the electrification, digitalization, and the reindustrialization of and growth of megaprojects in North America and increased global infrastructure spending, all of which are expanding our end markets and positioning Eaton for growth for years to come. We are strengthening our participation across the entire electrical power value chain and benefiting from momentum in the data center and utility end markets as well as a growth cycle in the commercial aerospace and defense markets. We are guided by our commitment to operate sustainably and with the highest ethical standards. Our work is helping to solve the world's most urgent power management challenges and building a more sustainable society for people today and for future generations.
Founded in 1911, Eaton has continuously evolved to meet the changing and expanding needs of our stakeholders. With revenues of $27.4 billion in 2025, the Company serves customers in 180 countries.
During the first quarter of 2026, Eaton re-segmented certain business segments due to a reorganization of the Company's businesses. The new segment is Mobility, which consists of the legacy Vehicle and eMobility segments. Historical segment information has been recast to reflect this change.
Portfolio Changes
The Company continues to actively manage its portfolio of businesses to deliver on its strategic objectives. The Company is focused on deploying its capital toward businesses that provide opportunities for above-market growth and strong returns, and that align with secular trends and its power management strategies. During 2025 and 2026, Eaton completed several transactions to strengthen its portfolio.
Acquisitions of businesses Date of acquisition Business segment
Fibrebond Corporation April 1, 2025 Electrical Americas
A U.S. based designer and builder of pre-integrated modular power enclosures for data center, industrial, utility and communications customers.
Resilient Power Systems, Inc. August 6, 2025 Electrical Americas
A leading North American developer and manufacturer of innovative energy solutions, including solid-state transformer-based technology.
Ultra PCS Limited
January 23, 2026
Aerospace
Producer of electronic controls, sensing, stores ejection and data processing solutions with operations in the U.K. and U.S.
Boyd Thermal
March 12, 2026
Electrical Global
A U.S. based global leader in thermal components, systems, and ruggedized solutions for data center, aerospace and other end-markets.
On January 26, 2026, Eaton announced its intention to pursue a spin-off of its Mobility business, which consists of the Mobility business segment, into an independent, publicly traded company. Eaton expects to complete the anticipated spin-off by the end of the first quarter of 2027, subject to customary legal and regulatory requirements and approvals, including final approval of the Company's Board of Directors and effectiveness of a Form 10 registration statement filed with the Securities and Exchange Commission. The planned spin-off is expected to be completed in a manner that is tax-free to Eaton ordinary shareholders for U.S. federal income tax purposes.
Additional information related to acquisitions of businesses is presented in Note 2.
IEEPA Tariffs
On February 20, 2026, the U.S. Supreme Court issued a ruling invalidating certain tariffs previously imposed under the International Emergency Economic Powers Act (IEEPA), and thereafter, the Court of International Trade (CIT) ordered the Customs and Border Protection (CBP) to develop a process to refund tariffs imposed under IEEPA. We are evaluating the impact of these developments on our business and financial statements and cannot reasonably estimate the financial impact nor deem such impact probable. Some of the factors considered in our evaluation include the uncertainty as to the extent tariffs will be refunded by CBP, what processes will govern such refunds, or if such refunds are fully collectable. No amounts have been recorded in the condensed consolidated financial statements as of March 31, 2026 given the uncertainty regarding the potential refund process.
RESULTS OF OPERATIONS
Non-GAAP Financial Measures
The following discussion of Consolidated Financial Results includes certain non-GAAP financial measures. These financial measures include adjusted earnings and adjusted earnings per ordinary share, each of which differs from the most directly comparable measure calculated in accordance with generally accepted accounting principles (GAAP). A reconciliation of adjusted earnings and adjusted earnings per ordinary share to the most directly comparable GAAP measure is included in the Consolidated Financial Results table below. Management believes that these financial measures are useful to investors because they provide additional meaningful financial information that should be considered when assessing our business performance and trends, and they allow investors to more easily compare Eaton's financial performance period to period. Management uses this information in monitoring and evaluating the on-going performance of Eaton.
Acquisition and Divestiture Charges
Eaton incurs integration charges and transaction costs to acquire and integrate businesses, and transaction, separation and other costs to divest and exit businesses. Eaton also recognizes gains and losses on the sale of businesses. A summary of these Corporate items is as follows:
Three months ended
March 31
(In millions except for per share data) 2026 2025
Acquisition integration, divestiture charges and transaction costs $ 109 $ 10
Income tax benefit 21 2
Total after income taxes $ 87 $ 8
Per ordinary share - diluted $ 0.22 $ 0.02
Acquisition integration, divestiture charges and transaction costs in 2026 and 2025 are primarily related to the following:
•The acquisitions of Fibrebond Corporation, Resilient Power Systems Inc., Ultra PCS Limited, Boyd Thermal, and Exertherm, the anticipated spin-off of the Mobility business, transactions completed prior to 2023, and other charges to acquire and exit businesses.
•Employee transaction and retention award compensation expense related to the acquisition of Fibrebond of $14 million in the first quarter of 2026.
•Employee incentive compensation expense related to the acquisition of Resilient of $11 million in the first quarter of 2026.
Charges in 2026 and 2025 were included in Cost of products sold, Selling and administrative expense, or Other income - net. In Business Segment Information in Note 15, the charges were included in Other expense - net.
Restructuring Programs
During the first quarter of 2024, Eaton implemented a multi-year restructuring program to accelerate opportunities to optimize its operations and global support structure. These actions will better align the Company's functions to support anticipated growth and drive greater effectiveness throughout the Company. Since the inception of the program, the Company has incurred charges of $374 million. This restructuring program is expected to be completed in 2026 and is expected to incur additional expenses related to workforce reductions of $78 million and plant closing and other costs of $24 million, resulting in total estimated charges of $475 million for the entire program. The Company expects mature year benefits of $375 million when the multi-year program is fully implemented.
Additional information related to these restructuring programs is presented in Note 14.
Intangible Asset Amortization Expense
Intangible asset amortization expense is as follows:
Three months ended
March 31
(In millions except for per share data) 2026 2025
Intangible asset amortization expense $ 140 $ 106
Income tax benefit 30 22
Total after income taxes $ 111 $ 84
Per ordinary share - diluted $ 0.29 $ 0.21
Consolidated Financial Results
Three months ended
March 31 		Increase (decrease)
(In millions except for per share data) 2026 2025
Net sales $ 7,451 $ 6,377 17 %
Gross profit 2,652 2,447 8 %
Percent of net sales 35.6 % 38.4 %
Income before income taxes 1,107 1,177 (6) %
Net income 868 965 (10) %
Less net income for noncontrolling interests (2) (1)
Net income attributable to Eaton ordinary shareholders 866 964 (10) %
Excluding acquisition and divestiture charges, after-tax 87 8
Excluding restructuring program charges, after-tax 30 14
Excluding intangible asset amortization expense, after-tax 111 84
Adjusted earnings $ 1,094 $ 1,070 2 %
Net income per share attributable to Eaton ordinary shareholders - diluted $ 2.22 $ 2.45 (9) %
Excluding per share impact of acquisition and divestiture charges, after-tax 0.22 0.02
Excluding per share impact of restructuring program charges, after-tax 0.08 0.04
Excluding per share impact of intangible asset amortization expense, after-tax 0.29 0.21
Adjusted earnings per ordinary share $ 2.81 $ 2.72 3 %
Net Sales
Changes in Net sales: Three months ended March 31, 2026
Organic growth 10 %
Acquisitions of businesses
4 %
Foreign currency 3 %
Total increase in Net sales 17 %
The increase in organic sales in the first quarter of 2026 was due to strength in data center and machine OEM end-markets in the Electrical Americas and Electrical Global business segments, strength in commercial & institutional end-markets in the Electrical Americas business segment, strength in residential end-markets in the Electrical Global business segment, and strength in military aftermarket, commercial OEM, and commercial aftermarket in the Aerospace business segment, partially offset by weakness in industrial end-markets in the Electrical Americas and Electrical Global business segments, weakness in utility end-markets in the Electrical Americas business segment, and weakness in the North American region driven by the exit of a low-margin light vehicle business in the Mobility business segment.
Gross Profit
Gross profit margin decreased from 38.4% in the first quarter of 2025 to 35.6% in the first quarter of 2026. Material factors affecting this decrease were a 400 basis point decline from commodity and wage inflation, partially offset by an 80 basis point increase from operating efficiencies and a 70 basis point increase from higher sales.
Income Taxes
The effective income tax rate for the first quarter of 2026 was expense of 21.6% compared to expense of 18.0% for the first quarter of 2025. The increase in the effective tax rate in the first quarter of 2026 was primarily due to greater levels of income in higher tax jurisdictions and the fact that the effective tax rate for the first quarter of 2025 included a reduction in the amount of foreign unrecognized tax benefits.
Net Income
Changes in Net income attributable to Eaton ordinary shareholders and Net income per share attributable to Eaton ordinary shareholders - diluted are summarized as follows:
Three months ended
(In millions except for per share data) Dollars Per share
March 31, 2025
$ 964 $ 2.45
Business segment results of operations
Operational performance 129 0.34
Foreign currency 8 0.02
Corporate
Interest expense - net (60) (0.15)
Intangible asset amortization expense (27) (0.08)
Restructuring program charges (16) (0.04)
Acquisition and divestiture charges (80) (0.20)
Other corporate items (9) (0.02)
Tax rate impact (43) (0.11)
Impact of shares - 0.02
March 31, 2026
$ 866 $ 2.22
Business Segment Results of Operations
The following is a discussion of Net sales, operating profit (loss) and operating margin by business segment. Additionally, the Company uses the following metrics as indicators of customer demand and future revenue expectations in the Electrical Americas, Electrical Global, and Aerospace business segments. The Company believes these metrics are useful to investors for the same reasons.
•Backlog: Includes orders to which customers are firmly committed
•Organic change in backlog: Percentage change in backlog, excluding (1) the impact of foreign currency, (2) divestitures, and (3) firm orders in place prior to closing of business acquisitions
•Organic change in customer orders: Percentage change in firm customer orders on a trailing twelve month basis, excluding (1) the impact of foreign currency, (2) divestitures, and (3) firm orders in place prior to closing of business acquisitions
•Book-to-bill: Average of the ratio of firm customer orders to Net sales for the last four quarters
Electrical Americas
Three months ended
March 31 		Increase (decrease)
($ in millions) 2026 2025
Net sales $ 3,600 $ 3,010 20 %
Operating profit $ 922 $ 904 2 %
Operating margin 25.6 % 30.0 %
Changes in Net sales:
Organic growth 14 %
Acquisitions of businesses
5 %
Foreign currency 1 %
Total increase in Net sales 20 %
Change from March 31
Performance metrics: March 31, 2026 March 31, 2025 2026 vs. 2025 2025 vs. 2024
Backlog $ 14,459 $ 10,050 44 % 5 %
Organic change in backlog 32 % 6 %
Organic change in customer orders 42 % (4) %
Book-to-bill 1.2 1.0
The increase in organic sales in the first quarter of 2026 was due to strength in data center, commercial & institutional, and machine OEM end-markets, partially offset by weakness in utility and industrial end-markets.
The operating margin decreased from 30.0% in the first quarter of 2025 to 25.6% in the first quarter of 2026. Material factors affecting this decrease were a 480 basis point decline from higher commodity inflation and a 100 basis point decline from higher costs to support growth initiatives, partially offset by a 210 basis point increase from higher sales.
Electrical Global
Three months ended
March 31 		Increase (decrease)
($ in millions) 2026 2025
Net sales $ 1,945 $ 1,610 21 %
Operating profit $ 373 $ 300 24 %
Operating margin 19.2 % 18.6 %
Changes in Net sales:
Organic growth 9 %
Acquisition of a business 6 %
Foreign currency 6 %
Total increase in Net sales 21 %
Change from March 31
Performance metrics: March 31, 2026 March 31, 2025 2026 vs. 2025 2025 vs. 2024
Backlog $ 3,162 $ 1,832 73 % 5 %
Organic change in backlog 20 % 5 %
Organic change in customer orders 13 % - %
Book-to-bill 1.1 1.0
The increase in organic sales in the first quarter of 2026 was due to strength in data center, residential, and machine OEM end-markets, partially offset by weakness in industrial end-markets.
The operating margin increased from 18.6% in the first quarter of 2025 to 19.2% in the first quarter of 2026. Material factors affecting this increase were a 180 basis point increase from higher sales and a 290 basis point increase from operating efficiencies, partially offset by a 470 basis point decline from higher commodity and wage inflation.
Aerospace
Three months ended
March 31 		Increase (decrease)
($ in millions) 2026 2025
Net sales $ 1,139 $ 979 16 %
Operating profit $ 304 $ 226 35 %
Operating margin 26.7 % 23.1 %
Changes in Net sales:
Organic growth 9 %
Acquisition of a business 5 %
Foreign currency 2 %
Total increase in Net sales 16 %
Change from March 31
Performance metrics: March 31, 2026 March 31, 2025 2026 vs. 2025 2025 vs. 2024
Backlog $ 5,004 $ 3,899 28 % 16 %
Organic change in backlog 15 % 16 %
Organic change in customer orders 13 % 14 %
Book-to-bill 1.1 1.1
The increase in organic sales in the first quarter of 2026 was due to strength in military aftermarket, commercial OEM, and commercial aftermarket.
The operating margin increased from 23.1% in the first quarter of 2025 to 26.7% in the first quarter of 2026. Material factors affecting this increase were a 280 basis point increase from the sale of a facility in the first quarter of 2026, a 190 basis point increase from higher sales, and a 160 basis point increase from favorable mix, partially offset by a 320 basis point decline from higher commodity and wage inflation.
Mobility
Three months ended
March 31 		Increase (decrease)
(In millions) 2026 2025
Net sales $ 766 $ 779 (2) %
Operating profit $ 89 $ 91 (2) %
Operating margin 11.7 % 11.7 %
Changes in Net sales:
Organic growth (6) %
Foreign currency 4 %
Total decrease in Net sales (2) %
The decrease in organic sales in the first quarter of 2026 was due to weakness in the North American region driven by the exit of a low-margin light vehicle business, partially offset by strength in the European region.
The operating margin was flat at 11.7% in both the first quarter of 2026 and 2025. Material factors affecting the operating margin were a 320 basis point increase from favorable mix and a 180 basis point increase from operating efficiencies, offset by a 210 basis point decline from higher commodity and wage inflation and a 120 basis point decline from lower sales.
Corporate Expense
Three months ended
March 31 		Increase (decrease)
(In millions) 2026 2025
Intangible asset amortization expense $ 140 $ 106 32 %
Interest expense - net 106 33 221 %
Pension and other postretirement benefits income (4) (5) (20) %
Restructuring program charges 39 18 117 %
Other expense - net 302 193 56 %
Total corporate expense $ 583 $ 345 69 %
The material factors affecting the increase in Total corporate expense in the first quarter of 2026 were higher Other expense - net, Interest expense - net, Intangible asset amortization expense, and Restructuring program changes. The increase in Other expense - net is primarily due to higher acquisition and divestiture costs.
LIQUIDITY, CAPITAL RESOURCES, AND FINANCIAL CONDITION
Liquidity and Financial Condition
Eaton's objective is to finance its business through operating cash flow and an appropriate mix of equity and long-term and short-term debt. By diversifying its debt maturity structure, Eaton reduces liquidity risk.
On February 6, 2026, Eaton Corporation, a subsidiary of Eaton, exercised a $1,000 million upsize of the existing $3,000 million five-year revolving credit agreement, increasing the total facility size to $4,000 million. The facility's maturity date remains unchanged at September 27, 2030. The revolving credit facility is used to support commercial paper borrowings and is fully and unconditionally guaranteed by Eaton and certain of its direct and indirect subsidiaries on an unsubordinated, unsecured basis. There were no borrowings outstanding under the revolving credit facility at March 31, 2026. Also on February 6, 2026 the Company increased its commercial paper program from $3,000 million to $4,000 million. The Company maintains access to the commercial paper markets through its $4,000 million commercial paper program, of which $2,497 million was outstanding on March 31, 2026, used primarily to manage fluctuations in working capital and to partially fund acquisitions closed during 2026.
On March 6, 2026, Eaton Corporation, a subsidiary of Eaton, issued notes (2026 U.S. Notes) with an aggregate face amount of $8,500 million. The 2026 U.S. Notes are comprised of six tranches: 3.85% notes due 2028 in the amount of $1,500 million; 3.95% notes due 2029 in the amount of $1,500 million; 4.20% notes due 2031 in the amount of $1,500 million; 4.50% notes due 2033 in the amount of $1,000 million; 4.80% notes due 2036 in the amount of $2,000 million; and 5.45% notes due 2056 in the amount of $1,000 million. Interest is payable semi-annually. The issuer received proceeds totaling $8,428 million from the 2026 U.S. Notes issuance, net of financing costs and discounts. The 2026 U.S. Notes are fully and unconditionally guaranteed on an unsubordinated, unsecured basis by Eaton and certain of its direct and indirect subsidiaries. The U.S. 2026 Notes contain customary optional redemption and par call provisions. The U.S. 2026 Notes also contain a change of control provision which requires the Company to make an offer to purchase all or any part of the 2026 U.S. Notes at a purchase price of 101% of the principal amount plus accrued and unpaid interest. The capitalized deferred financing fees are amortized in Interest expense - net over the respective terms of the 2026 U.S. Notes. The 2026 U.S. Notes are subject to customary non-financial covenants.
On March 10, 2026, Eaton Capital Unlimited Company, a subsidiary of Eaton, issued Euro denominated notes (2026 Euro Notes) with an aggregate face amount of €1,200 million ($1,390 million). The 2026 Euro Notes are comprised of two tranches of €600 million each, which mature in 2034 and 2038, with interest payable annually at a respective rate of 3.55% and 4.00% per annum. The issuer received proceeds totaling €1,191 million ($1,380 million) from the 2026 Euro Notes issuance, net of financing costs and discounts. The 2026 Euro Notes are fully and unconditionally guaranteed on an unsubordinated, unsecured basis by Eaton and certain of its direct and indirect subsidiaries. The 2026 Euro Notes contain customary optional redemption and par call provisions. The 2026 Euro Notes also contain a change of control provision which requires the Company to make an offer to purchase all or any part of the 2026 Euro Notes at a purchase price of 101% of the principal amount plus accrued and unpaid interest. The capitalized deferred financing fees are amortized in Interest expense - net over the respective terms of the 2026 Euro Notes. The 2026 Euro Notes are subject to customary non-financial covenants.
On March 6, 2026, Eaton Corporation, a subsidiary of Eaton, terminated the $8,000 million senior unsecured delayed-draw term loan facility (Term Credit Agreement) entered into on February 6, 2026. No loans were outstanding as of the date of termination and the Company incurred no fees or penalties in connection with the termination. The Term Credit Agreement was terminated in connection with the issuance of the 2026 U.S. Notes and 2026 Euro Notes.
Over the course of a year, cash, short-term investments, and short-term debt may fluctuate in order to manage global liquidity. As of March 31, 2026 and December 31, 2025, Eaton had cash of $565 million and $622 million, short-term investments of $186 million and $181 million, and short-term debt of $2,510 million and $1 million, respectively. Eaton believes it has the operating flexibility, cash flow, cash and short-term investment balances, availability under the existing revolving credit facility, and access to capital markets in excess of the liquidity necessary to meet future operating needs of the business, fund capital expenditures and acquisitions of businesses, as well as scheduled payments of long-term debt, for at least the next 12 months and the foreseeable future thereafter.
On April 1, 2025, the Company paid $1.43 billion, net of cash acquired, to acquire Fibrebond Corporation. On August 6, 2025, the Company acquired Resilient Power Systems Inc. for $86 million, including $55 million of cash paid at closing and an initial estimate of $31 million for the fair value of contingent future consideration. On January 23, 2026, the Company paid $1.53 billion, net of cash acquired, to acquire Ultra PCS Limited and on March 12, 2026, the Company paid $9.55 billion, net of cash acquired, to acquire Boyd Thermal. Additionally, on January 15, 2026, Eaton invested $75 million in SPAN for a stake of approximately 7 percent.
Eaton is in compliance with each of its debt covenants for all periods presented.
Cash Flows
A summary of cash flows is as follows:
Three months ended March 31
Change
from 2025
(In millions) 2026 2025
Net cash provided by operating activities $ 507 $ 238 $ 269
Net cash provided by (used in) investing activities (11,375) 1,233 (12,608)
Net cash provided by (used in) financing activities 10,796 (244) 11,040
Effect of currency on cash 14 (7) 21
Total increase (decrease) in cash $ (58) $ 1,221
Operating Cash Flow
Net cash provided by operating activities increased by $269 million in the first three months of 2026 compared to 2025. Material factors affecting this increase were working capital balances being $299 lower, partially offset by lower net income of $97 million.
Investing Cash Flow
Net cash used in investing activities increased by $12,608 million in the first three months of 2026 compared to 2025. Material factors affecting this increase were an increase in cash paid for business acquisitions of $11,079 million in 2026 compared to no cash paid for business acquisitions in 2025 and purchases of short-term investments of $13 million in 2026 compared to sales of short term investments of $1,366 million in 2025.
Financing Cash Flow
Net cash provided by financing activities increased by $11,040 million in the first three months of 2026 compared to 2025. Material factors affecting this increase were an increase in proceeds from borrowings of $9,871 million in 2026 compared to no proceeds from borrowings in 2025, an increase in net proceeds of short-term debt of $2,507 million in 2026 from $805 million in 2025, and no repurchase of shares in 2026 compared to repurchase of shares of $615 million in 2025, partially offset by payments on borrowings of $1,069 million in 2026 from $3 million in 2025.
Uses of Cash
Capital Expenditures
Capital expenditures were $193 million and $147 million in the first three months of 2026 and 2025, respectively. The Company plans to increase capital expenditures over the next several years to expand production capacity across various markets to support anticipated growth. As a result, Eaton expects approximately $1.15 billion in capital expenditures in 2026.
Dividends
Cash dividend payments were $415 million and $397 million in the first three months of 2026 and 2025, respectively. Payment of quarterly dividends in the future depends upon the Company's ability to generate net income and operating cash flows, among other factors, and is subject to declaration by the Eaton Board of Directors. The Company intends to continue to pay quarterly dividends in 2026.
Share Repurchases
On February 23, 2022, the Board of Directors adopted a share repurchase program for repurchases of ordinary shares up to $5.0 billion to be made during the three-year period commencing on that date (2022 Program). On February 27, 2025, the Board of Directors renewed the 2022 Program by providing authority for up to $9.0 billion in repurchases to be made during the three-year period commencing on that date (2025 Program). Under the 2025 Program, the ordinary shares are expected to be repurchased over time, depending on market conditions, the market price of ordinary shares, capital levels, and other considerations. During the three months ended March 31, 2026, no ordinary shares were repurchased. During the three months ended March 31, 2025, 1.9 million ordinary shares were repurchased under the 2025 Program and the 2022 Program in the open market at a total cost of $608 million. The Company does not intend to pursue share repurchases in 2026 due to the acquisition of Boyd Thermal on March 12, 2026.
Acquisition of Businesses and Investments in Nonmarketable Securities
The Company paid cash of $11,079 million in the first three months of 2026 to acquire businesses. There were no business acquisitions in the first three months of 2025. Additionally, the Company paid $85 million in the first three months of 2026 for investments in nonmarketable securities. There were no investments in nonmarketable securities in the first three months of 2025. The Company will continue to focus on deploying its capital toward businesses that provide opportunities for higher growth and strong returns, and align with secular trends and its power management strategies.
Debt
The Company manages a number of short-term and long-term debt instruments, including commercial paper. At March 31, 2026, the Company had Short-term debt of $2,510 million, Current portion of long-term debt of $84 million, and Long-term debt of $18,535 million. The Company believes it has the operating flexibility, cash flow, and access to capital markets to meet scheduled payments of long-term debt. For additional information on financing transactions and debt see Note 8.
Supply Chain Finance Program
A third-party financial institution offers a voluntary supply chain finance (SCF) program that enables certain of the Company's suppliers, at the supplier's sole discretion, to sell receivables due from the Company to the financial institution on terms directly negotiated with the financial institution. The SCF program does not have a significant impact on the Company's liquidity as payments by the Company to participating suppliers are paid to the financial institution on the invoice due date, regardless of whether an individual invoice is sold by the supplier to the financial institution. For additional information on the SCF program, see Note 7.
Guaranteed Debt
Issuers, Guarantors and Guarantor Structure
Eaton Corporation has issued senior notes pursuant to indentures dated April 1, 1994 (the 1994 Indenture), November 20, 2012 (the 2012 Indenture), September 15, 2017 (the 2017 Indenture), August 23, 2022 (as supplemented by the First and Second Supplemental Indentures of the same date and the Third Supplemental Indenture dated May 18, 2023, the 2022 Indenture), and May 9, 2025 (as supplemented by the First and Second Supplemental Indentures of the same date, the Third Supplemental Indenture dated March 6, 2026, and the Fourth Supplemental Indenture dated March 10, 2026, the 2025 Indenture). Eaton Capital Unlimited Company, a subsidiary of Eaton, is the issuer of six outstanding series of debt securities sold in offshore transactions under Regulation S promulgated under the Securities Act (the Eurobonds) and Registered Senior Notes (as defined below) issued under the 2025 Indenture. The senior notes issued under the 1994, 2012, 2017, 2022, and 2025 Indentures are registered under the Securities Act of 1933, as amended (the Registered Senior Notes). The Eurobonds and the Registered Senior Notes (together, the Senior Notes) comprise substantially all of Eaton's long-term indebtedness.
Substantially all of the Senior Notes (with limited exceptions), together with the credit facilities described above under Liquidity and Financial Condition (the Credit Facilities), are guaranteed by Eaton and 17 of its subsidiaries. Accordingly, they rank equally with each other. However, because these obligations are not secured, they would be effectively subordinated to any existing or future secured indebtedness of Eaton and its subsidiaries. As of March 31, 2026, Eaton has no material, long-term secured debt. The guaranteed Registered Senior Notes are also structurally subordinated to the liabilities of Eaton's subsidiaries that are not guarantors. Except as described below under Future Guarantors, Eaton is not obligated to cause its subsidiaries to guarantee the Registered Senior Notes.
The table set forth in Exhibit 22 filed with the Form 10-Q filed on August 5, 2025 (10-Q Exhibit 22) details the primary obligors and guarantors with respect to the guaranteed Registered Senior Notes.
Terms of Guarantees of Registered Securities
Payment of principal and interest on the Registered Senior Notes is guaranteed, on an unsecured, unsubordinated basis by the subsidiaries of Eaton set forth in the table referenced in the 10-Q Exhibit 22. Each guarantee is full and unconditional, and joint and several. Each guarantor's guarantee is an unsecured obligation that ranks equally with all its other unsecured and unsubordinated indebtedness. The obligations of each guarantor under its guarantee of the Registered Senior Notes are subject to a customary savings clause or similar provision designed to prevent such guarantee from constituting a fraudulent conveyance or otherwise legally impermissible or voidable obligation.
Though the terms of the indentures vary slightly, generally, each guarantee of the Registered Senior Notes by a guarantor that is a subsidiary of Eaton Corporation provides that it will be automatically and unconditionally released and discharged under certain circumstances, including, but not limited to:
(a)the consummation of certain types of transactions permitted under the applicable indenture, including one that results in such guarantor ceasing to be a subsidiary; and
(b)for Registered Senior Notes issued under the 2022 and 2025 Indentures, when such guarantor is a guarantor or issuer of indebtedness in an aggregate outstanding principal amount of less than 25% of our total outstanding indebtedness.
Further, each guarantee by a direct or indirect parent of Eaton Corporation (other than Eaton) provides that it will also be released if:
(c)such guarantee (so long as the guarantor is not obligated under any other U.S. debt obligations), becomes prohibited by any applicable law, rule or regulation or by any contractual obligation; or
(d)such guarantee results in material adverse tax consequences to Eaton or any of its subsidiaries (so long as the applicable guarantor is not obligated under any other U.S. debt obligation).
The guarantee of Eaton does not contain any release provisions.
Future Guarantors
The 2012 and 2017 Indentures generally provide that, with certain limited exceptions, any subsidiary of Eaton must become a guarantor if it becomes obligated as borrower or guarantor under any series of debt securities or a syndicated credit facility. Further, the 2012 and 2017 Indentures provide that any entity that becomes a direct or indirect parent entity of Eaton Corporation and holds any material assets, with certain limited exceptions, or owes any material liabilities must become a guarantor. The 2022 and 2025 Indentures provide only that, with certain limited exceptions, any subsidiary of Eaton must become a guarantor if it becomes obligated as borrower or guarantor under indebtedness with an aggregate outstanding principal amount in excess of 25% of the Parent and its Subsidiaries' then-outstanding indebtedness.
The 1994 Indenture does not contain provisions with respect to future guarantors.
Summarized Financial Information of Guarantors and Issuers
(In millions) March 31, 2026 December 31, 2025
Current assets $ 4,307 $ 4,075
Noncurrent assets 22,833 13,439
Current liabilities 6,339 4,598
Noncurrent liabilities 20,547 10,788
Amounts due to subsidiaries that are non-issuers and non-guarantors - net 6,701 9,499
(In millions) Three months ended March 31, 2026
Net sales $ 4,344
Sales to subsidiaries that are non-issuers and non-guarantors 279
Cost of products sold 3,153
Expense from subsidiaries that are non-issuers and non-guarantors - net 71
Net income 313
The financial information presented is that of the issuers and the guarantors, which includes Eaton Corporation plc, on a combined basis and the financial information of non-issuer and non-guarantor subsidiaries has been excluded. Intercompany balances and transactions between the issuers and guarantors have been eliminated, and amounts due from, amounts due to, and transactions with non-issuer and non-guarantor subsidiaries have been presented separately.
FORWARD-LOOKING STATEMENTS
This Form 10-Q Report contains "forward-looking statements" within the meaning of federal securities laws. These forward-looking statements are based upon management's current expectations, predictions, estimates, assumptions and beliefs concerning future events and conditions and may discuss, among other things, litigation, expected capital expenditures, future dividend payments, anticipated share repurchases, liquidity, the successful integration of recent acquisitions, the anticipated separation of the Mobility business, anticipated capital deployment, and expected restructuring program charges and benefits. These statements may also discuss goals, intentions and expectations as to future trends, plans, events, results of operations or financial condition, or state other information relating to the Company. These statements are not guarantees of future performance, and actual results may differ materially. Any statement that is not historical in nature is a forward-looking statement and may be identified by the use of words and phrases such as "aim," "anticipate," "believe," "could," "develop," "endeavor," "estimate," "expect," "forecast," "goal," "guidance," "intend," "may," "outlook," "plan," "possible," "potential," "predict," "project" "seek," "should," "target," "will," "would" or other similar words, phrases or expressions. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this report. These statements should be used with caution and are subject to various risks and uncertainties, many of which are outside of our control.
The following factors could cause actual results to differ materially from those in the forward-looking statements: the impact of acquisitions, joint ventures, and investments and the integration of acquired entities; disruptions by natural disasters, labor strikes, wars, geopolitical instability and/or conflict, political unrest, terrorist activity, economic upheaval, or public health concerns that impact our production facilities; significant inflation or shortages of raw materials, energy, components, and/or labor, or similar challenges for our customers; reliance on suppliers to provide raw materials, components and services; the development and use of artificial intelligence in our business operations, including potential impacts on compliance with law and our reputation; service interruptions, data corruption, loss or impairment, network security and related operational impacts due to cybersecurity attacks; weather disruptions and regulatory, market and social reactions to such disruptions; our ability to identify, attract, develop, engage and retain qualified employees; our ability to complete the anticipated spin-off of our Mobility business; stock price and end market impacts due to technology disruptions; volatility of end markets; continued successful research, development and marketing of new or improved products; geopolitical, economic or other risks arising from worldwide or regional economic conditions; the global nature of Eaton's business and exposure to economic and political instability, including war or armed conflict, changes in governmental laws, regulations and policies; changes in countries' trade policies, including the imposition of sanctions or tariffs; changes in our tax rates or tax laws and regulations applicable to our business; rules, regulations, audits and investigations and related compliance risks associated with being a governmental contractor; our ability to protect our intellectual property; litigation and environmental regulations impacting our business; and the other risk factors discussed in Part I, Item 1A of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2025 and other reports filed by the Company with the SEC. We disclaim any obligation to update publicly any forward-looking statements, whether in response to new information, future events or otherwise, except as required by applicable law.
Eaton Corporation plc published this content on May 05, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on May 05, 2026 at 16:23 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]