XML 23 R10.htm IDEA: XBRL DOCUMENT
v3.22.0.1

ACQUISITIONS AND DIVESTITURES OF BUSINESSES | 12 Months Ended
--- | ---
Dec. 31, 2021
Business Combination and Asset Acquisition [Abstract] |
ACQUISITIONS AND DIVESTITURES OF BUSINESSES | ACQUISITIONS AND DIVESTITURES OF BUSINESSES Acquisition of controlling interest of Ulusoy Elektrik Imalat Taahhut ve Ticaret A.S. On April 15, 2019, Eaton completed the acquisition of an 82.275% controlling interest in Ulusoy Elektrik Imalat Taahhut ve Ticaret A.S. (Ulusoy Elektrik), a leading manufacturer of electrical switchgear based in Ankara, Turkey, with a primary focus on medium voltage solutions for industrial and utility customers. The purchase price for the shares was $214 million on a cash and debt free basis. As required by the Turkish capital markets legislation, Eaton filed an application to execute a mandatory tender offer for the remaining shares shortly after the transaction closed. During the tender offer, Eaton purchased additional shares for $33 million to increase its ownership interest to 93.7%. Ulusoy Elektrik is reported within the Electrical Global business segment. Acquisition of Innovative Switchgear Solutions, Inc. On July 19, 2019, Eaton acquired Innovative Switchgear Solutions, Inc. (ISG), a specialty manufacturer of medium-voltage electrical equipment serving the North American utility, commercial and industrial markets. ISG is reported within the Electrical Americas business segments. Acquisition of Souriau-Sunbank Connection Technologies On December 20, 2019, Eaton acquired the Souriau-Sunbank Connection Technologies (Souriau-Sunbank) business of TransDigm Group Inc. for a cash purchase price of $907 million, net of cash received. Headquartered in Versailles, France, Souriau-Sunbank is a global leader in highly engineered electrical interconnect solutions for harsh environments in the aerospace, defense, industrial, energy, and transport markets. Souriau-Sunbank is reported within the Aerospace business segment. The acquisition of Souriau-Sunbank has been accounted for using the acquisition method of accounting which requires the assets acquired and liabilities assumed be recognized at their respective fair values on the acquisition date. The final allocation as of the date of acquisition follows:
(In millions) |  |  |  |  | Final Allocation
Accounts receivable - net |  |  |  |  | $ | 60 |
Inventory |  |  |  |  | 125 |
Prepaid expenses and other current assets |  |  |  |  | 4 |
Property, plant and equipment |  |  |  |  | 103 |
Other intangible assets |  |  |  |  | 370 |
Other assets |  |  |  |  | 8 |
Accounts payable |  |  |  |  | (33) |
Other current liabilities |  |  |  |  | (58) |
Other noncurrent liabilities |  |  |  |  | (126) |
Total identifiable net assets |  |  |  |  | 453 |
Noncontrolling interests |  |  |  |  | (3) |
Goodwill |  |  |  |  | 457 |
Total consideration, net of cash received |  |  |  |  | $ | 907 |
Goodwill is calculated as the excess of the consideration transferred over the fair value of net assets recognized and represents the anticipated synergies of acquiring Souriau-Sunbank. Goodwill recognized as a result of the acquisition is not deductible for tax purposes. The estimated fair values of the customer relationships and technology intangible assets were $250 million and $95 million, respectively. The Company generally determines the fair value of intangible assets acquired using third-party valuations that are prepared using discounted cash flow models that rely on the Company's estimates. These estimates require judgment of future revenue growth rates, future margins, and the applicable weighted-average cost of capital used to discount those estimated cash flows. The estimated weighted-average useful lives was 20 years for customer relationships and 15 years for technology intangible assets. See Note 6 for additional information about goodwill and other intangible assets. Eaton’s Consolidated Financial Statements include Souriau-Sunbank’s results of operations. Souriau-Sunbank's sales for the years ended December 31, 2020 and 2019 were $287 million and $3 million, respectively. Sale of Automotive Fluid Conveyance business On December 31, 2019, Eaton sold its Automotive Fluid Conveyance Business. The transaction resulted in a pre-tax loss of $66 million which was recorded in Other expense - net. This business was reported within the Vehicle business segment. Acquisition of Power Distribution, Inc. On February 25, 2020, Eaton acquired Power Distribution, Inc. a leading supplier of mission critical power distribution, static switching, and power monitoring equipment and services for data centers and industrial and commercial customers. The company is headquartered in Richmond, Virginia and is reported within the Electrical Americas business segment. Sale of Lighting business On March 2, 2020, Eaton sold its Lighting business to Signify N.V. for a cash purchase price of $1.4 billion. As a result of the sale, the Company recognized a pre-tax gain of $221 million in 2020. The Lighting business, which had sales of $1.6 billion in 2019 as part of the Electrical Americas business segment, served customers in commercial, industrial, residential, and municipal markets. Acquisition of Tripp Lite On March 17, 2021, Eaton acquired Tripp Lite for $1.65 billion, net of cash received. Tripp Lite is a leading supplier of power quality products and connectivity solutions including single-phase uninterruptible power supply systems, rack power distribution units, surge protectors, and enclosures for data centers, industrial, medical, and communications markets in the Americas. Tripp Lite is reported within the Electrical Americas business segment. The acquisition of Tripp Lite has been accounted for using the acquisition method of accounting which requires the assets acquired and liabilities assumed be recognized at their respective fair values on the acquisition date. The table below summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed on the acquisition date, as well as measurement period adjustments recorded as of December 31, 2021. These preliminary estimates will continue to be revised during the measurement period as further information becomes available and additional analyses are performed. The third-party valuations for Other intangible assets and Property, plant and equipment have been received. The current measurement period adjustments did not have a material impact to the Consolidated Statements of Income.
(In millions) |  |  |  | Preliminary Allocation |  | Measurement Period Adjustments |  | Adjusted Preliminary Allocation
Short-term investments |  |  |  | $ | 5 |  |  | $ | — |  |  | $ | 5 |
Accounts receivable |  |  |  | 94 |  |  | — |  |  | 94 |
Inventory |  |  |  | 184 |  |  | (7) |  |  | 177 |
Prepaid expenses and other current assets |  |  |  | 6 |  |  | (1) |  |  | 5 |
Property, plant and equipment |  |  |  | 6 |  |  | (5) |  |  | 1 |
Other intangible assets |  |  |  | 630 |  |  | (26) |  |  | 604 |
Other assets |  |  |  | — |  |  | 2 |  |  | 2 |
Accounts payable |  |  |  | (13) |  |  | — |  |  | (13) |
Other current liabilities |  |  |  | (32) |  |  | (3) |  |  | (35) |
Other noncurrent liabilities |  |  |  | (157) |  |  | (3) |  |  | (160) |
Total identifiable net assets |  |  |  | 723 |  |  | (43) |  |  | 680 |
Goodwill |  |  |  | 928 |  |  | 43 |  |  | 971 |
Total consideration, net of cash received |  |  |  | $ | 1,651 |  |  | $ | — |  |  | $ | 1,651 |
Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and represents the anticipated synergies of acquiring Tripp Lite. Goodwill recognized as a result of the acquisition is not deductible for tax purposes. The adjusted preliminary estimated fair values of the customer relationships, trademarks and technology intangible assets of $539 million, $33 million and $32 million, respectively, were determined using either the relief-from-royalty model or the multi-period excess earnings model, which are discounted cash flow models that rely on the Company's estimates. These estimates require judgment of future revenue growth rates, future margins, and the applicable weighted-average cost of capital used to discount those estimated cash flows. The weighted-average cost of capital is an estimate of the overall after-tax rate of return required by equity and debt market holders of a business enterprise. The estimated useful lives for customer relationships, trademarks and technology intangible assets were 20 years, 15 years, and 5 years, respectively. See Note 6 for additional information about goodwill and other intangible assets. Eaton's 2021 Consolidated Financial Statements include Tripp Lite’s results of operations, including segment operating profit of $139 million on sales of $419 million, from the date of acquisition through December 31, 2021. Acquisition of Green Motion SA On March 22, 2021, Eaton acquired Green Motion SA, a leading designer and manufacturer of electric vehicle charging hardware and related software based in Switzerland. Green Motion SA was acquired for $106 million, including $49 million of cash paid at closing and $57 million of estimated fair value of contingent future consideration based on 2023 and 2024 revenue performance. The fair value of contingent consideration liabilities is estimated by discounting contingent payments expected to be made, and may increase or decrease based on changes in revenue estimates and discount rates, with a maximum possible undiscounted value of $109 million. Green Motion SA is reported within the Electrical Global business segment. Acquisition of a 50% stake in HuanYu High Tech On March 29, 2021, Eaton acquired a 50 percent stake in HuanYu High Tech, a subsidiary of HuanYu Group that manufactures and markets low-voltage circuit breakers and contactors in China, and throughout the Asia-Pacific region. HuanYu High Tech has production operations in Wenzhou, China. Eaton accounts for this investment on the equity method of accounting and is reported within the Electrical Global business segment. Acquisition of Cobham Mission Systems On June 1, 2021, Eaton acquired Cobham Mission Systems (CMS) for $2.80 billion, net of cash received. CMS is a leading manufacturer of air-to-air refueling systems, environmental systems, and actuation primarily for defense markets. CMS is reported within the Aerospace business segment. The acquisition of CMS has been accounted for using the acquisition method of accounting which requires the assets acquired and liabilities assumed be recognized at their respective fair values on the acquisition date. The table below summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed on the acquisition date, as well as measurement period adjustments recorded as of December 31, 2021. These preliminary estimates will continue to be revised during the measurement period as third-party valuations are received and finalized, further information becomes available and additional analyses are performed, and these differences could have a material impact on Eaton's preliminary purchase price allocation. The current measurement period adjustments did not have a material impact to the Consolidated Statements of Income.
(In millions) |  |  |  | Preliminary Allocation |  | Measurement Period Adjustments |  | Adjusted Preliminary Allocation
Accounts receivable |  |  |  | $ | 84 |  |  | $ | — |  |  | $ | 84 |
Inventory |  |  |  | 179 |  |  | (1) |  |  | 178 |
Prepaid expenses and other current assets |  |  |  | 45 |  |  | 7 |  |  | 52 |
Property, plant and equipment |  |  |  | 86 |  |  | — |  |  | 86 |
Other intangible assets |  |  |  | 1,575 |  |  | — |  |  | 1,575 |
Other assets |  |  |  | 19 |  |  | (9) |  |  | 10 |
Accounts payable |  |  |  | (40) |  |  | — |  |  | (40) |
Other current liabilities |  |  |  | (159) |  |  | 3 |  |  | (156) |
Other noncurrent liabilities |  |  |  | (77) |  |  | (3) |  |  | (80) |
Total identifiable net assets |  |  |  | 1,712 |  |  | (3) |  |  | 1,709 |
Goodwill |  |  |  | 1,088 |  |  | 3 |  |  | 1,091 |
Total consideration, net of cash received |  |  |  | $ | 2,800 |  |  | $ | — |  |  | $ | 2,800 |
Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and represents the anticipated synergies of acquiring CMS. As a result of the acquisition, goodwill of $295 million recognized in the United States is expected to be deductible for tax purposes. Other intangible assets of $1,575 million include customer relationships, technology and backlog. Given the timing of the acquisition, Eaton utilized a benchmarking approach based on similar acquisitions to determine the preliminary fair values for intangible assets. See Note 6 for additional information about goodwill and other intangible assets. Eaton's 2021 Consolidated Financial Statements include CMS’s results of operations, including segment operating profit of $128 million on sales of $450 million, from the date of acquisition through December 31, 2021. Acquisition of a 50% stake in Jiangsu YiNeng Electric's busway business On June 25, 2021, Eaton acquired a 50 percent stake in Jiangsu YiNeng Electric's busway business, which manufactures and markets busway products in China. Eaton accounts for this investment on the equity method of accounting and is reported within the Electrical Global business segment. Sale of Hydraulics business On January 21, 2020, Eaton entered into an agreement to sell its Hydraulics business to Danfoss A/S, a Danish industrial company. The Hydraulics business sold hydraulics components, systems, and services for industrial and mobile equipment. The business had sales of $1.8 billion in 2020 and $1.3 billion in 2021 through the date of the sale. During the first quarter of 2020, the Company determined the Hydraulics business met the criteria to be classified as held for sale. Therefore, assets and liabilities of the business have been presented as held for sale in the Consolidated Balance Sheet as of December 31, 2020. Assets and liabilities classified as held for sale are measured at the lower of carrying value or fair value less costs to sell. No write-down was required as fair value of the Hydraulics business assets less the costs to sell exceed their respective carrying value. Depreciation and amortization expense was not recorded for the period in which Other long-lived assets were classified as held for sale. The Company used the relative fair value method to allocate goodwill to the Hydraulics business. The fair value of the Hydraulics business was estimated based on a combination of the price paid to Eaton by Danfoss A/S and a discounted cash flow model. The model includes estimates of future cash flows, future growth rates, terminal value amounts, and the applicable weighted-average cost of capital used to discount those estimated cash flows. The weighted-average cost of capital is an estimate of the overall after-tax rate of return required by equity and debt market holders of a business enterprise. These analyses require the exercise of judgments, including judgments about appropriate discount rates, perpetual growth rates, revenue growth, and margin assumptions. The assets and liabilities classified as held for sale for the Hydraulics business on the December 31, 2020 Consolidated Balance Sheet are as follows:
(In millions) | December 31, 2020 |  |
Accounts receivable - net | $ | 345 |  |  |
Inventory | 369 |  |  |
Prepaid expenses and other current assets | 18 |  |  |
Net property, plant and equipment | 504 |  |  |
Goodwill | 920 |  |  |
Other intangible assets | 248 |  |  |
Operating lease assets | 61 |  |  |
Deferred income taxes | 6 |  |  |
Other noncurrent assets | 16 |  |  |
Assets held for sale - current | $ | 2,487 |  |  |
Accounts payable | $ | 241 |  |  |
Accrued compensation | 26 |  |  |
Other current liabilities | 101 |  |  |
Pension liabilities | 60 |  |  |
Operating lease liabilities | 35 |  |  |
Deferred income taxes | 3 |  |  |
Other noncurrent liabilities | 2 |  |  |
Liabilities held for sale - current | $ | 468 |  |  |
On August 2, 2021, Eaton completed the sale of the Hydraulics business to Danfoss A/S. As a result of the sale, the Company received $3.1 billion, net of cash sold, and recognized a pre-tax gain of $617 million, subject to post-closing adjustments to be negotiated with Danfoss A/S. The Hydraulics business did not meet the criteria to be classified as discontinued operations as the sale does not represent a strategic shift that will have a major effect on the Company's operations. Acquisition of Royal Power Solutions On January 5, 2022, Eaton acquired Royal Power Solutions for $600 million. Royal Power Solutions is a U.S. based manufacturer of high-precision electrical connectivity components used in electric vehicle, energy management, industrial and mobility markets. Royal Power Solutions will be reported within the eMobility business segment.

X
- References No definition available. + Details
Name: | us-gaap_BusinessCombinationAndAssetAcquisitionAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for business combinations, including leverage buyout transactions (as applicable), and divestitures. This may include a description of a business combination or divestiture (or series of individually immaterial business combinations or divestitures) completed during the period, including background, timing, and assets and liabilities recognized and reclassified or sold. This element does not include fixed asset sales and plant closings. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=2122178 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
Name: | us-gaap_MergersAcquisitionsAndDispositionsDisclosuresTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration